Indigrid Infrastructure Trust (540565) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the India Grid Trust Limited Q4 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Subhadip Mitra from Nuvama Wealth Management. Thank you, and over to you, sir.

Good afternoon, friends. On behalf of Nuvama Wealth Management, welcome you all to the IndiGrid ended Fourth Quarter FY '23 Conference Call. We are joined today by the senior management of IndiGrid, represented by Mr. Harsh Shah, CEO and Whole Time Director; Mr. Navin Sharma, Chief Financial Officer; Ms. Meghana Pandit, Chief Investment Officer; Mr. Satish Talmale, Chief Operating Officer. We will start with opening remarks by the management followed by a Q&A session. I will now like to hand the call to Harsh for his opening remarks. Over to you, Harsh.

Thank you, Subhadip and thank you, everyone, for joining the call. I'm very warm welcome to our annual investor presentation as well as the quarter 4 results. As we have done in the earlier presentation, I will take you through the part of the presentation, and I'll invite my colleagues to discuss about the rest of the segment and eventually do the question and answer. To start with [indiscernible] Slide #3, which talks about what is the vision and vision is to become the most admired yield vehicle in Asia, which is going to be based on our focused business model, value accretive growth, predictable distribution and an optimal capital structure. While focusing on these 4 pillars and the vision on Slide 4, what we stand today is with AUM is about INR 23,000-odd crores, INR 22,800 crores to be specific, spread across 20 states and UT, 61 different generating elements between transmission lines and substations, 100 megawatts solar generation as a date about 27 years of average residual contract line and the sizable amount of residual value in terms of amount of metal that we can [indiscernible]. On Slide 5, considering this annual presentation just taking through the evolution over the years, since inception last couple of years, middle ages, I would say, 2019 to '20 and 2021 to '23 over the last couple of years. As this portfolio is just to showcase how our portfolio has grown in terms of starting from 10 revenue-generating elements, and now 61, and is going further to 75, 77 next year. Unitholder base diversification from a developer owned invite to financial sponsor owned and financially sponsor owned managed professionally managed in two, a variety of investors getting introduced starting from insurance company, NPAs, pension funds over the last 6 years. And in general, proliferation of market and liquidity increase with reducing lot size and diversified ownership. Along with that, our revenue, asset base EBITDA and NDCF has also grown multiple. That's been the evolution of us over the last 6 years, coming to exactly the quarter 4 quarterly update on Slide 7. There's been significant activity in quarter 4 until the board meeting in portfolio growth. We have signed definitive agreements to sign -- acquire Virescent Renewable Energy Trust, which is a AAA rated InvIT with an operational renewable assets of about INR 4,000 crores in size, subject to closing adjustments and customary approvals. IndiGrid AUM will increase by 18%, almost to INR 27,000 crores after applying this and the renewable energy portfolio will stand at 674 megawatts peak. In the quarter, we also completed acquisition of Khargone Transmission Limited from Sterlite Power, an ISTS TBCB project is approximately 626 kilometers of transmission line and 765 kV substations for about INR 1,500 crores. Financial performance, augmented by KTL and the other acquisitions which have done earlier in the year and last year, our quarter 4 FY '23 revenue and EBITDA witnessed 9% and 6% growth, respectively. Quarter 4 collections were healthy at 114%, the trend which we have seen in the past. DPU was bumped up, I would say, ahead of the schedule in quarter 4, '23 itself at INR 3.45 versus INR 3.19, which was in quarter 1 of FY '22 -- quarter 4 of FY '21. This year, we have increased it quarter early, and we have increased it by a significant amount for this year and the next year. So next year, the DPU guidance is at INR 13.8 a unit, which is approximately again a 4.5% growth over the last year of guidance of INR 13.2. During the quarter, we also raised one of the long -- I would say, one of the longest infrastructure bonds with 18 years of tenure with IFC at very competitive terms and a stringent ESG and governance norms. And we are pretty excited about having IFC on board and also you will see that assessment of ESG work indicates pursuing. Our AUM stands at INR 22,800 crores, net debt to AUM at 59.5%, which left substantial headroom for growth, considering the cap of 70%. Operating performance remain to be robust. We are at 99.6% availability at the end of quarter 4 FY '23, 2.5 million safe manhours achieved till now. And we commissioned our first Battery Energy Storage System coupled with solar installation in one of our substation, which allowed us to offset substation’s auxiliary power consumption with green power as well as it allows us to experiment with BESS at the working level to get hands ready and to be -- to provide us more insights and understanding to go for larger products. All in all, this is kind of standing up well with our strategy of delivering superior returns, sustainable increase in DPU and stable operations. Turning to Slide 8 on quarter 4 FY '23 update. While there is a lot of details, the top 3 points captures the summary is we do see accelerated additional generation capacity to meet the rising demand. And that's something I'm sure many of us have read in the newspaper in genral, the demand has been growing consistently, and this is relating to the fact that government focused a lot [indiscernible] electrification over the last 5 years, which is resulting into increased demand. And there are a lot of latent demand which earlier was not served to get them on the grade. And we think this is just the beginning. And overall, consumption growth on electricity side will continue to grow sustainably. What this would require is additional transmission networks, which will facilitate evacuation both for renewable as well as [indiscernible] products, and we do see adding a lot of opportunities on that account on our business. In addition to that, the heightened focus on renewable generation and energy storage infra is also going to used in both investment in renewable energy storage as well as in transmission sector. So we believe we are playing in a each sort of electricity growth that's going to pan out over the next 10 years. On Slide #9, a quarter 4 FY '23 operational performance, I'll invite my colleague, Satish Talmale, to join and take you through the quarterly highlights.

