IRB Infrastructure Developers Ltd said Tuesday it has struck two deals that would see the toll road arm of Spain’s Ferrovial and Singapore sovereign wealth fund GIC invest Rs 5,347 crore ($713 million) to buy around 42% together of the publicly listed company.
Ferrovial’s toll road business unit Cintra would invest up to Rs 3,180 crore to buy up to 24.9% stake of IRB. This would be just short of the 25% threshold that triggers an open offer.
In a parallel transaction, GIC would invest Rs 2,167 crore to buy a stake of up to 16.9% in IRB. GIC already owns around 5% stake in the company.
IRB said the preferential allotment would be at a price of Rs 211.79 per share.
Virendra D. Mhaiskar, founder of IRB, will continue as the promoter and single-largest shareholder after the completion of the transactions with an approximate 34% stake. He will retain management control of IRB.
The company said the equity fundraise will help achieve the twin objectives of deleveraging and access to growth capital to take part in the infrastructure development and monetization plan of the government.
The firm will use Rs 3,250 crore to reduce debt, utilise up to Rs 1,497 crore for growth capital and Rs 600 crore for general purposes.
The two transactions are subject to execution of definitive documents, approval of IRB shareholders, receipt of regulatory and lenders approvals and satisfaction of customary condition precedents.
IRB said that if is unable to issue shares to both investors concurrently, including due to regulatory issues, the total investment would get reduced to somewhere between Rs 4,307 crore and Rs 4,462 crore. The exact quantum will depend on which investor transaction is completed earlier, it added.
“The strategy we initiated in 2017 by sponsoring the first public InvIT provided IRB a platform for recurrent capital recycling,” said Mhaiskar. “This strategy was further strengthened in 2019 by sponsoring the private InvIT, which enhanced the business model by getting a recurrent investor for reducing equity commitments thus increasing the ability to take in more projects at one time.”
Mhaiskar also said that the current transaction is the final step in optimizing the capital structure and freeing cash flow for growth.
Cintra CEO Andres Sacristan said the investment in IRB Infrastructure represents a “great opportunity” to expand into a new market— India — that has “very promising fundamentals” for toll road development.
“IRB has a portfolio of high-quality assets and a platform with the capability to capture some of the strong growth expected in this sector,” Sacristan said.
Eng Seng Ang, CIO for infrastructure at GIC, said the wealth fund’s investment will enable IRB to develop and operate a greater network of roads and enhance India’s infrastructure. “As a long-term global investor, we see India as a key market, given its strong economic fundamentals and infrastructure development potential.”
Avener Capital acted as the exclusive financial advisor to IRB for the transaction. S&R Associates acted as the legal advisor.
IRB is the largest private roads developer in India, with an asset base of over Rs 55,000 crore across the parent company and two InvITs. It has built over 13,095 lane kms across India in two decades and has a 20% share in India’s Golden Quadrilateral project, the largest by any private infrastructure developer in India.