Indigrid Infrastructure Trust (540565) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the India Grid Trust Q1 FY '23 Results 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.

Thank you, Cathy, and thanks for dialing in, all. I welcome you all on India Grid Trust's Q1 FY '23 results con call. From the management today, we have with us Mr. Jyoti Kumar Agarwal, CEO and Whole Time Director; Ms. Divya Bedi Verma, CFO; Ms. Meghana Pandit, Chief Investment Officer; and Mr. Satish Talmale, Chief Operating Officer. I would like to hand over the call to Mr. Jyoti Agarwal for his opening remarks, post which we'll have a [indiscernible] Q&A. Thank you, and over to you, sir.

Thank you, Swarnim, and good afternoon to all the investors on the call. I'm sure by now you would have gone through the presentation that we have shared yesterday. I'll quickly take you through some portion of the presentation and then the rest of the leadership team will take you through the rest of it, and then we'll throw it open for questions and answers. If you go to Slide 4 of the presentation, it's an overview of the overall quarter 1 highlights. So at an organizational level, the first and foremost thing that I want to talk about is the transition in the leadership. We've seen Harsh moving on to newer pastures. And given the systems and processes that have been in place, we've seen a seamless transition in both the CEO role as well as the CFO role. We've also seen one more leadership change. Swapnil Patil who has been the Company Secretary for a long period of time with us, ever since inception, due to personal reasons at his family level, he had to move on. And the Deputy Company Secretary, Urmil Shah, has been appointed by the Board in his place effective August 1. We have completed 5 years and over the 5 years, we've grown tremendously through value-accretive acquisitions, superior asset management framework and the best-in-class corporate governance practices, while ensuring continued stability and predictability in the platform, and we thank all the stakeholders including the unitholders that have trust and confidence in us. On the financial performance update, this year, the revenues and EBITDA, has been more or less steady, marginal growth of about 1% or 2%. This marginal increase was largely due to robust asset management framework where we could get some cost synergies and additional incentive despite no major acquisitions during the period. Collections this quarter are better than the corresponding quarter last year, although still short of the pre-COVID level, but we're seeing much better traction in terms of collections in the last couple of quarters. In line with our DPU guidance, the Board of Directors approved a DPU of INR 3.30 for Q1, and we are on track to achieve the DPU target of INR 13.20 per unit for FY '23. Our AUM was relatively unchanged at about INR 21,000 crores, leading to a net debt to AUM of about 58%, leaving enough headroom for growth before we hit the category cap of 70%. On the operational performance side, we were impacted by unprecedented rains and floods in one of the regions that we have a large asset, which is the Northeast region, which did impact availability. But nevertheless, we were still able to manage sort of a handsome average availability of 99% in quarter 1. And we've been able to implement DigiGrid across the entire portfolio, and Satish will talk later on in the presentation in terms of what that entry is for us. If you move to the next slide on the industry update. We've seen a robust coming back of power demand. We've seen a peak power demand of an all-time high of 213 gigawatts in April. Again, for the quarter, it was very high at about 210 gigawatts. This is largely due to the post-pandemic economic activity coming back, also helped by heat waves in Northwest India. We have crossed 400 gigawatts of installed capacity in June and it's nice to know that we're inching towards 30% share of renewable. In terms of the regulatory developments and industry developments, we see a very, very robust pronouncements in terms of the spend estimates on transmission over the next 5 years, almost as high as INR 1.2 trillion. As I said, 2,000 circuit kilometers of transmission lines and nearly more than 2 lakh megavolt ampere of transformation capacity. Now all this would mean that there would be a lot of bidding in the ISTS space. And many of these assets would come through for the market of corporate control in the secondary market, and we will be very actively looking at it. Apart from this, I think the NMP, the National Monetization Pipeline, is also catching traction, and we do expect some of the assets in the transmission space to be coming in the market over the course of the financial year. We'll be actively looking at this space for opportunities. We've seen investments in the interregional transmission capacity, largely for the evacuation of the new generation centers to the grid, mostly it's renewable and we've seen one of our assets that we have bid out in Kallam also being a part of that. And we're seeing a lot of traction, regulatory and otherwise in the battery energy storage space, which we are also proactively watching to see how do we leverage on this as an existing play to our current portfolio. I'll now hand it over to Satish to take it over to the next slide, please.

