Kalpataru Power Transmission Limited (KPTL) is in talks with Cube Highways and Canadian pension fund PSP Investments-backed roads platform ROADIS over the disposal of its roads portfolio, according to two people familiar with the situation.
The roads portfolio is housed under Mumbai-based KPTL’s subsidiary JMC Projects (India) Limited.
The company has four road projects that commenced operations in 2014-15. According to the concession agreements signed between National Highways Authority of India (NHAI) and JMC, two of the projects – Kurukshetra Expressway and Vindyachal Expressway – have concession periods of 28 years and 27 years respectively stretching till 2037-38. The other two projects – Brij Bhoomi Expressway and Wainganga Expressway – have concession periods of 15 years and 18 years respectively till 2027 and 2030.
According to a June 2018 note by Standard & Poor’s local unit CRISIL, Kurukshetra Expressway had lower than anticipated traffic volumes and revenue, leading to significantly lower cash flows. “The deferral of premium from NHAI and support from sponsors have been inadequate to meet payments in a timely manner leading to overdues as of June 2018,” CRISIL said in the note. Kurukshetra Expressway is a joint venture with Kolkata-based Bharat Road Network Limited.
According to another ratings note dated February 2019, by Moody’s Indian arm ICRA, the Brij Bhoomi Expressway project also had lower cash flows for the last four years but was being compensated by its parent firm to meet its debt repayments. Wainganga Expressway, rated by CARE, also has “significantly lower than envisaged traffic on the toll road” and is servicing debt with the help of its parent firm.
However, the road projects, while still loss-making, have started to show improved cash flows, one of the sources said. JMC Projects reported a 42.1% on-year rise in net profit to INR 487m (USD 7m), on a 29.7% rise in net sales to INR 9bn in the fourth quarter of 2019.
KPTL MD and CEO Manish Mohnot told local media on 4 July that the company will divest its non-core assets to focus on its core engineering business and participate in more power transmission projects via the public, private partnership route. The sale of the roads portfolio is expected to complete by the end of the current financial year, through 31 March 2020, he said. While the company had been talking to potential buyers for a while, the road projects were not as profitable as its transmission projects, he added.
Bharat Road Networks declined to comment. A Cube Highways spokesperson in India also declined to comment. ROADIS said it does not comment on potential business development opportunities while an external representative of KPTL did not respond to emails requesting comment.
KPTL, on 3 July, said, that it entered into binding agreements with Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ)-backed CLP India to sell stakes in three power transmission projects.
Inframation had reported on 9 April that Kalpataru had put the three projects up for sale.