I Squared Capital (ISQ) is an independent global infrastructure investment manager focusing on energy, utilities, and transport in North America, Europe, and select high growth economies. The Firm has a presence in New York, Houston, London, New Delhi, Singapore and Hong Kong. To complement its diversified portfolio of global infrastructure assets, ISQ is forming Road Holdco based in Singapore to acquire operational road projects in India.

Cube Highways India Pvt. Ltd. (“CH1”), an existing IFC equity client, has acquired 100% shares of GAEPL from the original shareholders and taken over the ownership and operation of the Project. CH1 is a strategic client in good standing with IFC as a founding shareholder; it was set up in 2014 by I Squared Capital (“ISQ”) and IFC to acquire controlling stakes in brownfield/ operational roads in India, with the initial shareholding percentages of 80% and 20%, respectively. The CH group (comprising the 2 platforms CH1 and CH2 where IFC is a shareholder, as well as 2 entities set up later where IFC is not) is considered the leading private sector road operator in India today. It owns and operates a cumulative 8,879km across 28 projects.

CH1’s current shareholding structure is as follows:

1. IFC: Owns 10.10% stake
2. ISQ (owns 45% stake): It is a US$11 billion private equity fund based in the USA, Canada and Cayman Islands. ISQ specializes in infrastructure investments and is present in emerging markets as well as OECD countries. It has a portfolio of about 90 assets aggregating 5,100MW of power capacity, 31,000 lane kms of highways and 237,500m3 of wastewater treatment capacity in addition to investments in telecom, city gas and other sectors. IFC has worked with ISQ in Asia as well as LAC.
3. Abu Dhabi Investment Authority (“ADIA”) (owns 24.9% stake): It is a public institution established by the Government of Abu Dhabi in 1976 as an independent investment institution. ADIA now manages a diversified global investment portfolio across more than 24 asset classes and sub-categories

Japan Highways International B.V. (“JHI”) (owns 20% stake): It is a consortium headed by Mitsubishi Corporation along with Japan Overseas Infrastructure Investment Corporation for Transport & Urban Development and East Nippon Expressway Company Limited

 IFC will consider an equity investment in the Road Holdco of up to US$100 million. IFC will also consider providing refinancing for the debt of the roads that the Road Holdco will acquire. IFC’s total debt investment is expected to be up to US$150 million.

Till date IFC has committed the entire equity of US$100 million. The Road Holdco (CH1) has acquired 6 projects till now (total of 6 projects now that GAEPL has been acquired). IFC has also provided INR equivalent of US$ 68 million in the form of Non-Convertible Debentures for a project called N.A.M. Expressway Ltd. (“NAM”).

NAM is a 212-km state highway (SH) in Telangana and Andhra Pradesh states of India. The project road starts from national highway (NH) 9 junction at Narketpally in Nalgonda district in Telangana at Km 0.000 and ends at NH 5 junction at Medarametla at Km 212.500 in Prakasam district of Andhra Pradesh. 190.38 km of NAM has been four laned and has been operational since March 2014 and an additional 6 km has been operational since September 2016. After toll revision in May 2018, the present tollable length is 202.805 km.

 The Road HoldCo will acquire operating road projects across India.

This is an early stage corporate investment in a holding company that will acquire, own, operate and maintain operational road assets in India. However, at this stage the pipeline of road assets/projects that the Road Holdco will invest in is not known. In such investments, IFC expects that the company will have in place an ESMS, including a screening procedure, to ensure that the portfolio of road assets that the Road Holdco acquires is operated, maintained, monitored and managed in accordance with IFC Performance Standards. While some of the individual operating road assets that the company will acquire may have limited risks and impacts, IFC is treating this investment as a category A project according to IFC’s Procedure for Environmental and Social Review of Projects since: (a) the sector in which the Road Holdco will operate, roads and highways, is potentially high risk; (b) the company does not have a known pipeline of projects and the risks and/or impacts associated with them are not known at this stage. However, the assets to be acquired may have impacts of varying significance on one or more aspects that are contemplated in the PSs 2 through 8; and (c) some of the road assets to be acquired, particularly those that have been in operation for less than one year, may have residual/balance land and right of way (RoW) acquisition underway with potential for economic and/or physical displacement, or impacts on indigenous peoples (IPs), natural habitat, or cultural heritage.

While all Performance Standards (PSs) are applicable to this Project, IFC’s due diligence indicates that  PS 6 ‘Biodiversity Conservation and Sustainable Management of Living Natural Resources and PS 7 ‘Indigenous Peoples’ are not considered applicable to the first identified investment prospect and as such are not covered below, it is likely that one or more of these PSs will be applicable to future sub-projects.