New Delhi: Highway developer Ceigall India Ltd is planning to sell its five road projects under the hybridannuity model (HAM) in a deal having an enterprise value of $540 million, two people aware of the development said.
Out of the five, work has started on two, while the other three are awaiting clearances. The company will sell the assets once work on all five is complete, the people cited above said on the condition of anonymity.
When contacted, Ceigall India managing director Ramneek Sehgal said the company is constantly evaluating opportunities and takes actions that are in the best interests of the company. He, however, refused to provide details.
Ceigall India has built 1,740 lane km of highways, flyovers, bridges, tunnels, expressways and runways. In October, Mint reported that an alternative investment fund of Neo Asset Management is close to buying Ceigall’s stake in an operational four-lane Malout highway built under HAM at an enterprise value of ₹450 crore.
Projects of Ceigall
Among Ceigall’s five projects on the block, work has begun on two—the ₹480 crore (164.4 km) six-laning of Jodhpur Romana (Bathinda)—Mandi Dabwali (Punjab/Haryana Border) section of NH-54; and the ₹540 crore (91.4 km) construction of 4-Lane Greenfield Jalbehra – Shahbad section of NH—152G in Haryana.
Work on three other HAM projects including a ₹861.28 crore project for 271.46 km in Punjab; a ₹1,151 crore project for 198 km and ₹1,500 crore projects for 221.4 km in Jharkhand, are awaiting clearances. Two of them have arranged debt, and equity will be brought in once all approvals are secured.
The total cost of the five HAM projects Ceigall is developing is around ₹4,500 crore (including government’s annuity), and it should offer good value for prospective investors, an industry expert said on the condition of anonymity.
HAM was created in 2016 as a mix of engineering, procurement and construction (EPC) and annuity models. It is seen as safe for both developers putting in money for construction, as well as investors taking up projects later for operation and maintenance (O&M). A concessionaire is compensated by fixed annuity payments during the construction and O&M phases. Also, 40% of the construction annuity is paid by the government during construction, and the balance during the remaining concession period. O&M payments are linked to inflation for up to 15 years. Annuity payments eliminate the risk of income fluctuations resulting from changes in traffic volumes.
“We have been witnessing aggressive interest from institutional investors like AIFs in HAM-based highway projects, since this allows investors to lock good returns for a period of 15-20 years. This trend is expected to only gain momentum in the coming years as big-ticket investors look for stable and long-term returns,” the expert added.
Other investments
Among recent investments, Actis acquired a portfolio of two operational HAM road assets from EPC firm Patel Infrastructure Ltd; and Highway Infrastructure Trust has signed definitive agreements with PNC Infratech Ltd and PNC Infra Holdings Ltd to acquire 12 road projects at an enterprise value of ₹9,005.7 crore. Cube Highways Trust also bought seven road assets from Singapore-based Cube Highways and Infrastructure Pte Ltd at an enterprise value of ₹5,172 crore.
Selling the assets would help Ceagall raise money to deploy in other projects; however, the company must wait as equity transfers are not permitted before completing the projects. Alternatively, Ceigall can seek to replace existing investors with new ones in projects that have not taken off due to delays in clearances or land acquisition.
Ceigall has completed over 34 projects in the roads and highways sector. It has 18 ongoing projects, including 13 EPC projects and five HAM projects which includes elevated corridors, bridges, flyovers, rail over-bridges, tunnels, expressway, runway, metro project and multi-lane highways. The company has an order book of ₹9,500 crore.