Thanks, Harsh. Good afternoon, everyone. So starting with safety, we achieved our zero-harm milestone for the quarter as well, 2.5 million safe manhours have been achieved. We had zero fatalities, zero recordable Loss Time Incident, and zero first aid cases. Overall, on asset performance, we achieved 99.60% quarterly average availability for the portfolio, whereas from annual performance point of view, we are standing at 99.7%. Solar generation with 100-megawatt plant, we achieved 61.20 million units, which has generated at 28.38% CUF. On reliability, typically, quarter 4 has a lot of scheduled outages for the correction of any planned identified issuance defects in the system, so which will take to clean up those defects. Our grid performance is one of the best compared to our peers, and we achieved quite a 0.12 line in substation [ trips in a year]. On digital asset management platform, I think all our efforts are operational on the platform since last 8 to 10 months. Now we are heading towards advanced business intelligence platform, which would help us to take analytical decisions and enable faster decision making to improve reliability and safety of the assets. As Harsh already mentioned, the battery energy storage system is already commissioned, and this will help us to scale up for any large battery energy storage projects. On the right-hand side, the availability performance, we achieved our normal [indiscernible] availability. And as a portfolio, we are at 99.7% at average level for the financial year performance. Again, on the key indicators point of view, quarterly comparison, the number of trips per line has slightly increased because of some weather-related events, but otherwise, we are on track as far as our annual targets are concerned. There is an increased focus again on training manpowers, reporting culture on EHS, which is helping us to achieve over [indiscernible] goals. Yes, that's it. We'll hand over next to Navin.

Yes. Thanks, Satish. So that brings us to our financial performance for the -- on the Slide #10 on quarter 4. As you can see on earnings table, our revenue and EBITDA stands at 9% and 6% year-on-year growth, our NDCF generated at substantially higher at 18% at INR 347 crores for the quarter versus INR 293 crores last quarter year-on-year. On collections, that was mentioned earlier, it's been a good quarter with about 114% collection, and that's been a trend that we have seen quarter 4 typically plays out in a higher collection. However, this is even higher than what we experienced last year. Our DSO stands at 54 as of March '23, which is -- while it's 4 days higher than March '22, but it's pretty much similar in line that we see of our usual days of 60 days. On the next slide, I'll just take you through the DPU growth journey that we've gone through and our management objective is to ensure: Superior Return; Sustainable DPU; and Stable Operations. FY '23, we did 3 acquisitions, which enable us to grow DPU first of that was Raichur Sholapur, which is acquired about INR 240 crores. Second was Khargone Transmission is around INR 1,500 crores. Third was we signed a framework agreement GR Infra, which is pretty [indiscernible] terms of our acquisition, but as and when it takes on, it will add to the FY '24 DPUs. Also, FY '22 acquisitions, which were the first solar projects yielded the first full year cash flows in FY '23, which in the FY '22 were only for [indiscernible]. In addition to that, we do see a pipeline of -- strong pipeline with respect to Virescent coming to closure for early H1 FY '24. GR Infra assets -- Rajgarh Transmission coming to acquisition and a strong pipeline on greenfield transmission and BESS. So we are pretty confident of the pipeline that's converting -- that might convert into the overall asset base. With that in mind, we increased the DPU by 4.5% to 3.45% this quarter. And we believe that there can be an additional DPU increase by 2% to 3% once some of the pipeline acquisitions fructify in FY '24 and stabilized. On the right-hand side, you can clearly see our overall chart of growth of DPU that's taken place over the period of years. The next slide is with respect to the details on DPU, INR 3.45 consists of INR 2.53 of interest. INR 0.03 of dividend taxable. INR 0.026 for nontaxable. Again, I would urge all of you to check the respective income tax sections and your individual tax treatments, including capital repayment, another income of INR 0.05. Net-net, we have distributed INR 241.5 crores for this quarter. Record Date stands at May 18, 2023, and tentative distribution date would be around 27 May, 2023. NAV has remained pretty much stable at INR 131.62 versus last year, while there have been asset addition, there has also been risk-rate increase, and therefore, that is something which is balancing out. Going down the next slide is in consolidated EBITDA to NDCF Waterfall for the quarter. We have generated INR 525.8 crores of EBITDA at SPV. There were total working capital, CapEx movement and tax at SPV which made the NDCF at SPV at INR 6,071 crores -- sorry, INR 607 crores, considering all the finance cost is at IGT. The INR 251 crores is at IGT, which is the finance cost getting reduced. And effective NDCF generated was INR 347 crores, the third blue bar. We distributed INR 241.5 crores, and we added to the reserve about INR 105 crores. And as on the year-end, we would have resolved approximately INR 322 crores, which is nothing but the 10% NDCF over the period of years. We tried to save and create balance for steady performance. On Slide #14, we Meghana -- I would invite Meghana to take care of balance sheet on that. Meghana, can you please.

