Neo AIF to pick up Ceigall India equity in Punjab road project for ₹450 crore

Neo Infra Income Opportunities Fund (NIIOF) is set to pick up the entire equity of Ceigall India Ltd in its operational four-laned road stretch extending from Punjab to Rajasthan for around ₹450 crore.

According to two people aware of the development, Ceigall India is in advanced talk with parent Neo Asset Management to sell 100% stake in the Malout highway project for an enterprise value of ₹400-450 crore. 

Neo Asset Management is the alternative asset management arm of Neo Group that runs Neo Infra Income Opportunities Fund.

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Ceigall India is an infrastructure construction company that has built over 1,739.88 lane km of roads, highways, elevated roads, flyovers, bridges, railway over bridges, tunnels, highways, expressways and runways.

The four-lane project

The road project is a four-lane, 65-km stretch from Malout in Punjab to Sadhuwali in Rajasthan on a hybrid annuity mode under the Bharatmala scheme.

“The concession period is for 17 years, including two years of construction period. The project got completed on 6 June, 2023,” said the first person quoted above.

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“Ceigall is expected to get capital receipt earning of anywhere between ₹180-200 crore from this 100% stake sale. Further, a term loan liability of ₹280-300 crore will be transferred to Neo as part of the deal,” the person added.

The deal is expected to be sealed in the last quarter of the current financial year. Both Neo and Ceigall refused to comment.

The Malout highway project also includes 31 km of slip and service roads. 

Projects that are being executed under the HAM model have been drawing institutional investors since they provide fixed return during the entire concession period.

“We have been witnessing aggressive interest from institutional investors like AIFs in HAM-based highway projects since this allows investors to lock good returns for a period of 15-20 years. This trend is expected to only gain momentum in the coming years as big-ticket investors look for stable and long-term returns,” said an industry expert.

NIIOF is a privately pooled Alternative Investment Fund (AIF) that invests in income-generating renewable energy and road projects in India.

The fund, with an estimated assets under management of ₹2,000 crore, focuses on renewable energy and road projects by buying out equity of promoters at favourable IRRs.  

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Neo Asset Management has nearly ₹35,000 crore (more than $4 billion) in assets under advisory and over ₹6,000 crore (about $714 million) in alternative assets. In August this year, Neo Group had raised ₹400 crore (around $47 million) in a fresh equity funding round led by Japanese lender MUFG Bank along with New York-based Euclidean Capital. 

Peak XV Partners, which had invested around $35 million in October last year, also participated in this round.