Brookfield in driver’s seat to buy out Anil Ambani’s road assets for Rs 8000 crore
Brookfield, the world’s 2nd biggest manager of alternative assets like real estate and private equity from Canada, is closing in to make its second big buyout in the Indian toll roads and highways sector. Brookfield has emerged as the frontrunner to take over the entire portfolio of 11 road projects of Anil Ambani flagship Reliance Infrastructure for an enterprise value of Rs 8000 crore, said multiple sources aware of the ongoing negotiations. Both sides have entered into exclusive negotiations and are hoping to sign a definitive sale agreement by next month. Last August, Brookfield agreed to buy six road projects of Gammon Infrastructure for an enterprise value of Rs 2000 crore. It is today the sole foreign player to own 100 per cent of road assets portfolio in India. Reliance is among the largest NHAI concessionaire with concession periods ranging from 18-30 years. All its 11 roads – located in high traffic urban corridors including New Delhi, Bangalore, Jaipur, Agra, Gurgaon, Pune among others – currently generate revenues. In FY16, the portfolio earned toll revenues of Rs 675 crore, an increase of 10 per cent YoY but is expected to clock Rs 900 crore topline in FY17, where in the entire portfolio will complete one full year of operations. So far, it has invested Rs 7500 – Rs 8000 crore behind these build-operate-transfer (BOT) projects spanning 1,000 km across seven states. Of this, around Rs.5,000 crore is debt. Both Brookfield and Reliance declined to comment. “All the 11 projects are housed under separate SPVs. All of them will come under 1 mother SPV and Reliance plans to sell 100 per cent shareholding of that to Brookfield. There is no FDI restriction in roads and only NHAI approvals will be required,” said a source in the know, on condition of anonymity as the talks are still in private domain. “Brookfield after the Gammon buyout last year has on ground expertise to manage and run such toll roads assets in the country,” he added. Investment bank Ambit is sell side the advisor in the deal. Restructuring Reliance With an eye to turn Reliance Infrastructure debt-free on a standalone basis by 2017, the company’s management has been actively pursuing a series of asset sales. The company was founded as an electricity company when the undivided Reliance Industries acquired the state-run Mumbai electricity distribution company and then expanded into infrastructure development. But of late, the Reliance group has been in the process of restructuring – selling off capital-intensive businesses like cement and roads and looking to rope in partners for its Mumbai electricity distribution arm in an attempt to reduce debt and focus more on new, capital-light, high RoE defence business. It recently agreed to sell its cement business to Birla Corp for Rs 4800 crore and has signed a non-binding term sheet to sell 49 per cent in its Mumbai power business to the Canadian pension fund Public Sector Pension Investment Board (PSP Investments). Following the closure of both the cement and roads portfolio, Reliance Infrastructure’s debt is expected to come down by Rs 13,000 crore. The company’s standalone debt was about Rs 15,500 crore as on 31 March. Consolidated debt was Rs.25,000 crore in the same period, which the firm expects to cut by a third to Rs 8,000 crore by the end of the current fiscal itself. “The net cash flow of Rs 24 billion from stake sale will be used to reduce standalone debt. We believe the focus on defence equipment business, along with steady cash flows from the power distribution business, can create value for shareholders in the long term,” wrote IDFC Securities analysts Shirish Rane and Mohit Kumar earlier this February post the cement sale at 2.2 X equity invested. “If Reliance can recover its invested equity and debt it will be happy. It is clearly defocusing on most sectors other than defence and EPC,” said another sector analyst when asked about the likely deal valuations. Big bull on India After pumping in $2 billion in India since 2009-10 when it set up its local office, Brookfield is planning to invest $2 billion more in India over the next 2-3 years to buyout upscale offices and commercial towers, stranded roads, power and utilities infrastructure as it aims to double its existing asset base in the country. It started investing here in 2012-13, with $20 million in Kotak Mahindra Bank Ltd’s infrastructure fund and subsequently tied up with Peninsular Land for mezzanine lending to residential projects. But its first mega local deal was in 2014, when it bought out Unitech Corporate Parks Plc. (UCP), a portfolio of six assets including special economic zones and information technology (IT) parks for around Rs 4,700 crore. It was one of the largest commercial real estate transactions. Today, with 400 people in the team, Brookfield rivals some of the biggest real estate and infrastructure companies in the country in heft. Globally, the group also seeks to be countercyclical, buying during distressed periods. In India, in recent times its name as a potential suitor has repeatedly cropped up in almost all multi-billion M&A transactions – from DLF or Hiranandani’s office portfolio to Jaypee’s cement assets. With operating platforms well in place following big ticket