Kohlberg Kravis Roberts (KKR) & Co. is in the final stage of discussions to acquire a portfolio of Indian road projects from local developer HG Infra Engineering, two sources familiar said.

The seller will dispose of four projects, the sources said, adding it expects to receive around INR 5bn (USD 60m) in return for its invested equity of about INR 3.4bn. Technical due diligence by KKR is ongoing and a deal is likely to be signed in the next two or three months, they said.

The projects - all under construction - will likely open to traffic soon with HG Infra having achieved more than 90% progress in each, the sources said.

The contracts are all in the hybrid annuity model, in which the National Highways Authority of India (NHAI) covers 40% of the cost and the developer arranges the rest in a combination of debt and equity. The company is repaid its investment with interest either in annual or half-yearly installments over a 15-year concession, during which the NHAI assumes the traffic risk.

If the deal concludes, this will be KKR’s third roads acquisition in India. In July 2021, it said it would buy seven highways from Global Infrastructure Partners (GIP) and in December, it agreed to acquire five more from local developer Ashoka Buildcon.

India’s central roads authority approved the transaction with GIP last month while its consent for the deal with Ashoka Buildcon is still pending.

KKR’s Managing Director and Head-India Infrastructure, Hardik Shah told Infralogic last year the Indian roads sector is a compelling investment opportunity, given its ability to partially hedge against inflation.

Toll rates in India are linked to the wholesale price index (WPI) and are increased every year. For roads awarded after 2008, operators are allowed to increase rates by 3% plus 40% of the WPI.

HG Infra Engineering did not respond to a request for comment. KKR declined to comment.