Thank you, Jyoti. So I will update on our quarter 1 operational performance. Again, from [ safety ] perspective, we had a zero event quarter, no injuries, no incident. The proactive reporting culture and lot of measures around developing the HSE culture has helped in maintaining consistently zero harm. On availability, quarter 1 average availability was at 99%. And if you look at the bar chart, I think you'll find 2 assets which are lower than our target availability. One is the RTCL. So there is no practical impact on IndiGrid because this was in the [ NHAI ] event. It was a road highway diversion project, which was recovered from NHAI both from revenue loss perspective as well as from cost perspective. On NER, as Jyoti mentioned, we had an unprecedented situation in Assam and due to the flash floods, one of the tower got collapsed. Happy to share that we could able to restore that tower and lines are already charged. And we are highly confident that we will see the claims pass through. On reliability, I think, I'm pretty sure that in quarter 1, we have achieved lower trips per line compared to last year. Typically, quarter 1 has increased trips per line because of the changing weather condition, but the performance was better than the previous year quarter. Digital asset management, glad to share that all of our assets are on digital platform. That means that every field activity, which is performed are getting monitored and [ getting ] captured on this digital platform. This will definitely help IndiGrid to create a platform, which will be highly sustainable to enhance our lifecycle risk and improve our cost efficiency as well. At the same time, we have integrated a digital platform with the SAP ERP system. So that activity is also completed. Emergency preparedness, we do have emergency restoration system, which has really helped us during this unfortunate incident in Northeast. We could able to restore it. And of course, the investment in climate forecasting technology has helped us managing our outages and mitigating any proactive risks, which gets encountered due to high wind conditions. Glad to share that we are now certified with ISO 27001, which is a cybersecurity certification. And all of the risk mitigation measures are largely completed on cybersecurity front. On the right-hand side, there are few indicators. We spoke about trips per line. The focus on [indiscernible] training continued. Lost time incidents are zero. There is a good track record of reporting culture, which is reflecting in the number from -- compared to last year, you can see that. On utility solar, we generated roughly around 57.52 million units with CUF of 19.08% with the plant availability exceeding our targets. It is slightly lower than compared to last year because of the cyclone which happened in the month of May, which impacted a bit of solar radiation. That's why it's slightly lower. Otherwise, availability point of view, reliability point of view, performance is meeting expectations. Thank you, and we'll hand over to Divya.

Thank you, Satish. I'm on Slide #7, quarter 1 financial performance. For this quarter, we have clocked in a revenue of around INR 561 crores and EBITDA of INR 512 crores as against the previous year quarter, which had a growth of -- margin growth of 1% and 2%, respectively, in revenue and EBITDA. NDCF generated for the quarter stands at INR 115 crores. As compared to the previous year quarter, we see a downfall, but for comparison purpose, I will exclude one-off items like last year quarter, we have done factoring of around INR 50 crores. So like-to-like basis, we are almost there on the same numbers or a stable, revenue and EBITDA and a stable NDCF. The DPU for the quarter as approved by the Board and as per our guidance is INR 3.30 as compared to the previous year quarter of INR 3.19 which is a growth of 4%. So our platform is showcasing stable sustainable growth and value accretion is coming in. Coming on the collections for the quarter stood at 77% as compared to the previous year quarter collection of 70%. We have seen in the last 2 years in COVID, the collection in quarter 1 have been largely impacted. Because of COVID in financial year '21, we've seen our quarter 1 collections were at 56%, last year at 70% and this quarter at 77%. We are catching up with the collection. We see the trend of catching up with the collection. And just to update, on 1st of July, we logged in another [indiscernible] and the collection percentage for the quarter 1 would have been around 80-plus percent. The DSO days stood at 65 days for this quarter end. Coming on Slide #8, as approved by the Board, the distribution of INR 3.30 would be in form of interest, INR 3.06 and a capital repayment of INR 0.24. For a unit base of around INR 70 crores, this quarter, we will be distributing INR 231 crores. With that distribution of INR 231 crores, total distribution since inception of IPO is around INR 2,200 crores across [indiscernible]. The record rate of this distribution will be 1st August, 2022, and the tentative distribution will be happening by 10th of August. And the graph on the right hand side, which showcase 3% to 4% Year-on-Year growth on a quarterly distribution trend. Coming on the next Slide #9, which is a showcase of our EBITDA to NDCF waterfall. So INR 510 crores at SPV level, with adjustments of various finance costs, working capital movement, tax and CapEx, we have generated NDCF of INR 115 crores this quarter. As we started with a heavy reserve of INR 221 crores, so this quarter, without doing any factoring or any other measure, we have dipped into a reserve of INR 116 crores and our closing reserve stands at INR 105 crores. With this, we will be achieving our distribution of INR 231 crores and as per the guidance. Now I'll hand over to Meghana to take up the next slide.

Thanks, Divya. Coming on Slide #10, balance sheet continues to remain robust with AAA rating from the 3 agencies. In Q1 FY '23, out of the overall refinancing of FY '23, it's about INR 2,400 crores. I'm happy to share that we have refinanced almost [ 88% ] of that. So other than INR 300-odd crores, we have refinanced the entire requirement of refinancing for this fiscal. And that has happened at an average going rate of [ 6.94% ] for the quarter, which is substantially lesser than the overall average cost of debt, which stands at around 7.51%. This is again lower if you look at Q4 of FY '22, which stood at 7.76%. With this refinancing getting done, the average cost of debt today stands at 7.51%. So we are -- almost 76% of overall borrowings being fixed rate, we are geared up to face headwinds on the interest rate environment that we are seeing. We have a very healthy net debt to AUM of about 58%, we remain in significant headroom for future acquisitions. Our cash balance again stood at INR 880 crores, which includes about INR 330 crores for distribution, and just about INR [ 350 ] crores of venture and rest as free cash. If you look at the right hand side pie, it shows the diversified book of the total gross borrowing of INR 12,700-odd crores, which is between NCDs of 40% and bank loans of 60%. Even within the NCDs and bank loans, you can see a very diversified mix of investors across mutual funds, corporate, retail, public NCD holders, private asset and public sector banks together. Coming to the refinancing schedule on the slide, we can see that it is very well spread overall, ranging between about 10% to 12% of the gross borrowings. So there isn't any particular year in which there has been a bunching up of maturities, which we have seen for FY '23 which now stands largely [indiscernible]. Moving on to the next slide, which talks about our returns. We continue to form -- [ on our focus, on people ], total return [indiscernible] further distribution and price change. On the distribution part, we have delivered about 59% and price change is about 42% aggregating back to the total return of 101%, annualized returns of 15% compared with the debt product of 10-year, 30-year GSec. We've outperformed that. On the right-hand side, as you can see the equity investors as well as other than this, we have also performed but more importantly on a risk-adjusted basis, which is affected by the beta stood at the lowest level of 0.08%. So we have been consistently outperforming the comparable for this quarter as well. I will hand it over to Jyoti to cover a bit about the business outlook of this year. Jyoti?

