Singapore-based investment firm Standard Chartered IL&FS Asia Infrastructure Growth Fund Company is set to pick up 17% equity in Hyderabad-based infrastructure company Navayuga Road Projects (NRPPL) for R360 crore.
The deal, which is expected to provide much-needed equity support to the road sector company that is in need of fresh capital to finance new projects, comes at a time when the sector is witnessing a torpid investment climate. A host of road sector companies in the country are facing severe fund crunch because of the drying up of bank financing in sluggish market conditions. Projects bid at a premium a couple of years ago are stuck and developers have rushed to the government to rescue the projects.
Equity support from abroad is thus being looked at actively to get the necessary capital that will be helpful in bidding for new projects.
With regard to the deal, Navayuga proposes to raise capital by fresh issue of equity shares/compulsory convertible instruments by way of private placement arrangement from foreign players. It will involve NRPPL issuing 8,83,926 shares to Standard Chartered.
?Navayuga will be raising 17.007% of the total equity shares to Standard Chartered to raise R357.60 crore,? a source privy to the development told FE. The proposal has already got the nod from the investment approval body Foreign Investment Promotion Board (FIPB) and the deal is likely to be struck in a few days.
The company failed to respond to a detailed questionnaire sent by FE though company executives agreed to give their comments. ?A lot of builders are doing so and it is a healthy practice considering that it helps builders reassure their guarantees with the lenders,? Feedback Ventures chairman Vinayak Chatterjee said.
Navayuga Road Projects is engaged in construction and development of infrastructure projects primarily on engineering procurement and construction (EPC) and built operate and transfer (BoT) basis. The Indian company will use the additional capital for making further investments in special-purpose companies it floats to undertake various road projects won through the bidding process.
The government targeted to award 9,000 km of road and highway projects last fiscal. Though the actual award was a lot less, in the current fiscal there is expectation that a similar level of projects would come up for awarding.
NRPPL is a holding company of eight special purpose companies engaged in development of different road projects under concession from the National Highways Authority of India/ministry of roads, transport and highways/state authorities.
Standard Chartered IL&FS Asia Infrastructure Growth Fund Company is engaged in investing in infrastructure companies, assets and other services related to infrastructure in Asia.
A lot of companies, for quite some time, have been opting for stake sale to raise funds and, in turn, to have a healthy balance sheet to comply with the bidding norm.
The inability to tie up funds for projects with banks has been forcing the companies to explore options other than stake sales, such as partnerships with other firms.