India-based Reliance Infrastructure is looking to sell its cement and roads businesses by March 2016, to focus on future defence sector opportunities. CEO MS Mehta said due diligence has already started on both units, and the company expects valuations in line with the last few cement industry transactions. The roads business may be sold to a foreign fund that has liquidity and plans long haul investment in India’s infrastructure.
Mehta said Reliance has received 15 preliminary expressions of interest and shortlisted seven potential buyers for the cement business. It is reported by The Financial Express newspaper that Reliance is looking to sell 11 road assets totalling INR 88 billion (US$ 1.35 billion) covering around 1,000km. According to Mehta, the investment is suitable for investors seeking long-term annuity as the assets are de-risked. The funds will go towards completing the Pipavav Defence and Offshore Engineering Company takeover (started in March 2015) and removing debt.
The defence sector is seen by Reliance as ideal as it has lower capital intensity, gestation period and regulatory uncertainty, coupled with higher job creation and possibly return on equity.
