HCC Concessions Ltd, the infrastructure development arm of HCC Group, completed its 100% sale of Farakka-Raiganj Highways Ltd (FRHL) to Cube Highways and Infrastructure II Pte Ltd (“Cube Highways”). FRHL, which forms part of the main arterial highway in West Bengal, is among the largest Public Private Partnership (PPP) projects in India, with an enterprise valuation of Rs 1,508 crore, comprising debt of Rs 905 crore and an equity valuation of Rs 603 crore. Cube Highways is a platform controlled by I Squared Capital, Abu Dhabi Investment Authority and IFC.
The total expected pay-out of Rs 603 crore to HCC Group includes (i) cash pay-out of Rs 270 crore which combines equity consideration and contractor payments; (ii) Rs 233 crore of hold backs to be released on the completion of dispute resolution with NHAI; (iii) up to Rs 100 crore of earnout is payable in 2023 contingent on traffic projections (the traffic in FRHL has already returned to pre-COVID levels).
Additionally, as part of the agreement with Cube, HCC Group will be entitled to a revenue share from FRHL over the entire concession period, which could be material in nature, and the details of which will be specified on completion of the ongoing conciliations with NHAI. The enterprise value of Rs 1,508 crore also excludes a structure section of the project, which was descoped by NHAI, and for which Cube has offered a contingent pay-out. A successful closure with NHAI in the coming months of its tolling right confirmation, would entitle HCC Group to additional consideration estimated at Rs 200 crore.
On the occasion, Arjun Dhawan, Group Chief Executive Officer, HCC said “We are pleased to conclude a transaction of this size and complexity, despite the hurdles presented by COVID19. We have faced every type of challenge in developing this project, from lengthy land acquisition delays to meeting the expectations of numerous stakeholders while executing in major towns such as Farakka, Kaliachawk, Malda, and Gajol. With the support of NHAI and our lenders, without whom this project would not have been possible, FRHL became the most valuable asset in our Concessions portfolio. This sale to Cube unlocks substantial sums which may be reinvested back in our EPC business.”