IRB Infrastructure Developers Limited (IRB) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to IRB Infrastructure Developers conference call, hosted by the company for discussing the unaudited financial results for Q4 FY '20. We have with us on the call today, Mr. Virendra Mhaiskar, Mr. Sudhir Hoshing, Mr. Anil Yadav, Mr. Mehul Patel and Ms. Poonam Nishal. [Operator Instructions] Please note that this conference is being recorded. I will now request Mr. Mhaiskar to give an overview of the significant development during the quarter. Thank you. And over to you, sir.

Very good morning to all of you. I would like to welcome all the investors and analysts on this conference call. Hope you have been able to go through our detailed numbers as well as the presentation that has been released. As you would all know by now, we have achieved the financial closure for India's largest Toll Operate Transfer project, Mumbai-Pune Expressway project and have also made the upfront concession fee payment of INR 6,500 crores to MSRDC last evening. It is a landmark achievement and accentuates our leadership position in Indian roads and highways segment, especially as more than half the stipulated time for closure was tied away in lockdown. We achieved this feat in one of the most troubled time, thanks to a strong balance sheet and a meritorious project with the support of our lenders, State Bank of India and Union Bank of India, who have extended a term loan facility of INR 6,610 crores for the project. IRB has infused the entire project equity of INR 1,438 crores upfront. With this, IRB group's asset base has grown beyond INR 45,000 crores of enterprise value, which is the largest road portfolio by a huge margin in India across the listed company to InvIT and the wholly owned assets in the listed company. Further, you would notice some changes in our consolidation method. I will quickly take you all through that before getting into the results. IRB has adopted a more structured business model post the GIC transaction. It comprises 2 business segments, EPC and owned assets, which include 3 BOT projects, one hybrid annuity project and one Toll-Operate-Transfer project, and investments in 2 InvITs as the sponsor. So there is one public InvIT, where we have a 16-odd percent stake; and the private InvIT, where we have 51% stake, and we continue to manage operation and maintenance for all assets housed under both these InvITs through our EPC arm, which also undertakes construction and execution of projects under the umbrella of IRB group. Now in this structure, InvITs are self-sustaining portfolios in the sense that at the portfolio level, there is no additional support required for operating these assets. Corresponding to its 51% stake in private InvIT, IRB will invest equity for under-construction projects and would earn interest, capital return from the cash flows generated. Hence, we are adopting a partial consolidation from the date of GIC transaction, , which means we continue to consolidate the wholly owned BOT, TOT and HAM assets and also the EPC business, while InvITs are reflected as investment on our balance sheet. Interest earning from public InvIT appear as other income on our P&L, and profit and loss from the private InvIT is treated as a share of profits from associates. This approach has been implemented effective March 1, 2020, and the numbers given in the presentation are similarly aligned. Two significant developments couldn't have happened at a more opportune time for us. Just before the pandemic struck, we had successfully completed the transaction with GIC affiliates, thereby reducing debt by INR 3,000 crores and also taken over operations of the Mumbai-Pune Expressway on 1st of March. Other than these developments, coming to Q4 review, we started the quarter with strong momentum, which continued till first week of March, both on construction as well as toll collection side, post which the operations were impacted due to COVID-19. Reported construction numbers, in effect, are for, you can say, around 75 days of operations in Q4 '20, led by Udaipur-Shamlaji BOT, CG BOT and Hapur-Moradabad BOT primarily. In February, our toll collections, too, had hit a comfortable double-digit year-on-year growth with a meaningful uptick seen in Ahmedabad-Baroda, Agra-Etawah, Kaithal-Rajasthan, Solapur-Yedishi projects, as is highlighted in our presentation as well. Notably, as we have been mentioning, with completion of major structures in Agra-Etawah, strong momentum in traffic was also seen coming back in that project, and the same is now awaited for Rajasthan projects in coming quarters as well. The buoyancy witnessed in the month of February is indicative of the demand scenario in India, which is again reflected in the rebound witnessed in traffic as the country is opening up in phases. We are back to over 70% pre-COVID level traffic for our portfolio by now, even when many cities and state sections are not allowing traffic movement freely. Prima facie, even though the toll collections resumed effective 20th April as instructed by NHAI, the lockdown relaxation started only effective June 2, 2020. It is within a span of 2 to 3 weeks that the traffic has shot back to be over 70% level, and we continue to witness further improvements on an ongoing basis. This is a combination of both pent-up demand from lockdown as well as economic activities now getting back to normal gradually. We expect to achieve traffic as -- to the pre-COVID level within the next few months. In this unprecedented and troubled time, a healthy balance sheet and liquidity on hand provided us a strong footing to not only withstand these challenging times but also continue to chase growth opportunities as they come by. Financial closure for the Mumbai-Pune TOT is a strong example of bank's continued interest to provide project funding to meritorious and strong projects. To combat liquidity challenges and to compensate for slowed activity as well as 26 days of lockdown, the government has extended support in the form of moratorium for existing loans, increase in working capital limits, NHAI loans and an extended -- extension of the concession period of projects, which has helped us in conserving the cash. On the whole, these initiatives are expected to make the COVID impact NPV-neutral on the portfolio of assets. As regards growth opportunities, government-awarding activity is expected to resume in a meaningful way in coming quarters. Recently, NHAI, too, has been vocal about bringing BOT model back with a more powerful and bankable MCA. However, exact mix of awards on BOT, hybrid annuity and EPC will depend on revised expenditure corpus with NHAI. I'm sure you will have a lot of questions on current situations as well as our numbers. So without any further ado, I will request Anil to take you through the financial analysis before the Q&A session. Over to you, Anil.