acquisitions, Brookfield has been scouting for operationally intensive businesses and sectors or troubled assets with dislocated capital structures. “Our core areas — property, infrastructure, power and private equity, that is building materials and industrial businesses — happen to be where a lot of the stress is. But the assets themselves are not stressed, but are world class. They just happen to belong to businesses that are stressed,” Brookfield India Country Head, Anuj Ranjan had told ET recently in an interview. Intereestingly, just last week, State Bank of India (SBI) and Brookfield proposed to launch a joint venture (JV) fund to which the Canadian partner has agreed to commit Rs 7,000 crore to purchase distressed assets. SBI, the country’s largest lender, will contribute up to 5 per cent of the
403 road projects worth Rs 3.85 lakh crore initiated during UPA rule are pending: Nitin Gadkari
As many as 403 road projects totalling Rs 3.85 lakh crore initiated during the UPA rule are pending due to a variety of reasons, Lok Sabha was informed today. Responding to supplementaries, Road Transport and Highways Minister Nitin Gadkari said by the next Parliament session, finality will be achieved regarding these projects — either they will be restarted or terminated. He said work orders for the projects were issued before encroachments were removed or forest and environment clearance given. Gadkari said work has stopped in various projects and, in some cases, the companies given the contract are on the verge of being declared bankrupt. Banks were told to provide additional funds for these projects. “If we terminate the projects, you will lose and the blame will eventually come on you. This is what I told the banks,” he said, adding that his ministry walked the extra mile to ensure that the pending projects reach a logical conclusion. In his written response, he said the ministry has fixed a target for award of road projects of 25,000 km length during the current fiscal which are envisaged to have tentative completion period ranging from 24 months to 36 months. Road projects in total length of about 1,378 km have been awarded during 2016-17 till June, he added. Tarik Cohen Authentic Jersey
Govt’s plan to expand highway network could revive builders
Transport minister Nitin Gadkari’s plan to expand the highway network in the world’s fastest-growing major economy could help revive struggling construction stocks. The nation will aim to add 41 kilometers of roads daily from March next year, up from 20 kilometers a day currently, Gadkari said in an interview. A project logjam had slowed the pace to about 3 kilometers when Prime Minister Narendra Modi’s government took office just over two years ago. “The situation has changed,” Gadkari, 59, said in his office in New Delhi on 20 July. “We’re working fast and taking decisions. Now land acquisition isn’t a problem. Forest clearance isn’t a problem.” An eight-member index of builders including Ashoka Buildcon Ltd. and Sadbhav Engineering Ltd. compiled by Bloomberg News has tumbled 11% in 2016. The gauge had surged after Modi took office amid optimism about his focus on improving infrastructure. Its decline this year bucks a 7% advance in the benchmark S&P BSE Sensex. The Sensex trades at 21 times reported earnings, data compiled by Bloomberg show. The valuations for the eight-member index range from 6.3 times for MBL Infrastructures Ltd and 13 times for KNR Constructions Ltd to 80 times for Man Infraconstruction Ltd. “Cement, road construction as well as tollway companies will benefit from an acceleration in road building,” said Chinmay Madgulkar, an analyst at Taurus Asset Management Co. in Mumbai. Road construction has the potential to create millions of jobs, Gadkari said. Boosting employment is critical for the government ahead of key state polls next year and a general election that’s due by 2019. As many as 95% of stalled road projects are back on track now, the minister said. He plans to double the length of national highways to 200,000 kilometers, but didn’t give a time-frame. Gadkari added that the government plans to sign 25,000 kilometers of road deals in the year through March 2017. His ambitions contrast with India’s mixed history on executing infrastructure upgrades. About 60% of the $2 trillion economy’s roads are paved, compared with 87% in China, according to Bloomberg Intelligence. “Things are moving fast,” Gadkari said. “As a minister, it’s my duty that by hook or crook I should manage it.” Chris Kelly Womens Jersey
New regulations to change face of Indian roads
