HCC Concessions, the infrastructure development arm of HCC Group, completed its 100 per cent sale of Farakka-Raiganj Highways (FRHL) to Cube Highways and Infrastructure II Pte (Cube Highways). FRHL, which forms part of the main arterial highway in West Bengal, is among the largest Public Private Partnership (PPP) projects in India, with an enterprise valuation of Rs 15.08 billion, comprising debt of Rs 9.05 billion and an equity valuation of Rs 6.03 billion. Cube Highways is a platform controlled by I Squared Capital, Abu Dhabi Investment Authority and IFC. 

The total expected pay-out of Rs 6.03 billion to HCC Group includes (i) cash pay-out of Rs 2.70 billion which combines equity consideration and contractor payments; (ii) Rs 2.33 billion of hold backs to be released on the completion of dispute resolution with NHAI; (iii) up to Rs 1 billion of earnout is payable in 2023 contingent on traffic projections (the traffic in FRHL has already returned to pre-COVID levels). 

Additionally, as part of the agreement with Cube, HCC Group will be entitled to a revenue share from FRHL over the entire concession period, which could be material in nature, and the details of which will be specified on completion of the ongoing conciliations with NHAI. The enterprise value of Rs15.08 billion also excludes a structure section of the project, which was descoped by NHAI, and for which Cube has offered a contingent pay-out. A successful closure with NHAI in the coming months of its tolling right confirmation, would entitle HCC Group to additional consideration estimated at Rs 2 billion. 

On the occasion, Arjun Dhawan, Group Chief Executive Officer, HCC said “We are pleased to conclude a transaction of this size and complexity, despite the hurdles presented by COVID-19. We have faced every type of challenge in developing this project, from lengthy land acquisition delays to meeting the expectations of numerous stakeholders while executing in major towns such as Farakka, Kaliachawk, Malda, and Gajol. With the support of NHAI and our lenders, without whom this project would not have been possible, FRHL became the most valuable asset in our Concessions portfolio. This sale to Cube unlocks substantial sums which may be reinvested back in our EPC business.” 

HCC Concessions and FRHL have been in active discussions with NHAI to conciliate all claims and disputes totalling approximately Rs 30 billion, which are expected to conclude in Q3 FY21. FRHL will pass on receipts from NHAI against all claims (mainly for land acquisition delays) to HCC Group on receipt of these monies. The completion of the conciliation process will not only release capital to the Group from the NHAI but also the amounts conservatively held back by Cube. 

The consortium of lenders to FRHL is led by Yes Bank and comprises Indian Bank, ARCIL, IIFCL, Bank of Baroda, Punjab National Bank and Union Bank of India. The legal and financial advisors for this transaction were Cyril Amarchand Mangaldas and Edelweiss Financial Services, respectively.