Exits, asset sales: Infra sector rides a bumpy road

NEWDELHI: There seems to be a big turn ahead for the highways sector.

While infrastructure majors are selling assets to pare debt, a number of developers are looking to completely exit the business.

Anil Ambani-led Reliance Infrastructure (RInfra) recently entered into an exclusive negotiation to sell all its 11 assets to Canada’s Brookfield Asset Management for around ₹10,000 crore, according to sources. A formal announcement is likely soon. Once concluded, it will be the biggest highway asset deal in the country, and help RComm reduce its debt by ₹5,500 crore.

Till now, infrastructure players, including GMR, GVK, Essel and Essar, have been selling assets, but mostly in bits and pieces. The last biggest deal in the sector was concluded by Gammon Infrastructure when it exited nine projects, of which five were highways, valued at ₹1,833 crore. The projects were sold to Brookfield.

According to experts, such deals are paving way for freeing up stuck equity and allowing len- ders to introduce fresh funding in new projects.

Lenders already have an estimated ₹2.12 lakh-crore exposure to the highways sector. Banks have been reluctant to lend to infrastructure companies due to rising stressed assets.

“With developers selling assets, it will help the sector develop a new O&M (operation and management) vertical for long-term operations, separate from development and construction,” said Rohit Singh, joint secretary in the highways ministry.

“It will also free up a lot of developer equity, giving them a chance to bid for fresh projects. In cases, where developers do not want to continue in the highways business, the money raised by asset sales will come back in the system, if not in highways, then in other sectors. This will help bridge the infrastructure deficit.”

However, many analysts also consider these exit deals as distress sales.

“India has seen one of the highest number of public-private partnership (PPP) projects among developing countries. However, over the last few years, there has been a slowdown in the award of PPP projects, particularly in the highways sector. There are many factors, which has led to the decline in private sector interest in the sector, including weak financials of companies, higher risk involved, lengthier dispute resolution mechanism, and funding constraints. These have been pulling down the valuations,” said Rohit Inamdar, senior vice-president, rating agency ICRA.