Essel Infra’s road assets get 4 non-binding offers

Industry experts remain skeptical of infra M&A deals

From being the holding company of an amusement park to a fullfledged presence in the infrastructure sector, Essel Infraprojects has come a long way, but now it is time to sell.

The company, which looking for a buyer for its assets for more than a year now, said it had received four non-binding offers for its road assets.

“Essel Infra confirms the ongoing discussions with all the prospective buyers in the ecosystem, pertaining to the divestment of its road portfolio. The company has already received four non-binding offers from prospective buyers and is in the process of shortlisting those who will be provided an opportunity to proceed,” said an Essel Group spokesperson.

With road projects worth ~1 trillion looking for a buyer, industry experts point out it is a tough market for anyone to sell infrastructure assets.

“Buyers are now willing to pay much less than what was offered a year ago. There seems to be a change in traffic projections that these companies are working out M&A decisions on, with traffic growth now expected to be lower,” said a senior rating agency official.

An IDFC Research report puts Essel Infra’s road portfolio at ~9,200 crore, which includes seven operational and three under construction projects. “There is a large number of assets in the market looking for suitable buyers at an acceptable valuation. Besides, the government is offering brownfield assets through competitive bidding through TOT (toll-operate-transfer) model in roads, second tier airports. It has become buyer’s market. As a result, sellers are finding it difficult to close the deals,” said Vishwas Udgerikar, Partner, Deloitte India.

Among those looking to monetise assets is the National Highways Authority of India (NHAI) with its TOT model, he said. The response to the NHAI’s second round of TOT bidding was also tepid.

In a bid to monetise its assets, Essel Infrastructure managed to strike a deal with Sekura Energy, backed by the Edelweiss Infrastructure Yield Plus Fund, for two operational and two under-construction transmission projects in October last year.

The Essel Infra spokesperson added, “Some of the customary regulatory and lender approvals have been received. Once all pre-closing conditions are met, the closure of the transaction will occur.”

An email query sent to Edelweiss requesting status of the deal remained unanswered. Part of its power portfolio includes seven operational solar assets and 15 under construction solar assets valued in the range ~3,400-4,000 crore, according to IDFC.

The Essel group has also been on the lookout for a buyer for its power distribution business. “They were in the market earlier, but not much translated into a deal,” said a person with knowledge on the development. The company runs power distribution in the Nagpur and Muzaffarpur circles on the franchise model.

On its distribution business, the Essel spokesperson said Essel Infraprojects was open to other divestments too.