Baba Kalyani-led BF Utilities set to raise Rs 500 cr for B'lore-Mysore road

JP Morgan, 2i Capital which holds stake in SPV expected to get stake in BF Utilities

Baba Kalyani-led BF Utilities, the publicly-held company which is executing the Rs 6,000 crore Bangalore - Mysore expressway project,  is set to raise Rs 500 crore through the equity route.

The company is looking to raise this sum to fund the completion of the first phase of the expressway which has been in the works for nearly two decades due to scores of land acquisition issues. In addition to completion of the 12 kilometres of the expressway under the first phase, BF Utilities is also expected to deploy the fresh resources to start development of the township along the expressway, as and when the courts clear the compensation play to the land holders.

Senior investment banking sources said that BF Utilities is likely to tap the QIP route for this fund raise and this transaction will most probably proceed parallely with a planned move to merge an SPV (special purpose vehicle) executing the project under BF Utilities.

BF Utilities, in which the promoters led by Baba Kalyani hold a little over 65 per cent,  has a step-down subsidiary Nandi Infrastructure Corridor Enterprise (NICE). It had subsequently floated an SPV  — Nandi Economic Corridor Enterprise (NECE) to execute the first phase of the project.

BF Utilities had floated the NICE with the aim to develop 20,193 acres over a period to develop 111 km of expressway connecting Bangalore to Mysore, 41 kms of peripheral ring road, nine link roads, five townships besides 16 interchanges.

NICE subsequently floated the SPV Nandi Economic Corridor Enterprise to develop close to 6,100 acres for the various aspects of the expressway, including the peripheral ring road, link road, 12 kms of expressway, one township and one interchange.  As part of the initiative, NECE has managed to complete 41 kms of the peripheral ring road, nine kms of link road, only six kms of the expressway and eight interchanges.

The rest of the expressway project has been held up for want of various approvals for acquiring land as well as for the township.

The expressway which has been hit severely by the numerous legal disputes, has been at the centre of protracted negotiations between the management and Deve Gowda, the erstwhile chief minister of Karnataka, who has been opposing the project in its totality over allegations of land grab.

The NECE project has so far seen investments of close to Rs 3,600 crore with a debt component of around Rs 1,600 crore while there has been private equity infusion of $200 million from JP Morgan and Singapore-based 2i Capital. BF Utilities owns 74 per cent in NICE, and NICE, in turn, owns 68 per cent in NECE. It is further understood that BF Utilities is working on a plan to absorb the SPV as well as the subsidiary into the parent, primarily to avoid the multi-layer structure. This move is expected to pave way for JP Morgan and 2i Capital to land equity worth $200 million in the publicly-held BF Utilities.

The project which has been at the centre of much debate in Karnataka, has so far managed to be a good option for heavy trucks to move away from the city and it is understood that it is generating revenues of around Rs 14 crore per month.

Ashok Kheny, MD, Nandi Infrastructure Corridor Enterprise (NICE),  a subsidiary of BF Utilities recently told Business Standard that they are in the process of restructuring NICE as well as its SPV subsidiary Nandi Economic Corridor Enterprise (NECE) to enhance shareholder value.  

“As part of this process,  we are looking to merge NECE into the parent instead of a three-layer structure.  JP Morgan and 2i who had invested in the SPV NECE, will most probably land equity in the publicly-held BF Utilities. The process is underway and we will have clarity on the amount of stake which the investor will be getting,” Kheny said.