Indigrid Infrastructure Trust (540565) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the India Grid Trust Q2 FY '22 Earnings Conference Call hosted by Edelweiss Securities Limited. [Operator Instructions] I now hand the conference over to Mr. Swarnim Maheshwari from Edelweiss Securities. Thank you, and over to you, sir.

Yes. Thanks, Monika. Hi, everyone. On behalf of Edelweiss, I welcome you all to India Grid's Q2 FY '22 Earnings Results. From the management today, we have with us Mr. Harsh Shah, Chief Executive Officer; Mr. Jyoti Kumar Agarwal, Chief Financial Officer; and Ms. Meghana Pandit, Chief Investment Officer. I will hand over the call to Harsh for his opening remarks, post which we have -- which we'll have the Q&A session. Thanks, and over to you, Harsh.

Yes. Thank you, Swarnim, and thank you, everyone, for joining on this 18th quarterly call. I'll just add, Swarnim, from management team, there is fourth member, that is Satish Talmale, who is Chief Operating Officer. So just adding that. To start with, on Slide #3, I've created a vision to become the most admired yield vehicle in Asia. This is been the 18th quarter since listing, and we have consistently followed this vision with the pillars that I've mentioned on the slide, which is a focused business model, value accretive growth, predictable distribution and optimal capital structure. Based on this strategy over the last 18 quarters, we have reached as India's first and one of the largest power transmission yield platform today. This is on Slide #5. Total assets under management stands today at INR 21,400 crores across 19 states and UT put together. And we have 52 revenue-generating elements. So 52 different revenue-generating elements, which has distinct revenues attached to it and have their own availability and generation packages. We have approximately 7,500 circuit kilometers on 40 lines, and 11 substations transforming about 13,550 megawatts of MVA of transmission. We'll speak about solar, but we have, as of now, 100 megawatts of solar generation also in the portfolio, which we acquired during the quarter 2. Average residual contract life for our asset is about 30 years. And however, the assets are on loan basis, so we continue to own the [indiscernible]. And in a similar simpler terms, we have approximately 11,550 towers, which includes approximately 4,35,000 metric tons of steel and aluminum. Before we jump into the quarter 2 performance, I would just speak a little bit about the key power sector trends that we are seeing and feeling in the market. The demand trends since COVID has moved, I would say, in a very buoyant category, and we are very bullish about, in general, the consumption patterns of the country. And it would, we believe, continue to grow considerably over the next decade to come. Now this is something which provides for a very strong requirement for a robust backbone to deliver the electricity in time wherever it is required in a reliable manner. On the supply side, I would say the coal crisis, that I'm sure all of you would have read about or heard about, is a transient phase, and it would pass, and we do not think that, that is a sectoral or a material sectoral issue which will impact our business in any manner. However, what this would -- this has already started enabling within the regulatory circles as well as the ministry is to have a robust grid, which will enable diverse source of power to deliver the electricity at different points of time in the country. And that's something which has already shown very well by the intent of ministry in terms of implementation of G&A, which is gross network access, which we think would be able to be a successful one, only if there is substantially increase of spend in transmission fixed rate. And the last one is the technological disruption that are taking place in the sector, whether it is cost of solar, storage, we believe that is going to have a substantial impact on both consumption as well as where it is consumed and where it is sourced from. And we, as a provider of, I would say, pipe to deliver from generation to the consumer, we think there is going to be a substantially more investment in transmission, which will take place over the next entire decade. Coming to the key quarter 2 highlights for the company. Our revenue and EBITDA both has grown 43% year-on-year and 49% year-on-year, respectively. Our DPU has increased 6% year-on-year to INR 3.19 a unit versus INR 3 a unit, which was last year. We declared the increase in DPU earlier this year, and we are on track to deliver the INR 12.75 a unit, which we had guided the market towards. We could achieve this because the quarter 2 collections were really healthy, and we had 105% collection in this quarter 2, which is in line with the similar trend that we have seen from now. We continue to maintain a well-capitalized balance sheet. In this quarter, our balance sheet size is about INR 21,400 crores as we added about INR 660 crores of solar assets. Our net debt to AUM remains at 57%, which is significantly below the 70% cap and provides us sufficient headroom to grow. We have AAA by the 3 rating agencies and continue to maintain that. In terms of asset management, we have invested considerable amount of time and effort over the last year or so, and we are seeing that coming to fruition in form of higher availability, lowest trips since inception, which showcases a higher reliability of our asset portfolio. And in addition to that, we have invested into DigiGrid as we spoke about in detail, which is transforming the portfolio management, the way we are managing our assets and tracking it. And we also purchased an emergency restoration system, which adds to our reliability because it allows us to restore powers in case of any force majeure events in a substantially faster manner. In line with our ESG goals, earlier this year, we launched a program called IndiGreen and planted 50,000 trees in some of our substations. And many of them are [indiscernible] their increase, which we believe will create both employment as well as economic value for the communities that we operate in. On the policy side, InvIT regulations over the last 4.5 years has been consistently evolved over different aspects for better. And the first one, what has happened this quarter is about the FPIs have been unable to invest in debt securities of issuing in which -- issued by [indiscernible]. We've been working with the regulators over the last couple of years on this, and this has come up recently, which will further diversify our sources of borrowing. Trading lot size, which is reduced to 1 since August 2021, which I'm sure all you are aware about, that is taking place in quarter 2. And PFRDA has enabled NPS-backed pension funds to invest in debt securities. So in all, in general, liquidity to both units as well as debt securities issued in IndiGrid have been increasing over a period of time. I would have Satish Talmale, who is the Chief Operating Officer, to run you through our operating performance on Slide #9. Satish, over to you, please.

Yes. Thank you, Harsh. So good afternoon, everyone. So quarter 2 operating performance was one of the best record what we had in terms of overall performance in availability and reliability. So we could able to maintain availability of 99.8% across the portfolio against our normative availability target of 98%, and exercising incentive up to 99.75%. So this was, so far, the best performance. We also achieved the lowest trips per line as one of the reliability indicators across the portfolio, which is at 0.1. And as you can see on Slide #10, the quarter-on-quarter performance is at 0.27 last year. And this quarter, we achieved 0.10 against that. With the digitization, with the key projects like DigiGrid and a couple of other couple of technologies, we are trying to sustain our performance in more by digitizing our operating activities. So already, we have implemented it across 25% of the portfolio, with wide variety of assets with GIs and AIs substation and transmission lines. And by end of this fiscal year, we will be completing across the assets. As Harsh said, emergency trips per line is key objective to get ready for any unplanned situation. So ERS has been inverted into portfolio. So that has enhanced our confidence to take care of any force majeure events and restore the power in a shortest possible time. On HSE, we had a very good quarter, with 100% safe man-hours with continued focus on training and our learning programs. And as you can see on the chart, the number of unsafe conditions reporting has dramatically increased, so which means that it's very proactively the teams are identifying all the concerns, and then reporting it and then closing it proactively. That will definitely help us to achieve our HSE deliverables. On COVID-19, as in quarter 2 was more focused on making sure that all the operating teams in the field are vaccinated and at the same time, not to be complacent with the situation and get ready with all the appropriate preventative measures from COVID perspective. So overall, had a good operating performance. Quickly on the solar generation. We had one of the best generating plant in the area where the other solar plants are there. And we have one of the highest CUF generating plant located in our solar asset. So the CUF was 22.7% of the last quarter, yes, with a generation of 50.1 million units. So that's it. Back to Harsh.