To call the current scenario regarding Indian roads and automobiles haphazard would be an understatement. In the last year or so, numerous regulations have been issued or proposed by the Ministry for Road Transport and Highways (MoRTH). Union Minister Nitin Gadkari, who helms the ministry, said, “The auto industry has one of the highest employment potentials in the country. The future is very bright and we should make the auto industry according to international standards.” In this piece we try to make sense of it all and see where the road is heading in terms of the Indian automotive landscape. Introduction of BS-VI emission norms With the new regulations, the first issue that the ministry aims to tackle is the menace of rising air pollution. Besides the recent ban of cars with 2-litre plus diesel engines in the Delhi-NCR, the government is working hard towards introducing BS-VI emission norms across the country by April 2020. The availability of BS-VI fuel across the country is critical for the feasibility of introducing BS-VI norms in the country. In this regard, former environment minister Prakash Javadekar has stated that the government will invest Rs 60,000 crore to improve fuel quality to BS-VI levels. The government is confident of providing BS-VI quality fuel by the intended deadline. However, fuel adulteration is a major concern in Tier-2 and Tier-3 cities and stringent quality control processes need to be implemented. Engine technologies will also need to be updated to comply with BS-VI norms. In case of diesel-powered cars, for instance, BS VI will necessitate the incorporation of the Diesel Particulate Filter (DPF) in the exhaust system which would increase costs. DPFs trap the harmful particulate matter as they flow out of the exhaust system. Some systems self clean by burning off the residue at high temperature while others need periodic cleaning. Without DPFs, BS-VI fuels would be rendered redundant. Stable regulations Another big issue that the government needs to tackle is the uncertainty when it comes to emission norms and other regulations in the country. The knee-jerk diesel ban, for instance, has many manufacturers up in arms against the ruling. The sheer arbitrariness of the ruling is also a matter of concern since there was no empirical evidence to justify the ban. Maruti Suzuki’s CEO and Chairman, RC Bhargava, stated that it’s nitrous oxide (N2O) that’s to be blamed and not Particulate Matter 2.0/ 2.5 (PM2/ PM25) for the alarming levels of air pollution in Delhi-NCR. He further stated that adopting western practices completely, to counter pollution, does not help in the Indian context. Detailed studies are the need of the hour to come up with specific solutions for India. Just before going to press, the National Green Tribunal (NGT) issued an immediate ban on all 10-year-old diesel cars in New Delhi. Pawan Goenka, executive director, Mahindra and Mahindra, says that vehicle regulations in India are unstable and every new budget levies changes to vehicles which does not bode well for the automobile sector. Another new programme is the Voluntary Vehicle Fleet Modernisation Programme, wherein vehicles bought on or before March 31, 2005 can be exchanged for a new BS-IV compliant vehicle. Owners, in exchange for their old car, get financial aid to buy a new car. They get a scrap value of the car, partial excise duty exemption and manufacturer’s special discount. The aim is to scrap old vehicles which contribute to air pollution at a greater level than modern day cars. The fuel efficiency of such cars is below that of modern cars, which translates to higher fuel imports and considerable losses to the exchequer. The programme estimates that 28 million pre-2005 vehicles will be scrapped. The savings for oil imports itself is estimated at Rs 7,000 crore. However, the finance ministry has, so far, refused to offer partial excise duty exemption for the vehicles as buyers of expensive vehicles stand to gain more. Instead, it intends to offer cash incentives. For now, the policy is stuck in limbo. Manufacturing hybrid/electric vehicles in India The government is also urging automobile and auto component manufacturers in India to get involved in manufacturing pure electric/hybrid vehicles and their components in India. The government believes that the manufacturing in India will significantly reduce the cost of electric vehicles. The high purchase cost and lack of charging infrastructure is one of the primary reasons why electric cars haven’t received the desired response. Pawan Goenka also stated that an electric car in the Rs 6-8 lakh bracket makes more sense in our country. Nitin Gadkari recently visited premium electric carmaker Tesla Motor’s headquarters in the US to discuss possibilities of tying up with Indian manufacturers to manufacture electric vehicles. He also promised land to set up a factory at a major port in India, which in turn would serve as the Asia manufacturing and distribution hub for Tesla Motors. The company says that it would consider the proposal if plans to expand manufacturing out of the US materialise. This could be hugely beneficial for India as Tesla’s prowess in manufacturing electric cars and setting up charging infrastructure is regarded as one of the best. Also, collaborating with Indian manufacturers would benefit both. For Tesla, India will offer cheap and cost-effective manufacturing while the Indian manufacturer gains access to proven technology. Recently, the government has approved retrofitment of electric/hybrid kits on cars that have been made on or after January 1990. The cost of the retrofitment is estimated to be under a lakh but we have our doubts. Primarily as such kits are a very new and rare concept and will be quite expensive. Further, fitting them will require extensive modifications and may affect the dynamics of the car, putting a big question mark on safety. Making safety systems mandatory in vehicles India is known to record one of the highest number of road accident-related fatalities in the world. A major contributing factor is the lack of safety systems like airbags and ABS in vehicles. While it may be
