Infra.india Regulatory News (IIP)

15 July 2014 

Infrastructure India plc

("IIP" or the "Company" or, together with its subsidiaries, the "IIP Group")

Proposed Placing and Notice of Extraordinary General Meeting

Infrastructure India plc, the infrastructure fund investing directly into assets in India, announces that it is proposing to raise up to US$102 million (approximately £59.5 million) before expenses by way of a placing at a price of 18 pence per share, subject to shareholder approval (the "Placing").

A circular convening an Extraordinary General Meeting of the Company to be held at IOMA House, Hope Street, Douglas, Isle of Man, IM1 1APat 10:00 a.m. on 11 August 2014 to grant the Board authority to allot the Placing shares for cash on a non pre-emptive basis will be sent to shareholders today and will be available to download from the Company's website at www.iiplc.com.

Further details of the Placing are provided below.

Enquiries:

Definitions in this announcement are the same as those included in the Company's circular to be posted to shareholders today, dated 14 July 2014, available on the Company's website at www.iiplc.com.

Introduction

Infrastructure India today announced that it is proposing to raise up to US$102 million (approximately £59.5 million) before expenses by way of a placing of Ordinary Shares. Details of the Placing can be found below.

The Company has received an indication from an affiliate of GGIC, the Company's majority shareholder, that it may be interested in subscribing for such number of the Placing Shares as represents 51.17 per cent. of the Placing Shares, pro rata to GGIC's current shareholding and may be willing to subscribe for the remainder of the Placing Shares, at the Company's request, in the event that certain other existing Shareholders, or new investors, do not wish to subscribe.

The terms of such a potential commitment are under discussion. Entry into any agreement with GGIC or its affiliates in respect of the Placing would constitute a Related Party Transaction, further details of which are provided below.

Further information about the Placing, the Extraordinary General Meeting and the Company's current trading and prospects is set out below and summary details of the Company's portfolio is set out below. Further information about the Company and its portfolio, financial information and constitutional documents can be found on the Company's website at www.iiplc.com.

Background to and reasons for the Placing

IIP is a closed end investment company, whose Ordinary Shares were admitted to trading on AIM in March 2011. The Group focuses on investing in Indian infrastructure projects and currently has five assets in its portfolio in the transport and energy sectors, two of which are wholly owned.

In the past fiscal year, an unprecedented combination of slowing growth, difficult credit markets, record lows for the Rupee, policy uncertainty and a national election has impeded Indian governmental institutions, including public sector banks, on which the Company's asset class relies to function properly.

VLMS, the largest holding in the IIP portfolio, has faced continued delays in disbursement of approved debt from a banking consortium comprising two public sector lenders. This lack of fund disbursement, combined with the need to service project loans on a current basis and pay ongoing operational expenses, has resulted in a significantly strained liquidity position. Discussions have commenced with VLMS' two lender consortia to restructure existing loans in return for the introduction of fresh equity to allow the projects currently under consideration to complete.

It is the intention of the Board that the proceeds of the Placing will be used to provide construction capital for the portfolio and to align the liquidity of VLMS with current trading, to provide working capital to the Group, to strengthen the VLMS balance sheet, and to service existing loan facilities as may be needed. Critically, the proceeds will provide VLMS with the ability to complete and commission all four terminal facilities with two facilities commencing operations this fiscal year. The proceeds of the Placing should provide the Group with sufficient cash resources to fund the business until at least 31 December 2015.

The Placing

The Company is proposing to raise, in aggregate, up to US$102 million (approximately £59.5 million) before expenses by way of the issue of new Ordinary Shares pursuant to the Placing. The issue price will be 18 pence per Placing Share. The Placing is conditional, inter alia, upon Shareholders passing the Resolutions proposed at the EGM on 11 August 2014.

A GGIC affiliate has indicated that it may be willing to subscribe for all of the Placing Shares in the event that certain other existing Shareholders, or new investors, do not wish to participate in the Placing. In the event that such GGIC affiliate subscribes for all of the Placing Shares, GGIC's interest in the Company would rise to 75.15 per cent. of the Enlarged Issued Share Capital.

Indicative Placing Statistics

*assuming that all of the Placing Shares are subscribed for

The above number of Placing Shares and the number of Ordinary Shares in issue following Admission are based on the prevailing US$:£ exchange rate as at 11 July 2014 and are subject to adjustment. The actual number of Placing Shares will depend on the US$:£ exchange rate at the time of subscription.

