Canadian Pension Fund to Invest Rs 2,000 Crore in Larsen & Toubro Infra Arm

Engineering major Larsen & Toubro (L&T) on Monday said the Canada Pension Plan Investment Board (CPPIB) has agreed to invest over Rs 2,000 crore in its infrastructure arm - L&T Infrastructure Development Projects (L&T IDPL), a move that will help the company complete its ongoing projects.

This is the first direct private investment by a Canadian pension fund in a domestic infra development company, Group chief financial officer R Shankar Raman said in a statement.

Initially, CPPIB's wholly-owned subsidiary, CPP Investment Board Singaporean Holdings 1 (CPPIBSH), will make an initial investment of Rs 1,000 crore in L&T IDPL, a release issued in Mumbai said.

This will be followed by a second tranche of Rs 1,000 crore, or a higher amount as may be agreed between the two, 12 months after the initial investment, it said.

"The investment board will buy preference shares of L&T IDPL, compulsorily convertible into equity shares by 2018 at a mutually agreed price. After conversion, the CPPIBSH will hold a minority stake in L&T Infrastructure," according to the release.

Mr Raman said that in the long term, the Canadian pension fund would be an ideal partner for L&T and will provide growth capital to L&T IDPL to expand its infrastructure development business.

"This transaction represents CPPIB's first investment in India's infrastructure sector with a highly reputable partner and fits well with our strategy for the country as a key long-term growth market," said Andre Bourbonnais, senior vice president-private investments at CPPIB.

L&T IDPL's business includes development of roads and bridges, ports, metro rail, power transmission lines, wind energy and emerging sectors such as water and railways. It handles infrastructure assets with an estimated project cost of $7.5 billion comprising 23 projects across sectors.

The completion of the transaction and receipt of funds are subject to fulfilment of customary closing conditions for transactions of this nature and procuring approvals from government authorities and regulators, the release said.

Toronto-headquartered CPPIB has been an active investor in the recent past in Indian firms across sectors.

In February, it tied up with diversified business conglomerate Piramal Enterprises to offer rupee debt financing to residential projects in major metros. The two partners have committed an initial investment of $250 million each for this.

Last November, CPPIB and the Shapoorji Pallonji Group formed a strategic alliance to acquire FDI-compliant, stabilised office buildings in major metropolitan areas in the country.

CPPIB will own 80 per cent of the venture with an initial equity commitment of $200 million.

The Canada Pension Plan Fund totalled 219.1 billion Canadian dollars as of March 31.