L&T in talks with Canadian pension fund OMERS to invest in IDPL

P Manoj MUMBAI | Updated on November 12, 2019

File photo   -  Reuters

Move comes after CPPIB takes 48.99 per cent stake on CCPS conversion

Larsen & Toubro Ltd (L&T) is looking to reduce the holding in its infrastructure unit to as low as 25 per cent and is in advanced talks with investors such as Canadian pension fund OMERS Infrastructure for a stake sale.

If the deal goes through, OMERS Infrastructure could invest as much as $150 million for a minority stake in L&T Infrastructure Development Projects Ltd (L&T IDPL).

India’s biggest engineering and construction firm said on November 9 that Toronto-based Canada Pension Plan Investment Board (CPPIB) will hold 48.99 per cent stake in L&T IDPL on conversion of the Compulsorily Convertible Preference Shares (CCPS) allotted to the pension fund giant in 2014 and 2015.

CPPIB invested ₹1,000 crore in L&T IDPL in December 2014 followed by a further ₹1,000 crore in December 2015, against which it was allotted the CCPS that had to be converted into equity by September 30.

On October 18, L&T said it purchased the 2.55 per cent stake held by hedge fund Old Lane in L&T IDPL for Rs47.99 crore, making it a wholly-owned arm.

With the CCPS conversion, L&T now holds 51 per cent in IDPL which it plans to cut to 24-25 per cent, at least two people briefed on the plan said.

The conversion of CCPS allotted to CPPIB paves the way for the entry of more investors into IDPL such as OMERS Infrastructure with whom L&T has been holding talks for some time, one of the persons mentioned earlier, an investment banker, said.

“It isn’t our practice to directly comment on market speculation and rumours,” a spokesman for OMERS Infrastructure told Business Line in an e-mailed response.

L&T’s comment is awaited.

The Ontario Municipal Employees Retirement System or OMERS is a pension fund that handles the retirement benefits of all local government employees in the Canadian province of Ontario.

OMERS Infrastructure invests globally in infrastructure assets on behalf of OMERS, one of Canada's largest defined benefit pension plans, with $97 billion in net assets as at December 31, 2018, it said on its website.

OMERS invests and administers pensions for almost half a million active, deferred and retired employees of nearly 1,000 municipalities, school boards, libraries, police and fire departments, and other local agencies in communities across the province of Ontario.

In February this year, OMERS Infrastructure made its first infrastructure investment in India by taking a 22.4 per cent stake for $121 million (about ₹870 crores) in L&T IDPL sponsored IndInfravit Trust (IndInfravit).

CPPIB is also an investor in IndInfravit, picking up 30 per cent of the InvIT’s units for ₹1,120 crore.

Allianz Capital Partners (ACP), part of insurance giant Allianz, holds 25 per cent of the units of the trust.

“Our investment in IndInfravit aligns with our strategy to diversify our portfolio and generate value for OMERS plan members,” Ralph Berg, Executive Vice President and Global Head of OMERS Infrastructure, said in February while announcing the investment in IndInfravit.

“At the same time, we will participate in the expansion of the Indian economy by investing into crucial infrastructure. Today’s announcement also represents an opportunity to deepen our relationships with Allianz Capital Partners, CPPIB and L&T,” he added.

Published on November 12, 2019

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