Representative Image (Source: ShutterStock)
IRB Infrastructure Developers Limited has struck two separate equity fundraises through preferential allotments to Cintra, an arm of Spanish infrastructure major Ferrovial and Singapore’s GIC, the highway construction firm announced on October 26.
Moneycontrol was the first to report the deal earlier in the day and had named GIC & Cintra as likely investors
According to the deal details, Cintra would invest equity capital of up to Rs 3,180 crore and will have a maximum stake of 24.9 percent in IRB post their investment. On the other hand, GIC (through its affiliate), would invest equity capital of up to Rs 2,167 crore into IRB for a maximum stake of up to 16.9 percent in IRB post their investment.
The total investment proceeds to IRB from these investments will be a maximum of Rs 5,347 crore, making it the biggest equity fundraise by a listed road and highway firm. The issue price for both the preferential allotments is Rs 211.79 per share.
Mr. Virendra D. Mhaiskar, the founder promoter of IRB will continue as the promoter and single largest shareholder post completion of the transactions with an approximate 34.0 percent stake and will retain management control of IRB.
The two transactions are subject to execution of definitive documents, approval of IRB shareholders, receipt of regulatory and lenders approvals, and satisfaction of customary conditions.
Following is the indicative use of proceeds from the twin investments -
1)Deleveraging of the Corporate Level Debt – Rs 3,250 Cr
2)Growth Capital for Current and Future Opportunities – Rs 1,497 Cr
3) General Corporate Purposes – Rs 600 Cr
In the eventuality that IRB is unable to issue shares to both investors concurrently (including due to the timing of receipt of regulatory approvals of either investor being longer than the regulatory approvals for the other investor), the total investment would get reduced to Rs 4,307 crore – Rs 4,462 crore. The exact quantum will depend on which investor transaction is completed earlier. Avener Capital Private Limited acted as the exclusive financial advisor to IRB for the transaction
Commenting on the occasion, Virendra Mhaiskar, CMD – IRB Infrastructure Developers Ltd. said “We are delighted to welcome Ferrovial through its subsidiary - Cintra into the IRB Family. Through this investment, IRB will deeply benefit in terms of their global experience and best practices in the development, investment, and operation of toll road projects. We deeply value the existing relationship with GIC. This new investment by GIC is a further stamp of approval of their confidence on the robust business model of IRB.
"The strategy we initiated in 2017 by sponsoring the first Public InvIT provided IRB a platform for recurrent capital recycling. This strategy was further strengthened in 2019 by sponsoring the Private InvIT, which enhanced the business model by getting a recurrent investor for reducing equity commitments thus increasing the ability to take in more projects at one time. The current transaction which addresses the twin objectives of deleveraging the holdco debt and providing growth capital is the final step in optimizing the capital structure, unleashing the free cash flow generation for growth, thus creating immense shareholder value," Mhaiskar added.
“This investment in IRB Infrastructure Developers represents a great opportunity for Cintra to expand into a new market for us — India — that has very promising fundamentals for toll road development. IRB has a portfolio of high-quality assets and a platform with the capability to capture some of the strong growth expected in this sector. Cintra would work with IRB to enhance its competitive position in the Indian market. Our international experience as an investor and operator would optimize IRB's operational capacity and ESG compliance, a field in which Cintra and Ferrovial are international leaders,” added Andres Sacristan, CEO, Cintra.
Eng Seng Ang, CIO – Infrastructure at GIC said “Our investment in IRB, a leader in Indian road infrastructure, will enable the company to develop and operate a greater network of roads and further enhance the infrastructure in India. As a long-term global investor, we see India as a key market, given its strong economic fundamentals and infrastructure development potential.”