HCC, which had closed yesterday at Rs.5.13, briefly skimmed the 10% UC of the day at Rs.5.64 and is now traded at Rs.5.50 levels.
The company’s infra arm, HCC Concessions, yesterday completed its 100% sale of Farakka-Raiganj Highways Limited ("FRHL") to Cube Highways. This sale to Cube unlocks substantial sums which may be reinvested back in HCC’s EPC business.
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.1,508 crore, comprising debt of Rs.905 crore and an equity valuation of Rs.603 crore.
Cube Highways is a platform controlled by I Squared Capital, Abu Dhabi Investment Authority and IFC.
The total expected pay-out to HCC is Rs.603 crore which includes (i) cash pay-out of Rs.270 crore which combines equity consideration and contractor payments; (ii) Rs.233 crore of hold backs to be released on the completion of dispute resolution with NHAI; (iii) up to Rs.100 crore 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 Rs.1,508 crore 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.200 crore.