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Another mega deal on cards

ICICI Ventures, IDF in process of picking up 15-20% in L&T IDP arm

india Updated: Jan 23, 2006 02:24 IST

In one of the largest domestic private equity deals in India in recent times, ICICI Ventures and India Development Fund (an infrastructure equity fund with a corpus of Rs 1,000 crore) are in the process of picking up anything between 15 to 20 per cent in a L&T subsidiary L&T Infrastructure Development Projects Pvt Ltd. Interestingly, ICICI Ventures and IDF will acquire a stake for $100 million (Rs 450 crore) making the company’s valuation in the vicinity of Rs 2250 crore.

In many ways, L&T is unleashing the potential of its infrastructure play by offering a piece of the action to private equity firms. When contacted Y M Deosthalee, CFO confirmed that the company was hoping to close the deal in the short term. He said, “We are in discussions with financial investors and should complete in the next month or so.” It is believed that the aim of bringing in financial investors into the holding company is to separate L&T’s construction business from its investment arm. The holding company is likely to be listed at a later date, though the timeline has not been determined yet. At the same time, the exercise will help in unlocking the hidden value of the company.

With the government rolling out its gargantuan infrastructure push, L&T hopes to be at the cutting edge through this holding company. L&T IDP is the umbrella holding company where around 20 special purpose vehicles with projects underway have been clubbed together. Domestic subsidiaries and associate companies involved in infrastructure projects like roads, ports, airports, bridges on build own operate and transfer basis (BOOT) like International Seaports, Kakinada Seaports, Dhamra Port Co, International Seaport Haldia, Nac Infrastructure Equipment Ltd, L$T - HCC, Jharkhand Road Project, L & T- Shahpoorji Pallonji JV, L & T - Hochtief Seabird JV, L & T Transportation Infrastructure, Ahmedabad-Mehsana Toll Road, GVK Jaipur-Kishengarh Construction Enterprise, L & T Western India Toll Bridge, Second Vivekananda Bridge Tollway, Bangalore International Airport, L & T Infocity, Hyderabad International Trade Exposition, Cyberpark Development & Construction and Vizag International Water Supply Co are part of this company,

Total equity commitment for the different SPVs by the holding company is estimated to be in the vicinity of Rs 400 crore. However, the combined project size would be between Rs 5,000 to Rs 7,000 crore. The financial investors will infuse the capital in the holding company which in turn will invest in India’s infrastructure growth story.

The holding company holds majority stake in most of these SPVs. Since all the SPVs are in the implementation stage, the entire equity commitment has not been exhausted.

A case in point is the L & T Infocity project in Hyderabad which is an 89 per cent L & T owned subsidiary where only Rs 16 crore has been committed as equity till date.

But the project size is nearer to Rs 900 crore and a further equity call may be required. The JV with AP Industrial Infrastructure Corporation has already marketed two phases of the Hyderabad HITEC City where major global tech firms are housed. Phase 111 Cyber Pearl involving development of 5 lakh sq ft has recently been started.

First Published: Jan 23, 2006 02:24 IST