I'm on Slide #14 on the balance sheet of IndiGrid. We continue to be AAA rated by all the 3 rating agencies, and we ended the year with an average cost of debt of about 7.53%. Over the cash balance of about INR 1,160-odd crores, which includes about INR 400-odd crores for DSRA and about INR 240-odd crores of distribution for quarter 4. The mix between the floating and the fixed rate borrowings continues to be skewed on the fixed end borrowings, more than 3/4 of our borrowing book is fixed rate borrowing. We ended the year -- fiscal year with a net debt to AUM of about 59.5% and again, a very robust interest coverage ratio of about 2.16x. The gross borrowing ended being about INR 14,600-odd crores, which is spread between bank loans and NCDs, which is also diversified amongst various classes of investors on NCD, we have mutual funds, corporates, retail, insurance companies, domestic pension funds and on the loans as well subscribed by private banks as well as public sector banks. The average cost of incremental borrowing for the quarter in line with the way the market -- debt markets have moved, was slightly higher at around 7.86%, which were we borrowed for closing the Khargone transaction. Harsh has already mentioned about the raising about INR 1,140 odd crores of NCDs from World Bank funded IFC, International Finance Corporation, with a tenure of 18 odd years. The chart at the bottom of the slide provides the repayment or refinancing schedule. So we are looking at the refinancing plan of about INR 930 odd crores for FY '24, 50% of which is coming up in the next quarter for which we already have the funding and balance 50% is coming at the end of the fiscal. So we will be raising funds to refinance this facility as well. Rest of the years, as you can see, we have tried to ensure that our refinancing amounts don't cross more than 12% to 13% of the gross borrowing. Moving on to Slide #15. This talks about the total return, risk-adjusted total returns to investors, both on the annualized part as well as the total returns part since the time we got listed. As you can see, we are again outperforming compared to all the pure-play debt indices, which is the GSEC, 10 year GSEC Bond and the 30 year GSEC Bond as well as on the right-hand side, you can see we've compared ourselves to the indices -- equity indices, both on the Infra Utilities as well as pure-play transmission entities. And as you can see, we are providing a superior risk adjusted return, risk being monitored through Beta, which remains at the lower end of about 0.08x. Moving ahead on the business outlook part. Harsh, you want to comment?