Thanks, Meghana. So going forward, we will continue to focus on maintaining stable operations for predictable and sustainable distribution, while looking for value-accretive acquisitions. I think on the portfolio side, with the implementation of DigiGrid across the entire portfolio, we are very confident that it will enable us to strengthen our operational capability through predictive, preventive and risk-based maintenance practices, which is very important, given the diversity of the portfolio and the terrain that it operates. We will continue to play a stewardship role in advocating policy initiated [ language ], including index inclusion and tackling funds and remain very optimistic about the growth potential of the power sector on the back of supportive regulatory policies and growing investments. We believe we are well positioned with our steady cash flows and low cost of debt to tap into the opportunities in transmission, solar and other related adjacencies in the country. So that brings us to the end of our quarterly update. I'll request the moderator to open it up for Q&A, please.

[Operator Instructions] The first question is from the line of Mohit Kumar from DAM Capital.

Congratulations on another steady quarter. My first question is on the -- of course, we've gone through the entire acquisition the last few years. And how do you see the pipeline or is it third-party assets pipeline, especially for transmission, looking at this point of time? Do you think there are sizable opportunities available? Or it's too low, and we need to look for the different kind of answers to grow our business? And are we looking to acquire something in this fiscal year?

Yes, Mohit, so it's a good question. I'll let Meghana address it in detail, but I'll share my perspective. I think, if you look at our business, the core is transmission, and we have a reasonable outlook in terms of pipeline in this space. Now obviously, M&A happens in spurts, and there's also some bunching up of bidding that has happened over the last few years, where some of the assets will, in our opinion, come through in the market for corporate control over the next 12 to 18 months. And we are proactively scouting these opportunities as we speak, and we'll be very actively looking at those assets as and when they come into the market. I don't see there being a burst of opportunities. But yes, we will have to be selective in terms of what opportunities plays well, given our whole value proposition of ensuring that these are value-accretive [ to be met ] further at the end of the day. There would be obviously opportunity from the NMP process, and we would like to believe for a fair trial recovery, the digital assets. So power of NMP should be auctioned in my opinion, if they will be auctioned then we'll be actively looking for those opportunities as well. So there are opportunities. Of course, we cannot talk about some of the assets, specifically where we are working on. And I would hesitate to give you a guidance in terms of whether we'll do asset acquisitions this financial year or not. When there is the moment where there is development on the M&A plans, we'll obviously come to the market and announce. But I can tell you that there are opportunities and the M&A team is actively scouting for those, but maybe Meghana can provide more details to you.

Sure. Yes. Adding on to what Jyoti said, Mohit, if you look at from an acquisition perspective, [Technical Difficulty] we had entered into, there is one asset which achieved COD in December 2021. So that is one of the assets that we are looking to acquire. And as and when we continue to progress, we'll of course, announce to the market. Other than that, I would say a couple of others on the operational transmission side also remains that we are looking at. The third bucket that I would categorize acquisition opportunities will be the solar projects that we had said, we'll be very selectively looking at, specifically with long-term PPAs with certain NTPCs and from counterparties such as [indiscernible]. I think Jyoti also mentioned that we are very closely watching and monitoring the battery energy storage services, where we believe that a lot of our operational efficiencies will come to the play as a transmission player. Now we already have these leverages which we can work to go. So this is an adjacent space that we are closely looking at, in addition to the NMP which, I think, Jyoti spoke about. So these are the ones from an acquisition perspective that we are closely looking at as we speak here.

Can we expect the clarity on the power grade national monetization pipeline, the second tranche? Any sense of -- anything you're getting from the government on the time line, sir?

I think there are some structural nuances which they're trying to iron out, given the intent is to try and not sell these assets by selling the rights and liabilities associated with those assets, and that's an engineering problem, which for power sector, in particular, given highly regulated space, it is taking some time to sort out. But we believe towards the second half of this financial year, some assets in the transmission space will come through, and there will be pure market determined process. Obviously, we are actively looking for those assets to come in the market and we'll be bidding for them for sure.

As for the cash flow side, the -- I think that there's an increase in working capital in this particular quarter. Is this temporary? Or you think this is going to reverse or this is going to be permanent?

So the first quarter generally is the weakest of the quarter when it comes to collections. That has been the historical trend. And while this quarter, we had better than last corresponding quarter of the last year, that is 77%, much lower than the average for the year. So this is a usual trend of working capital because of collections being lower. It tends to go up and then normalizes over the ensuing quarters.