Yes. I think Jyoti will take the subsequent financial performance then.

Thanks, Harsh. Good afternoon, everybody. I'm on Slide 10, which talks about the financial performance for the second quarter. We clocked a revenue of about INR 548 crores this quarter and an EBITDA of INR 504 crores, which were a handsome increase on a year-on-year basis on the back of acquisitions and in line with the longer-term trend. The NDCF generated this quarter was INR 224 crores. And as mentioned by Harsh earlier, we've declared a dividend or DPU of INR 3.1875. which is in line with what we had guided at the beginning of the year for the full year. This quarter saw healthy collections at 105%, which is in line with the longer-term second quarter trend. The average for the second quarter of the last 5 years was about 100%. So this particular year, it was a little bit higher than the longer-term average, but a little bit lower than what happened in the immediately preceding year. The collections saw uneven trend. It was a bit slow at the beginning of the quarter, but more than caught up in the month of September. We saw the highest monthly collection over the last 4 years. Due to the healthy collections, we saw a significant decrease in the DSO days, down to 52 days compared to 81 days in the corresponding quarter of the last year. I move to the next slide, where we give the details of the DPU. So as mentioned, the DPU for this quarter is INR 3.1875, and we are on track to meet the increased DPU guidance of INR 12.75 for FY '22. The DPU comprises of all the 3 components this quarter, an interest amount of INR 1.86, capital repayment of INR 1.28 and INR 0.05 dividend. The record date for the DPU is November 2, and the likely distribution date would be 10th November or before. The NAV this quarter was higher than the last quarter by almost INR 5, and this is primarily because of the acquisition of FRV, the equity component of FRV. Combined with the INR 223 crores gross distribution for this quarter, we have distributed in excess of INR 2,500 crores since listing. And we are on track to sort of continue to increase the DPU on a 3% to 4% year-on-year growth. The next slide is a bridge between the EBITDA and the distribution. So we had an EBITDA at SPV level of a little bit higher than INR 500 crores, INR 507 crores, which translated to an NDCF at SPV of about INR 511 crores and a distribution of INR 223 crores. Other than the usual items of finance costs, both at the SPV level as well as at IGT level, the debt repayment -- primarily at the SPV level. CapEx and some expenses and tax, the 2 highlight items are working capital movement and the reserve. So on the back of robust collections this quarter, we saw a positive movement of working capital of almost INR 33 crores. This is after accounting for a INR 25 crore net repayment due to factoring. We did about INR 50 crores factoring in the first quarter. The factoring in the second quarter is only INR 25 crores. So despite a INR 25 crores net increase, we had about INR 7, crores, INR 7 crores higher than the net increase due to factoring in this particular quarter. We also were able to add to the NDCF reserve marginally by INR 1 crore. And we started the quarter with INR 115 crores NDCF reserve and INR 1 crore were added, a little less than INR 1 crore. And we ended the quarter at about INR 115 crores of NDCF reserve. I move to the next slide. This is Slide 13, which talks about our debt situation. So we have a gross borrowings of about INR 12,700 crores as of September 30. A very well diversified book across NCDs as well as loans, slightly higher skewed towards NCDs, 54%, balance coming from bank loans and is well diversified across a wide variety of investors, mutual fund, banks and all types of banks, private as well as public, corporates, insurance companies, retail/HNI, a very well diversified book. We raised about INR 850 crores of NCD in the second quarter at a marginal cost of 6.72%, which brought down our average cost of borrowing to 7.81%. So over the last 1 year, we've been able to bring down our average cost by almost 75 basis points. And given the marginal cost is still lower than the average cost, there's still some room to go before we sort of hit the bottom of the average cost of debt. We're carrying a very robust cash balance in excess of INR 800 crores, which comprises of DSRA as well as the NDCF reserve, and the DPU for this particular quarter of INR 223 crores. Our net debt to AUM, as mentioned earlier, is 57%. So there's a fair bit of headroom before we come anywhere close to the 70% regulatory cap. We have more than 70% of our borrowing -- almost 74% of our borrowing is fixed rate borrowing. And to that extent, we are obligated towards the interest rate movements, and healthy EBITDA to interest ratio of -- in excess of 1.9x. In terms of our repayment schedule, we've been able to even out the repayment profile, also term out the repayment profile and we have repayments less than INR 1,500 crores in all the years, except for FY '23, for which we are in advanced discussions with a handful of lenders for tying up the refinancing much ahead of time. I'll now hand it over to Meghana to take through the next section of the presentation.

Sure. Thanks, Jyoti. I'm on Slide #14, where we compare ourselves with respect to on the total return basis, total return as is reflected in terms of the distribution plus the capital appreciation, which is reflected through price change. So on the graph, we are comparing ourself with pure debt instruments, which is reflected through the 10-year GSEC bond as well as the 30-year GSEC bond. As well as on the right-hand side of the bar, you can see that pure-play equity indices like NSE 500, NSE Infra, PGCIL, PGCIL InvIT, et cetera. All put together, if you look at the total returns as well as the annualized returns since listing, IndiGrid has outperformed on a risk-adjusted basis. The bottom table talks about the beta, which is a metric which reflects volatility in the price. So while we have evidence significant ramp-up in the stock markets recently, which is reflected in all the indices, increasing on the total return basis. If you look at the volatility and look at the risk consistent basis, IndiGrid has significantly outperformed all of them. Moving on to the next section, we'll take you in terms of how are we looking at FY '22 and beyond. I'll request Harsh to give us comments on Slide #16. Thank you.