Sure. So on the business outlook, again, following the same principle on the portfolio strategy, we will continue to look and identify and acquire value accretive assets, which ensure consistent DPU and stable DPU growth. We will work towards consummating the pipeline deals that are existing, which is the recent acquisition, framework and GR and some of the other bids that we are seeing. We're also actively looking to explore some of the specific greenfields, bidding opportunities in power transmission and utility scale. And I think focus is to deliver on the increased DPU guidance that we have provided, and we are confident doing that. On the balance sheet front, as we have continued to maintain, we will continue to maintain adequate liquidity and optimize our interest cost and elongate tenures, which is allowing us to keep a robust balance sheet and not impacted by a change in interest rate scenario. And we do plan to raise equity capital up to INR 1,500 crores to ensure that we use that to fund our partly the recent acquisition and also keep adequate headroom for growth. On the asset management side, we will continue to work towards the resiliency and which mean that we are able to ensure that our operations remain stable and predictable, and we maintain more than 99.5% availability across portfolio. We also migrated to self-reliant O&M practices across the portfolio. So a sizable part of our portfolio is managed by IndiGrid's own teams and not by contractors, which allows us to ensure our costs are in the check. Our control on the asset remains better. And we needed to do that by utilizing the right set of digital tools that we have invested over the last few years. Apparently, we continue to ensure world-class EHS and ESG practices across our portfolio. On the industry stewardship, I think there are 2 points which we continue to work consistently first being maximizing private sector participation in electricity sector, both in greenfield, the [indiscernible] , which should come for tariff-based companies in the bidding as well as nationally monetization pipeline, where we do believe that the right way of monetizing public asset is to call for an auction and used to our strategic objectives, which we pursue in the industry. And IndiGrid and InvITs, I think we continue to work towards increasing awareness on broader subsegment as well as stakeholders about what in [indiscernible] and maybe buy back what you want [indiscernible] That's been the business outlook that we see for next year and key priorities. On the next slide, while our EGM notice has not yet issued but many of the activities that we have described above, requires approval of unitholders. And therefore, we plan to call for an extraordinary general meeting soon, and that would be in the first week of June, which we [indiscernible] a physical class voting. And the first item on that which requires approval of VRET acquisition of Virescent Renewable Energy Trust in units of Virescent's. Along with that, acquisition of shares of Virescent's Investment Manager and Project Manager. These 2 items are linked to acquisition of Virescent. There have been many slides that we have published on the Virescent. Besides that, along with this presentation, we will be publishing valuation report as well, which will provide a great amount of detail for unitholders to evaluate [ physical ] voting. On item number three, we have proposed to consider an approved amendment in Investment Management Agreement to add for provision of success fee linked to enterprise value, which, again, the details and the description and rationale is provided for in the presentation found would be addressing any question answer relating to that also in the call today. Item #4 is linked to the capital raising approval of up to INR 1,500 crores by institutional placement, which I have mentioned above in the presentation. And the point #5, is to consider and approve declassification of status of Sterlite Power as a sponsor of IndiGrid considering that they own 0 or nil shares at IndiGrid or the managers of IndiGrid. So these are the decisions that EGM that continued in first week of June, we should soon be showing the EGM notice, which will carry the requisite detail for unitholders to consider. However, the purpose of considering in today's call was to address any prima facie questions or clarifications our investors might have. With that, I would take a pause and we'll open for question and answer. So there is adequate time for question and answer for this time.

[Operator Instructions] First question is from the line of Mohit Kumar from ICICI Securities.

And congratulations on the good year and this is very heartening to see the consistent increase in DPU over last few years. First question is, can you just clarify the leverage now and leverage post price issue and the leverage post acquisition of Virescent? Can you give these 3 numbers would be helpful, yes.

Sure. So the leverage now is approximately 59.5% as of year-end, which is FY '23. After acquisition of Virescent, it will be -- and again, valuation before we get published, the closing adjustment might happen. But effectively, it will be approximately 65% on closure of the Virescent transaction. Subsequent to depending on how much capital we raise, right, INR 1,000 crores or INR 1,500 crores. It will come back to 75%, 60%, right? So it will be in the same range, but the exact numbers are difficult to project in the future. But it is 59.5% now, it will grow to approximately 65% and it will come back to 60% to 62% depending on the size of the capital raise we do.

Sir, the broader question is there -- is then that what is the future of the trust are you looking to -- because this is only 60%, we don't have enough headroom. So are you looking -- should we expect more future raises in the coming years?

I think that's -- I mean, we keep debating the question. We need to strike the balance because when we raise capital, we need to be able to see that we are still able to meet our DPU growth, right? So there is an optimal debt to equity that is needed in infra to be able to, I would say, use of the projects and really provide the right yield. On the other hand, if we over-lever we run the risk of being susceptible to impact on the balance sheet. So we try to strike a balance between the 2, even at, let's say, 60%, today, we had about INR 6,000, INR 7,000 crores of headroom from a purely regulatory perspective to acquire assets. But we are showing our integration to raise capital [indiscernible] from me after closing Virescent, which will take us to 65%. And the reason why we are raising capital is to be able to keep enough [indiscernible] to close further acquisitions. So I think we have enough headroom to grow after Virescent and capital as will have INR 7,000 crores, INR 8,000 crores of headwind to grow without raising capital. That is sufficient, and that allows us to balance the DPU growth and the right DPU yield versus the growth potential. So I think it's a balance that we are looking to strike and I think it's the right balance between INR 1,000 crores to INR 1,500 crores capital.

Understood, sir. Sir, my second question is that you've introduced the fees, which you're looking to [indiscernible] from the unitholders, this is -- can you explain how does it work? This works for us, because the -- you need to -- if you acquire an asset, let's say, INR 100 crores, I mean, with the guidance for this fiscal, can they get paid? Or is it based on the 2, 3 years of DPU guidance?