The next question is from the line of Ruhi Pabari from Reliance Nippon Life Insurance.

Hello, am I audible?

Yes, ma'am, you're audible.

Congratulations on the good set of numbers. So I just have one main question, I mean that is pertaining to the availability of the transmission lines for 2 projects -- for 2 lines where we've seen that it has gone below the requirement as such, and the reasons you actually provided. I wanted to understand with respect to this, what is -- is there any payments impacts to this and if yes, how much? And also like going forward, any corrective actions which we may have taken with respect to the same. That's my -- the first question. And second is the follow-up question on the working capital. This time the peak of the high working capital, and I understand it is a quarterly seasonal phenomena that way, that means when the collections are over and your working capital is kind of really high. So we see a little dip in the reserve. So any -- if you could just throw some light with respect to the building of the reserve in the one quarter.

Yes. Thanks, Ruhi. I'll probably take the question on reserve and then Satish, maybe can address your questions on lower availability in those 2 assets that you spoke about. So if you look at our reserve buildup, generally, in the first quarter of the year, there is a dip in the reserve because of lower collections, right? And of course, if you look at the last 2 years because of the COVID impact, the dip in the reserves were quite steep. Now we have been doing factoring in the first quarter to meet our commitments on DPU, which sort of gets normalized in the next quarter. So if you look at the quarter 1 of FY '22, there was a factoring of INR 50 crores that's been done. And if you adjust for that, the actual collections are comparable at about INR 118-odd crores in last year's first quarter and about INR 115-odd crores of NDCF in this quarter, right? So it's sort of comparable. There was a 1 day anomaly where about INR 20-odd crores of collections were supposed to come on the 30th of June, spilled over to the 1st of July. So if you add that and like-to-like, I think it's comparable compared to last year. We did not do factoring because, one, there was a very, very healthy reserve of almost 1/4 of DPU. We had a bumper collection in March quarter. And so we thought that instead of having a negative carry where your cash is earning 2%, 2.5% and you pay a much higher rate on the factoring, we decided to dip into the reserves. We don't see this to be a worrying thing. We will see a catch-up of the reserves in the ensuing quarters to levels which are more normal. So I don't think we as management are that much worried about it. And we will see a gradual sort of normalization of reserves in the coming quarters. Maybe, Satish, you can address the lower availability in RTCL and NER?

Sure. Thanks, Jyoti. So on these 2 assets, the #1 RTCL and basically a road line diversion work, where all the commercial losses are recovered. So it's basically a contractual arrangement wherein we perform our obligation to correct the line and NHAI provides a recovery for the cost as well as for revenue loss. So that's pretty simple. On NER, as this was a major event, definitely, it's qualified as a force majeure and is yet to bring the availability certificate. On the corrective actions, those are around 2 fronts. One is on temporary restoration. So the line is already charged, so which catered for immediate power requirement in that particular region. The permanent restoration will take some more time because we are raising the foundation and then monsoons are also there. Also looking at that, once we complete this job, then definitely, we'll have the availability for the region. So which will bring us back to our original availability targets. I hope that helps.

Yes. Is there any P&L impact because of NER?

Yes, Divya. Do you want to take this question on P&L impact?

Yes. Okay. For the current quarter, we have considered a minimal impact of negative of INR [ 12 ] crores, but this is temporary in nature as we have a confirmation of force majeure and we are expected to receive this certificate by August, we will reverse. So it will get through that in the subsequent quarter.

The next question is from the line of Vivek Ramakrishnan from DSP Mutual Fund.

I'm sorry to be like a stuck record on this collections bit, but I was just trying to get the rhythm of the collections because it changes the working capital cycle. Is it that -- is there any predictability to it? Or is it -- do we need to see it quarter-on-quarter in terms of how it grows and eventually hope that because of priority, you will get your collections? And the second question related is, is there any errant counterparties in the overall collection pool that is causing this delay, which can easily get righted in another quarter? Those are my questions.

Yes, Vivek, good questions. I think there are -- the second question is, Vivek, I mean there are no like specific counterparty risks in the collection, that's the advantage of being a part of the ISTS. So whatever risks are there are generic to the entire transmission service providers, and not specific to us. In terms of patterns of collections, I think this is pretty much the normal pattern of collection that we've seen for the last 5, 6 years. Just that the first quarter collections, despite being the lowest, are a little bit higher than what we've seen this quarter. Normally, they are in the range of 90%, but they are the lowest for the year. So there's some bit of push to be catch-up, which is supposed to happen. Also, you must be mindful that there was a little bit of a front loading of collections in the March quarter. We saw a tremendous uptick in the collections in the month of March, for example. So that has also led to a little bit of lower collections in this particular quarter. So -- but I don't think there is any aberration here. This will normalize over the next couple of quarters as you will see. And given this is an ISTS tool, this is sort of not specific to us. We are not getting any priority over others. It's just that this is the overall systemic reaction at the secure level and distributed to push maybe to all the transmission service providers. So it is endemic to the entire transmission industry as far as ISTS is concerned. We don't get any one way or the other. We are not higher than anybody else and not lower than anybody else. Yes?