Thank you, Meghana. So coming to the outlook that we see for the rest of the financial year and beyond, we are divided into 4 buckets, of course, one being portfolio growth. From the factor of industry that I spoke earlier, we believe there is going to be a tremendous amount of investment that is going to take place in the transmission space. And we are seeing over INR 50,000 crores of interest rate and another INR 40,000 crores, INR 45,000 crores of interested bids coming over next 3 to 4 years, which is going to create a healthy pipeline for acquisition bidding. We are focused on acquiring the assets that we are tied up for, including KTL, which is a framework asset. As and when it gets commissioned, we will conduct due diligence under the frame of agreement with Sterlite Power and look to apply that. The third is we have also started evaluating building opportunities in power transmission with our partners. To ensure that we have an early entry into some of these biddings that is taking place and which adds to our pipeline, and we are focus that for the rest of the year, we are pretty much confident to deliver the INR 12.75 a unit that we had guided the market towards. On the balance sheet, we will continue to improve the balance sheet strength because now we have raised the rights issue on early part of this year, and most of the restrictions that existed on raising debt have pretty much been mitigated by different regulatory bodies and which is enabling us to diversify our sources of borrowing in longer tenants. So the priority for us would remain for next year or next half year, to reduce the interest cost and elongate tenure or the upcoming repayments that are coming. And we see it not as a risk, but as an opportunity to refinance these loans, which are up refinancing in FY '22 and '23 and take advantage of the lower interest cost. In terms of asset management, I think as we have focused on, we continue to invest in technology, whether it is DigiGrid or ERS or other technologies in place. We're keeping in mind to ensuring our availability to the maximum and to maximize the incentive as well as ensure a world-class EHS and ESG practices across our portfolio. In terms of the few policy initiatives, which are still outstanding, is with respect to the tax anomalies between equities and InvIT, especially with respect to long-term capital gains tax, for InvIT, which is applicable for 3 years. Also, we are working with regulators and exchanges to ensure that index increases happens for InvITs and REITs. And we continue to invest more time and effort to ensure increasing awareness about IndiGrid and InvITs in general. We believe all this is achieved by us and the company. We are on our path to deliver superior total returns, sustainable increase in DPU and stable operations. With that, I would just take a pause and Swarnim, maybe can open for question.

[Operator Instructions] We have the first question from the line of Rushabh Sharedalal from Pravin Ratilal Share and Stock Brokers.

Congratulations. Just one question just to understand the business better. So we have multiple assets in our portfolio, and you do mention that the average residual contract for the asset is 30 years. So I basically just wanted to understand that, basically, our economic ownership in most of our assets is close to 100%, most of them, not all. So what really happens after 30 years? Do we renew the contract? Or the asset goes out of the portfolio? What exactly happens to it? Just wanted to understand that.

Sure. So I think economic ownership is 100%, to be honest, in all assets, not just part, on all assets, we have 100% economic provision. All assets that we own today, other than solar and one small asset, which is in Jhajjar, which is a state transco project, have or made contract, which is perpetual in nature. So what that means is that when the contract gets over of 35 years -- when the contract is over for 35 years, subsequently, if the transmission lines are required, which we believe will be required to be evacuating power, there would be a renewal of contract under some mechanism. Whether it is going to be a cost-plus mechanism or it is going to be freshly discovered pricing mechanism, there would be some consideration for us to operate those lines. Because in the absence of that, we will be better off selling all the metal that we spoke about in the first line. So we believe most likely there is going to be a regulated return cost-plus model beyond the original concession period that will continue. However, we'll have to wait and see what takes place. But considering the amount of assets that exist and the replacement value of those assets at that point in time will be multifold, we are confident that this will continue beyond the original contract. And just correcting myself, I think you're right, one asset, which is Parbati that we own 24%%, that's clearly exception, and because that's a joint venture with Parbati.

Right, right. So basically, just correct me if my understanding is wrong, but -- so the assets are owned by us, and the average period of those assets, where they'll be in our portfolio, is 30 years. But after that, if the contract is not renewed, then the asset will go out of the portfolio, and you will be able to sell the metal and recover the cost. Is that understanding correct, right?

So understanding is correct. I'll just rephrase that assets will not go out to the balance sheet. Asset is still in the balance sheet. But instead of being as a transmission line, it will become a 4,35,000 tons of metal, I think, because you're not using that asset anymore as a transmission line. Now -- so you will monetize that. You will have cash in the balance sheet, after monetizing that. But essentially, the asset remains in the balance sheet, just the nature of asset make it fast.

Right, right. Got it, got it. And just a small request from our end, actually, we have been communicating to the exchanges for a long time. So if -- to include InvIT as the -- to include InvIT into the fact that they can also be used for margins -- as margins. So if you can also at least drop a small kind of a communication to the exchanges, I think it would be very helpful for our investors as well. Just that's a request, not any kind of a...

Yes. No, we'll surely put it across them.

The next question is from the line of Sagar Sanghvi from ADD Capital.

Congrats on good set of numbers. Only one question. On the DPU front, so how do you arrive at a mix of the DPU, whether it's interest or dividend or capital repayment? That's it from my side.

Sure. Jyoti, would you like to answer that question?

Yes. So there is -- based on the operating profits that the company's individual SPVs are generating, they rise at the NDCF at each entity level. And based on the nature of the way to upstream that cash from the SPV to the IGT for distribution onwards to DPU, there are 2 or 3 avenues that are available. One is, of course, the interest avenue, which is a function of the debt that the IGT or the parent trust has as a loan into the SVP. The other is dividend, which is a function of whether there is profit in the SPV or not. And the third is repayment of the loan. Now it's a function of how much the operating cash flow has been generated. And what are the avenues available for streaming that to the trust at the top of distribution as DPU. So based on these 2 factors, we try to optimize the distribution towards interest and dividend first. And to whatever extent it's not possible because the cash flow is higher than what the interest can be charged, based on the outstanding loan, we upstream as the repayment of the loan. And that upstreaming of the repayment of the loan is then onward distributed to the investors as capital repayment. So that's how the mechanics work. In this particular quarter, there were collections, which were higher towards September. And because those were not -- it was not possible to distribute or upstream those high collections entirely by way of interest or by dividend, we had to sort of repay the loan, which IGT had given to the SPV, then which were distributed as capital repayment.

Right. But then you would have some visibility on the interest repayment as well, right? So in some particular quarters, you have interest of dividends. Some quarters, you have capital repayment as well. So the question is how, as an investor, should we look at going for the few quarters and the FY '23 as well?

Yes. So in this particular quarter, there is a steady-state dividend upstreaming in one of our assets, which is the PrKTCL. There was a -- 2 petition that was filed, which led to a -- through a provision, because of which the dividend upstreaming part was not possible to be done in this quarter. Probably, it will happen even in the next quarter. Thereafter, the steady state dividend upstreaming, which we flow to DPU as dividend, will be maintained, reinstated. I think given that, based on current projections, we feel that about INR 0.70 to INR 0.75 out of the INR 3.19 in every quarter should come as capital repayment. Now what we try and do every quarter is optimize it to skew towards the interest and dividend portion as much as possible. So it's not going to be hard fixed for INR 0.70, INR 0.75. But based on current outlook, and subject to any further acquisitions, et cetera, it looks like a steady state, INR 0.70 to INR 0.75, is likely to continue to come back as capital repayment.

Okay. Okay. Can you assume, if there is any volatility, it would be on the cash flow adjustment on the -- respective subsidiary of SPVs?

