Informist, Tuesday, Jul 13, 2021
--Sources: Adani Ent in talks to buy stake in Sadbhav Infra
--Adani Ent may buy significant stake in Sadbhav Infra
--Adani deal may cancel Sadbhav Infra, Sadbhav Engg merger
By Sunil Raghu
AHMEDABAD - Adani Enterprises Ltd is learnt to be in talks to acquire significant stake in infrastructure asset company Sadbhav Infrastructure Project Ltd, sources in know told Informist.
A deal with Adani Enterprises will result in cancellation of a proposed merger of Sadbhav Engineering and Sadbhav Infrastructure, the sources said.
"It may take a while for the deal to finalise. For now, the discussions are revolving around percentage and valuation of the equity to be sold by Sadbhav Infra," one of the sources said.
Sadbhav Infrastructure currently has Ahmedabad Ring Road Infrastructure Ltd, Maharashtra Border Check Post Network Ltd, and three hybrid annuity management projects as operational assets. The company was to be merged with Sadbhav Engineering following the sale of nine road assets to an infrastructure investment trust owned by Larsen & Toubro and the Canadian Pension Investment Board for over 66 bln rupees.
Sadbhav Engineering owns about 70% of Sadbhav Infrastructure.
Sadbhav Infrastructure went public with a 4.25-bln-rupee initial public offering in September 2015, and issued shares at 103 rupees a share.
At 1358 IST, shares of Sadbhav Infrastructure were trading 9.2% higher at 37.90 rupees on the National Stock Exchange, while those of Adani Enterprises were down 0.7% at 1,410.55 rupees.
Sabdhav Engineering is expected to use funds from the stake sale to Adani Enterprises to pare debt, which stood at 17.1 bln rupees as on Mar 31.
Adani Enterprises is expected to hold the stake in Sadbhav Infrastructure through one of its road business subsidiaries. Adani Road Transport Ltd and Adani Road Operations & Maintenance Ltd are in the business of construction, operations and maintenance of roads.
The tie-up could help Adani group get an experienced partner, while Sadbhav Infrastructure could get a partner with bigger balance sheet, a pre-requisite for a capital-intensive sector such as roads.
Most projects road companies bid for require blocking large funds as bidding advance or as guarantee money to ensure seriousness in bidding, quality of roads, or their proper operation and maintenance. Even the toll is collected over years, while the cost is required to be made upfront. This forces many road companies to leverage their balancesheet and even makes it difficult for many to expand beyond a point.
"The key issue facing Sadbhav group is of cash in hand. The situation is such that at times it is forced to delay salaries of to its staff for two or three months," sources said. "For Sadbhav, road projects in North India too have failed to generate toll as was expected and COVID has only made the situation worse."
This, even as Sadbhav group has raised over 16.5 bln rupees since Apr 1 through bonds, sale of units of IndInfraVit and debentures. Sadbhav Engineering has also extended its unconditional and irrevocable corporate guarantee for the entire outstanding long-term debt of Sadbhav Infra.
Repeated attempts to reach out to the Sadbhav group management did not elicit any response. An Adani Group spokesperson said that the group did not want to comment on "speculation", though as part of the company's business growth strategy, "we continue to evaluate various viable options". End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Avishek Dutta
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