The next question is from the line of Rahul Marathe from ICICI Prudential Pension Fund.

Congratulations on good set of numbers. So just wanted to know on 2 things. On the BSS side, you said that you are looking at various opportunities. So if you could just quantify some of the upcoming opportunity or anything on that side? And secondly, on the factoring that you had mentioned, so what are the costs that are we incurring on the factoring in terms of annual percentage?

So, Rahul, we have not done any factoring this quarter. We have done it in the corresponding quarter of the last year. So there's no factoring cost that we have paid in this particular quarter. In terms of...

For the period, what was the rate that you did? I wanted to understand the rate.

I think there is generally a 2%, 2.5% negative carry. I think, if my memory serves me right, we were at about 5.5%, 6% versus a cash yield of about 2%, 2.5%, right? So there is a negative carry, which we decided, given the future heavy reserve, we don't want to do that in this particular quarter. Yes?

Yes, okay. And on the...

On your question on BSS, I'll let Meghana address with specific details, but the way we are looking at this opportunity is that this is very, very adjacent to the transmission business, given that many of our substations have a lot of extra land and you don't need that much extra land for setting up a battery energy storing station. What you need is connectivity to the grid and we are the grid. So -- and then this is also [ after ] no moving parts and availability-based revenue mechanism. So we see a lot of adjacency as far as [Technical Difficulty] with our transmission footprint. But then that's where the similarities end and the differences start. Technology-wise, it is an evolving space, lot of moving parts there. And the regulatory and the commercial construct is also evolving globally and also in India. So we are looking at it very, very closely. We see this is a very attractive space to, sort of, foray into in due course. But some certain things will have to fall in place, especially the regulatory and the commercial certainty for it to sort of fit very well with our overall value proposition of predictability and stable cash flow, right? But we're watching it very closely. We're into the whole bidding process, giving our suggestions to the regulators, the authorities and being keeping updated with developments through the ecosystem, so that once it sort of fix [indiscernible] we can play a meaningful role. And in terms of the specific opportunities, maybe Meghana can elaborate about this.

Yes. So, Rahul, typically from a size perspective, it varies on what the bid specifications are and it can move from 200 megawatts to 500 megawatts to 600 megawatts. It's very bid-specific per se, and we are seeing that this market is evolving. So to be honest, we'll not be able to mention on particular numbers because it's a range. I think what is important is this adjacency is something that we are clearly monitoring. And as and when we participate in it, we'll be able to throw more light on it from a quantum perspective, what it is that we are targeting. Yes.

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

Before I ask the question, just a clarification, you mentioned the revenue loss of INR 20 crores for the NER, right?

INR 12 crores.

INR 12 crores, okay. So 2 questions. First of all, now that we have shown a Y-o-Y growth of almost 1%, 2%, so it means almost 5 quarters, we haven't been able to add any assets or AUM largely. And this is despite many of the sellers might be anticipating an increase in the rates. So despite that, we haven't been able to do anything on the AUM front. And also, it is more surprising because you added 2 more dimensions to it, one was solar and second was battery that we have been talking about. So despite all of this, 5 quarters gone, no asset addition, very, very surprising. So if there is any specific information that you want to share, why that hasn't been done, especially in a rising interest rate scenario because the sellers would know that asset prices will go lower. And many people would have anticipated that. That is #1. The second is again, we have been looking at this big refinancing chart for FY '23 for a very long time of INR 2,300-odd crores. And ultimately, we did it in the June quarter of this year where we would have got a much higher rate compared to what we would have got earlier. And I think a lot of people have been giving this feedback for a long time that, if possible, we should have done refinancing earlier, then why did we wait all the way for the rates to increase. So any covenants or specific information that you can share why it had to be done in 1Q and not earlier when so much of feedback was given around that?

So Sarvesh, first of all, you may be surprised, but frankly, we are not surprised that we've not grown the AUM because that's not really our core value proposition. It's important that we understand our core value proposition is that we grow the AUM that we grow it in a manner which is fitting with the business model, the strategy of the platform where it has to be value-accretive and it has to generate NDCF, which provides predictable DPU. If you look at the market for transmission, I don't think there have been too many secondary transactions. In fact, hardly I can recognize or remember standalone transmission assets being available in the market. So [indiscernible] and that's the right thing to do. When the opportunity comes which fits into the model, we will bite it. We don't have to go for the sake of it and definitely not at the cost of predictable distribution. So that's an important thing, which I thought I'll address. In terms of the second question, maybe Meghana, you can get that?

Yes, sure. So, Sarvesh, if you look at the cost of borrowing at which we have already refinanced it, it is, I would say, substantially lower than our [ IRR ] [indiscernible] been there more importantly to -- in line with the interest rate environment that we work in, so we have taken advantage of the interest rates, which has been there. More than the covenant, we had lined up refinancing and we had lined up [indiscernible] financing for specifically [ electricity ] financing. And when the opportunity was there, we had refinanced it. So not very sure -- there was no point in refinancing it and paying any specific payment for breakdown cost. However, idea was, we tie up in advance and just [indiscernible] the opportunity [Technical Difficulty].