Thank you, sir. I will present the financial analysis of FY '20 versus FY '19, full year '20 versus full year '19. As explained by sir, basically, because of the COVID, we had an impact on the revenue. And further 9 assets were transferred in the month of March to the private InvIT, so their revenue is not reflected. So in terms of revenue, we have increased from INR 6,903 crores to INR 7,047 crores, increased by 2%. The breakup of the revenue, construction revenue was INR 4,710 crores, which has increased by 11% to INR 5,211 crores. And there was dip in the total revenue because Mumbai-Pune earlier got transferred from August, and this year, the full impact was not there on account of Mumbai-Pune. Revenue has dipped from INR 2,193 crores to INR 1,837 crores, decreased by 16%. The EBITDA has also reduced by -- increased by 1% from INR 3,133 crores to INR 3,166 crores. Interest cost is also up because the project which got operationalized during the year, the interest charged to the P&L earlier was capitalized. Interest cost has increased from INR 1,120 crores to INR 1,564 crores. Depreciation slightly reduced on account of Mumbai-Pune amortization was not there for full year. So that has reduced from INR 540 crores to INR 468 crores. PAT for the company has reduced by 13% from INR 850 crores to INR 737 crores. In terms of debt, gross debt for the company as on March 31 post transfer of the 9 assets is INR 7,604 crores. Cash, cash equivalent is approximately INR 2,500 crores. Net debt is INR 5,083 crores. And net worth of the company is INR 6,683 crores. Net debt to equity is 0.6:1. And now I will request the moderator to open the session for question and answers. Thank you.

[Operator Instructions] The first question is from the line of Mohit Kumar from IDFC Securities.

Congratulations on closing the deal with SBI and Bank of India (sic) [ Union Bank of India ], sir. So I have 3 questions, sir. First, primarily, sir, given the fact that there's a COVID, is there any protection which we have in the Mumbai-Pune Expressway deal given the fact the contract cannot be extended in this case?

So what is the question here?

The question, sir, what is the protection we have in the sense what kind of protection we have available under the contract for us.

So first, let me clarify this that if you're hinting at the COVID impact and any losses that might come up as a result of this, the compensation for the lockdown period has already been adjusted with MSRDC. The interest component that was payable for the 100-odd days because we took over the project on 1st of March, and we paid them the upfront on 18th of June. So for that period, whatever was the interest due to them of almost 184 days has been now reduced by INR 70-odd crores, considering the fact that this compensation for the lockdown was worked out basis the formulation provided in the contract. So as far as the period gone by, there has been no loss because of Bombay-Pune project reporting lower revenues, point number one. Point number two, for the further period beyond the hard lockdown, that is from 20th of April till now, till the time the collections go back to the pre-COVID level, 90% of that as per NHAI formulation. The same compensation mechanism will apply for the further period from MSRDC, which would amount to extension of the concession period. To that effect also, the letter has been already released by MSRDC, post which the lenders, after satisfying themselves with the same, have finally disbursed the money. So as far as COVID effect is concerned, the project is fully hedged.

Okay. Understood, sir. And sir, secondly, given our EPC order book has declined, how do you see the FY '21 revenue? And has the construction started on all our BOT projects?

As far as order book is concerned, you might have noticed actually the order book going up this time because till now, the operation and maintenance order, which needs to get netted out in the consolidation, is now no longer going to get netted out. So if you look at the total order book, it has now gone to almost INR 12,000 crores, which would have a significant amount of O&M order book, which now gets reflected because this was something which was not getting reported because it used to get netted out. So overall, the order book has increased quite well. If you see order book increase, it is likely to happen over the next 1 or 2 quarters as the bidding commences back.

Okay. And sir, is there any progress on the BOT tendering? Have you heard anything from the government or the NHAI?

I think the Finance Minister herself in the package had made it very clear that there will be a minimum 3 months' extension and a maximum of 6 months. The actual will be calculated basis the project, the geography where it is and the kind of impact that the project will witness. But the formulation was very clear that till the time you reach the 90% levels of the pre-COVID collection numbers, they will take that as a base and give the extension basis that.

My question was whether -- is any BOT toll projects tendering happening? Have you heard anything from NHAI?

Yes, yes, the BOT award is already happening. There are already 2 projects which are now on the NHAI portal for -- up for bidding, and the bidding is due early next month.

Next question is from the line of Ashish Shah from Centrum Broking.

Congrats to the team on the financial closure. Sir, I had one question on the accounting part that we discussed. So the interest income or any return that will come from the private InvIT, how does that get accounted? And what would be those amounts that we expect maybe this year or next year?

Interest will be accounted similar to what treatment we are giving for the public InvIT. But as we discussed last time also, till the projects are under construction, whatever the surplus will be generated from the private trust will be utilized as an internal approval for the trust. So there will not be any payout to the unitholders till that time.

