Engineering and construction giant Larsen and Toubro has agreed to sell a minority stake in its subsidiary Infrastructure Development Projects Ltd (IDPL) to the Canada Pension Plan Investment Board’s Singapore arm for ₹1,000 crore.
CPP Investment Board Singaporean Holdings 1 will pick up the stake; the size will be decided later based on valuations. This will be followed by a second tranche of ₹1,000 crore or more, as may be agreed upon by the two entities after 12 months from the date of the first investment.
Asked how many IDPL preference shares would be allotted in the first tranche, R Shankar Raman, Chief Financial Officer, L&T, told
As to when L&T would begin the process of conversion of the compulsorily convertible preference shares to equity, Raman said the valuation would be decided by 2018 according to a mutually agreed process.
Responding to how much stake L&T would be comfortable to part with in IDPL, Raman said there was no agreed percentage and the extent of dilution would depend on the value “we achieve” before the conversion.
Strategic move The Canadian fund has left the valuation to a future date, and the investment should be seen as strategic more than on a comfort level, he said.
Asked how long the pension fund would remain invested in IDPL, Raman said given the country’s requirements and the potential, it would be 20-25 years. Moreover, he added, for a pension fund of over $200 billion, the commitment was not large.
Andre Bourbonnais, Senior Vice-President, Private Investments of the Canadian fund, said: “We have been looking at a number of asset classes in India, and have already invested in real estate. Infrastructure is another asset class that we were interested in. This transaction with L&T IDPL represents our first infrastructure investment in India.”