Yes. So I think the further details will be there in the EGM, but the base we went about this was to running benchmark IndiGrid with, I would say, a wide variety of stakeholders in terms of asset managers. And today, IndiGrid fees are about 0.25% of AUM and subject to a cap of 1.75% of EBITDA. If you look at it, it's one of the lowest if not the lowest is that in any asset managers will be charging. And I'm not comparing with the InvIT, whether it's mutual funds or AIF or other platforms. We also compared with other yieldcos in Singapore, Hong Kong, Australia, elsewhere. And we are still among the lowest in terms of fees. Now what that does is to really hamper the -- I would say, managers' capability to incentivize and attract the right talent. But so what we wanted to do is to create a fee structure, which is globally accepted is an incentivized employees and manager for growth. And the way we have structured it is to have and introduce a success fee or an incentive fee on acquisitions. But [ able ] after the financial year ends and when the financial year guidance has been met, now many other times, we acquired assets in quarter 4. Sometimes we acquire assets in quarter 1. So instead of every asset we pay a fee, which becomes difficult to judge as well as won't allow opportunity for pillar of operations. So we have put a simplistic structure. So let's say, for example, in FY '23, the company has acquired X rore of assets. We will say 0.5% of onetime fee on that, subject to FY '23 guidance doing that, right? So it will be a decision the management Board will be able to exercise at the end of the financial year looking back for the last financial. That is how it is designed at the moment. And I think it is still one of the lowest [ success fee ] if we compare with the global fund. So we again tried to strike the balance between that and investment manager as a company has also committed that majority of this onetime fee will be going towards employee incentives towards growth. So I think it's kind of directly linked with the employees.

The next question is from the line of Shalini Vasanta from DSP Mutual Fund.

This is [ Kunal ] from DSP Mutual Fund. So my question is in terms of leverage, again, like you mentioned occasionally for this VRET acquisition, or you would reach a 65% mark and post the capital raise, you will be again back to sub-60%. So what kind of peak level of leverage you are comfortable with and also in order to maintain a AAA rating, yes? So that was the only question.

I think it's an interesting question. I think the -- we have been saying that consistently from a comfort perspective, we are comfortable with around 65% compete leverage, but that's peak, and that's comfort. So from a covenant perspective, we continue to maintain 67% [indiscernible] allowed us. So if let's say Virescent was a little bigger, it might have been 67%, and we would have been fine, right? But anything above 65%, we are -- it's out of our comfort zone, and therefore, we would start looking to raise capital. So it's not like a covenant, but it is, I would say, business strategy to ensure that we remain below 65% for both risk as well as agility in terms of further growth opportunity to materials.

Next question is from the line of Sagar Sanghvi from ADD Capital.

First, 2 types of questions. On the recent acquisition that has been announced, one, intensity in the renewable space, would you bought the asset at about 8x EV by EBITDA. So what is the IRR that you are looking for all these kind of acquisitions? And what is the hurdle rate for IRR? That is one. And two, you mentioned that the DPU will increase by 2% to 3% once the acquisitions fructify. Where is the asset that you're adding is about 18% of the total asset base right now, and the NDCF that will be generated, that is INR 200 crore would be about 20% of the current NDCF. So that should give a bump up of about INR 2.75 on the existing DPU of INR 13.8, about 20% odd kind of thing.

Yes. So I'll address your second question first, and you're absolutely right. Let's say, if IndiGrid was comfortable managing at a higher leverage, right, let's say, 65%, 67%, that means the entire INR 200 crores of additional NDCF that we would earn can translate into direct accretion to unitholders and therefore, INR 2, INR 3 [indiscernible], right? But, we think that, that is not the right way to run a platform because we do want to grow further, and that means we are going to raise more capital. So when you raise more capital, we are going to receive more units. And therefore, when you issue more units, the INR 200 crores, depending on what is the size of the capital raise and other things will get divided on a wider unitholder base, right? And that would leave not INR 2.75 or maybe INR 0.50 or Rupee of accretion, right? Yes, it is still not 2% to 3%. It can be more. But I would say if we give a guidance, we want to be 100% sure instead of giving an optimistic guidance and not deliver on it. So yes, can it be more than 2%, 3%? The 2%, 3% is approximately INR 0.40. Yes, it can be. But we would like to see integration, cash flow, how much valuation at what price, INR 1,000 crores or INR 1,500 crores, depending on that, we will give further guidance, right? But INR 200 crores directly adding to the INR 70 crore units right now is not appropriate because we are going to receive more units. So that is the right way to look at it. Because we think that's the right way to run the business. See if anything more [indiscernible] this is the only product that we're going to have, it might be comfortable with 65%, 67%. And if you can grow and eventually, we can run the business like that. But we have chosen to always keep a headroom on DPU growth, both for risk and opportunities. And therefore, the DPU growth immediately that you may see may not be like 10%, it maybe 2%, 3%. That's the answer for question number 2. Can you repeat your question one, please?

