Brookfield to Acquire Ambani Gas Pipeline
Canadian firm to buy East West Pipeline for an enterprise valuation of $2 billion
Mumbai: Canadian investor Brookfield is set to buy the lossmaking East West Pipeline Ltd (EWPL), earlier known as Reliance Gas Transportation Infrastructure Ltd, for an enterprise valuation of ₹ 14,000 crore ($2 billion).
Brookfield is uniquely sponsoring an infrastructure investment trust (InvIT) called India Infrastructure Trust as the acquisition vehicle to take over the 1,400 km common carrier pipeline from Kakinada on the east coast to Bharuch in Gujarat. The Competition Commission of India (CCI) approved the transaction last week. Brookfield has also filed an application with the Securities and Exchange Board of India (Sebi) for registering the InvIT, approval East West Pipeline Ltd is a pvt co of Operational revenue:
Net loss: Total outstanding debt: COMMON CARRIER GAS PIPELINE FROM KAKINADA TO BHARUCH
for which is expected this month, following which a formal joint announcement will be made, said multiple sources aware of the matter.
The pipeline housed under EWPL is being transferred to an entity called Pipeline Infrastruc-
gas from KG Basin, also other sources to users in west coast
GAIL and Gujarat State Petronet for onward delivery nationwide
KEY FY18 FINANCIALS
884 CRORE 715 CR
ture Pvt Ltd (PIPL), a wholly owned subsidiary of Reliance Industries Holding Pvt. Ltd (RIHPL). That’s a holding arm of Mukesh Ambani and family, the promoters of Reliance Industries Ltd (RIL).
The local currency hit a record low at 72.92 to the dollar last Wednesday, but has bounced back to close at 71.86 Friday amid reports of the government considering measures to arrest the slide.
“Overseas investors are on a wait-and-watch mode amid emerging market weakness,” said Manish Wadhawan, managing director and head of fixed income at HSBC India, and one of the 12 participants in the poll. “They may not immediately rush to bet money unless the fine prints come out on the proposed measures (the Indian government plans to take).” But the rupee and bond yields could see some respite on Monday, as the government’s intension has helped allay investor apprehension, Wadhawan said. Most of the respondents bet on the rupee's wide trading range till December-end. A majority of them have set a trading range of 69.50-73 to the dollar, with a few predicting even 68-75.
While the government talked about steps to curb non-essential imports and boost exports, currency traders were looking for stringent measures like an interest rate hike, floating of NRI bonds or opening of a special dollar window for oil companies that are the biggest importers.
Foreign portfolio investors are, meanwhile, seeking more clarity on the five-pronged measures. They consider those related to non-essential imports and removal of debt investment cap as the most important ones.
“Curbs on non-essential imports will lead to permanent solutions in controlling CAD (current account deficit), paving way for sustainable overseas inflows over a period of time,” said MS Gopikrishnan, head of macro trading, South Asia, at Standard Chartered Bank. “While the measures would weigh on the markets on Monday, but for it to sustain, investors need more clarity,” he said. Ananth Narayan, associate professor of finance at SP Jain Institute of Management and Research, said India should look at long-term measures, such as to support the Make in India and Make for India programmes, to reduce the reliance on imports and support the currency. The government has yet to clarify the items of the non-essential category, the imports of which will likely be discouraged with higher import duties. This measure should help cut the expanding current account deficit, or the excess of overseas spending over revenue. CAD was at a four-quarter high of 2.4% of gross domestic product in the April-June quarter on the back of rising crude oil prices.
“It will be important to wait and see if any further meaningful measures are around the horizon,” said Ashish Vaidya, head of trading–India at DBS Bank. “Announced measures will have a marginal positive impact, but are not a gamechanger.”
The government also proposed to remove the exposure limits of up to 20% of an FPI bond portfolio to a single corporate group, and 50% to a single company.
Overseas investors can invest in Indian corporate bonds up to Rs 2.67 lakh crore in a year. Last year, investors used up about 80-90% of the limit, but that figure has now dropped to 76% as global investors shied away from Indian corporate debt papers. “We should see some dollar inflows next few months,” said Jayesh Mehta, managing director at Bank of AmericaMerrill Lynch. Growth is key to bring in foreign capital to India. “The authorities should take measures which will improve the country’s growth, a key to attract global investors,” Mehta said.
In September, overseas investors net sold around Rs 9,400 crore of domestic equities and debt securities. A further rise in share prices may be limited, leaving little space for significant risk-returns for such investors in the short term.
“Friday's news flow will not impact dollar flows immediately but it may have a medium-term impact,” said Piyush Garg, head of research at ICICI Securities. “Market will be driven by movement in emerging market currencies, movement in the rupee and oil prices.”