Sorry, can you come back again?

So if there's any volatility in the mix, can you assume it either the cash flow adjustment in the respective SPVs?

So the P&L performance or the pure accounting performance volatility is not that high. These are all availability-based revenues, as you know, are very, very marginal volatility. But yes, the collection-based volatility could be there. Add individual SPV level collections may be higher, what depending upon how the overall collections are behaving. So P&L volatility not that much, collection volatility could be there, yes.

The next question is from the line of Pratik Kothari from Unique PMS.

So just in continuation to an earlier response, this excess cash that we generate at the operating level, which we had to upstream. So as per regulation, even 90% of this has to be paid back to unitholders? Or can this be used for something else also?

No, so 90%...

Yes, go ahead, Jyoti. Sorry.

Yes. So as per regulation, 90% of the cash flow, the NDCF, which is generated at each individual SPV, necessarily has to be upstream to the trust level, and 90% of that has to be necessarily distributed as a DPU. So from a pure regulatory requirement point of view, any cash that is getting generated, and this year getting generated at an SPV level, net 81% minimum has to be distributed as DPU to the unitholder.

Fair enough. And -- so sir, in this quarter, this excess cash, which was generated, so this would have been over and above the INR 3 interest, which we had earlier alluded to, right? Why this compensating for interest and not over and above that?

No, it's not like that, sir. There are about 14, 15 SPVs. So depending upon which SPV got more cash, to the extent possible, we would be upstreaming it as interest. But if, let's say, based on the outstanding loan and the outstanding interest, if there is more cash than what you can upstream as interest, and you'll have to upstream it in other ways, right? It could be either dividend, which is not possible because most of our SPVs are, at least from an accounting point of view, loss making or principles. And so we have no option but to upstream it as principal. And based on -- like I said, based on current visibility, that is likely to continue, at least in the foreseeable future and somewhere around INR 0.70 out of the INR 3.20 will come as principal repayment.

Fair enough. Just to explain it a bit, so let's say it's based on the interest, IGT would have given some loan to the SPVs based on certain interest, and you will be getting that money on an operating basis, which you upstream up to the unitholders. So what the loan, which has been given to the SPV, has come down with the interest has come down and hence this excess cash collection because this wasn't expected at least a quarter or 2 back? So why has this composition changed now?

And to be honest, the cash flow which has been collected at the operating level, at some point of time would need to be distributed as capital repayment for sure. This particular quarter, the one anomaly is that the dividend, which comes from one of our entities, which is PrKTCL, that has not been upstream because of a provision that was made where there are no funding profits to upstream as dividend. And that amount had to be substituted by more cash flow coming from some of the other entities. And because the interest amount is only fixed, that amount came in, in the form of extraordinary payment through capital repayment. On a steady-state basis, the dividend that we were paying was around INR 0.15 to INR 0.20. As you can see that in this particular quarter, only about INR 0.5 has come back. And that is another reason why we had to distribute more as capital repayment. I think based on overall composition of the cash flows overall amount of debt, which has been infused into the SPVs interest cost on that, et cetera, we believe that a steady state INR 0.65, INR 0.70 is likely to continue at least for the foreseeable future. Yes.

The next question is from the line of [ Nimesh Rathod ] from [ SSR Charitable Foundation ]. As there is no response, we'll move to the next question from the line of [ Dinesh Kothari ] from Srei Infrastructure.

So I would just like to know that IndiGrid's purchase one of the solar assets recently. So what are the plans regarding the solar assets? And how is it beneficial for IndiGrid?

Sorry, can you repeat your question, please?

Yes. I'm just asking that IndiGrid has purchased one of the solar assets. They have started acquiring solar assets. So what are the future plans with the solar plants? And unlike how will it be useful for IndiGrid?

Yes. So I think future plan is that we'll keep, like we do for transmission projects, we will evaluate solar projects, which has -- which are operating solar projects or track record of operations and has a strong counterparty. That is the plan. We don't have a particular number that we want to become a 1 gigawatt or a 2 gigawatt or INR 5,000 crores, which is not as such, I would say, specific numbers as goal. However, we believe solar project has very strong correlation and very similar to transmission projects in terms of asset management practices being a similar regulator, and when you have predictability of solar generation. So because of that, if we choose the contracts, a strong counterparty contracts, then we believe they are as good as transmission projects. And all the projects that we purchase will eventually result into a better distribution for individual investors, and that is the end goal for IndiGrid.

So investors can think of getting more than INR 3.19 if the acquisition takes place going forward?

It depends on sale proposition, timing of acquisition, but I can talk about in the past, right? When we came to listing year at INR 2.75 a unit for quarter. Right now, we are INR 3.19 a quarter, which translates into approximately 4%, 5% growth every year. So that has been our focus. And yes, if we are able to achieve value accretive growth by acquiring more projects, we believe there is a possibility of increasing of DPU as well.

We have the next question from the line of Sarvesh Gupta from Maximum Capital.

Just one question is, as you said, the INR 0.70 to INR 0.75, which has come to capital repayment is expected to continue for at least 2 more quarters. So is there any medium-term guidance that you can give in terms of the split of DPU between the 3 modes of payments?

No, I would say we would refrain from giving a guidance on this side. The reason being that there are already 2 guidances given by management: one is [indiscernible] number on a yearly basis at INR 12.75, and second one is on a quarterly basis of INR 3.19. Further breakup of that is theoretically possible, but it is not going to be in control of management to really deliver because it is dependent on, if the cash flow moves by 1 month, right, in September, if the subsequent cash comes in October, the ratio changes materially, right, for that quarter. And then both investors and then it will get confused that is important to us. To be honest, the ratio is going to remain unpredictable over a longer period of time because it is dependent on the capital structure of specific SPV and the collection in the specific SP, right? And this is something which makes it a little more complex than projecting it that this is going to be the percentage for a medium term or longer term. And to be honest, practically other than the tax impact, which is that on capital repayment, there is no TDS. We believe there is no difference. As long as INR 12.75 is divulged, that is our focus. Our focus is not to really maximize a particular component which we need to focus on. So our guidance would rather confuse investors than really help because it's not going to be a straight line, right? And quarter-on-quarter changes will make it more confusing.

Understood. But this ratio of noninterest form of payment has certainly increased, I think, in the last few quarters in some way or another. So are there some trends in your financial structure which is contributing so? And are those trends going to continue going forward?

Okay. Yes. So I think one, it's a structural trend which is going to continue. Recently, we have acquired a cost-plus asset, which is an asset which is giving tax-free dividends, right? So that is a PrKTCL asset. So as and when that asset, which I believe was approximately INR 35 crores to INR 40 crores of dividend, right, comes, on a per unit basis that translates to around INR 0.50, right, INR 0.40 to INR 0.50. So about INR 0.40 of distribution will come -- so anywhere from INR 0.30 to INR 0.50 distribution will come from dividends because of that acquisition, which was a structural change, right, which was not there last year. So that is one change which will continue from a dividend perspective. And only by exception, like it happened in this quarter or next, the dividend will go down. Otherwise, dividend of that size will continue in that asset. But in particular, there is no structural trend. That is just the quarter-on-quarter movement of cash versus our interest liability. So there is a long-term trend on that.

