Global investment firm KKR, through an affiliate entity, is set to acquire crisis-hit non-banking finance company Infrastructure Leasing & Financial Services’ (IL&FS) stake in Bangalore Elevated Tollway Private Ltd. (BETPL).

Galaxy Investments, a wholly owned subsidiary of KKR Asia Pacific Infrastructure Holdings, has entered into a definitive agreement with UK’s development finance institution CDC’s India Infrastructure Fund II to acquire a stake in the company.

BETPL is a special purpose vehicle (SPV) promoted for the development of four-lane elevated and six-lane roads from Silk Board Junction to Attibele in Bangalore. IL&FS Engineering and Construction Company Ltd (IECCL), an IL&FS group company, holds 24% of BETPL, while India Infrastructure Fund II holds a 76% stake.

India Infrastructure Fund entered an agreement with Galaxy Investments to sell its entire equity interest in a road asset platform managed and operated by it and comprising seven road assets, including BETPL, revealed an affidavit filed by IL&FS in The National Company Law Appellate Tribunal (NCLAT).

“While the stake sale in BETPL will bring in positive equity in the proportion of 24%, it will result in debt resolution to the extent of over Rs 600 crore as the entire debt will be taken over by the new owner,” said a person close to the development.

In January 2021, KKR announced the final close of KKR Asia Pacific Infrastructure Investors SCSp, a $3.9 billion fund focused on infrastructure-related investments across Asia Pacific.

As part of the agreement with India Infrastructure Fund, KKR has offered to acquire a 100% equity interest in BETPL and redeem outstanding non-convertible debentures (NCDs) and optionally convertible redeemable preference shares (OCRPS) held by India Infrastructure Fund and IECCL.

The aggregate consideration offered by Galaxy would be infused into BETPL, which would use the same to redeem the NCDs and OCRPS held by IECCL.

And a proportionate part of the aggregate considerations would be paid to IECCL for the acquisition of the entire equity shareholding of BETPL held by IECCL.

“IL&FS Group is in discussion with Galaxy Investments II Pte Ltd to sell its minority stake in BETPL, as part of its asset monetization initiative under the approved resolution framework,” said an IL&FS spokesperson.

However, he refused to give any more information about the deal while the talks were still going on.

KKR did not respond to a request for comment for this story.

IL&FS is monetising its assets to meet debt obligations. The failure of IL&FS to meet repayment obligations in September 2018 triggered a liquidity squeeze that gripped India’s non-banking finance sector. As part of a clean-up, the government then replaced the IL&FS board, which has since been engaged in trying to resolve total debt worth over Rs 99,000 crore as of October 2018.

The Uday Kotak-led IL&FS board estimates overall recovery to be around Rs 61,000 crore of the total debt, an upward revision from its earlier estimate of Rs 56,000 crore. Improved valuations, better operating performance, and enhanced recoveries from non-group exposures are driving higher recoveries.

The board expects over 90%, or Rs 55,000 crore, of the estimated recovery to take place by March 2022. It has already resolved an estimated recovery worth over Rs 52,000 crore as of December. The estimate includes proceeds through both debt resolution and liquidation.