Canada Pension Plan Investment Board (CPPIB), Caisse de dépôt et placement du Québec (CDPQ) and National Investment and Infrastructure Fund (NIIF) are reportedly holding independent negotiations to buy IDFC Alternatives’ Highway Concessions One for $700m.

IDFC Alternatives’ Highway Concessions One holds seven operating roads. These projects consist of five toll roads and two annuity roads across seven states in India.

The roads are Ulundurpet Expressways in Tamil Nadu, Nirmal BOT in Telangana, Dewas Bhopal Corridor in Madhya Pradesh, Bangalore Elevated Tollway in Karnataka, Godhra Expressways in Gujarat, Jodhpur Pali Expressway in Rajasthan, and Shillong Expressway in Meghalaya.

A souce familiar with the matter told Economic Times: “CPPIB, CDPQ and India’s sovereign fund NIIF have submitted their initial term sheets and are currently carrying out due diligence.”

In 2018, US-based Global Infrastructure Partners (GIP) acquired IDFC Alternatives’ infrastructure investment business.

Under the realignment exercise, GIP opted to monetise its interest in the seven road projects under the Highway Concessions One vehicle.

Usually, infrastructure funds invest in early stage roads projects with higher execution risk and then exit once the toll traffic increases. They usually sell them to pension funds as investors look for annuity returns for long periods.

“Their portfolio is in better shape than most of the other road assets up for sale and the interest is expected to be higher.”

According to the company’s website, the 472km roads network brought in revenues of Rs6.2bn for the financial year ending 31 March 2018.

Highway Concessions One’s non-road platforms include renewable energy, telecom towers and rail freight terminals.

GIP had entrusted investment bank Citigroup to search for buyers.

With a book value of $200m, the portfolio is likely to bring premium of about $700m to IDFC.

Most of the road assets of IDFC come with longer concessional agreement and pay dividends.

Another party involved in the deal told the financial daily: “Their portfolio is in better shape than most of the other road assets up for sale and the interest is expected to be higher.”

IDFC, CDPQ and CPPIB and NIIF either did not respond to queries or confirm to The Economic Times.

The Modi government launched business-friendly models such as hybrid annuity, where the authority bears 40% of funding for project costs.

The government also identified 75 operational highways that could be sold through toll-operate-transfer (TOT) mode.

Through the TOT phase, the government collected Rs96bn.