Sadbhav Group To Sell Nine Road Projects To IndInfravit Trust 

Sadbhav Engineering Ltd. said its infrastructure unit will sell its entire stake in nine operational road projects to Canadian pension fund-backed IndInfravit Trust as the construction company looks to pare debt.

The L&T-backed infrastructure investment trust will buy these projects from Sadbhav Infrastructure Project Ltd. for Rs 2,550 crore—Rs 1,900 crore in cash and the remaining Rs 650 crore as units of the trust—the construction company said in an exchange filing. Its stake will not exceed 10 percent unit holding in the trust after the transaction.

The deal, valuing the roads assets at Rs 6,611.2 crore, will see the parent's net debt come down to Rs 4,060 crore, the filing said. Sadbhav Engineering's consolidated debt, according to an earlier disclosure, stood at Rs 10,423 crore as of March.

“The deal augurs well as it would help significantly de-leverage balance sheet for Sadbhav Engineering,” Prem Khurana, research analyst at Anand Rathi, said in a note. It will give Sadbhav Infrastructure access to capital to cover for the pending equity needs, he wrote.

The infrastructure unit will continue maintain and manage the Rs 4,000-crore road contracts for the remaining period. Of the nine 2,619-length-kilometer operational projects, seven are tolled and two are annuity-based. They contribute around 24.05 percent to the overall turnover of Sadbhav Infrastructure.

The deal is in line with estimates in terms of inflows and unit allocations in the trust, Kunal Bhandari, research analyst at HDFC Securites, said in a note. The much-awaited announcement paves the way for Sadbhav Infra Projects bidding for new hybrid annuity model/build operate transfer projects, he said. “We expect Sadbhav Engineering to accelerate execution as liquidity is sorted and the money is expected in three months.”

IndInfravit is backed by L&T Infrastructure Development Projects Ltd., and other unitholders include Allianz insurance companies represented by Allianz Capital Partners, Canada Pension Plan Investment Board and OMERS Infrastructure.

“The InvIT platform clearly underlines how India remains an attractive destination for serious and committed long-term investors,” said J Subramanian, chief executive at LTIDPL IndvIT Services Ltd., said in the statement. “We look forward to more such transactions in the near future.”