has gone up. “Foreign investors also have to take note of a depreciating currency and the country risk,” Venkatesh points out. According to Sanjay G Ubale, MD and CEO, Tata Realty and Infrastructure (TRIL), the discount rate has risen from around 13-15% in 2010 to 15-17%.
Given challenges on the currency front—the rupee has depreciated by 40% in three years eroding gains of foreign investors — valuations could be headed south. Suneet Maheshwari, CEO and MD of L&T Infra Finance, believes valuations for road assets may have dropped by anywhere between 25% and 40%. “Toll estimates have fallen and moreover the rate of growth in traffic and toll too is expected to be much slower,” Maheswari explains, adding, the shortfall in toll receivables could be as much as 20%, depending on the sector where it is located.
Not surprising then that GMR has sold a 74% stake in its Farukhnagar-Jadcherla expressway to SBI Macquarie for R206 crore — around 1.3-1.4 times of the book value — and 74% in its Ulundurpet Expressways to IDFC Alternatives for R222 crore — 1.12 times of the book value. The IVRCL portfolio, may change hands at below the book value, say sources.
Tata Realty is looking to snap up a portfolio of three assets – Salem Tollways, Kumarapalayam Tollways and IVRCL Chengapally Tollways (ICTL) – from the Hyderabad-based IVRCL. “There are more sellers than buyers in the market as the dynamics has changed. With more projects on the block, investors now have the upper hand,” says Ubale.
Sellers admit they are on the back foot though few are willing to sell an asset below book value. Not all are disappointed at the prices that their assets are fetching. “It’s better to recycle the capital and put it into new ventures,” says one developer. A recent CLSA report lists several assets that could be sold, including the operational and toll-based Himalayan Expressway, which may be sold by the JP Group. Others potentially saleable road projects include GMR’s Ambala-Chandigarh highway and the Hungud-Hospet highway, of which 95% has been completed.
Deal flow is likely to pick up given how