Got it, sir. Got it. And the entire -- the outcome of the private InvIT -- 51% of that will get consolidated along with the -- at the PAT level, right? That's how we'll account?

Yes.

Sure. On the EPC business, I mean, I know stand-alone is not entirely the EPC business, but when I see the stand-alone debt for the FY '20, there's INR 7,500 crore of debt number that we see from the balance sheet. So just wanted to know how does it strike off in terms of the debt and breakup between what would have been an internal debt from the SPV or -- and what is the external debt here?

There basically -- on a stand-alone basis, if you look at the debt portfolio, basically, it remained more or less the same what it was last year. If you exclude the OD, the debt level will be in the range of around INR 2,000 crores.

Okay. INR 2,000 crore is the external debt and -- plus OD will be, I mean, maybe around INR 1,000-odd crores, right?

Yes.

Okay. So just to understand, I mean, why does the number appear so high when I look at the stand-alone balance sheet of INR 7,500-odd crores?

See, as you know that Mumbai-Pune and even modern road makers, whatever the surplus is there, they have extended as a loan to the parent company. And this was -- to certain extent, it was there in the last year also. There would have been some increase in this year.

Got it, sir. Last question. This O&M that we've said that we'll now start accounting, I mean, we'll not net out the O&M because we are not consolidating these entities line by line. So what is the O&M revenue that one can look at? I mean based on the order book for the next couple of years, what would be the approximate O&M revenue?

I think O&M revenue, both from public InvIT and private InvIT put together, will be somewhere in the range of INR 400 crores to INR 500 crores per annum basis.

[Operator Instructions] Next question is from the line of Vibhor Singhal from PhillipCapital.

Sir, just a few bookkeeping questions from my side. So sir, in the balance sheet, if you look at the consolidated balance sheet, we see an entry for financial liabilities that have increased significantly. I understand the investments would have increased because these projects had got transferred from [indiscernible] investments from GIC. But what is this change in financial liabilities in view of?

Change of the financial liability with respect to -- if you look at the financial liability also, earlier, there were loans basically extended to these SPVs. And earlier those got -- being a subsidiary, those used to eliminate it while doing consolidation. Now we are doing associate accounting, so that's why they are appearing in the financial statements.

So these liabilities stand on the stand-alone company?

These are the assets for the stand-alone company. I'm talking about stand-alone IRB.

So I'm talking about the consol level. The consol level of our total financial liabilities has gone up, so excluding debt. Removing debt, the other financial liabilities have gone up by around INR 6,680 crores.

I will say -- I will revert back to you.

We'll take that offline, sir. Not a problem. Sir, you mentioned the gross debt at the consol level at around INR 8,500 crores?

No. Vibhor, INR 7,600 crores.

INR 7,600 crores. So out of that, you mentioned INR 2,000 crores would be at stand-alone level.

Yes.

And sir, would you be able to break the remaining? Because now we are not consolidating any of the SPVs. So now we just have Vadodara-Ahmedabad and 2 more SPVs, right?

Yes.

So would you be able to give us a breakup as to how much debt is there in those SPVs?

Yes, Vibhor. Vibhor, we have basically OD/FD facility of around INR 900 crores in parent company and roughly INR 2,000 crores of debt. And plus we have INR 700 crores OD/FD facility in one of the other SPV, that is MIPL. And plus Ahmedabad-Vadodara is INR 3,000 crores of debt. VK1 is INR 300 crores of debt.

Sorry, sir, which one?

VK1, VK1, the HAM project

HAM. Right. How much, sir, sorry, is that?

INR 300 crores.

INR 300 crores. Okay.

And balance is in Modern Road Makers.

Sure, sir. Okay. And sir, how much is the debt that we tied up for the Mumbai-Pune Expressway?

Debt tied up for Mumbai-Pune is INR 6,610 crores. Out of that, we will be roughly drawing INR 5,500 crores for payment of the first tranche.

And the remaining part is, as sir said in the beginning, INR 1,430 crores of the entire equity has already been invested.

Yes.

Sure, sir. So now basically, what is our commitment for the GIC projects, the projects which are getting into the GIC InvIT or the IRB Infra, the private InvIT that we have? How much of equity do we need to put into those projects hereafter?

Approximately INR 500-odd crores is remaining for the 9 assets, which has transferred to the private InvIT.

Okay. And on the -- our own portfolio, just the HAM remains, in which we have to put in the equity, right?

But Vibhor, HAM projects, basically, almost 50% equity is already infused. Equity requirement will be in the range of INR 100 crores, INR 125 crores for the HAM.

Right. Fair, sir. Now just my last question, sir. Given that now we have a very strong balance sheet, we have almost divested all our portfolios into the 2 InvITs. We now have the Mumbai-Pune Expressway, where also our equity requirement is kind of taken care of. So hereafter, are we looking at, let's say, increasing our portfolio, either in these, let's say, the parent companies or any of the InvITs by acquiring more BOT projects from the market? I understand that NHAI is probably taking its own time to remodel the MCA, and it might take some time. In the duration of time, given the strong balance sheet that we have, are we looking for any -- acquiring any BOT projects that are available in the market?

I think as far as IRB is concerned, so long as we have the option of bidding out and winning, we would prefer that. If that market dries up, then yes, we can look at this option. As regards the InvITs are concerned, the individual InvIT board will decide on this.