Estimated Timetable of Principal Events

Related Party Transaction

GGIC currently directly and indirectly holds 51.17 per cent. of the Company's issued share capital. Under the AIM Rules for Companies therefore, GGIC is deemed to be a related party of the Company. As a result, the entry by the Company into an agreement with GGIC or an affiliate of GGIC in connection with the Placing will constitute a related party transaction pursuant to Rule 13 of the AIM Rules for Companies.

In accordance with Rule 13 of the AIM Rules for Companies, entry into a Related Party Transaction must be notified by an AIM company through a Regulatory Information Service without delay. The notification must include, inter alia, a statement that the independent directors of the AIM company consider, having consulted with the company's nominated adviser, that the terms of the Related Party Transaction are fair and reasonable insofar as Shareholders are concerned.

Entry by the Company into an agreement with GGIC or its affiliates in relation to the Placing would be notified by the Company through a Regulatory Information Service and include such a statement, and would also provide Shareholders with the key terms of such agreement.

It is expected that entry into any such agreement, and the resultant announcement, would occur prior to the EGM and would include provisions for the payment to GGIC or its affiliates of customary placing fees and expenses.

Use of proceeds

The Company proposes to use the gross proceeds of the Placing for the following purposes, certain of which have already been met from the proceeds of the Company's existing US$16.2 million Loan Facility:

The net proceeds of the issue of the Placing Shares should enable the Company to finance the construction of all the terminal facilities through to completion, settle unsecured creditors, meet other lender requirements and provide VLMS with working capital.

Given that certain of the VLMS construction costs and debt service requirements detailed above have been met using the Group's US$16.2 million Loan Facility at Group level, the use of proceeds detailed above will include the early repayment of the US$16.2 million Loan Facility, in accordance with its terms, which has a final maturity date of November 2014. The repayment schedule for the US$17 million Working Capital Facility, falling due in April 2017, remains in place.

The estimated expenses of the Placing, assuming that customary fees and expenses would be payable by the Company in connection with any agreement entered into with GGIC or its affiliates are £1.2 million (approximately US$2.0 million).

Current trading and prospects

The Net Asset Value of the Group for the six-month period ending 30 September 2013 was £216.7 million (£0.63/share compared with £0.78 as at 30 March 2013, and £0.65 as at 30 September 2013). The Board intends to announce its preliminary results for the financial year ended 31 March 2014 in September 2014 at which time the Board does not expect the Net Asset Value to be materially different from the £216.7 million reported as at 30 September 2013. The net proceeds from the issue of the Placing Shares will, the Directors believe, be materially accretive to the Net Asset Value in the current fiscal year.

Transport

VLMS continues to experience delays in the disbursement of approved debt from public sector banks to fund construction, working capital and service project loans now in scheduled amortisation periods, despite the terminals under construction not being complete. These delays have impaired the progress of VLMS and triggered the Board's view that a full financial solution is needed by way of the Placing. VLMS is discussing with its lending banks restructuring its existing bank facilities. The discussions include a meaningful reduction in the rate of interest and extension of tenor but require an infusion of equity of approximately US$45 million. At present, there is no guidance on timing or outcome of such discussions. The loan facility announced in May provided the immediate capital required to complete the terminal at Nagpur, which will commence initial domestic operations in July 2014. Further investment into VLMS will allow the completion and commissioning of all four new terminal facilities, of which two are expected to be operational this fiscal year, subject to completion of the Placing.

WMP is performing as expected. Toll revenue data demonstrates continued traffic growth, maintaining the performance trend identified in the interim results for the period ended 30 September 2013. In February 2014, WMP completed the installation of four weighbridges to address overloaded vehicles, with the majority of traffic being multi-axle vehicles. A further four

weighbridges are planned this year.

Energy

IHDC and IEL continue to perform as expected. Construction at IHDC's 8MW Raura project remains on-track for commercial operations in 2017. Commissioning of 4MW Panwi in Himachal Pradesh contributed to better overall generation in the year to March 2014. For IEL, there has been gradual improvement of the Tamil Nadu grid, although grid availability may continue to be an issue for Theni in the near-term.

