According to reports, deals in the infrastructure space are set to increase as companies put dozens of assets across roads and renewable energy sectors on sale, according to analysts and investment bankers. A number of such deals have either been announced or are in the due-diligence stage and will likely be completed in 2017.
A number of infrastructure-focused funds and overseas pension funds have announced plans to invest in India’s roads and renewable energy projects.
Also, while deals in the thermal energy sector are expected to remain subdued due to the presence of only a handful of buyers, predominantly looking for operating assets, “the renewable sector, primarily solar, will see activity in fund-raising as companies will continue to need additional capital to build their projects,” Singh added.
Several Indian infrastructure developers, weighed down by debt, have announced exits from individual highway projects to monetize assets and repay creditors while renewable energy firms evaluate fund-raises and going public.
The infrastructure sector raised about $3.78 billion in 2016 across 36 transactions, including mergers and acquisitions (M&A), private equity (PE) investment and two initial public offerings (IPOs), analysis of monthly data from investment bank Equirus Capital Pvt. Ltd showed. This compares with $2.9 billion raised in 2014 and about $3.7 billion raised in 2015.
According to data from Grant Thornton India, about $2.91 billion was raised from 39 M&A and PE transactions in 2016 across engineering, infrastructure, and clean-tech sectors.
Funds such as US-based I Squared Capital, Indian asset manager IDFC Alternatives’ infrastructure fund, Canada’s Brookfield Asset Management, Australia’s Macquarie Group, and the Canadian pension funds Canada Pension Plan Investment Board (CPPIB) and Caisse de Depot et Placement du Quebec (CDPQ) have committed large investments in the sector and are looking to buy assets across roads, thermal power and renewable energy to build their own portfolio in India. CDPQ, for example, had last year committed investments of $150 million for renewable energy in India and also joined hands with Tata Power Co. Ltd and ICICI Venture to launch a platform to facilitate investments in power projects with an initial capital of up to $850 million.
“Going forward, I would expect a lot more mid-sized M&A activity in renewables given that significant solar capacity would get commissioned from the equity lock-in restrictions in 2017. Likewise, I expect the TOT (toll-operate-transfer) model to be a game changer in road sector investments this year,” Aggarwal said.