So the kind of competitive intensity in the renewable space with you acquiring asset at 8x EV by EBITDA, so what is the hurdle IRR for this? And what is the IRR that you are paying to acquire this asset?

Okay. So I would, to be honest, refrain from using [ heuristics ] like EBITDA, and I'll give you why. One is 8x EV EBITDA, maybe higher, maybe lower depending on how much cash we are acquiring the company with, right? That is one. Second, it is also a function of how much is a residual tenure. This company has around 18 years of PPA yet. So accordingly gets valued. Again, all these numbers will be public in valuation report. So one can actually run the financial model exactly. Third is the EBITDA numbers that get published are kind of accounting EBITDA numbers. And what is the difference between that number and the practical number is straight lining. So under 8x, many of the EBITDA which are higher now, later, lower tomorrow, get straight lined and therefore reduced. In some cases, it will be increased. So the one needs to tie up to the actual cash generation and not just the accounting EBITDA in some of the renewable energy projects. So it is not -- I mean, you might end up with a wrong conclusion either on the higher side on the lower side in terms of both EBITDA multiple and profitability. So I would urge you to look at the valuation report that gets published, which will talk about the exact projections for each asset of Virescent that's going to be acquired to create a model. To answer the second question on that was what is the return rate if we acquired. We do look at acquiring renewable energy projects at least 100 to 200 bps higher than what we make on transmission projects. I think the specific return or IRRs, I would refrain from communicating on that because there are a variety of assumptions that goes into that, starting from cost of debt, tax, repayment structure, all of it. So what looks like a, let's say, 13.5% IRR to us might look like 11% to somebody else, right? So it's a nuance working, but again, all the information that is required to make the right judgment on that is available in public domain in the valuation report, in our incremental cost of debt. In-short information is made available. But to give a threshold return that we make won't do justice on the call, both for inaccuracy as well as some [indiscernible].

Got it. Okay. And the last one is, you mentioned you'll be reaching about INR 27,000 crores of AUM with a recent acquisition. So -- and with the incremental capital, [ should either it will be ] INR 33,000-odd crores of AUM that should surprise a capital [indiscernible]. So any asset in pipeline that you identified and looking to add for next 1, 1.5 years, sir?

Yes. There are many, many assets in pipeline, but we can't comment on that in the time we signed something, right? So we got a wait for that.

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

Thanks for the good set of numbers. My question is the distribution of the income per unit. There are several parts interest, dividend taxable, dividend non-taxable. As the Indian investor, we are confused that which partly taxable, which is not taxable. So if you can help with the guideline or some sales certificate. I know that it would be difficult in [indiscernible] in earlier concepts was it maybe differ from individual to individual. For the India like [indiscernible] 1,000 units and only [ INR 12,000 ] could be used a year. It's difficult for me to give a few certificate INR 25,000. So with that disclaimer, can you please provide a certificate or any guidelines or any suggestion this part [indiscernible] in my hands.

I think Kabra, we are completely understand your concerning issue. We do provide that. So if you look at our distribution advice, which is called Form 64-B, if I'm not wrong, that captures pretty much an exact manner component, which will be what is given is what under what tax provision, right, whether it's under 115UA or 194LBA or other provisions. So we do provide that distribution advice. I would suggest you to look at that. Second, we do provide something called FAQs. Right now, our FAQs are already available on our website. They are yet to be updated for the latest amendment that has taken place in March. We would be updating that. Between these 2, I believe it will give you the right amount of guidance to make that judgment yourself. I don't think you need to see a certificate for that. However, I think it eventually -- the way -- as you know, India functions is that the liability of right filing of taxation is the individual responsibility, right? Even if the government knows what is the tax profitability, it is responsibility lies with the individual. We, as a company, cannot take that liability unfortunately, but we are providing every disclosure required for you to file that return and also FAQ, But the effect will come up with a disclosure that please take our adviser [indiscernible], right? Because we cannot take the liability of guiding people on tax, right? It is a specific subject matter. And we won't know what other incomes you have. So I think there is enough disclosure if you look at Form 64B, which we are providing annually. Now we are going to provide quarterly plus our distribution advice, which is that and [indiscernible], which will be updated. You will have adequate amount of information to make that judgment.