Vibhor, on your previous question, increase in the liability, because Mumbai-Pune, the liability was not paid, that has got increased by roughly INR 6,500 crores.

Sir, Mumbai-Pune, the earlier one, which got expired in...

No, no, new contract. Basically, since we have already signed a contract, we have to account that as a liability. Now payment is done. That will get reduced from the liability.

And because now we've taken INR 6,600 crores debt on that project, so in the next quarter, we will see that debt in the overall debt number itself?

Yes. So INR 5,500 crores debt will be reflected, and liability will reduce by INR 6,500 crores.

Next question is from the line of Vimal Shah (sic) [ Viral Shah ] from Prabhudas Lilladher.

It's Viral Shah. Congratulations on a great set of numbers, sir. Just 1 -- 2, 3 questions. One is a bookkeeping one. In terms of construction revenue, can we have the breakup for the quarter in terms of execution from 3 projects?

Yes, yes. Basically, in terms of the execution, I will just give you the number project-wise. Karwar-Kundapur was roughly INR 50 crores; Agra-Etawah, INR 60 crores; US BOT, INR 75 crores; CG tollway, INR 200 crores; KG was INR 75 crores; VK1 was INR 250 crores; Hapur-Moradabad was INR 300 crores; InvIT, O&M and public -- private and public was close to INR 100 crores of revenue; and balance-odd was change of scope, utility shifting and other ones.

Fair enough, sir. Secondly, in terms of interest rate, sir, what is the interest rate at which we have tied the debt?

We have tied at 8.4%.

And this is with the moratorium of?

No, there is no moratorium for the Bombay-Pune loan because the revenue is already on. So there is no need for having any moratorium, but the total tenure of the loan is around 9 years.

9 years. Okay. Fair enough, sir. And lastly, in terms of our total number, have we restated any numbers, particularly Thane-Ghodbunder because when we look at the total of 4 years, it comes to INR 712 crores versus what we have reported as INR 523 crores. So is there a disconnect there?

See, there is some compensation given by the Maharashtra government because the cars and SG buses were exempted -- state government transportation buses were exempted. So there, basically, we don't collect. We get a compensation from the government. And since we report the toll revenue separately, we report what we have collected. We don't include the numbers, basically, which the government is giving.

[Operator Instructions] Next question is from the line of Prem Khurana from Anand Rathi Shares and Stock Brokers.

Sir, to begin with, I think in your Notes to Accounts, I mean, there is this note wherein it says, we have sold 49% stake in MMK as well to an affiliate of GIC. If you could explain that transaction, please? I mean is it -- was it kind of a part of the deal, a larger deal that we've done in terms of private InvIT or it is something else? Because I understand MMK was for Mohol which is OE and the concession is OE cease to exist now for that asset?

Yes. So Mohol-Mandrup-Kamtee, as you -- MMK toll road, whatever you call it. So this was an SPV, which was in the balance sheet, which -- where the business had ceased to exist because the concession was over. And as you know, for any InvIT transaction, you need an investment manager company. So this particular SPV was converted into an investment manager company. And GIC being -- has also invested into this investment manager. So they hold a 49% -- the GIC affiliates hold a 49% stake in the investment manager company as well, and hence, the mention in the Notes to Accounts.

Are there any assets in there because they have given you some premium there?

So whatever was the net worth in the company, which was there, whatever was the cash in the company, to that extent, they have paid the premium to get -- acquire the 49% stake.

Sure. Okay. Okay. And sir, any update on Ahmedabad-Vadodara arbitration? Because, I mean, we have -- I understand we have extension, we are not required to make the payment to the authority till the time this is settled. But would that continue till the time we...

So as per our last update, the hold on payment of compensation in case there is a shortfall continues till the same is decided in the arbitration under Section 17. And this was accorded by the high court. And that status continues.

Okay. Sir, any thoughts around going for conciliation because NHAI seems to have kind of settled all these issues and they are kind of asking developers to kind of go for conciliation rather than going into the court of law or do arbitration because arbitration would be -- I mean in terms of tenure would be longer gestation when compared to conciliation. So would you be willing -- I mean if they were to invite you, would you be willing to kind of go for conciliation rather than kind of go for arbitration?

Frankly, my opinion is a little different. My opinion is that the conciliation process is being worked out by NHAI. We also tried for the same. But for complex legal issues, I don't think they have been able to settle those in the conciliation. Very, very simplistic matters are easier to solve in the conciliation method. But where there is a legal interpretation issue, I think they are best solved by the arbitration and the courts.

And just one more, if you could share your thoughts on hybrid annuity, I mean, till the time you get to have BOTs come back. And what is the kind of appetite? I mean if there's some more time before the BOTs are made available to you, would you be willing to kind of go and bid for hybrids? And what -- how much is the appetite, I mean, if it is hybrid that you were to look at? We have always seen you kind of take up 3 earlier, but unfortunately, 2 got canceled, and we have only 1 left with us now. What is the thought process going forward?

Anyways, HAM was never our preferred option. So no love lost for the 2 getting canceled. But as far as our appetite is concerned, with the balance sheet becoming lighter now, we definitely have appetite to go out and bid for more BOT projects. We do have an understanding with GIC affiliates that in case of future projects, if they have appetite, they would be more than keen to come and join us in those BOT projects in the same manner what we have done for the existing set of BOT projects. And we do feel that there are green shoots coming up from NHAI on bidding out on BOT rather than EPC and HAM. So let's wait and see how much they are able to come up with.

