Cube Highways Eyes $240M Raise, Targets $1.4B Valuation

Key Takeaway

• Cube Highways plans to raise $240 million by listing Indian toll-road assets under an infrastructure investment trust, targeting a valuation of 100 billion rupees.
• Indian equity funds saw record inflows of $4.2 billion in May, driven by retail investors favoring equities over traditional investments.
• The iShares MSCI India ETF (INDA) led with over $300 million in inflows, reflecting strong investor interest amid India's infrastructure push and political stability.

Cube Highways Fundraising Plan

Singapore-based Cube Highways Group is planning to raise up to 20 billion rupees ($240 million) by listing some of its road assets under an infrastructure investment trust (InvIT), according to sources familiar with the matter. The Cube Highways Trust, backed by global infrastructure investor I Squared Capital, is seeking a valuation of 100 billion rupees for its holdings, which include seven Indian toll-road assets. The company plans to dilute around 20% of that valuation through the investment trust. The sources, who requested anonymity due to the private nature of the information, indicated that Cube Highways is working with advisers and may raise the capital via private placement within the next two months.

Infrastructure investment trusts function similarly to mutual funds, allowing for the pooling of assets to finance projects and potentially addressing investment shortfalls. Cube Highways' fundraising initiative aligns with India's broader push to enhance its infrastructure to attract global manufacturers. Prime Minister Narendra Modi, who recently began his third term, is expected to continue focusing on infrastructure development, including the upgrade of roads and highways to reduce transportation times for businesses. Crisil Ratings projects that India's infrastructure spending will double by 2030, reaching nearly 143 trillion rupees.

I Squared Capital and Cube Highways did not respond to requests for comments via email and phone calls.

Indian Stock Market Dynamics

Indian stock exchange-traded funds (ETFs) are likely to continue attracting traders seeking opportunities in emerging markets, especially during a busy election year. Prime Minister Modi, considered market-friendly, has pledged to continue working on the country's economic development. Nirmala Sitharaman's reappointment as India's finance minister in Modi's new coalition government provides policy continuity.

For the week ending June 7, India recorded the largest inflow across emerging markets, totaling $468.9 million. The iShares MSCI India ETF (ticker INDA) led the inflow with over $300 million, while the WisdomTree India Earnings Fund (EPI) also saw significant investments, pulling in about $146 million. This influx followed a volatile period where Indian stocks initially sank on June 4, erasing $386 billion in market value for the benchmark NSE Nifty 50 Index, as election results suggested Modi's party might struggle to secure a majority. However, the market quickly rebounded, recouping all losses after Modi secured backing from his coalition allies.

Record Inflows into Indian Equity Funds

Inflows into Indian equity funds surged to a record high in May, with retail investors largely ignoring the spike in stock volatility preceding the election results. According to the Association of Mutual Funds in India (AMFI), mutual funds received 347 billion rupees ($4.2 billion) in inflows, marking the 39th consecutive month of positive investments. Individual investors in India are increasingly favoring equity investments over traditional options like fixed deposits and bonds, driven by higher returns.

Monthly recurring investment plans have emerged as the most popular product among retail investors, contributing nearly $2.5 billion in net flows to stocks. "While recent data has shown a dip in household savings in India, systematic investment plans have continued to pick up," said AMFI Chief Executive Venkat Chalasani during a conference call. The HDFC Manufacturing Fund, introduced in May, received more than 95 billion rupees in subscriptions.