Infrastructure India has announced that an agreement has been signed for the sale of its interest in Western MP Infrastructure & Toll Roads Private Limited (“WMP”). It is also providing an update on its largest portfolio asset, Distribution Logistics Infrastructure Limited (“DLI”).
WMP operates a 125 kilometre toll road in the central Indian state of Madhya Pradesh with a 25-year concession, which commenced in April 2008. IIP invested in WMP in 2008 through its wholly owned subsidiary Roads Infrastructure India, which holds a 26 per cent interest in the asset. IIP’s total investment in WMP amounts to £12.5m. The remaining 74 per cent interest in WMP is owned by Essel Infra Projects Limited.
On 7 April 2016, they agreed to sell the entire 26 per cent interest in WMP to an affiliate of Essel Infra for an agreed cash consideration of INR 2,030 million (approximately £21.6m). The sale price represents a discount of approximately 13 per cent to the £25m value ascribed to IIP’s interest in WMP in its unaudited interim results for the period ended 30 September 2015. The transaction is expected to close in the second half of Q2 2016 and the net proceeds from the disposal will provide the Group with additional working capital resources.
The Board says it is pleased with the terms of the sale of IIP’s minority interest in WMP, which it says have been achieved amidst difficult market conditions in the Indian road sector.
DLI is 99.9 per cent owned by IIP and is one of the largest private supply chain transportation and container infrastructure companies in India, with a large operational road and rail fleet. DLI continues to make progress with implementation of its business plan.
Following revisions to government procedures for customs notifications, DLI is pleased to report that it has now received regulatory approval from the Customs Commissioner for its Nagpur terminal to commence export-import (“Exim”) operations. This enables DLI to commence and ramp-up operations through its own customs bonded area at Nagpur, and crucially, the ability to operate the integrated logistics park to its full potential.
At Palwal, key infrastructure relating to Exim and domestic operations is now complete. At Bangalore, infrastructure for both Exim and domestic operations is complete and DLI has received in principle agreement from the Indian Railways for the rail siding at its integrated logistics park, which is already under construction.
In November 2015, torrential rainfall and local flooding in Chennai disrupted construction at DLI’s terminal. The floodwaters took several months to recede and DLI management believe it prudent to revise the layout of the site. The reconfiguration of the container freight station and Free Trade Warehousing Zone is expected to lead to commissioning of the facility late this calendar year.
While market conditions in the industry continue to be soft, with tight margins in domestic rail transportation and no rebound in Exim volumes, the Board continues to be optimistic in DLI’s long term potential and the strength of its business plan.
IIP : Infrastructure India sells toll road