Okay. And sir, 2 bookkeeping questions. If you could give me the breakup for O&M in terms of how much is from private InvIT and how much is public and how much would be Mumbai-Pune. Because when we met the last time, you said, I mean, Mumbai-Pune alone would contribute almost around INR 2,300-odd crores at least. So fair to assume the balance increase that we've seen during the quarter is because of the public? Or if you could give me the breakup between these 3 heads, please.

Yes. With respect to the Mumbai-Pune, it was only for a month. There was no significant O&M on the Mumbai-Pune. We had almost INR 40 crores from the -- INR 40 crores, INR 50 crores from the public InvIT and similar revenue was from the private InvIT.

No, no, not revenue. I was talking about the order backlog split, please. INR 7,000-odd crores of O&M that you show, how much of this is from private and how much is from public and how much is Mumbai-Pune?

Basically, we will get back to you.

Next question is from the line of Parikshit Kandpal from HDFC Securities.

Congratulations on the financial closure of such a large project. So my question is more on, you said that you've already achieved 70% plus of toll collection efficiency in the existing portfolio. So by when do you expect this to normalize to the pre-COVID levels?

I think it will largely depend on the fact how the states decide to unlock the economy. And it would basically depend basis that.

Okay. But is it -- 70% is good enough for you to service all your liabilities? Have you opted for moratorium in these assets? And so how do you match the servicing of the liabilities at these 70% of cash flows?

Certainly, we have availed the moratorium till August.

Okay. So you're comfortable there basically even up to the moratorium period, the cash flow is sufficient to service the interest and the repayments?

That is right.

Okay. So just on the long-term growth plan for the toll, so traffic and -- inflation, I would assume, has been a little bit lower. But on the traffic side, when do you see the recovery start panning out? And do we still maintain long-term growth of 5% to 6% in the traffic?

Yes, we do.

Okay. And Anil, sir, on the cash on -- so how much is the cash on the stand-alone? And also, if you can give a breakup of the other income in EPC and BOT?

Our cash is total INR 2,500 crores. And in terms of the breakup of the construction other income and toll other income, INR 82 crores was full year other income in construction, INR 113 crores was toll other income for full year. For this quarter, it was INR 22 crores for the construction and INR 29 crores for the toll other income. And similar was corresponding quarter of the last year.

And sir, cash in stand-alone is INR 2,500 crores, right?

INR 2,500 crores.

Okay against a debt of INR 3,000 crores in the stand-alone.

Yes.

Next question is from the line of Teena Virmani from Kotak Securities.

Sir, my question is regarding Mumbai-Pune tollgate hike, which was supposed to be from the month of April. So what's the scenario on that front? Has it happened? Or was it postponed? Or how is it going to be seen?

No, no, the toll hike has been effected from April 1 itself. So when we started the tolling on 20th of April, the same was started with the revised rate.

Okay. Okay. So from 22nd, 23rd of April onwards, whenever the toll collection come in, it is with the revised rate?

That's correct.

So wasn't there any scope of renegotiation with MSRDC, given the fact that the traffic projections would get impacted in FY '21 and in -- I mean, there would be a recovery in FY '22, and there would also be an extension in the concession period. But regarding compensation of the loss in toll revenues in the form of cash compensation, was any such thing not negotiated with MSRDC on that front?

So as I was trying to explain, there was an interest component, which was payable for the period between March 1 till June 18 on -- because if you look at it, it was a little differently structured project that's only because their earlier toll operations contract was getting over, the toll rights were transferred to us from 1st of March, whereas the TOT -- the upfront payment was effected only yesterday. But having taken over the rights from 1st of March, we were supposed to pay an interest on the INR 6,500 crores component till -- from March 1 to June 18. This component was around INR 184-odd crores. Now MSRDC had a formulation in the contract, where this kind of a lockdown, even in the last time when de-mon had happened, they had done a similar compensation, that whatever was our pre-lockdown revenue, that is for March 1 to March 20, average of that, that much revenue for the lockdown period multiplied by the number of lockdown days, that is, from March 25 to April 19, was computed, and around INR 70-odd crores of cash compensation from that interest payable was deducted, and the rest was only paid to them. So that compensation has already been taken effect. And for the further period, when we are presently continuing to collect a little lower revenue than what we were anticipating, for that period, the same formulation as we have in the NHAI contract is also available in this contract, which is extension to the concession period till 90% of the pre-lockdown revenue is reached. So they're matching the same NHAI provision in this TOT project also. And accordingly, once we reach the pre -- around 90% level, the exact number of days extension will be calculated. But my guess is that it would be at least 2 months of extension that will come through.

Okay. Okay. And on the other projects, the toll collection on the other projects was impacted in the past few quarters on account of parallel construction activity on the Rajasthan projects. And also, how is the status of that construction activity on those projects? And when can we see the revival in toll revenues from these 3 Rajasthan projects?

So in a nutshell, I would say that all the project construction completions will at least stand deferred by 3 months. And the toll revenue also, as I said, has already gone back to around 70-odd percent level. So as the lockdown relaxations kick in, we expect the same to go back to the normal level.

