Singapore based investment company, Cube Highways and Transport Assets Advisors Private Ltd is in initial talks with investors, including Abu Dhabi Investment Authority (ADIA), Caisse de dépôt et placement du Québec (CDPQ), and Ontario Teachers' Pension Plan Board to sell a part of its operational road assets through an infrastructure investment trust (InvIT).
The move comes after the Centre removed the tax barrier for private placement of InvITs in the Budget 2021, putting them at par with publicly listed ones. However, the proposal to tax dividends in the hands of unitholders of trusts and the resultant double taxation has brought down the attractiveness of existing and planned InvITs and real estate investment trusts (REITS).
The company will hive off its operational assets into an InvIT and place it privately with other investors, sources told the media. Cube is exploring a valuation of around $2.5 billion for the InvITE, said the sources.
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The Cube Highways InviT will consist of the toll-operate-transfer (TOT) assets that it secured from the National Highways Authority of India (NHAI) last year for $683 million.
Finance minister Nirmala Sitharaman had modified the definition of business trusts and included unlisted private trusts in the tax exemption bracket in the budget.
Cube Highways has 28 road projects or over 8,600 km of highways across India under the TOT, annuity and direct ownership. It has invested over $3 billion in India's road infrastructure so far.
The TOT bundle it acquired last year from NHAI includes nine stretches of road totalling 566.27 km across Tamil Nadu, Jharkhand, Uttar Pradesh, and Bihar.
The government introduced the TOT model in 2016, allowing it to monetise public funded infrastructure and develop new assets.
Cube is backed by Singapore based global infrastructure fund—I Squared Capital, spun off from Morgan Stanley's infrastructure investment team.
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Also read: Cube Highways takes over another project