Indigrid Infrastructure Trust (INDIGRID.BO) Earnings Call Transcript & Summary

Ladies and gentlemen, good evening, and welcome to the IndiGrid Q2 FY '26 Earnings Conference Call hosted by Spark Institutional Equities Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ketan Jain from Spark Institutional Equities Private Limited. Thank you, and over to you, sir.

Thank you. Thank you, operator. Good evening, everyone. On behalf of Avendus Spark, I welcome you all to the Second Quarter FY '26 Results Conference Call of IndiGrid Infrastructure Trust. We are joined today by Mr. Harsh Shah, Managing Director; Ms. Meghana Pandit, Chief Financial Officer; and Mr. Sanil Namboodiripad, Chief Operating Officer. I would now like to hand over the call to Mr. Harsh Shah for his opening remarks. Over to you, sir.

Thank you. Thank you, Ketan, and thank you, everyone, for joining the quarter 2 results call today. I will refer the slides of the presentation that we have uploaded on the exchanges as a matter of reference, and me, Meghana and Sanil will take you through the quarterly performance and we'll end the call with Q&A in this regard. Starting on Slide 3, I would like to reiterate our vision. Our vision is to become the most admired yield vehicle in Asia. And on the back of focused business model, value accretive growth, predictable distribution and optimal capital structure, we believe we have the ingredients that will take us to the most admired vehicle in Asia. On Slide 4 is just a depiction of our assets under management as of date. We are present in 20 states and 2 union territories with 90 different revenue-generating elements with an AUM of about INR 32,500 crores, spread across 9,300 circuit kilometers and 25,000 MVA of transformation capacity. We also own about 1.5 gigawatt peak of solar generation and 900 megawatt hour of BESS projects. Our transmission projects, most of them are on a BOOM basis of perpetual contracts, but the residual contract life is approximately 25.7 years and for solar, the same number is 19.6 years. On Slide #5, I'll take you through the specific highlights of the quarter. In this quarter, we have signed one agreement, a definitive agreement to acquire a project called NERES XVI for an EV of about INR 460 crores. Then the project is commissioned from Techno Electric. We also raised capital of INR 438 crores via preferential allotment and with a healthy mix of institutional as well as noninstitutional investors. IndiGrid were also included in this quarter in the FTSE Emerging Markets/APAC -- All Cap Index and FTSE India -- All Cap Index, which I'm sure many of you have seen has boosted the liquidity in the IndiGrid pickup. On our portfolio side, we have secured a second TBCB win with 125 megawatts and 500-megawatt hour of BESS projects in Uttar Pradesh with the contracting party as NVVN. IndiGrid plans to acquire this project when it achieve COD and we acquire from EnerGrid. With this win, total battery capacity as in the gigawatt hour terms, we are at 2.1 gigawatt hour between IndiGrid and EnerGrid together. On the financial side, quarter 2 reported a marginal increase of 2.6% on extra income revenue on account of 2 projects that we acquired last quarter. There is a marginal dip on quarterly EBITDA by 1.1% on a year-on-year basis. It's largely because of the spillover impact of onetime issue in a solar project where the turbine had a breakdown, which is resolved now and a true-up of tariff order in one of our regulated tariff mechanism project. None of these -- both these issues are adjusted in this quarter, and therefore, this is a one-off impact. On AUM net debt basis, we are closing the quarter with an AUM of INR 32,500 crores, AUM of 61.4%. And a post preferential issue basis, the net debt will be approximately 60%, which will give us a sizable headroom to grow further. On quarter 2 FY '26, the collection was at 108% for transmission, 89% for solar. Overall, DSO days remain in very healthy territory. DPU, we declared a DPU of INR 4 a unit, which is 6.7% higher than the same period last year and in line with the full year guidance, which we provided in quarter 1 this year. Our weighted average quarterly availability for the quarter is 99.72% and solar CUF is at 20.9%. We believe that these are clear signs that we will be able to deliver superior total returns, sustainably increased DPU and maintain stable operations. On the next slide, Slide 7, a high-level update on the industry. We saw a peak demand of 229 gigawatts during this quarter. While the peak demand reduced a little bit compared to last year, largely due to prolonged monsoons, we believe that the decade of growth in power sector has just begun, and we'll continue to see growth in both peak demand and installed capacity in the country, which we feel is going to fuel in our 2 target segments, which is transmission and renewables, a sizable amount of growth opportunities in the coming years. In quarter 2, about INR 28,000 crores of new projects, transmission bids and INR 12,000 crores of new BESS bids were concluded under TBCB mechanism. If you look at the next slide, we are looking at the next 12 months to 18 months, another INR 120,00 crore bids in transmission and about INR 15,000 crore bids in battery storage. So we're seeing a very healthy pipeline of about INR 1,25,000 crores in the sector. just in transmission and BESS. On Slide 9 is our operating performance quarter-to-quarter. I will request Sanil, our Chief Operating Officer, to brief you on the same.