Okay. So first follow-up on the first question is, so solar was also that we added, right? So I understand transmission, very little has been done on the deal side. But what about solar, which was at a higher IRR compared to our average assets, and that's where we added because we were seeing sort of a dry run on the transmission side? So are we not seeing any opportunities which will suit us in the solar side because that hasn't grown -- that book also hasn't grown much? And secondly, on this refinancing side, so let's say, 6 months back, what was the rate at which we were raising and what is the rate at which we have refinanced this INR 2,000-odd crores, if you can tell me that?

So, Sarvesh, the short answer to your first question is yes, there are no opportunities in solar that we have been [ met with to look befitting ] to the model. Otherwise, you can rest assure that we would have announced something, right? So that's the short answer. In terms of the refinancing, it's there on the Slide 10, we've refinanced this particular large chunk at sub-7%. So it's brought down our average borrowing cost by almost 25 basis points. And we did that preemptively ahead of the hurdling of the rates. So like-to-like, I think 1 year back, this particular financing would have cost us upwards of 7.5%. So within about 50 basis to 60 basis lower this year, and we did this proactively to the extent we could that it made commercial sense, so we preemptively borrowed at attractive rates and refinancing. There's been a significant benefit on the refinancing because the assets or the loans which are coming off, they're coming off a very high watermark of 9%. And that brings -- that's what led to the lowering of the average book by almost 25 basis points. Going ahead, there are a couple of refinancing which are coming up, not a large chunk now. I think over the next 1 year, there would be about INR 550 crores, INR 600 crores of refinancing. So these are also coming off a high watermark of almost 8.5%, 8.6%. We are already in discussion in terms of proactively sort of refinancing these at the right time. We do expect, despite the hardening cycle, there to be a net value accretion to the bottom line because refinancing rates will be lower than the hurdle at which these liabilities are coming off.

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

I just had a quick follow-up question on NER. So the deemed availability certificate application that you mentioned, so that is a protection for the revenue loss or capital or both? So I would assume that we'd be incurring some capital cost also for all the restorations. So if you could throw some light on that.

Good question, Kayur. Maybe I can address, and then Satish you can chip in. So there are 2 impacts [Technical Difficulty] capture it for you. There are 2 impacts. One is, of course, there's an availability loss because this is a tower collapse and as you get protection under the force majeure clause through the deemed availability, then obviously, there is a cost of restoration as well. We anticipate and we'll see what the final design and engineering solutions to the permanent restoration comes in, we do anticipate anywhere between, let's say, INR 8 crores to INR 12 crores on the restoration between now and September, October. Now this is a -- our entire facility is fully insured, including any [indiscernible] will get recovered through the insurance. So that's how we get protection in terms of the capital cost of restoration as well as the availability through the force majeure deemed availability. Satish, you want to add anything?

Understood. So we have protection, let's say, on both the revenue.

Yes.

And just one more question. So I think Meghana mentioned about one of the projects, which has achieved COD in December '21 that you might potentially acquire. So can you give us a broad range in terms of the size of the transaction?

Meghana, do you want to...

Yes. So I mean the asset is under diligence. But from a lease perspective, will be somewhere about, let's say, INR 1,400 crores to INR 1,500-odd crores is what I can mention at this point in time.

The next question is from the line of [ Mahesh Shah ] from Edelweiss Tokio Life Insurance.

Congratulations on a good quarter. One question I had is in terms of eventually all these contracts that we have, the [ BOOM ] contracts, the revenues taper down. So how are we planning to maintain the DPU? Like what kind of leverage are we targeting at the final end? Are we ever going to take it up to 70%? Or how does that work? And how are we planning to maintain the DPU over time?

Yes. So very good question. Mahesh, so first in terms of our DPU strategy, we do have a plan in place to ensure that the DPU trajectory, we have a visible sort of runway for 5 to 7 years at a minimum, including the potential accruements to DPU that we've been doing over the last 4, 5 years. And based on the current transmission revenue trajectory -- by the way, it's not necessary that it's a linear decline. I mean, sometimes it goes up first 2 years and comes down. It's a sort of flattish trajectory at least over the next 7, 8 years and then there's some decline. Based on the current portfolio, we do have a runway up to 7, 8 years easily to be able to manage the DPU expectation. And then that becomes the reason why any growth in the AUM has to be DPU-accretive because the idea behind growth is not for the sake of growth. So we sort of extend -- keep on extending this DPU trajectory so that the runway continues to remain 7, 8 years, right, on a rolling basis. So that's the logic behind ensuring that acquisitions are DPU-accretive. Your other question, if you can just repeat that, Mahesh?

It was around the -- how -- that's the acquisition side, so in terms of [Technical Difficulty] I think for a while now broadly. And so do we intend to ever go to 65%, 70% or...

Yes. So 70% is a theoretical sort of -- it's a regulatory cap and we don't want to go to like that kind of a level. I think once we hit, let's say, somewhere around 62%, 63%, we would be looking to sort of create headroom for further growth through an equity raise. There is some headroom right now, we're at 57%, 58%. But yes, internally, we don't want to be at a zone where we don't have an equity plan and we are above 65%. So we start thinking about it, let's say, 60%, 61% make sure that somewhere around 62% to 65%, we do have a concrete plan in place, I guess, sort of not be above 65% at any point of time.

