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India’s biggest road asset investor Cube Highways and Infrastructure is in initial talks with investors including Caisse de dépôt et placement du Québec (CDPQ), Abu Dhabi Investment Authority (ADIA) and Ontario Teachers’ Pension Plan Board to sell part of its operational road assets through an infrastructure trust.

Cube will hive off its operating assets into an infrastructure investment trust or InvIT and place it privately with other investors, said three people with direct knowledge of the development. Cube is backed by Singapore-based global infrastructure fund I Squared Capital, spun off from Morgan Stanley’s infrastructure investment team. The company is exploring a valuation of around $2.5 billion for the InvIT, they said.

The move comes after the government removed the tax barrier for private placement of InvITs in the budget, putting them at par with publicly listed ones. However, the proposal to tax dividends in the hands of unit holders of trusts and the resultant double taxation has eroded the attractiveness of existing and planned InvITs and real estate investment trusts (REITs). The government is planning a carveout to maintain the status quo.

The Cube Highways InvIT will consist of the toll-operate-transfer or TOT assets that it won from National Highways Authority of India (NHAI) last year for Rs 5,011 crore. “The InvIT is being valued at around $2.5-3 billion and will have some other existing annuity assets the company has,” said one of the persons with knowledge of the development.

Although there is ambiguity over the dividend distribution tax and other regulatory issues for a private InvIT, sources said Cube, which is headquartered overseas, will be out of the tax net.