Infrastructure developer KNR Constructions is in talks with Cube Highways and Canadian asset manager Brookfield to sell its entire stake in four of its road projects that were won under the hybrid annuity model (HAM).
According to sources, Brookfield and KNR Constructions have signed initial agreements for exchange of information and detailed due diligence.
The enterprise value of three of the projects, once their construction is complete, would be about Rs 4,000 crore.
However, sources said, for any deal to materialise, KNR would need to offload the projects at a discount, given the construction risk which would have to be borne by the acquirer in the interim.
An email sent to KNR did not elicit any response till the time of going to press. Brookfield and Cube Highways also did not respond to queries.
In an exchange filing in July, KNR said three of its HAM projects have achieved financial closure. KNR has a portfolio of five HAM projects worth Rs 5,611.2 crore with three of the projects already having received sanction letters from banks for finance.
The first project, for a 61 km stretch between Chittoor and Mallavaram in Andhra Pradesh and costing Rs 1,730 crore, has a concession period of 17.5 years. The 32 km road between Meensurutti and Chidambaram in Tamil Nadu and costing `482 crore carries a concession period of 17 years. The third project, a 39-km road from Trichy to Kallagam in Tamil Nadu, has a 17-year concession period and costs `1,020 crore. KNR is expected to announce the financial closure of these projects soon.
The fourth project, in Telangana, is 47 km, with a concession period of 17 years, and costs Rs 1,234 crore.
In the roads sector, KNR Constructions had orders of Rs 1,980 crore under the engineering, procurement and construction route as of June 30, 2018. It also has two operational annuity projects and two toll projects.
Under HAM, the road transport ministry acquires land, procures the necessary clearances and approvals and funds 40% of the project cost. The rest is financed by the developer through a combination of debt and equity. The government then collects toll and repays the developer in annual instalments over the concession period.