Got it, sir. Another question that I had was around the national monetization pipeline. So from what I understand, the government has now kind of discouraged against transfer of full transmission assets or assets directly to private or nongovernment counterparties and it was more of revenue transfer that they were looking at under the national monetization pipeline. Is my understanding correct? And like, what we'll be bidding for?

That is the -- we discussed this a little bit earlier. But that is the idea or the intent of the government. And while some other infrastructure classes are more amenable to that kind of a construct, power is a bit difficult. So they're looking at how they can achieve the monetization in a way that they can look within the regulatory framework, at the same time, have the assets coming back at the end of the transmission license period, right? So we don't have full visibility around what the final outcome would be, but they're working on finding a path where the assets are made available to private participants, but there's a mechanism whereby the asset's comes back or is available to the government at the end of the concession period. We will see what construct comes because in power, if you have a concession devoid of the assets, then that doesn't work from a regulatory construct. There are other complications in GST, et cetera. And so it's taking a little bit long to stitch it together, but they are working very proactively, and we are hopeful that we should see some transmission-related monetization in this financial year.

The next question is from the line of Ankit Patel from L&T Mutual Fund.

Am I audible?

Yes, Ankit Patel.

My question was around the last quarter, there was a discussion of certain under-construction projects also being looked at in a strategic way. So just wanted to understand what is the thought process? Does it remain the same? And also, if an update is there on the KTL asset.

Yes. So Ankit, when you say KTL, you're talking about the Kallam transmission asset, which we had bid and won?

Yes.

Great. So that is the under-construction asset that we had bid and won last calendar. And it's a small -- around INR 200 crore asset in Osmanabad in Maharashtra, and it's of a very simple terrain, smallish 35, 40 acres, no forest approvals, plain terrain and we've been able to progress well on that particular asset. We've got the regulatory approvals. We've got the land. We've also sort of awarded the EPC to KEC. We do expect the asset to be up and running middle of the next year. And we are doing well in terms of our initiatives in that direction. The idea behind doing this is that we do have -- 10% facility has been through under construction, but then we are very mindful of the under-construction related challenges, the infrastructure developmental risk. So use this sort of easy project to build scale capabilities to be very proactively looking at the feedback loop and learn from this and decide whether we want to do more of such projects at a margin from an AUM growth point of view. So far, the feedback is very, very encouraging. We managed to acquire the land within the administration in record time. KEC is a marquee contractor, so things will be pretty much on track. We will obviously evaluate, continue to evaluate this and then update the broader market and the investors in terms of the next step, if there is any feedback loop, which enables us to do more of such projects in the future. Right now, we want to stick to it. It's early days still. If the land is there, we have to start the construction, but it's been an encouraging progress as far as the first under-construction project is concerned.

Okay. So I think then this would still be less than 1% of AUM. But would you have any targets or set any targets in terms of what kind of percentage you would like to go to?

So look, I mean, there's a regulatory cap of 10%, Ankit, and so it's not that we can do beyond 10% based on how confident we feel and based on the asset opportunities which are there, which fit into our stable distribution predictable platform strategy, we'll look at how do we play this. We are also cognizant that another way to play this could be, there's no framework loop, right, where we sort of take in the whole asset phase on day zero, we enter into a credible partnership with an EPC player with some skin in the game, if required, some equity skin in the game, but take over the asset once the asset is ready and sort of derisk ourselves from the project risk part of it. So there are multiple models here. Right now, I want to tell the investors that this is the only project that we're doing and there's some time to go before we feel that there's enough feedback from this initiative for us to sort of take a quantification forward. We'll obviously be updating the market as and when there's any development in this respect.

The next question is from the line of [ Tanveer ], an individual investor.

Am I audible?

Yes, yes. You are audible.

So I have just 2 questions. One related to the NHAI impact that was there. Has that already been realized in this quarter, the recovered loss? And the second was, can we assume that the NER availability will be around 94% for the next 2 quarters or so? And I had one more -- another question around last quarter, you all spoke about speaking with SEBI regarding inclusion of InvIT in the index. Is there any update or any follow-through on that part?

Yes. So on the RTCL and NER, maybe Divya, you can give an update on that and Meghana, you can update on the index inclusion efforts, please?

Sure. For NHAI, yes, we have realized the loss of revenue completely and we got an advanced payment from there. On NER availability, for the quarter 1, as I mentioned, we had a committee meeting, and we are very confident of getting a COD measure. So we will get 100% revenue for the quarter 1. For upcoming quarter, as we have already done our restoration through ERS, subject to the restoration, we'll get the availability [Technical Difficulty].

Yes, so on the index inclusion, the [Technical Difficulty] and exchanges. We understand that we are considering it very seriously and are hoping that it gets done in the coming quarters. Having said that, right now, if you're asking me, if it has been done, that's not the case. But we are working with the regulators to get InvIT included in SEBI.

Okay. And if I may ask, are you -- I mean, have they communicated any concerns around that? What is the biggest -- so what's stopping them from having InvIT included?

Not really something -- it's not like any concern, but it's a process which involves 2, 3 regulators, including the exchanges, SEBI plus largely the mutual fund -- previous funds also get impacted because of this. So they are just figuring out if any of those specific debtor equity funds, how will it impact, so to say. So as such, not a specific concern per se, but it's a process and it's been [indiscernible].

