Investors queue up, but IL&FS's sale of road assets to be bumpy

Despite investor interest, the sale of road projects is going to be a complex task for the crisis-hit Infrastructure Leasing & Financial Services (IL&FS) Group, which is monetising its assets to get out of the financial mess.

It may take a month for the shadow lender to put up road assets on the block and all of them may not come up as a single package for monetisation, sources said.

IL&FS Transportation Networks Limited (ITNL), having a debt of around Rs 28,000 crore, has 31 road assets including projects that are ready, under construction and those which have been awarded but work is yet to commence.

Sources tracking the developments said both domestic as well as international investors have shown a healthy interest in these assets and they would come forward for bidding.

But the sale of road assets is likely to be cumbersome as each of the projects needs to be analysed separately. 

"The assets with ITNL can be classified as a mix of annuity, build-operate-transfer and semi-government. Among these sections, the concession periods too vary. It is a complex portfolio to put it other words," said an analyst.

For example, Road Infrastructure Development Company of Rajasthan Ltd (RIDCOR) and Jharkhand Road Projects Implementation Company Ltd (JRPICL) are joint ventures with the respective state governments. "There are clauses in the agreement for them (IL&FS) to divest their stake to another private player and retire the debt," said a source. However, with the Gujarat government showing willingness to acquire IL&FS's stake in the Gujarat International Finance Tec-City (GIFT), Rajasthan and Jharkhand governments, too, may come forward to acquire the private player's stake.

"In their case, the debt is from their own group," added an analyst.

Moreover, it will be easier to find buyers for the assets that are operational and tolled. These projects are likely to attract better valuation or price bids as compared to annuity projects.

The projects where construction is yet to be completed would face certain challenges. Similarly, the assets having a concession period of below five years, particularly those which are nearing the end of the concession period, may be difficult to monetise. Private players acquiring such projects may take debt to finance the purchase, which will result in higher interest cost for them.

IL&FS Group spokesperson denied commenting on the subject.

Even before the crisis at IL&FS came to the fore, discussions were underway between the group and Cube Highways for the acquisition of five road projects by the latter. Similarly, American private equity firm Lone Star Funds had shown interest buying three road projects from IL&FS, which has a debt of over Rs 91,000 crore.

CUTTING THE DEBT PILE

• Rs 28,000 crore – Debt of IL&FS Transportation Networks Ltd
   
• 31 – Road assets the company has, including projects that are ready, under construction and those which have been awarded but work is yet to commence