But my question is not pertaining more to the lockdown. So lockdown, obviously, would have impacted the toll collection. But these couple of projects were anyways impacted by a parallel construction activity. So the toll collection was getting impacted for Udaipur-Gujarat, Kishangarh-Gulabpura and even for CG tollgate. So when can we see the revival in the toll collection leaving aside the COVID impact?

Yes. So the 4- to 6-lane projects, which are primarily having tolling and construction going simultaneously, do see some kind of aberration of traffic because of construction activities. So the classic case in point will be Kaithal-Rajasthan project where we saw significant ramp-up coming back after the construction was done. Even in Agra-Etawah, you would see that there has been a good ramp-up of traffic as the -- most of the structures on the asset are now complete. So as the asset completion nears, we expect the revenues to significantly get ramped up here as well.

Okay. Okay. So on the commissioning side of these projects, Gulabpura and Kishangarh would most likely be getting over by August?

As I said, 3-month delay is anticipated because of COVID impact, but I can assure you that all these 3 projects will get completed in this financial year.

In this financial year. So going ahead, for the P&L side, now that you have done partial deconsolidation, so the revenue will be coming in mainly from the EPC side, which is comprising of these projects and any new projects plus your O&M income plus the toll income, which you are getting from Mumbai, Pune, Agra and the smaller projects which are there in the portfolio. Is my understanding correct on this?

Yes, the principal will be, the EPC business will be recognized revenue; O&M, which the EPC company will conduct for the private InvIT and public InvIT, will also be recognized revenue. Then the wholly owned subsidiaries revenue like Mumbai-Pune and Ahmedabad-Baroda will be a recognized revenue on the tolling side.

On the tolling side. And correspondingly, their debt and other things would go off from the balance sheet, the debt of the 9 SPVs?

No, the debt on the wholly owned assets will continue to get consolidated in IRB, whereas the public InvIT and private InvIT debt, which was earlier getting consolidated with IRB, will no longer be consolidated with IRB.

Yes. So for the 9 SPVs, the debt would not be consolidated -- the debt would not be coming at the balance sheet level?

That's correct.

Next question is from the line of Ashish Shah from Centrum Broking Limited.

Just a few follow-ups. We raised some INR 1,250 crores of NCDs. So now this is meant for refinancing or replacing the existing stand-alone debt or this goes towards the equity in Mumbai-Pune and hence will remain here? Because we also have a reasonable amount of cash in the stand-alone and hence this question.

Yes. So you're right. So we had almost INR 1,500 crores of cash, which has been now primarily deployed in Mumbai-Pune. But alongside that, in FY '21, we have almost INR 700 crores of principal repayment on the corporate debt that we had. So primarily, that was required to be refinanced, which has now been more or less done. And other than that, because of the COVID cash flow mismatches, we wanted to shore up cash at the corporate balance sheet. So basically, that was the purpose for raising the debt.

Got it. Also on the Ahmedabad-Vadodara, the arbitration issue, sir, just want to clarify, till there is an outcome of the arbitration, are we not paying any premium at all? Or it is subject to the availability of cash and there may be some payment? I just wanted to be clear on that.

It will be subject to availability of cash. So the formulation is very simple. The total toll collection less O&M as per supplementary agreement, less debt servicing, and after that, whatever remains will go towards premium payment.

Right. So Q4, we might have not paid anything, but it's -- with the toll collection now improving, there's a visible improvement in the numbers. So there is a likelihood that in the coming quarters, there will be some payment based on the cash availability?

That is right. That is right.

Next question is from the line of Nilesh Bhaiya from Motilal Oswal Financial.

I have a few questions on a couple of -- on both your InvIT and -- as well as on the consol level. So firstly, on this GIC InvIT, I think, Anil sir mentioned that the equity commitment is around INR 500 crores from our balance sheet. So will that be right that the actual equity commitment on that InvIT is INR 1,000 crores and both GIC and IRB have to put in INR 500 crores? That will be the right assessment?

No. The INR 500-odd crores number is for IRB over the next 2 years, and GIC will bring in another INR 500 crores.

Yes. So INR 500 crores each. So INR 1,000 crores equity is required in that InvIT, it would [ clear INR 500 crores ].

That is correct.

And this will entirely be Hapur-Moradabad? Because...

No, there will be some debt -- some equity balance to be infused in Kishangarh-Gulabpura, Gulabpura-Chittorgarh as well.

Okay. Because I thought that Hapur-Moradabad itself had an equity commitment of, say, INR 1,400 crores, INR 1,500 crores.

So that -- significant amount has already been brought in...

Already been infused. Okay. Fair enough. And sir, the other question that I had, and probably it might be a bit of theoretical question and just a clarification how the InvIT works. So I assume that when GIC and IRB have invested and, obviously, you have changed the capital structure of each of the projects, the way the InvIT happens, right? You replace your debt by equity. So probably there should not be any cash losses in the -- in all the projects or at a portfolio level, at least, there should not be any cash losses which should happen at the InvIT level. That is my assumption. But theoretically, if there is a cash loss and then if you have only 2 players like IRB and GIC, and it's a private InvIT, then how does the InvIT structure work? Will both the players then need to put in -- bring in more money to finance this cash loss? Sir, how -- basically I'm not clear what happens if at an InvIT level there is a cash loss, sir. That I'm not clear, how the working happens.