The next question is from the line of Swarnim Maheshwari from Edelweiss Securities.

So the first question is on Khargone. I believe Sterlite Power has commissioned this asset in January. It's been about more than 6 months. So what's taking us so long to really acquire the asset? Is the due diligence still on?

Swarnim, yes, the diligence process is currently underway. While the COD was achieved, it is, as you now, COD also [Technical Difficulty] from approvals and from revenue recognition, et cetera, that's inducted in the COD process. It takes some time. The process is underway per se from a diligence perspective and we are moving at the right pace.

So when can we expect this, next quarter? Can we expect this in Q2?

I think, Swarnim, forward-looking guidance, I don't think we are targeting that, but once definitive agreements of the project is done, we will announce it.

Okay. Because I mean, just curious to understand, normally, whenever the asset get constructed earlier also, for the framework asset, it normally hasn't taken this long. So I just wanted to understand, is there some issue or what is it exactly?

No, see, Swarnim, there is no issue as such. As Meghana alluded to, when the COD happens, there are a few loose ends around revenues, which are contingent on certain regulatory decisions, right? And so think from a sellers point of view, you ought to optimize valuation when you sell, and if there is a line of sight which you'll get 100% certainty on some revenue streams based on regulatory process, then you'll have to wait a little bit here and there. So it's largely that, but let us say it is fully on, and we don't want to sort of give a guidance because M&A gets tricky, right? So -- but if you ask me, I feel this is definitely this financial year transaction, if not the calendar year, but we'll of course, guide the market at the right time when the developments are good enough to come with a formal disclosure.

Got it. The second thing is on RTCL. So in Q1, we had a lower availability due to NHAI and you had mentioned that everything is recovered from NHAI. Have we also recovered the incentive income from NHAI because if not for that, we would have also achieved the incentive income? So is that also taken care of?

A very good question. So look, I mean, there is a small, I think, Divya can correct me, INR 1.5 crores of nonrecognition of revenue because of this. But this is only a deferment, because we have full availability for this particular asset. And then as the availability catches up towards the end of the year, then this is a protected revenue which we'll recognize, my guess is, sometime in the third quarter and the fourth quarter for sure. There's just a small timing gap of recognition of revenue. I think it's INR 1.5 crores, Divya can correct me. But beyond that, there is no real financial impact.

Got it. And finally, on DigiGrid, we have rolled it out across all the assets. So how is it performing? And have we been able to see some tangible benefits and if possible if you can quantify for this period and for the coming period, what would be the tangible benefits in terms of the cost savings or something from DigiGrid?

Satish, you want to take the strategic?

Sure. Yes. And thanks for this question. So tangible benefits will certainly take some time because the platform has been just launched and implemented. But what it enables us to improve the transparency from all the field operating activities we go through every day. So earlier, we were heavily dependent on the people to capture all these in a manual mode. But now these are getting entered through all the iPads and tabs, it's coming and it's consistent across the portfolio, that is the biggest advantage. Because [Technical Difficulty], the analytics will help us to make a better informed decision in terms of prioritizing the [Technical Difficulty] focusing on the right things on the portfolio, and that will drive the tangible benefits in terms of better productivity, reduction of manpower and all the resources. But give me a couple of quarters, I'm sure we'll be able to quantify this and then present in the investor meeting.

Swarnim, there are 2 aspects of DigiGrid. One is of course what Satish mentioned, it does enable sort of nonavailable capabilities for preventive, predictive maintenance and very good from a risk management point of view. It's also well integrated into the, FAS, financial accounting system. So in terms of some of the investments that we would have had to otherwise make in, let's say, procurement and other financial-related capabilities, that is sort of obligated. And the most important benefit of DigiGrid is that it helps us sort of [ B2B O&M ] increase on a year-on-year basis, making it agnostic to people and some of the other aspects of inflationary elements of O&M. So it is an investment which will reap benefits over a period of time. And so far, it seems to be stabilizing very well. It is also about culture and habit change, right? And that was a concern that we had. But thankfully, the team has really risen to the occasion and people are sort of taking it up quite well. So we're very happy with the decision and the benefits will, as Satish said, will come through over a period of time.

What is the cost of this rollout, by the way? I mean, is it -- the cost -- what is the cost of this rollout?

Divya, do you want to address that?

Yes. So kind of an [indiscernible] model, we spend around INR 2 crores a year.

Okay. I think all my questions are answered. So just one last bookkeeping question, what was the incentive income in this quarter?

Yes, this is around INR 5 crores.

Sorry, how much is it?

INR 5 crores.

INR 5 crores. Okay. Because I think -- I mean, on a quarterly basis, we used to kind of book around INR 10 crores to INR 11 crores. So this quarter, it's substantially -- is it to do with NER?

Yes. We have -- we did not book any incentive in NER. It's in settlement INR 5.9 crores. That's around INR 6 crores, sorry. Yes.

Thank you. Ladies and gentlemen, this was the last question for today. I now hand the conference over to the management for their closing comments.

So thank you, everybody, for being on the call and for your questions and your support and trust in IndiGrid. We look forward to your continued support and wish you a happy health. Stay safe. Thank you.