SMH was entrusted, in February 2014, to a special task force of the National Manufacturing Competitive Council, a group mandated to resolve issues related to projects of national importance. Following the election, the Ministry of Power, under its new leadership, is also taking an active role in advancing discussions and meetings have commenced with key stakeholders.

Announcement of Final Results

The Company expects to announce its Final Results for the year ended 31 March 2014 in September 2014.

Extraordinary General Meeting

The Placing is conditional upon, inter alia, the approval by Shareholders of the Resolutions to be proposed at the Extraordinary General Meeting. A notice convening the Extraordinary General Meeting to be held at IOMA House, Hope Street, Douglas, Isle of Man, IM1 1AP at 10:00 a.m. on 11 August 2014 is set out at the end of the circular today being posted to Shareholders, at which the following resolutions will be proposed:

Resolutions

Resolution 1 will increase the authorised share capital of the Company to allow for the allotment of the Placing Shares and to provide the Company with additional authorised share capital capacity to allot further new Ordinary Shares the Board consider this appropriate in the future;

Resolution 2 will approve the disapplication of pre-emption rights conferred by Article 5.2 of the Articles of Association in respect of the allotment of the Placing Shares; and

Resolution 3 will approve the disapplication of pre-emption rights conferred by Article 5.2 of the Articles of Association in respect of the allotment of Ordinary Shares generally during the year ahead.

Resolution 1 will be passed if those Shareholders who vote in favour represent more than 50 per cent. of the Shareholders as, being entitled to do so, vote in person or by proxy, at the EGM. Resolutions 2 and 3 will be passed if those Shareholders who vote in favour represent at least 75 per cent. of the Shareholders, as being entitled to do so, vote in person or by proxy, at the EGM.

Action to be taken

A Form of Proxy to be used in connection with the Extraordinary General Meeting is enclosed with the circular being posted to Shareholders.

Whether or not you intend to attend the EGM in person, please complete and sign the Form of Proxy in accordance with the instructions printed thereon and return it to IOMA Fund and Investment Management Limited, IOMA House, Hope Street, Douglas, Isle of Man IM1 1AP as soon as possible and, in any event, so as to be received by 10.00 a.m. on 9 August 2014.

Risk factors

The Company's business and the value of its Shares remain subject to the risk factors set out in page 10 of the Company's admission document dated 11 February 2011 (which is available on the Company's website at: www.iiplc.com). The Company is the controlling shareholder and operator of a number of its assets and as such the risks that the Company's businesses face include the timely completion of financing, delays in receipt of approvals or regulatory licences, land acquisition and conversion of land use, and construction risk. Where those assets include operating businesses then the additional risks to note include those typically faced by any trading business including revenue generation, cost control, the ability to trade at appropriate margins and competition.

Recommendation and voting intentions

The Independent Directors, taking into account the funding options currently available to the Company and the immediate funding needs of the Group, consider that the Placing is in the best interests of Shareholders as a whole and unanimously recommends that Shareholders vote in favour of the Resolutions.

The Directors intend to vote in favour of the Resolutions to be proposed at the EGM in respect of their beneficial holdings, which amount to 43,020,660 Ordinary Shares in aggregate, representing 12.56 per cent. of the Existing Issued Ordinary Share Capital.

In addition, GGIC has indicated that it intends to vote in favour of Resolutions to be proposed at the EGM in respect of its beneficial holding, which amounts to 175,324,980 Ordinary Shares in aggregate, representing 51.17 per cent. of the Existing Issued Ordinary Share Capital.

If the Resolutions are not passed, the Company would need to consider alternative options, the terms of which the Independent Directors strongly believe may not be as advantageous to the Company as the Placing. This includes raising finance by alternative means or a sale of the Group or its assets at a price that may not recognise their potential value. Any one, or both, of these actions could have a significant adverse or dilutive effect on the interests of Shareholders.

Portfolio

The following sets out summary details of the Company's portfolio of investments.

Vikram Logistic and Maritime Services Private Limited

VLMS is a supply chain transportation and container infrastructure company with a large operational road and rail transportation fleet and a material presence in central, northern and southern India. The company provides a broad range of logistics services including container freight transportation by road and rail, customs clearing and handling and bonded warehousing. VLMS is constructing four large container terminals in Nagpur, Bangalore, Chennai and Palwal (in the National Capital Region). The Company holds 99.9 per cent. of the shares in VLMS. The value ascribed to the asset in IIP's Interim Results published on 10 December 2013 was £146.4 million.