We have the next question from the line of [ Nimesh Rathod ] from [ SSR Charitable Foundation ].

Harsh and team, as usual, the numbers look very good. One line which picked up my attention, and that was 100% safe man-hours achieved in quarter 2 FY '22. So heartiest congratulations because I think this line should actually be printed in gold. Again, I would like to bring in appreciation for the fact that ERS kits have been added, which simply means that there is more focus or rather at least more reporting on risk management, which is appreciated. I would like to point out or rather bring in an element of thought here in terms of what is our thinking as far as the balance sheet is concerned. One observation, and Harsh, would request you to take this to the Board as well, is that there is an inclination of keeping the debt element alive in the balance sheet. Given these circumstances where there is excess liquidity, I would look at what major companies around us are doing. And I think most of them are trying to leverage the existing liquidity -- excess liquidity and converting the debt to more serviceable equity, in our language, more unitholders. I wonder, the upcoming repayment of FY '23, which is, I think, close to about 23 billion or 24 billion, would it be refinanced with debt? Or would there be at least attempt to refinance it through some QIP or some other means of raising funds?

Yes. Thanks, [ Nimesh ]. I think -- I take your appreciation on the risk management on EHS. I mean Satish and team is putting a phenomenal job on ground to ensure that reliability remains high as well as the people working on ground are safe on our assets. On the very interesting question that you've asked on debt and the equitization of debt, I think it's a very interesting one. I would address it in 2 buckets. First is InvIT is very unique as a business. And I would say they are in equity in nature but are much more predictable and better in actually delivery. Let's say, for example, pick up any high dividend-yielding business or any, let's say, consumer business also, which is a high-delivery business, right, they trade at a particular multiple, right? And let's say they are trading at 20x or 25x or whatever, right, some multiples they're trading at of the [ path ] or dividend, okay? Now investors are okay or comfortable trading in multiple on those stocks because fundamentally, we believe that next year also, somebody is going to purchase a [ toothpaste ] or somebody is going to purchase something else or there is going to be an EPC contract coming way of this company. Even though there is no announcement, there is no predictability, but still there is an underlying belief that this is a need of the country, of the market, and therefore, it will continue, right? But otherwise, no company would have more than a year or 2 years of order book, right, and predictability, therefore. Whereas in a business like, let's say, IndiGrid, we have visibility of 30 years that we exactly can say what we are going to earn in second year from now and 15 years from now, okay? But we are still being traded or looked upon as, instead of a business, an asset. This is what we have been [ warned ] from this investment. It is like a bond. Now what is happening because of that is that instead of trading like a business where market appreciating what has been created over the last 4, 5 years, but this is not a bunch of 13 assets. This is a business which is created. And therefore, this is going to continue to add more projects and continue to run like a going concern. People are valuing it as a fixed number of assets. And therefore, the questions around IRR and different things coming, right? How many people ask what is the IRR of a consumer company or an EPC company? Not many. So that underlying shift has happened, but what happened in a way we would have envisaged or expected or the way it happens globally, right? If it takes place, then what would happen is that the multiples that we will trade at, right, would be, to be honest, better than borrowing and continuing with that. So for example, as Jyoti has mentioned today, the cost of borrowing is at, let's say, the incremental one that we did at 6.7%, right? And if you look at 6.7% borrowing, it is fairly attractive from our portfolio because we are coming down the cost curve, right? But if one was to look at that if I want to replace 6.72% with an equity, let's say, 6.72% would mean about a 14x price to earnings in some manner or price to our dividend -- let's say, price to dividend in some manner bank, right? Now if we were trading at even 12, 13x, it would make sense to raise equity and do it. We are trading today at, let's say, INR 140 or INR 130, somewhere around 9%, somewhere around 11x price, right, of what we distribute, so 12.75. Now if that number really comes to 13, 14x, absolutely agree with you, it will make sense to raise equity. And there are investors who are willing to invest. There is enough liquidity, et cetera, which would make sense to -- which would make mathematical sense to raise equity and replace debt, right, at that point in time. Because you are now recognized as a going concern business, you don't really need to keep borrowing. Now this is a case in which the entire perception of the business needs to change from the market. It's a process. A lot has changed over the last 4 years in terms of IndiGrid business per se. But it's still a journey. But to be honest, simple mathematical answer is if we are trading at 14x our DPU, it makes absolute sense to raise equity and repay debt. That's one question. Second is a -- second aspect that comes into place is that we need to balance between the equity that we raise and the debt that we have and the new assets that we will acquire, right? So 3 things needs to be triangulated. For example, we did raise rights issues. So exactly what we did is INR 1,200 crores of rights that we did in April. Now that rights issue has obviously allowed the leverage to be lower. And cash is fungible, whether we use it to prepay debt or acquire asset gain, balance sheet where there is additional equity that's created in April this year. So -- but that equity is raised at INR 110, right? So if we were to look at 12.4, this one, we raised at 10, 11x multiple. Now at 10, 11x multiple, the raise, it does not make mathematical sense. Mathematically, it will be better if you borrow. But we wanted to keep ourselves ready if there is a larger acquisition comes and therefore keep the headroom ready to grow. And therefore, we sized it accordingly. Now in the same manner, if you are raising equity or our -- if we are trading at 14x and raising equity, certainly, we will prefer to raise equity over debt, right? So I mean that's the challenge that I'm talking about. But I think it was this evolution of the product in the business, and the understanding, I think, we'll reach there eventually.

Maybe one of the things or one of the expectations we could start by saying is that there is a need at times to let go of the incremental DPU in case we want a leaner balance sheet.

True, true. I think that's exactly the reason why we raised equity, right, of INR 1,100, INR 1,300 crores. But -- yes, but I think we need to strike a balance. That's exactly what we're doing. We're doing a balance right now. And then with 57% of the debt, we are already very lean versus the infra projects in general or even other most of the corporate.

We have the next question from the line of Sunil Kothari from Unique Investments.

My question is to Mr. Harsh. Sir, basically, as an investor, what -- up till now, we were able to understand from whatever commitment or language or the promise we as IndiGrid is making was that we would like to grow as an organization. So that's why we are raising capital, first initial offering and then again, right? And now slowly, we are talking about giving capital back maybe for a foreseeable future, INR 0.65, INR 0.75 per quarter. I'm a little really confused, but please don't reply me regulatory language, but make me understand why this is happening. We have lesser opportunity now to grow. That's the reason we are giving capital back, or it's just some temporary phenomena, please.