And just if, I provided the FAQ and all the details with my chartered accountant. But they are not clear. They say because the individual investment you have to take care. Say, for example, capital deployment. Everybody is confused, whether it's capital repayment is taxable or not. Because it is not covered in this 115UA and 194LBA. Can you please suggest that this particular component is flexible or not in my hand?

So if you look at this budget, the announcement has come. It is part of the Income Tax Act now since 31st of March, first April onwards, we are not supposed to deduct TDS on capital repayment. As long as capital repayment is issued to the level of issue price of units, for our case, it is [ 100 ]. We are not deducting TDS but cost of acquisitions for [ units ] will be reduced. And therefore, when you actually sell the unit, if you sell the unit, your cost of acquisition will stand reduced to the extent of capital repayment we have received, right? Now that is what I'm exactly replicating what is said in the Income Tax Act. But beyond that, I think you will have to interpret your financials in terms of how the tax is computed.

My finances is okay, but my financials so far concerned is [indiscernible] to these units. So for that only because I have talked to many Indian friends. Also who have investedn in IndiGrid. And everybody is confused, every chartered accountant is also confused almost because for that particular unit, they are not going to be [ steady ] for inspection. But anyway [indiscernible] For a particular unit, for example?

It's okay for [indiscernible].

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

Harsh, my first question is on the transmission assets. One, if you can just throw some light about the availability, which is out there in the market, the kind of pipeline that we are witnessing. And also in the context of your NMP the power grid was supposed to sell some assets, is there any movement on that side we are tied up with GR Infra to bid for certain projects. So just some color comment on how things are operating there.

No. So we have a good pipeline, as I mentioned earlier. First, on GR Infra, I believe the project is moving on well. And as and when it is ready, we would look to acquire that project. On other INR 5,000 crores a bid that we tied up, we bid for 2 projects, we could not win because as I said earlier, for us, profitability and returns are most important. We don't need to acquire projects if they don't yield accretion to us. And therefore, we stayed out of those bids. But there are still some -- many of the bids which are left on transmission greenfield. We are looking at that, including battery energy storage. And we'll see how many of those will convert into pipeline. But it is subject to meeting our risk return thresholds. And -- but the pipeline looks to be healthy, and we will see what -- which part of the pipeline eventually gets converted into. The next question is on Power Grid. As we cannot comment on behalf of Power Grid, but I believe that I think the sale has not taken place. And as also earlier, we seriously hope that such sale as and when it takes place, goes through a public auction process because it is a public asset built with taxpayers' money. And therefore, any monetization should go through a proper auction process. And I can only hope that government of India will follow that as and when it gets done.

So even the process to build our auction has not started for purchasing.

Yes. Public process is not started. If I don't know if there is [ any sense ]. But yes, I'm not aware of any process.

Fair enough. And my second question is on the new acquisition of VRET. Won this INR 200 crores of NDCF, which you mentioned in the presentation, but for the VRET Trust or this is what we expect to accrue to IndiGrid?

Your audio is unclear from your line. I request you, sir, to please use the handset mode.

So I hope this is better. Yes. So my second question is on VRET. The INR 200 crores of NDCF which you have mentioned, one, is that what VRET Trust used to generate or this is what we expect to accrue to IndiGrid? And second, I think we had mentioned somewhere that it went through a bidding process. And so if you can just highlight what the other bidders were at. And the reason I come this, I ask you this is in context of, one, it seems a bit expensive just prima facie. And I'm sure even you did mention that you'll come out with a valuation report. So -- and now it's a related party that ends my questions.

Sure. No, I think extremely valid question. I will address that question first. We -- I mean, we don't know who the second or third bidder was. Because it's not that we have access to it. The process was run by one of the bulge bracket top banks, and we were asked to participate. We participated in that. It went through a professional diligence process. And all the bids were compared by the bank and shared with the Terra, which is a seller over here. So it has been an independently run auction process where we have participated from IndiGrid side. In our Board meetings or investment committee meetings or in EGM, KKR, who is an affiliate of Terra as well as IndiGrid would be refraining from bookings. They did not participate in any of the Board meetings or investment committee meeting or did not have access to any of the diligence or terms that were shared at IndiGrid. So that has kept at complete absence on participation from KKR who can be potentially conflicted. And therefore, we are completely kept away from them. In addition to that, as I said, they would not be voting either on IndiGrid side where they are the shareholders or on the Virescent side where there are shareholders. So this will be voted on both IndiGrid and Virescent side, completely by minority shareholders other than KKR. So that's to kind of give you a perspective on not -- they had zero participation at Board. They will have zero participation in voting, and therefore, it is kind of [indiscernible]. But by that logic, it also means that I don't know who is the second or third bidder, right? Because the banker does not have obligation to tell us who was the second bidder was. So we are not aware of the exact name. So that's on question number 2. And question number one, I think you referred to on, can you repeat that [indiscernible] the reason, it seems expensive [indiscernible] valuation reports, but if you can clarify.

