IPO 'very possible' for Indian roads JV, says Actis

Michael Till, co-head of infrastructure investments at the emerging markets specialist, reveals Actis’ plans for its Indian roads joint venture with Tata and explains why ‘capital has to be very patient in emerging markets’.

TRIL Roads, the joint venture between emerging markets specialist Actis and India’s Tata Group, may end up being listed on the Bombay stock exchange in a few years’ time, Michael Till, co-head of infrastructure investments at Actis, told Infrastructure Investor.
 

Michael Till

In its debut deal in India’s infrastructure sector, Actis has teamed up with Tata to invest a combined $200 million in road building projects across the country over the next five years. Actis paid $77.5 million for a 35 percent stake in TRIL Roads with Tata investing the remaining $122.5 million to hold 65 percent of the vehicle’s equity.
 
“I think that [an initial public offer] is a very possible end result,” said Till. “I think the time scale will depend on our record and the number of deals we have concluded. So I would expect that to take some time – perhaps five years or more – as we bid for projects,” he explains.
 
Actis and Tata are looking to team up with Italian toll roads operator Atlantia, which already has a partnership agreement with Tata, to invest on a 50/50 basis at concession level, potentially taking the amount of equity available to TRIL Roads to $400 million. This capital will then be levered with government equity grants and project debt to allow investments in road concessions of some $2 billion, Till says.
 
For TRIL Roads, Till would like to build “a portfolio of six or seven roads – perhaps more depending on their size – and then, typically, you would be looking to get an equity value in the business of, say, $500 million,” before the idea of a listing becomes feasible, he explains, adding that Actis is in the joint venture for the long term:
 
“Investing in infrastructure in emerging markets requires capital to be very patient as it is usually supporting the development of new capacity, i.e. building new assets. If you manage the development process well, you can usually create value by de-risking an asset as it becomes operational. We will often then seek to create further value through refinancing and by aggregating assets into a portfolio that is attractive to other investors.”
 
To read the full interview with Actis’ Mike Till, please check out the September 2010 edition of Infrastructure Investor magazine.