IRF expresses concern over Gurgaon traffic nightmare
With the Millennium City coming to a standstill following heavy rains leading to massive traffic jams, the International Road Federation (IRF) today expressed deep concern and called for concerted efforts, both long-term and short-term, to address the problem. A spell of monsoon showers, which is welcomed otherwise, has brought the Millennium City to its knees due to severe water-logging resulting in long traffic jams, leaving millions of commuters, including office-goers, stranded. “Due to almost non-functioning of storm water drains and inadequate sewage system, GURGAON roads get water-logged each Monsoon resulting in potholes, sometimes moon craters. Water accumulates at unexpected places spelling danger for both motorists and pedestrians,” IRF Chairman K K Kapila said. Road network in Gurgaon encompasses different zones of authority like Municipal Corporation of Gurgaon, Public Works Department, Haryana Urban Development Authority, private builders and the Delhi-Jaipur Expressway under the National Highways Authority of India. “Each year after the monsoon, these agencies tend to pass the buck and thereby virtually disowning their own responsibility, as a result there is acute water-logging, deep potholes, portions of the roads getting sub-merged and side-walks becoming unusable, causing immense hardship to the general public,” he said. Kapila said apart from creating a unified body comprising all these authorities to tackle the drainage and water-logging problems of Gurgaon with representatives from each of the agencies initiating appropriate long-term as well as short-term measures, there is an urgent need to find immediate solution to contain the damage due to flooding of roads. “With continued urbanisation, the drains are either choked or ineffective to carry the surface water to the deep storm water drains, which also lack adequate capacity. For this, a long-term solution with proper network of drainage lines with adequate capacity for storm water and sewage drains is an immediate necessity,” he said. Immediate short-term measures must also be undertaken at locations where roads have been flooded, the global road safety organisation said. Dallas Cowboys Jersey
Indian Oil Corp to introduce pre-booking of slots at petrol pumps to avoid congestion
You may soon be able to avoid queues at petrol pumps by pre-booking your slot, or pay for the fuel without reaching for your wallet or card. Indian Oil Corporation, which accounts for nearly half of all filling stations in the country, is planning to offer customers these conveniences shortly. The state-run company is building a technology platform that will help ease congestion at filling stations, cut waiting time and raise service level for customers, BS Canth, director (marketing) said. This comes at a time when Indian OilBSE 2.01 % Corporation, the nation’s largest refiner and fuel retailer, is in the midst of defending its market share as private players such as Reliance Industries and Essar Oil and other public sector rivals expand. As per the plan, customers will be able to book a slot on their way to a filling station so that they don’t have to wait in a long queue. The filling stations will display slot vacancies, guiding customers to the right nozzle. Vehicles will be given radio frequency identification (RFID) tags for automatic identification and payment, Canth said. The company plans to run a pilot on these initiatives in six-eight months, he said. Like some other fuel retailers, IOC has already tied up with mobile wallet providers, making payments easier. “This is going to be a second revolution in retail,” said Canth, referring to the ever-increasing role of technology in raising the service level and standardising operation. These services are being planned because the “customers have come to expect these things now”, he said. The first revolution in fuel retailing happened at the beginning of the last decade following a deregulation of petrol and diesel sales, Canth said. Then the private players, led by Reliance, stormed the fuel retailing market, raising the level of service and grabbing a large market share from state firms. A spike in oil prices forced the government to bring back fuel sales regulation just a few years later, but by then the public sector had learnt its lessons. They expanded heavily, raised the level of service and invested in branding. “I can’t ignore the competition. I need to continue to innovate to stay the market leader…Soon we should be reengineering our offerings,” Canth said. The company is working on a plan to tailor its services based on “location and demographics”, he said. To drive home his point, Canth said customers in smaller towns and rural areas may not value fast filling as much as people in big cities do. “But if we were to provide all services at all locations, it would raise our cost. Therefore, we have to distinguish between what people appreciate at different places and accordingly plan our offering,” he said. Another area that the company is focused on is strengthening its presence on highways, more of which are being constructed or widened these days. It has begun building highway pumps with multiple facilities for travellers such as eateries, entertainment, bathing and resting facilities. Chris Harris Jr Womens Jersey