As you said, the technical answer to your technical question is, yes, both the people will have to bring in. But we have to appreciate the fact that the private InvIT debt has been reduced by INR 3,000 crores because we deleveraged the debt on these projects when we consummated the transaction. And there is going to be enough amount of surplus cash because the mix of project there is all revenue-generating project. So I, frankly, don't envisage that scenario. But if it so arises, then yes, it will be...

Yes. Yes, I think, it should not happen because we have changed the -- the capital structure changes under an InvIT. So theoretically -- ideally, it should not be -- it should not happen. The other part I wanted to understand, now you have 2 InvITs, one is private, one is public, and we are a developer, and we keep on adding BOT. So 2 things. One, if you can, again, tell us about the pecking order, how the ROFR works for a couple of your InvITs, if there is a pecking order. And secondly, in the GIC InvIT, today, you have 2 players, IRB and GIC. So isn't that this InvIT is supposed to be partnership between just GIC and IRB? Or are you open to add new investors also on that private InvIT platform?

No. On the private InvIT, it will remain to be an IRB-GIC platform. And we do have an understanding, which is a stated policy, which we have put out when that deal was consummated that in future BOT projects, if they had interest, they can certainly join and the same arrangement will continue.

But between the IRB InvIT, which is the listed -- the public listed and the privately listed, is there a pecking order that first the assets would be shown to, say, public InvIT and...

Okay. I'll answer that. The pecking order is that as per the ROFR agreement with the public InvIT, if IRB decides to divest the asset, then it will be first offered to a public InvIT. Now in this case, we are not divesting the asset and, hence, 49% is offered to GIC and then a private InvIT has been set up. So tomorrow, in that parlance, if IRB decides to divest the asset, then we'll have to offer it to the public InvIT first, and then if it says no, then we can decide to deal with it differently.

Yes. So that's really helpful. And in this IRB, is it -- so how are we carrying the -- our investment on the books? Have we taken MTM losses or we are carrying at book value? Because...

No, no, mark-to-market, I think.

Mark-to-market. Okay. Okay. Fair enough. I think that's really helpful because I wanted to understand the 2 InvIT structure, et cetera. Now coming to the IRB consol numbers, and this is a question to Anil sir, sir, you mentioned that financial liabilities have increased because of the liability towards Mumbai-Pune. So contra entry should be the current assets, right, in the consol?

That's correct.

That's correct.

Okay. And can you tell me the debt number again? Because I didn't -- because when I see the consol BSE announcement, it shows that under long-term borrowings and short-term borrowings, it added to INR 8,500 crores. And there should be some more debt, which is the part of the financial liabilities. So I just want to understand what the gross debt on the consol books? That's my question.

Gross debt would be in the range of around INR 7,000 crores, of which the parent company has around INR 2,700 crores, the EPC arm has around INR 700 crores, and the SPVs put together would be around INR 3,400 crores.

But sir, when I see the breakup of the balance sheet, the long-term borrowing and the short-term borrowing adds up to INR 8,500 crores. So that's why I'm not able to understand...

Anil has stepped out because he has an interview right now. So I will ask him to come back and give you those details.

Yes, yes. So that's fine. I think -- so now as a company, we are, again, looking back on -- back towards growth by addition of new -- by bidding new projects. So that should be the way we should approach this company, right, sir? I mean it's more about now new asset accretion. That would be the mantra going forward, right?

Pardon? I didn't...

My question was -- let me rephrase. So basically now, it's again -- because we have now divested all the assets, et cetera, so from a next 2- to 3-year perspective, it would be more of asset creation for us? That basically -- it can be through an EPC mode by bidding and developing on our own or maybe inorganic growth. But from next 2 to 3 years, we should be back into asset-creation mode as a company.

That is right. So if you mean taking up more BOT projects, when you say asset creation, yes, that's the right understanding.

Yes. So in that sense, we are back into asset creation. Okay, sir. All the best, sir. I'll take -- I'll approach Anil sir offline for clarification.

Sure, sure.

Next question is from the line of Parikshit Kandpal from HDFC Securities.

So will there be any funding support or shortfall support required for Ahmedabad-Vadodara project this year?

As I said, I briefly explained the waterfall mechanism. So I'll repeat again for your understanding.

I understood that, sir, but I'm just asking if there will be any quantum of support required or not. I just want that amount?

No. I think when you mean support, if -- whether the toll revenues are enough to take care of the debt servicing, definitely, they are.

Okay. Okay. So up to debt servicing, it's fine, but maybe premium is -- which should basically get deferred.

So if you look at the numbers, we collected close to INR 450-odd crores of toll revenue for FY '20. On a debt of INR 3,100 crores, the interest outgo was in the range of around INR 300-odd crores. So INR 150 crores of surplus cash was there. And then after meeting O&M, whatever was the balance was premium that was offered.

And debt repayment?

Yes. That's what I'm saying. Debt repayment also was around INR 50-odd crores. I think the original debt level was INR 3,300 crore. Now that has come back to INR 3,100 crores.

So you don't envisage as of now any support...

The debt obligation on the project is comfortably being met out from the revenues.