Thank you, Harsh. Good afternoon, everyone. This is on the Slide 9, operational performance. Regarding the HSE updates, we had 0 medical treatment cases and 1 first aid case and 1 lost time incident. These are minor incidents. Our performance, the Power Transmission segment, we had a weighted average of availability of 99.72% based on the revenues. We have solar generation for the quarter was at 533 million units at 20.90 CUF. The reliability scores, if you look at it, the trips per line was 0.022 (sic) [ 0.22 ], which was slightly increased compared to the last year because of various stripping on the lines that happened due to foreign materials and natural calamities. We had extended monsoon and thunder and lightning across the North and Northeast India. Substation trips per element is at 0.06, well within control. And regarding the solar availability, the plant availability was at 96.9%. This was due to some temporary availability challenges due to extreme weather conditions, flooding, et cetera, in Gujarat and Maharashtra and some of which have been recovered through the insurance coverages. If you look at the availability graphs, they are all in green, except for JKPTL, which is having slightly lesser availability as compared with the normative availabilities. This was due to a failure of a transformer, which has already been restored in August. The key indicators, we are at par with the last -- if you compare through quarter-on-quarter last year and this year, we are almost similar and not much of any concerns in the key indicators of number of trips per line, training man hours, lost time incidents as well as the generation in the CUF. So we are maintaining a consistent track record of maintaining superior availability and yield performance. Thank you. Over to you, Meghana.

Thanks, Sanil. Good afternoon, everyone. I'm on Slide #10. We'll take you through the financial performance for Q2 fiscal year '25, '26. The reported revenue for this quarter, we ended at INR 826.7 crores, which is a marginal increase of about 2.6% over Q2 of FY '25. On the EBITDA front, there is a marginal dip by 1.1%, basically because of 2 events. One was a spillover effect of the generator issue which we faced in Q1 and which has already been restored. And the other one was because of a true-up petition tariff impact in one of our cost plus or regulated tariff mechanism project, which is featuring. On the NDCF front, the NDCF generated for the quarter is INR 362.9 crores, which is 13.5% higher than Q2 of FY '25, which was at INR 319.7 crores. This is on the back of robust collections and the acquisitions also that we did in Q1 of FY '26. The DPU for this quarter continues at INR 4, which is a 6.7% increase over INR 3.75 for Q2 FY '25. On the collection and receivable days, pretty robust performance. In the transmission asset, the collections were at around 108% compared to 103% on a Y-o-Y basis. The DSO days also remained at around 35 days, which is pretty stable and pretty robust. Same on the solar side, the collections were at 89% in Q2 compared to 117% in Q2 last year. And again, on the DSO days, more or less constant at around 51 days compared to 47 in September 2024. Moving on to Slide #11 on the distribution update. As I said earlier, INR 4 for Q2 FY '26 continues. The breakup of which is given under the 4 components: interest dividend, capital repayment and other income, interest being the largest part of that. The outstanding units on September were at about INR 834.5 million, but after the preferential issuance, it has increased slightly. So the gross distribution for the quarter will be about INR 344.2 crores, which is on the expanded capital base. The record date for distribution will be -- is on November 14, 2025, and the tentative distribution date stands somewhere around November 21 or before that. The NAV per unit as on September is at about INR 148.4, which is more or less in line with Q2 of FY '25. The annual distribution trend that you see on the right-hand side of the graph continues to show almost a 6% CAGR on the distribution, which we have been maintaining and providing. So INR 4 for the quarter continues to be in line with the annual DPU guidance of INR 16 for fiscal year '25-'26. On Slide #12, the consolidated EBITDA to NDCF waterfall starting from EBITDA at the SPV level, we started at INR 729.8 crores and all the movements at all the SPVs put together, finance income, working capital movement, CapEx spend, et cetera, we come to the NDCF at SPV with INR 766.7 crores. With all the expenses at IndiGrid level, trust level, a large part of which is the finance cost and then the working capital movements and tax, we ended with an NDCF at IndiGrid with INR 362.9 crores. With the distribution for the quarter of INR 344.2 crores, close to about INR 18.7 crores got added to the reserves. So we end September quarter with a total reserve balance at INR 573.1 crores. Moving on to Slide #13, talking about the balance sheet position. We continue to remain AAA rated by all the 3 rating agencies, and our weighted average cost of debt stands at an attractive 7.44%. Net debt to AUM stands at 61.4% and with the preferential issuance taking into consideration, it will be at around 60%. Out of the total gross borrowing of INR 1,700-odd crores, 88% of the borrowings are in fixed rate nature, thereby insulated from highly volatile movements in interest costs. The interest coverage ratio also remains very healthy at about 1.71x and a cash balance of almost INR 2,000-odd crores, which includes the quarter 2 distribution plus DSRA and other balances. On the borrowing book, almost 71% of the borrowing book is in the form of NCDs, which are subscribed by various kinds of investors from mutual funds, banks, financial institutions, retail, insurance companies, et cetera. And almost 30% of the book is owned -- is provided by bank loans. The repayment or refinancing sharing that you see at the bottom of the chart provides a well-diversified and termed out borrowing to ensure that we do not bunch up a significant part of the debt in any particular year from a refinancing standpoint. We try and maintain the refinancing profile in a way that not more than 10% to 12% of borrowing comes up for refinancing in any particular year. Almost everything for FY -- fiscal year '25-'26 has been refinanced, barring close to about INR 4-odd billion, which will come up in the next 2 quarters. Moving on to Slide #14. We talk about the risk-adjusted total returns to the investors. And as you can see, IndiGrid continues to provide outperformed on an outperformed basis -- on an annualized return basis, it's about 13% total return, which is a summation of distribution plus the price change. Absolute terms, it's about 174% since the time we got listed. And when we compare this with pure-play debt securities, which is the GSEC bond, 10-year and 30-year and on the right-hand side, which is pure-play equity indices, you can see that IndiGrid stands out. More importantly, on the beta level, which signifies the risk profile or volatility in the stock, it remains very close to 0 at 0.06. So IndiGrid has consistently been outperforming on a risk-adjusted basis. Moving on to Slide #15 on the business outlook. I think from a portfolio strategy basis, we continue to focus on ensuring that stable operations are there, which will enable us to provide predictable and sustainable distribution. On the greenfield development, largely on the EnerGrid side and the few projects that IndiGrid is also executing, we have complete focus to ensure that we complete all these projects on time. Participating in the future greenfield opportunities on the back of a huge pipeline on transmission and battery energy provides great opportunities and also deliver on the DPU guidance of INR 16 for FY '26. On the balance sheet side, we continue to maintain our focus on ensuring the interest costs can be optimized as far as possible. And more importantly, we try and elongate the tenor profile in terms of the refinancing that we need to do and funding for any future acquisitions and ensure that the leverage remains on prudent basis by keeping a sufficient headroom for enabling inorganic and organic growth. Asset management, again, continues to be a focus area to ensure we provide at least 99.5% of availability across the operational transmission portfolio and similar CUF levels on the solar portfolio as well. Increasingly, we are focusing on ensuring that self-reliant O&M capabilities get strengthened, whether it is through digital and predictive analytics, both on the transmission side as well as on the solar side, and we are taking help of AI-powered image analytics and other options which are available for the same. Underpinning that continues the world-class EHS and ESG practices, which we continue to focus on and improve. And on industries stewardship basis also, I think we have been participating and we continue to do in terms of shaping of policy advocacy and industry dialogues to ensure how we are able to provide a deeper role in the infrastructure sector, both on the electricity side as well as on the InvIT side. I'll take a pause here, and we can start the question-and-answer session with this. Thank you.