Okay. So let me answer a very simple language. While English language, we are saying this is a capital repayment, practically, this is no capital repayment. InvIT is an equity product. There is no promise of capital repayment. Company cannot repay any capital to you. We have bought it at a particular price. It is traded in a different price. You can send that on an exchange. There is no concept of getting your capital back in your hands, okay? It is not a debt instrument, right? Now -- so it has nothing to do with what we did at IPO, what we did at preference issue, what we did a rights issue. We can very well do a preference issue today and next day provide INR 100 crores capital repayment as per what is done. It is not a meaning key -- we have taken -- we have raised money given it back to you, right? In language, it comes because the tax is drafted like that. The English language is drafted like that. Therefore, the same name we've given, capital repayment, okay? You are not getting your capital. What have you invested in? You have invested in a business which owns transmission lines and solar projects. It earns income by owning that, and it gives that income back to you after paying for expenses and financing costs and tax, right? Now the nature in which it is given back to you is in the hands of tax authorities of how the tax laws are drafted. It has nothing to do with that your capital came into the business and came out on its own, right? There's no such concept, okay? So the confusion that you may have is on account of the holdings that are used for income tax and otherwise that we are repaying capital. In reality, this is not a capital repayment to you.

So in my account, that will be counted as capital repayment. I'll reduce my cost and treat it as an income, right?

Correct.

So this is the law of this land, and we very well know that this was when we came with InvIT. It is also now same. So my question is whatever language it was used -- and previously, we were very sure or, I mean, very confident about not giving much capital back and growing the organization. What I understand, sir, you have raised this rights issue because you want to increase your balance sheet, you can borrow more. Now you are reducing your -- whatever you call that, as capital or equity. So...

No, no. Sorry to interrupt. No, no. I'm sorry, I'm sorry. Let me interrupt you over there. These 2 are not linked. This is exactly my point. You are linking the 2 points which are not linked to each other. We can grow. Growth has nothing to do with what happens in your tax accounts. So what you are linking is absolute capital repayment that we have [indiscernible]. These 2 are not linked. They are completely different points. So on one side, you are saying -- on one side, what you are saying is your accounting and tax books, right, but that has nothing to do with the growth opportunity and capital available with the company.

Fine, fine. So Harsh, just to clarify these things, you mean to say this repayment of capital can -- will it reduce our borrowing capability, the debt proposal which SEBI is...

No, no, no. See, definitely, absolutely separate. Please separate the reality and the tax for a second. The reality is what we said, that we want to grow. We have capital available. We have raised capital. We are going to deploy that capital, and we have [ non-income ], right? That is the reality. Now what you are getting back in your tax books is tax reality. That has nothing to do with our wanting to grow, SEBI limits, et cetera, okay? Now the way the income tax has drafted this, that it is a pass-through vehicle. And therefore, being the pass-through vehicle, whatever nature in which you receive cash flow, okay, from subsidiary, you need to repay it back to the same in the same manner to your investors. So we receive it in form of interest, we give it interest. We receive in form of dividend, we give dividend. We receive in form of principal repayment, we give it back in form principal repayment, right? Now this does not reduce our ability because, please understand, what we are drawing from SPV, right, is the operating cash flow. So whether -- if I have INR 100 crores of EBITDA in the SPV, after paying INR 70 crore interest or INR 80 crore interest and INR 20 crore principal, my SPV is still going to, next year, another INR 100 crore. SPV is not repaying me capital. SPV is around INR 20 crores of EBITDA. So it needs to upstream the money. In a normal company, you would get stuck because of depreciation opening up. Depreciation gets stuck in the company, right? To change this concept, they said, look, we are going to allow you to upstream your depreciation by paying your principal to your parent, which is an InvIT. But they also need to give it to investors in form of principal repayment. Yes, it reduces your cost of acquisition because the tax authorities did not want this completely tax free, right? Yes, this is reducing to their transport. So this is moving from your tax account to your capital tax account, which is better for you as an individual assessee or anyone for that matter from a tax perspective. So what comfort I can give you is that this has nothing to do with our ability to acquire more projects or has nothing to do with avenues that we have available to acquire projects. This is just given to you as a capital repayment because the income tax act is drafted. And you should be happy because you are paying on a -- indirectly paying or deferring your capital gains tax, and you are not paying tax on this account, right? So it's beneficial to retail investors to be honest because as and when you understand from us, the company's opportunity has nothing to do with this. These 2 are different things.

So just to make me -- a little bit more clarity. What I'm trying to now understand from you is the language which we were understanding. We are meaning maybe different. We were understanding that there will be more -- majority will be -- majority means always it will be an interest, sometimes some dividend, and sometimes some fraction of some paisa or some fee...

Principal.

As a principal. So now the language Mr. Jyoti has spoken is that there is a INR 0.65 to INR 0.75 for foreseeable future. So now we are foreseeing the future which will make it -- DPU distribution, whatever, INR 12.75 will increase every year, 3%, 4%, INR 13. But out of that, between INR 2.5 to INR 3 will be capital. And that is for how many years? If you can tell me, that will be a great help.

Yes, sure. So I think there are 2 points, right? One, as I said earlier also, we wouldn't be able to guide on what will be the principal. there still remains a minimal amount of principal because it is linked to the cash flow that comes in, in a particular SPV, in a particular quarter. What we can guide towards is that the majority, as we have said before, will remain interest. About INR 0.30 to INR 0.50 will remain as DPU -- sorry, dividend. Because these 2 things are firm, right? We have lent x amount of loans to subsidiary, on which we are charging y amount of interest, predictable number. Second, we have acquired a cost-plus asset, which gives a predictable dividend, predictable number for us to communicate. The third number is a balance of what we collect every year or every quarter. But the balance has the principal either, right? That balance, we can't predict, right? What we can predict is line 1 and line 2, right? So based on the cash flow variations that happen, based on, let's say, we acquire an asset with ready-made cash, based on capital event in between, it is impossible for us to guide for a midterm that we are continuing to have either the INR 2 or INR 1 or whatever the amount of principal we pay, right? It is not possible for us to guide. What we can guide is on INR 12.75 a share guidance. And we can very well guide on that the majority of that would remain as the interest and dividend because both of them are the exact numbers that we are guiding the SPV, right? Third part is the balance part. That is very difficult for us to predict. But the total remains same.

Okay. So just some -- the prediction our CFO has made for whether INR 0.65 or INR 0.75 for some quarters or some foreseeable future...

Some quarters will happen. See, some quarters will happen.

Okay. So that is what I'm asking. Some quarters or foreseeable future, these are the different languages we are using. So if you can say it simpler, that will be really...

Sure, sure. No problem, yes. So I'll assume that a couple of quarters, it will happen. And the reason also was provided by Jyoti that because we have filed a true-up petition, right, for one of the regulatory assets, so the dividend over there is changing. And therefore, the part of the component of principal is increasing. That is just for a tangent phenomenon.