Okay. Sir, just on the 2 InvITs, now there's been change in the policy that dividend will get taxed in the hands of the investor. So are we -- so what's the thought process there? Are we migrating? Are you still continuing with that higher API? Or like how do you position it now?

Not clear about the question. What do you mean by that?

So this -- the Finance Minister and the budget announcement has said that the dividend from the InvITs will get taxed in the hands of investor if the investor continue -- if the InvIT continues with the...

Got it. Got it. Okay. So to answer your question, there's 3 elements by which InvITs can distribute the cash: one is the return of capital, one is interest on the sub-debt that InvIT has infused into the SPV and then dividend. So for the foreseeable future, we would have the flexibility to keep paying out by way of interest on the money invested by the InvIT -- by the trust into the SPV. So for a considerable future, I don't foresee that tax likely to hit where we start distributing by way of dividend.

Okay. But you can circumvent that also if you continue to -- with the current higher tax regime, right?

It depends. I mean there would be a mixed bag of investors who would be happy to have that as an interest income and people who would want to have it as dividend. So if you give by interest -- by way of interest, then it makes sense for many of them.

So for us, we will continue the dividend -- I mean even in the future date, the dividend will get taxed in the hands of investors for the InvITs. So as of now we have gone with the adoption. Does it imply that?

Even if you look from a -- you have to return the loan first before you think about giving the dividend because the SPVs, so long as they are paying interest and so long as after paying interest the SPV doesn't become PAT positive, the question of dividend would still not arise.

Because I was coming more from the HNI perspective. I know private InvIT doesn't make much of sense because -- here I'm talking more on the public side, so the HNIs are there, so they may get impacted because of higher taxation. So even in private -- public InvIT, are you thinking of continuing with the higher tax rate? So just wanted your thought process on that?

That question will be better answered by the public InvIT management.

Okay. Fine. Just on the labor availability. So -- at the site. So how is it -- what is the efficiency you are working at the projects. If you can just touch upon that.

As I said, the execution will stand delayed by 2 to 3 months, but it will largely be a neutral exercise because of the extension to the concession period. On the execution side, we do have 60%, 70% labor available, basis which the construction has commenced. And on the toll revenue also, we explained we have reached -- clawed back to almost 70% levels of the pre-COVID tolling that we were achieving.

Next question is from the line of Prem Khurana from Anand Rathi.

Just if you could share your thoughts around, you were looking for a partner for your Mumbai-Pune. Any update that you would like to share with us there?

On Mumbai-Pune?

Mumbai-Pune, presently, we have decided to keep 100% equity with IRB. Going forward, yes, once the payment to MSRDC is done and the project is matured enough, we can look at offloading 49% equity in the project.

So at least what's the time it will remain with you?

Timing, in the sense, we would first like to make the payments -- the balance payments to MSRDC. Once that visibility is achieved, then that would be an appropriate time to my mind to think about offloading 49% if at all required.

Sir, if I understand the agreement correctly, I mean, you have an option to sell 49% stake even if you have not made the payment and full exit is possible only after the -- all the payments are made, right?

Yes.

You have an option. I mean it is -- it's not like whether you would exercise that or not.

The contract very much allows us to sell 49% once the payments are made. There is no restriction. So that will have to be notified to the corporation, but it's certainly allowed once the payments are made.

And one more bookkeeping question. Would you be able to share how much of debt was transferred because of these 9 assets that you transferred to InvIT private?

Anil has stepped out for the interview, as I said. Once he's back, I will ask him to share the same with you..

Next question is from the line of Mohit Kumar from IDFC Securities.

Sir, two questions. Sir, are you -- did you avail any COVID shortfall loan, which has been provided by NHAI? Secondly, sir, what is the repayment for our Mumbai-Pune Expressway loan for the next 2 years? Is there any liability for the next 2 years? [ Repayment ] -- principal repayment, sir.

Repayment in the Mumbai-Pune term loan significantly picks up after 2 years because for 2 years, the majority of the internal accruals go towards making the next 2 payments of INR 850 crores each. And as regards the COVID shortfall loan is concerned, we are contemplating to take the same from NHAI for the 3 under construction projects, which is Kishangarh-Gulabpura, Gulabpura-Chittorgarh and Hapur-Moradabad.

Next question is from the line of Jiten Rushi from Axis Capital.

Sir, just one question on the compensation part from NHAI. Are we looking for any compensation for the O&M and the interest cost during the lockdown period similar to what the toll operators had received in the de-mon time. So any updates on that, sir?

Presently, we are also waiting for that clarity. At the moment, the visibility what we have is that there will be an extension of 3 months. And in case of cash shortfall, if someone has not availed the moratorium, then they are willing to give us revenue shortfall loans. So that's the stated policy as of now.

Even though it is a political force majeure event, this something -- the compensation part has not been clear -- the clarity is not there so far, right, sir?

Yes, that visibility is still not there.

Ladies and gentlemen, that was the last question for today. I will now hand the conference over to the management for closing comments.

Thank you, everyone, for getting on this call and look forward to have you all back when we come out with the first quarter results sometime soon, and have a great day ahead.

Thank you very much. On behalf of IRB Infrastructure Developers, that concludes this conference. Thank you for joining. You may now disconnect your lines.