Just from the context of EV EBITDA or your -- the amount you're paying on per megawatts It's different from what we paid last year to FRV or in general, what happens in the market.

Got it. Got it. Perfect. So I differentiate again, I would urge you to do a little bit of more work because we don't pay based on per megawatts, we did pay based on what tariff we earn. The last acquisition we did had a much lower tariff than the tariff that is over here, and therefore, price per megawatt may not be the right comparison. Second, I just answered in detail about the EBITDA multiple when [indiscernible] to look at the EBITDA, pick up the model and the turn it into discounting, you'll get better answers on that. After the valuation reports of public soon. And third question was INR 200 crores NDCF, I think that is for us. That is not what Virescent generating. That is for us because we are going to finance it differently, run it differently. So this INR 200 crore estimation is based on IndiGrid estimates, not on Virescent's history.

Okay. And what's the tariff, yes?

I think 16 projects, but I believe the weighted average tariff is approximately INR 5, but again, let the numbers get published approximately INR 5.

Fair enough. And just last clarification. I mean, earlier, we had stated that your non-transmission assets be it battery solar or anything else, we would cap it at 25%, 30% of AUM. That still holds.

That still holds. But I would not -- utility energy storage into solar, it will be transmission, even government of India classifies as this transmission. But [ they don't -- ] we don't have anything in BESS. So that's the secondary question. But to your primary question, yes, we would cap it at 25%, 30%.

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

Yes. Firstly, congratulations for a stable set of numbers. So I guess most of my questions have been answered. But just one thing, I mean, if you could provide some more color on the underlying assets that are being acquired. In terms of quality of those assets, how does it fit into the criteria that [indiscernible] in terms of PPAs, counter-parties, operation track record?

Yes. So I think -- yes. So what we like about the assets that they've got on an average, approximately 7 years of operating history. Now what that provides us is that, it provides us exactly how the generation track record of assets were, right? And therefore, we don't need to necessarily depend on future basis on how generation will pan out. So we have a fairly good estimate of how generation would take place, right? Because a 7-year operating history is fairly sizable. Second, a majority of them are still with extremely good counter-parties like NTPC, SECI, GUVNL. Even beyond that, overall receivable cycles over the last few years have improved so much in all states assets also have under 90 days receivable. So we look at the receivables in a pretty healthy shape that we have seen. So good operating history, good quality of assets, good access to track record of generation and a lesser receivable date. So pretty much it kind of ticks almost all boxes for us.

Sure. Just one follow-up on the counter-parties. So I think you mentioned about central counter-parties. So if you could quantify as to what could be the share of central counter-parties in the portfolio?

In our overall portfolio, let me do the other [ around], the total solar portfolio will be approximately 17% to 18% of our AUM of IndiGrid. And out of that, approximately 12% will be SECI and NTPC and we [indiscernible] approximately 6% to [ 10% will ] be state, which includes UP, Punjab and [indiscernible].

Right, right. Understood. And sir, just one thing. I think you partly answered this question earlier, but I just want to understand that till now we have been very conservative and let's say, gradual in addition of solar assets. But now we have this rather large acquisition that is being planned. So could you also talk about the thought process? I mean, whether the share of solar will go up from here? Will it reduce what looks like an optimum level product?

Sure. So we are still conservative and will remain conservative. But conservative doesn't mean we don't do large transactions. And conservatively, we wait for the right opportunity where we find good quality assets and at the right price. So I don't think there is any change in our strategy. We do not follow a particular optimum mix of solar we want to reach. There is a cap that will follow, but we do not have a particular percentage we want to reach. We would remain neutral between transmission, solar, battery energy storage. In terms of which particular segment offers the best risk evolve, right? And while transmission assets are good, but if the bidding at the price for it is so high that it results into a investment returns than what we think is usable. We'll not acquire those assets. And since exists for solar as well. So whether we acquire solar transmission or battery energy storage is not a function of what sector we like. We like all 3. But what sector or subsector offers the right risk return for at that particular point in time. I think that is what our focus is on to really do micro level analysis, not a macro decision. So I think it might happen that we it might at 18%, and it might happen that we reach 30%. But none of it is going to be by design. It is going to be decided by opportunities that come to us.

Understood. Understood. But subject to a cap, let's say, about 30% or so cap in that range.