So within some -- after some few quarters or maybe a reasonable time frame, should we expect that there should not be or there will not be any major capital reduction? In terms of major, in my opinion, INR 2, INR 3 capital return is major. INR 11, INR 12 interest or maybe INR 0.50 capital is fine. So can you...

No, no. But I think we can't say anything on this, Sunil-ji. But if tomorrow we receive a INR 200 crore upside from some cash, we only were to give this capital.

So those repayments from the SPV is very unpredictable, this additional whatever we are receiving?

Yes, the additional ones are unpredictable. That's exactly what our point is, right? See, you can't have a daily prediction or monthly prediction of cash flows, right? We have an annual prediction. Therefore, we give an annual guidance, right? Then we give quarterly guidance. Within that quarterly guidance, to give further guidance is not possible. There will be ups and downs, and that is one of the reasons that we maintain INR 110 crores, INR 115 crores of cash reserves, right? And within that cash also, there is an interest in principal breakup, right? Now in 1 quarter, if we want to use a cash reserve, we will use the interest cash reserve. Another quarter, if the interest cash reserve is finished, then principal cash reserve is used, right? You will see variability over there. So it is impossible for us to guide on that. And I'm not sure why should we guide on that, right? We are guiding on the total DPU beyond the point. And if at all there's a higher capital deployment, it should be helping investors, but it's not possible for us to guide.

No, no. I totally appreciate that. Previously, we were guiding on this. That's why I'm asking you. Not...

Yes. So we are still guiding the same. That is going to remain available.

The next question is from the line of Kayur Asher from PNB MetLife.

Congratulations, Harsh and team, for yet another stable quarter. So just a few queries. I just wanted to get your thoughts on the possibility of debt raise from, let's say, the overseas market. Do you think there is a scope for further compression in our existing cost of funds if you were to borrow via this route? And are there any regulatory hurdles for InvIT for raising funds in this regard?

I think I'll allow Jyoti to take that. Jyoti, do you want to take that?

Yes. Thanks, Harsh. So obviously, the more the avenues of raising capital, the better, both in terms of an ability to raise capital as well as the competitive intensity leading to better pricing for us. So this is definitely a very welcome step. Other regulators are there, in particular, along FPIs to invest in the debt paper issued by InvITs. We believe there is room further for further compression like-to-like basis for our paper, both in the domestic as well as the international market. We have seen over the last, let's say, 3 or 4 quarters, significant compression in terms of our pricing vis-a-vis, let's say, our peers. Overall, about INR 0.70 to INR 0.80 compression has happened. And this is coming along with an increase in the tenor. And generally, the term structure is upward sloping. To that extent, on a like-to-like tenor basis, the compression has been even higher. We believe there is some more room to go or maybe another INR 0.20, INR 0.30 on a like-to-like basis. But we are also mindful of the fact that the interest rate environment is looking a little bit towards hardening. So while there could be a reduction on a same-store basis, on a like-to-like basis, on an actual basis because of likely hardening of rates between now and the next 2 or 3 quarters, whatever compression that might happen may get nullified by the hardening. So maybe we will see similar rates, at least for the next 2 or 3 quarters for our fundraising. FPI is definitely a very good avenue. There is a deep market out there. We are a AAA-rated InvIT. We have KKR internationally very well understood sponsors. That would help us in getting adequate participation from marquee investors and also potentially extend the tenor of our NCD issuance. So that will definitely help. Clearly from avenues of raising capital, there is one more avenue from international market, which is not available right now, which is the [ CV ] market, which also there is a proactive effort done by IndiGrid as well as some of the other InvITs. And we hope that in the near term, maybe 2 or 3 quarters from now, that avenue will also be available for us. That will help us raise dollar capital. And if, let's say, the cost of that capital on a hedged basis is comparable or lower, then that further sort of augments your toolkit from a variety of fundraising options concerned.

Sure, sure. Understood. Yes, that's it. And I think we have, I think, in our presentation, mentioned that we have close to INR 2,400 crores of debt maturities in FY '23. So just trying to understand here, what would be the average cost of this specific debt piece that would be refinanced?

Yes. So the average cost is significantly higher than the marginal cost. On an average, I think, this would be more than 8.5%. One of the papers is upwards of 8%. Another one is more than 9%. So like I mentioned during the presentation, given our marginal cost is still significantly lower, we're doing fund rates up 7%, whereas our average cost is 7.8%, right? So there is a significant headroom for the average cost to go down as and when we refinance some of the older papers which are coming for maturity.

Understood. Sure. And maybe one last bookkeeping question from my side. Could you help quantify the cash reserves that we would be holding at the SPV and the REIT level, both?

So the overall cash that we hold right now is about INR 800 crores, but this includes the NDCF reserve about INR 116 crores. We have about INR 335 crores of DSRA reserve. This also includes the INR 223 crores of DPUs, which will get paid middle of November. If you adjust all of this, I think we would have about INR 130 crores, INR 140 crores of extra cash beyond the 3 things that I talked about.

The next question is from the line of Abhilasha from Dalal & Broacha.

Sir, you mentioned this INR 50,000 crores was interest rate and around INR 45,000 crores of interest rate bids, which are expected to be tendered over in 3 to 4 years. So I just -- we just wanted to take a clarity on which bids are this, whether it also includes the solar bids, which would be tendered out over the next 3, 4 years. And where are we placed in terms of the strike rate or -- yes. I mean where do we want to take AUM from current level? What is our visibility in that as far as the market movement is concerned?

Thanks. So I think the first point is this is only transmission projects. This does not include solar projects. And second is we don't predict strike rate or we do not have a particular target in mind that we want to become a INR 30,000 or INR 50,000 crores. Even if it is INR 30,000 crores we started with, it's just a vision. It's not a target or a goal. Our focus is more on acquiring projects which are value accretive. And if we find projects which are accretive, basically in better returns, we would acquire. And if we think they are not, we will not acquire, right? So we'll have to see. We'll try for the projects, but eventually, the success is in the hands of what happens in the marketplace as well. But considering that there is a significant pipeline and there are limited players, we see a good success in this [ bigger ] business as well.

Okay. And solar then would be on and above that, what we have spoken? So that will be another interest which we will pursue going forward, right?

That's correct. That's correct.

The next question is from the line of Sarvesh Gupta from Maximal Capital.

Just the one follow-up question on this interest environment, like you said, maybe hardening in the coming quarters. So you are expected to pay down some of -- I mean, replace some of the debt in your balance sheet and which will be at a lower cost. But at the same time, the interest rates, as you said, might also increase a bit. So net-net, do you see your like-to-like interest cost component increasing? Thereby any chance of overall DPU getting impacted because of that? Or you see that net-net, it should be a likely positive impact because of the refinancing?

