In a new trend in the road infrastructure space in India, pension funds, sovereign wealth funds and private equity funds from Canada, Abu Dhabi, Australia and Singapore are seen emerging as new owners of road assets, replacing traditional owners like IRB, GMR, Dilip Buildcon and L&T, to name a few.
So far, these funds have collectively pumped in about ₹20,000-₹25,000 crore in up-and-running road assets and more funds are on their way. “Ownership of road assets has significantly changed over the last two years. Suddenly, there has been a change in ownership pattern,” said Jagannarayan Padmanabhan, director and practice leader, Transport Infrastructure Advisory, Crisil Risk & Infrastructure Solutions.
“Earlier it was L&T IDPL, Ashoka Buildcon, IL&FS and others who were the road developers. Now, you are having a separate set of owners of assets who were not active in this space. These include GIC, CDPQ, CTPID, CPPIB, Macquarie and Esquire Capital, who have now become owners of road assets.”
Some of the other foreign investors in Indian assets include AMP Capital and National Infrastructure & Investment Fund (NIIF), in which Abu Dhabi Investment Authority (ADIA) has made significant investment.
“What this means is that other than NHAI, foreign investors are controlling a certain percentage of India’s road assets. That is a significant twist in how things pan out. So, this is the set of people who have moved in the capital and more are is set to come,” he said. As per estimates, ₹20,000 crore to ₹25,000 crore has already come in from these foreign funds to brown field assetswhich are risk-free. These strategic investors are looking at the long term. “This is not flight capital that is coming,” he said. The divestment has helped and ‘a good number of transactions are on the cards’ by people who want to look at these projects. He added that the Centre’s plans for investment of ₹100 lakh crore in infrastructure in 5 years seemed to be far-fetched.
“This is a bit of stretch in terms of investments that can be garnered. So, while there is an ambition to do that kind of investment, the reality is there could be a shortfall,” he said.
Some of the investment programmes that had been planned before, like Bharat Mala [Road Programme] which is close to 6 lakh crore, Sagar Mala [Port] which is close to 8 lakh crore are going to be there.
“Internally, last year we had a view that in the next 5 years, the need for investment is about ₹50 lakh crore.
“While the share of central government funding is close to 45%, State governments will spend 25-27% and the rest will be done by the private sector. This means that the Centre is not going to spend the planned entire ₹100 lakh crore,” he said.
The Centre, which has already started asset monetisation programme, has found good success on roads and airports. Now it is looking at telecom towers, pipelines and the power distribution companies. A significant amount of non-core real estate of PSUs is also likely to go for divestment