[Operator Instructions] The first question is from the line of [ Davish Chandra ], an individual investor.

Excellent one more quarter. One time possible in such kind of rainy season at least we are good. We have to maintain everything. I have only one question, Mr. Harsh Shah. Normally, the slide which talks about DPU accretive acquisition that's very favorite screen. So I request to add that slide in your future presentation, which talks about the DPU different colors for different AUMs. That's it.

I think certainly, we will add that. We used to add that in the past. We will consider when from next quarter probably this talk.

The next question is from the line of Deep from Bandhan AMC.

Congrats on a steady quarter with success pref issue as well. So I mean my first question revolves around are we planning for some more fundraise in near term because I think we have INR 1,500-odd crores of Board approval and out of which we have raised INR 438 crores of pref issue. So I mean, any near-term plans and anything that you can throw some light on?

I think the Board has approved INR 1,500 crores, we have made it public. So yes, over a period of close to 12 months, we would look to raise INR 1,500 crores. The exact timing and mode of issuances, I think, gets announced closer to the issuance when the decision has been made. But yes, we do plan to raise INR 1,500 crores for the next 12 months.

Out of which first tranche [Technical Difficulty].

Okay. Sir, second question, I think, was around the true-up order impact in one of the cost assets, as you mentioned. So I mean, if we -- I mean, it's around revenue reversal of around INR 7 crores plus INR 16 crores versus INR 23 crores. So can we have some normalized EBITDA impact on this? Because I mean, if this event would not have happened and the spillover issue of the transformer failure in Q1 also wouldn't have happened. So I mean, what would have been the normalized EBITDA? Any sense on that?

I don't have that number exactly, but I can tell you that the cost plus true-up INR 23 crores has an impact of last 10 years. So annualized impact has been INR 1 crores, INR 2 crores. It's just that 10-year impact is coming in the quarter, and that's why you see that number a little bit higher. So you can probably add back that to come to a regular number. And on the -- on the rotator failure, I won't have the exact number, but we have about 40 days or 45 days in quarter 2. The rotator was repaired in mid-July. And therefore, about 45 days of revenue for that particular asset. But again, it's a variety of things put together. So any number that I give you will be a guess for right now. probably you'll see in run rate quarter next year -- next quarter.

Okay. Sir, I mean, I have one more question. I mean we have seen historically, NDCFs has always been high in H2. So I mean, the trend is like that because I think Q1 and Q2 revolves more around monsoon and less collections. So I mean, do we expect that trend to continue? And can we throw some business dynamics here? I mean is it -- I mean, how does this work?