Mirage-2000 upgraded: Another HAL project takes off on schedule
Continuing its success in various projects recently, HAL flew the first FOC upgraded Mirage-2000 aircraft on July 28, adhering to the scheduled date of today. “We have done it again on time. What it proves is HAL’s capability for mid-life upgrade of platforms to overcome obsolescence issues, enhancing the reliability and maintainability of these aircraft. The introduction of a modern facility for this project ensured the timely upgradation of the Mirage fleet,” said T Suvarna Raju, CMD, HAL. The Final Operational Configuration (FOC) design was implemented on an Initial Operational Configured (IOC) aircraft, which was received at HAL about eight months ago. “This significant milestone could be achieved with the dedicated effort of HAL’s team of designers and engineers with active support from IAF, RCMA and DGAQA,” added Raju. Kasen Williams Jersey
Lessors approach DGCA to get 3 Air Pegasus planes deregistered
Aircraft lessors have approached the civil aviation regulator, Directorate General of Civil Aviation (DGCA), asking it to deregister their three planes loaned to Air Pegasus after the airline defaulted on rental payment. The Bengaluru-based airline, which is facing severe fund crunch, has already suspended operations indefinitely, DGCA sources said. The airline has not been carrying out operations since Wednesday. “We have received an application from the lessors seeking deregistration of three ATR-72 plane with Air Pegasus,” a source said. The application is being processed, it said, adding that of the three aircraft, one is already out of operation for quite sometime. The deregistration will enable the lessors to take the aircraft out of the country after repossessing them. Air Pegasus Managing Director Shyson Thomas did not respond to calls. The carrier, which was launched in April 2015, operates flights from Bengaluru to Chennai, Cuddapah, Hubli, Madurai, Mangalore, Puducherry, and Trivandrum in South India, as per latest data available with the DGCA. Recently, DGCA has suspended five Air Pegasus pilots for serious safety violations. The civil aviation regulator had also warned that the airline would not be allowed to fly on new routes unless the lapses were addressed at the earliest. At that time, a senior Air Pegasus official had said that the issues raised by the regulator had been addressed. A safety audit of Air Pegasus, conducted in late April, showed serious violations safety rules in some of its flights. Ricky Seals-Jones Womens Jersey
Tata Power’s South African JV commissions 134 mw wind and energy farm
Tata Power Company’s joint venture in South Africa has commissioned a 134 megawatt wind energy farm in the country, the Tata group utility said in a press statement on Friday. Tata Power’s 50:50 JV with Exxaro Resources in South Africa, namely Cennergi (Pty) achieved commercial operations for its 134 MW Amakhala Emoyeni Wind Farm Project on Thursday. Cennergi was selected as the preferred bidder for two wind projects under the second window of the Renewable Energy Independent Power Producer Procurement Programme by the South African government. The statement said that Cennergi’s second wind project is expected to go into commercial operations shortly. “Tata Power has been pursuing growth opportunities in India and overseas. The commissioning of Amakhala Wind farm, Tata Power’s first wind project outside India, marks the company’s continued progress on its objectives of enhancing non-fossil based generation portfolio up to 30-40% of its total generating capacity and thereby creating value for its stakeholders,” said Anil Sardana, CEO & Managing Director, Tata Power. Eric Rowe Authentic Jersey
SpiceJet sees growth in passenger traffic; more in regional market
Lower oil prices has led to a growth in the domestic airline industry and also airlines have increased their capacity. According to data from Directorate General of Civil Aviation the airlines have carried almost 21% more passengers in June 2016 than it was in June 2015 (7.97 million and 6.6 million passengers respectively). SpiceJet is flying the highest in this criteria as reported, they are functioning at 93% seats full. SpiceJet told Bloomberg TV India, that it has seen good growth of 22 percent in the number of passengers. It has spotted a change in the mode of transport that people are using, that is more and more people are upgrading to air travel. Although Spicejet said that it doesn’t see any drop in the demand for domestic air travel, but most of the growth is from the regional market, and the growth in the metro cities market has been rather mute. Still the airline believes that continuous discounting will keep stimulating demands. Demands for International flights has been seasonal. It was only two years ago, the airline was making huge losses as they were not getting oil refills and also the retreating of creditors had hit them badly. Spicejet recently launched its subsidiary called ‘SpiceJet Merchandise Private Limited’ with a focus on consumer merchandise, including readymade apparel. From January to March this year, in a fifth straight quarter, Spicejet posted a net profit Rs 73.19 crore, a three fold rise. Ozzie Newsome Authentic Jersey