IL&FS Transportation Networks (ITNL), the road development arm of infrastructure development and finance major IL&FS, is in talks with I Squared Capital-backed Cube Highways to sell a majority stake in the recently completed Chenani-Nashri tunnel way (CNT) in Jammu & Kashmir (J&K), sources close to the development told FE.
The deal is being valued at about Rs 4,000 crore, according to investment bankers.
An email query sent to a company spokeperson at ITNL did not elicit a reply till the time of going to press.
FE had reported in January this year that ITNL was in talks with the Canadian Pension Plan Investment Board (CPPIB) to sell its stake. However, sources now tell FE the parties failed to arrive at an agreement over the valuations.
K Ramchand, MD, ITNL, had then told FE: “Being an annuity project from the National Highways Authority of India (NHAI), this project will receive an ‘AAA’ rating, which will help us in getting very fine rates. The option we have is either we sell or we refinance and hold the project, and then find a buyer later on during the year. Since we leave value on the table without refinancing, we expect a good value for our equity. We will see what works best for us.”
The cost for construction of CNT, also known as Patnitop tunnel, was originally estimated at about Rs 2,600 crore, but due to cost escalations, went up to around Rs 4,000 crore. ITNL has invested a little less than Rs 400 crore as equity in the project. The cost escalations, in part, were attributed to problems with the subcontractors, snowfall and bad weather conditions as well as the note ban, which hit the payment of daily wages. The project carries an annuity of Rs 635 crore, which is the highest awarded by the NHAI for a road project till date. The concession period is for 20 years.
The tunnel was inaugurated on April 2, 2017, and is India’s longest road tunnel with a length of 9.28 km. It is also the country’s first tunnel with a fully integrated control system and cuts the distance between Jammu and Srinagar by 30 km and reduces travel time by two hours. The all-weather tunnel bypasses 44 snowfall, landslide and avalanche-prone areas in winter.