With Rs 144-bn pipeline deal, Brookfield reinforces global strategy

If all goes well, Canadian investor Brookfield will soon buy East West Gas Pipeline Ltd, owner of a 1,400-km pipeline from Kakinada on the east coast to Bharuch on the west, from the Ambanis for an estimated $2 billion (Rs 144 billion).

With this deal (its largest ever), it may appear that Brookfield is renewing its focus on infrastructure deals but the Canadian investor will continue to pursue its global strategy of chasing opportunities in four areas — real estate, infrastructure, power and private equity. Its strategy is to buy assets where it can add operational value. It draws on its global expertise and local operational capabilities to add value. For instance, it has a 300-member operational team to take care of its road assets in India. Globally, real estate accounts for half its assets while the other half is shared between other assets.

In India, Brookfield has invested nearly $3 billion in real estate, a little more than half its total investment of $5 billion in India. With this deal, its total investment in India would go up to $7 billion. Its private equity developer financing book has grown to $450 million. Of course, the infrastructure space has become attractive today as the regulatory environment has matured and there’s a large number of operational assets available today against green field assets earlier that were marred by delays and regulatory risks. Operational assets have fewer uncertainties. Many developers and assets were over-leveraged and are today available at an attractive valuation. Brookfield in India is led by its senior managing partner Anuj Ranjan. 

Its India bets include acquiring a 15-million sq ft portfolio of office properties from Unitech and a $1-billion acquisition of Hiranandani’s 4.2 mn sq ft office park in Powai, Mumbai. In the past two years, it has purchased a portfolio of six toll roads, totalling 246 km of roadway. Unlike the residential market where annual rental yield is only 2-2.5 per cent, office assets fetch 6.75-7.75 per cent, making it far more saleable as an asset. Robust demand has helped owners command lease rates up to 10 per cent a year in the past. Since 2016, the yields have fallen in line with the drop in Indian interest rates. Globally, Brookfield is an aggressive investor in energy assets and related infrastructure — gas pipelines, coal terminals, electricity distribution and transmission. Clearly, it is keen to follow a similar path in India, snapping stressed assets in infrastructure.