VLMS is the largest asset in the portfolio and one of the top three privately owned Indian logistics businesses. The terminal at Nagpur is due to commence initial domestic operations in July and, subject to completion of the Placing, the remaining three terminals should be completed and commissioned within twelve months. Each terminal is a critical profit driver.

VLMS' ability to complete construction and commence operations at its terminals has been hampered by delayed disbursement of approved debt from public sector banks. Additionally, the need to service project loans and on-going operational expenses has significantly strained the company's liquidity. In addition to the Placing, VLMS is currently pursuing bank facility restructuring with both lender consortia, although there is not yet guidance on timing or outcome.

It is intended that VLMS will re-brand as Distribution Logistics Infrastructure Pvt. Ltd.

Western MP Infrastructure & Toll Roads Private Limited

WMP operates a 125km toll road in the central Indian state of Madhya Pradesh, with a 25 year concession. IIP owns a 26 per cent. interest alongside Essel Infra Projects Limited, with a 74 per cent. interest. The value ascribed to the asset in IIP's Interim Results published on 10 December 2013 was £20.6 million.

WMP is performing as expected, with toll revenue data demonstrating continued traffic growth identified in the Interim Results. IIP continues to take a conservative view of traffic growth and have maintained assumptions. The majority of traffic that utilise the toll road is multi-axle and in an effort to eliminate revenue slippage from over-loaded vehicles, WMP completed the installation of four weighbridges in February 2014, with a further four planned this year. WMP also plans an additional check-post.

Whilst the Company is unlikely to be a long term holder of this asset, current complications surrounding refinancing options, the higher discount rates being applied and the consequently lower values at which road assets are being offered for sale may preclude action in the short term to realise cash.

Shree Maheshwar Hydel Power Corporation Limited

SMH is constructing a 400MW hydropower project (ten turbines of 40MW each) on the Narmada River in southwest Madhya Pradesh. The project will provide electricity, reducing peaking power shortages, and drinking water to the city of Indore. Civil works are largely complete with 27 gates and three of the ten turbines installed. IIP owns a 17.7 per cent. interest in the project. The value ascribed to the asset in IIP's Interim Results published on 10 December 2013 was £23.6 million. IIP has certain downside protections provided by the developer.

SMH has suffered delays for regulatory and financing reasons and remains under the guidance of the Ministry of Finance. In February 2014, the project was entrusted to a special task force of the National Manufacturing Competitive Council, which is mandated to resolve issues for projects of national importance. The Ministry of Power, under its new leadership, is also now taking an active role in advancing discussions and meetings have commenced with key stakeholders.

The combined involvement of the Indian government, state, energy authority and banks in resolving financing issues and in recommencing installation will inevitably lead to a dilution of the Company's holding. This will have a consequent effect on valuation, despite the protections in place to preserve our equity stake, which will be reflected in the Company's upcoming Final Results for the year ended 31 March 2014.

India Hydropower Development Company LLC

IHDC develops, owns and operates a portfolio of small hydropower projects. The company has six fully operational plants with 62MW of installed capacity and a further 21 MW under advanced development or construction. IIP owns a 50 per cent. equal interest alongside Dodson-Lindblom International Inc. The value ascribed to the asset in IIP's Interim Results published on 10 December 2013 was £19.2 million.

Increased production in the year to March 2014 was a result of a favourable monsoon and commissioning of 4MW Panwi in May 2013. Construction at the Raura project in Himachal Pradesh is on schedule and the project remains on-track for commercial operations in 2017.

Indian Energy Limited

IEL is an independent power producer that owns and operates wind farms in India, with 41.3MW of installed capacity at two sites in the states of Karnataka and Tamil Nadu. IEL is wholly owned by the Company. The value ascribed to the asset in IIP's Interim Results published on 10 December 2013 was £11.2 million.

Grid availability has been a challenge at Theni in Tamil Nadu and although the state government has taken steps to strengthen grid infrastructure, grid availability may continue to be an issue for Theni in the near-term. Operationally, both projects continue to perform well with machine availability at Gadag over 99 per cent. and machine availability at Theni over 98 per cent in the past fiscal year.