Global investment bank Goldman Sachs will invest $220 million in Essel Highways, a subsidiary of Essel Infraprojects that constructs, develops and operates national and state highways.
Of the total structured investment of close to Rs 1,500 crore, Essel has secured an initial tranche of $85 million as mezzanine finance. Effectively, Goldman has subscribed to debentures of Essel Highways for this amount. The remainder will be invested by Goldman as certain milestones are achieved.
Ashok Agarwal, CEO and wholetime director, Essel Infraprojects, told FE the funds will be used to finance new projects and for strategic acquisitions. “The money will strengthen the roads portfolio while the debentures being subscribed to by a reputed institution like Goldman Sachs will help our reputation,” Agarwal said.
Essel Highways, set up in 2007, boasts road assets valued at around $2 billion. It has a road development portfolio of 14 projects, 10 of which are operational, equalling more than 4,400 lane kilometres across six states.
The deal momentum in the Indian highways sector has gathered pace in the last year but money has mainly moved into projects where promoters are looking to pare debt and de-stress balance sheets.
The Goldman-Essel Highways transaction will be among those where the capital will be used to grow the business. Canada-based CPP Investment Board’s investment of Rs 2,000 crore into L&T IDPL would be another example of such growth-oriented investment.
Among the bigger portfolio deals in the infrastructure space, Canada-based Brookfield AMC acquired six road and three power projects from Gammon Infrastructure Projects for an enterprise value of over Rs 2,600 crore in August last year.
The fund is also said to be the frontrunner for acquiring Reliance Infrastructure’s roads portfolio for an enterprise value of close to Rs 8,000 crore. Meanwhile, I Squared Capital and IDFC Alternatives — via its infrastructure fund — have also been buying into road assets.
According to information from the ministry of road transport and highways, in June 2016 the construction of highways in India reached a rate of 27-28 km per day.