KKR, OTPP to infuse up to $700 million in Highways Infrastructure Trust to acquire roads worth $1.8 billion

KKR, OTPP to infuse up to $700 million in Highways Infrastructure Trust to acquire roads worth $1.8 billion

Private equity investor KKR and Canadian pension fund Ontario Teachers’ Pension Plan (OTPP) are looking to infuse Rs 5,000-6,000 crore (approximately $700 million) in Highways Infrastructure Trust (HIT), which owns and operates road projects, people aware of the matter told Moneycontrol.

KKR is the sponsor of the HIT infrastructure investment trust (InvIT), while OTPP is its second-biggest shareholder.

The capital raised will fund the acquisition of two major road portfolios worth more than Rs 15,000 crore (around $1.76 billion), which the InvIT is in the process of acquiring, sources said.

These include 12 roads the InvIT is acquiring from PNC Infratech for an enterprise value of Rs 9,000 crore.

The KKR-PNC agreement, announced in January, is one of the biggest in India’s road sector and is the biggest of the year.

Several road assets in the portfolio are awaiting approval from the National Highways Authority of India which is expected soon.

The portfolio comprises 11 hybrid annuity model (HAM) roads from NHAI, one toll road from the Uttar Pradesh State Highways Authority and represents approximately 3,800 lane kilometres in Rajasthan, Uttar Pradesh, Madhya Pradesh and Karnataka.

The trust is also in the process of acquiring NHAI’s toll-operate-transfer (TOT) bundle-16 for Rs 6,661 crore. The TOT bundle-16 is a 251km stretch on the Hyderabad-Nagpur corridor of NH-44 in Telangana.

Acquisition of these roads will make Highways Infrastructure Trust one of the biggest owners of operating road assets in the country.

The $700-million infusion from KKR and OTPP is likely to take place in the first quarter of 2025, the sources said.

Emails sent to KKR and OTPP did not elicit a response.

HIT’s portfolio comprises 14 assets with a total length of 3,435 lane km across nine states, including the recent acquisition of a toll asset from Navayuga Engineering Company Limited and three HAM assets from HG Infrastructure.

HIT manages assets worth Rs 10,200 crore, its annual report for FY24 said. The acquisition of the PNC and TOT assets will significantly increase its assets under management.

The large capital infusion by KKR and OTPP in the Indian roads sector is a validation of the infrastructure opportunity in the country and the government's drive for increased public sector spending on infrastructure projects as a growth driver for the economy.

In its last union budget, the Indian government increased its infra capex spend by 11 percent to Rs 11.11 trillion or 3.4 percent of the GDP.