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Cube Highways front-runner to buy Sadbhav projects

Rouhan Sharma

Sadbhav Engineering (SEL) is in the final stages of discussions to sell a chunk of its roads portfolio in its subsidiary Sadbhav Infrastructure Project (SIPL), to Cube Highways. As per sources, I Squared Capital-backed Cube Highways has emerged as the frontrunner for 12 of SIPL’s road projects from among those that were in discussions with the Ahmedabad-based roads developer. Caisse de d p t et placement du Qu bec (CDPQ) had also been in talks with Sadbhav, as well as Canadian Pension Plan Investment Board (CPPIB).

While FE could not ascertain the size of the transaction, in a recent call with analysts, Nitin Patel, ED & CFO, SEL, had said the enterprise value of the projects is over Rs 10,000 crore. Sources said the projects will be divided into two groups, those already operational and those under construction. SIPL will raise funds from the sale of the operational projects to fund the under-construction ones as well as make capital available to bid for and invest in new projects. It will strike a pre-sell agreement to dispose these projects once their construction is completed.

In August 2017, Bhopal-based roads developer, Dilip Buildcon had struck a similar deal with the Chhatwal Trust (Shrem Group), wherein it sold a portfolio of 24 road projects, 10 of which were still under construction.

As per information available on the company’s website, SIPL has a portfolio of 10 operational toll projects, one partially operational toll project, and 12 hybrid annuity projects under development. As of March 2018, the total cost for the 11 toll projects is Rs 10,214.4 crore and the equity invested, including subordinated debt, is Rs 2,154.3 crore. The total cost of the hybrid projects is Rs 11,081 crore and the equity invested, including subordinated debt, is Rs 268.9 crore. Eight toll projects and seven hybrid projects are rated A- and above.

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While SEL s debt rose to Rs 1,510 crore at the end of the first half this fiscal, up from Rs 1,400 crore a year ago (partly in order to support its vendors and sub-contractors), the company expects to be able to cut its debt to about Rs 1,250-1,300 crore by the end of this year. While analysts said the rise in debt was discomfiting , they expect the company to garner a significant amount of money as mobilsation advances from the government for new projects that are set to start construction.

Any success with the asset monetisation plan would only further aid de-leveraging and afford access to growth capital, analysts from Anand Rathi said in a recent note. Both SEL and Cube Highways did not respond to an email query regarding the story.