Jyoti?

Positive impact because the rates which are -- at which these instruments are locked in are way higher than our marginal cost. So even after accounting for a marginal uptick to a hardening environment, net-net, the benefit would be there in refinancing this, whenever that happens. But second, what we're also doing in anticipation of sort of a hardening cycle is that we are discussing with some of the investors in these papers. And hopefully, there will be traction there over the coming couple of months to sort of prepay some of these papers and lock in the existing the rates. So it's a function of whether investors are comfortable in prepaying, et cetera, et cetera. But we are proactively working on it. And we hope that as a portion of these repayments, we will be able to prepay and lock in the current rate environment rather than confront a slightly hardened environment in the coming year.

Understood. And in terms of the -- Harsh, if you can answer that in terms of slightly liquidity that we are all seeing. Do you see a meaningful -- I mean in case you were having a sort of cutoff project IRR at which you would want to acquire, do you see the opportunity significantly diminishing now because of the gush of liquidity and maybe the IRRs that are -- that the projects that are available are much lower, thereby not letting you acquire too many assets in this moment?

Yes. So no, that's an interesting and important question. I think we have not lost out to bids because of price till now. I think there is certainly a gush of liquidity. There is many players who want to enter the business. That is taking place. However, I think we've not materially lost our projects because we could not meet the IRRs and then make it accretive. But at the end of the day, this business is not a year-on-year business to quarter-on-quarter, you need to acquire projects, okay? We need to take an outlook of 3 to 4 years. And between those periods, there are always gushes of liquidity that happens. Exuberance happens. People bid out projects. They Make mistakes. Then they're distressed. And then they eventually want to monetize, right? So it's a cycle. So IndiGrid's business or the strategy is much more long term. And therefore, we've got to wait for the right opportunity when the market is, I would say, not so forgiving for that project. And those projects will eventually be built and eventually come to market to monetize. And that would certainly be a better time to acquire assets, right? I would say that because we are not able to acquire assets right now because of we're not being able to meet the price. But it is an exuberant market, and because of that, what happens is people pause some of -- sometimes the monetization decision, right? And they feel that, okay, should we be selling, should we be keeping, where are we getting a better value, right? And that is when the processes of sales get postponed or delayed, right? But it's a cycle. Eventually, cycle turns around, and then there are better opportunities to acquire assets when people are more than willing to sell. We will wait out these cycles, and that's how the business should be looked at.

But on the reverse side, are you also thinking because of, again, the environment to sell down any of the assets that we already own?

Very good question. I think yes, if we sell down, there'll be a good mark-to-market, positive income of the assets in a big way. But we are not in the business of trading assets. We are the eventual owner of the asset. However, SEBI has -- and we had this scenario for this entity. And there are certain guidelines that are put in place. So if we sell the asset -- let's say, for example, we pick up an asset which in today's books is, take that, let's say, INR 500 crores in our NAV calculation of 134 and we are able to sell this asset at, let's say, INR 600 crores, okay, for a second. So the INR 100 crore extra that we will receive, right, which is over and above the NAV that we have published, or let's say, INR 1, INR 2, will be an upside that will happen if you sell it, right? But what will happen is that as per SEBI regulation point 1, we can only do this if we have owned the asset for minimum 3 years. We cannot do it before that. Second, if we decide to do that, we need to refund entire INR 700 crores, entire INR 600 crores to investors as return on your capital, right? Now why -- what is the advantage in doing that, right? And imagine the complication, the INR 0.70 DPU, capital repayment has kind of made people confused so much. Imagine suddenly INR 50 capital repayment coming in. So it just doesn't make sense both from a regulatory strategy and simplicity perspective. It just doesn't make sense to do that.

[Operator Instructions] Next question is from the line of Swarnim Maheshwari.

I've got [ 2 other ] questions. First one, so you had mentioned that we are exploring this opportunity to partner out for building this TBCB project. Now I just wanted to understand where -- over here, whether we will be taking any kind of balance sheet exposure. Or how is it going to be like?

Sorry, it is with respect to?

The TBCB assets that's there in terms of bidding pipeline, so we are exploring the option to partner out and bid for those assets. So whether there will be any balance sheet exposure. Or how is it that we are looking to do it?

Okay. See, it depends on the size and scale of the project, Swarnim, to be honest. I think we plan to do -- I mean there are 2 levels of strategy over here, okay? Strategy 1 is that we want to partner with developers. And we would partner with developers for projects which are larger in nature. And then there, we will look for partners to complete the project in the acquiring. The second type of partnership that we are looking at is there, we might invest a minority component early on to ensure that we have sufficient rights on the project to monitor the progress, quality and eventually acquire that. And the third would be that we -- instead of partnering with developer for smaller projects, we might look to partner with large contractors, right, who gives us a lump-sum turnkey kind of project and finished assets from -- because we do have capability to execute small projects. And in terms of capital, we have hedged also in terms of financing those projects. And if we partner with large EPC players and eventually execution also gets derisked substantially. So between all these 3, 4 options, depending on which option or which one will we succeed, that is where it will impact on the balance sheet. But we would be keeping any such exposure to a very, very small percentage of the balance.

Absolutely. Right, right. Yes, yes. On the -- the last question is for Jyoti. So now this INR 2,400 crores of repayment is for refinancing rather than actually doing [indiscernible], so is it like -- is it in Q1 or Q3? Which quarter is it actually due in? And also, have you already started considering or exploring the refinancing options for that?

Yes. So Swarnim, we've already started the discussions. I mentioned that earlier. But we're already in active discussions with a variety of lenders. And we should be able to refinance some of it ahead of time as well, sort of prepay some of the amount before the stated maturity. And in terms of your first question, I think about INR 700 crores is coming for maturity in the first quarter of the next financial year and INR 1,400 crores in the second quarter. And rest of it is evenly spread out over the year.

Right. So Harsh, we don't have any further questions. So can we close the call now?

Yes, please. Thank you.

Yes. So I would just like to thank the India Grid management for once again giving us the opportunity to host the call. And Harsh, would you have any closing comments over here?

Yes. Thanks. Thanks, Swarnim. So I think my closing comment remains in line with our outlook. We are focused on delivering superior total returns, which means sustainable predictability and growing it by way of acquiring and building more projects, and we are focused on that. I think some of the smaller quarter-on-quarter changes on distribution mix, et cetera, does not matter as long as our focus remains on delivering the total return that we have promised, and we are pretty much on track of that. And overall, India Grid has, in general, built a large utility with a strong management team and a very good, credible track record. And we are focused on continuing to operating on similar lines and deliver superior risk-adjusted total returns to the investment plan. With that, I would just close from my side.

Thank you so much, and wish you all a very happy Diwali. Thank you.

Thank you. Thank you.

Thank you very much, members of the management. Ladies and gentlemen, on behalf of Edelweiss Securities, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.