Canadian pension fund to get majority stake in L&T IDPL

Canada Pension Plan Investment Board (CPPIB), the world’s largest pension fund investor in private equity, will gain controlling equity stake in L&T Infrastructure Development Projects Ltd (L&T IDPL) when the Indian engineering and construction giant converts the compulsorily convertible preference shares (CCPS) be this month-end.

L&T IDPL allotted the compulsorily convertible preference shares to the Canadian pension fund when CPPIB invested Rs1,000 crore in L&T IDPL in December 2014, followed by a further Rs1,000 crore in December 2015.
Of the Rs2,000 crore CPPIB invested in IDPL, it reinvested Rs1,120 crore in to acquire a 30 per cent stake in L&T IDPL sponsored InvIT unit, IndInfravit Trust (IndInfravit), in June 2018.
IDPL transferred five of its operational toll roads to IndInfravit Trust, which left the InvIT unit with all high value projects, giving CPPIB a majority stake for its Rs880 crore investment during the conversion of CCPS.
Besides, as and when IDPL develop projects, it is supposed to transfer them to IndInfravit Trust once the execution is over. Otherwise the Trust will lose projects after some time. When the concession period of highway projects ends, they will revert to NHAI/government.
IDPL had a debt of about Rs357 crore as of 31 December 2018. This excludes the debt held by its many subsidiaries.
The CCPS conversion will make Toronto-based pension fund the majority shareholder of L&T IDPL with a stake of 51 per cent or more by 30 September, reports citing sources said.
L&T, which currently holds 97.45 per cent stake in IDPL, is expected to dilute its holding in the infrastructure company to less than 25 per cent, reports said.
With L&T willing to trim its holding to levels around 25 per cent, reports say some other funds may also are willing to buy stake in the company.
IDPL, like other infrastructure investors, is fund starved and needs money to bid for new projects. The equity dilution will give L&T IDPL money to invest in new projects.
In the process, L&T may acquire the less than 2 per cent stake held by hedge fund Old Lane in IDPL only to be offloaded to new investors/funds, reports said.
In fact, reports said, IDPL has been asked to look for office space outside the L&T campus in Chennai.
In any case, IDPL will have to move out of L&T premises once it becomes a non-L&T entity, which is only fortnight away.
CPPIB is one of the world's largest sovereign wealth funds and one of the world's largest investors in private equity, having invested over $28.1 billion between 2010 and 2014 alone. As of 30 June 2019, the CPP Investment Board had over C$400 billion in investment assets under management.