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

Good evening, ladies and gentlemen. Welcome to the IRB Infrastructure Developers Conference Call for discussing the unaudited financial results for the quarter ended December 2021 and recent developments. We have with us on the call today, Mr. Virendra Mhaiskar, Mr. Sudhir Hoshing, Mr. Anil Yadav, Mr. Mehul Patel, Ms. Poonam Nishal and Mr. Tushar Kawedia. [Operator Instructions] Please note that this conference is being recorded. I now request Mr. Mhaiskar to give an overview of the significant developments during the quarter. Thank you, and over to you, sir.

Very good evening, everyone. I would like to welcome all the investors and analysts on this conference call. I trust you and your families are well and safe. Hope you all have been able to go through our detailed numbers as well as the presentation release. We are pleased to inform you that the company has successfully completed the equity rate of INR 5,347 crores through preferential allotment of 24.9% share to Cintra, subsidiary of Ferrovial and 16.9% shares to Bricklayers Investment of GIC. Out of this proceed, we have prepaid corporate debt of INR 3,250 crores, INR 1,500 crores will be used for growth capital and balance for general corporate purposes after meeting the issue expense. Prepayment of debt, as I just mentioned, was done towards the end of December '21 and early Jan '22. We expect the interest savings from this to get reflected from quarter 4 FY '22. We are also happy to reiterate that the group has -- the company has won the Group 1 Greenfield BOT project between Meerut and Budaun, part of the prestigious Ganga Expressway project with a length of 130 kilometers and a total project outlay of approximately INR 6,700 crores. We have signed the concession agreement for the same, and we expect to achieve the financial closure ahead of schedule. The Pathankot Mandi Highway project and the Palsit Dankuni BOT in Bengal have also achieved the financial closure, which has the total project outlay of INR 828 crores and INR 2,314 crores, respectively. The appointed date for the VM7 package is also declared and that happened somewhere in November as against our expectation a couple months earlier. This has led to some deferral of EPC revenue. Traffic momentum continues unabated. Mumbai-Pune has reported 11% traffic growth in Q3 of FY '22 as compared to Q3 of FY '21 in terms of the added daily toll collection. We have provided the toll collection for the month of January '22 versus January '21 in our corporate presentation so as to understand the impact of the third wave, and you can see that it has not been very meaningful. The total order book of the company now stands at INR 18,500 crores, out of which INR 12,100 crores pertains to EPC. EPC order book will be executed in the next 2 to 3 years, and O&M order book will be executed over a period of 8 to 9 years. The current EPC order book itself will lead to around 15% to 18% CAGR growth in EPC revenues from FY '22 to FY '24 without factoring any new orders. The Union Cabinet recently cleared the PM Gati Shakti master plan. It is a giant trial in India's ambitious goal of achieving the U.S. 5 trillion economy mark. There is an allocation of INR 111 lakh crores of Greenfield assets in the core infrastructure sector to be enrolled -- to be taken out by FY '25. Roads with 19% amounting to INR 20 lakh crores have received the lion's share of allocation among infrastructure sector. This allocation provides very good clear visibility for the order pipeline over the period of next 3 to 5 years. Globally, tampering of liquidity is already started and slowing it will start in India as well. This will curve excess liquidity. And in our case, as we have timely raised resources through the preferential allotment, the same will act as a boon once the liquidity tightening starts in India. The tightening of the liquidity will further help reduce the competition is also what we think. The same will also result in improvement of IRR going forward as the competition gets a bit same. The availability of equity growth capital that the company now has of almost INR 1,500 crores will cater to equity requirements for projects worth INR 20,000 crores to INR 25,000 crores. This is a significant growth capital availability at the end of the company, which will help the company to grow meaningfully and in a very structured manner going forward. I would now request Tushar to give you a financial analysis for the quarter gone by.

Thank you, sir. I will now take you through the financial analysis, Q3 FY '22 versus Q3 FY '21. The total consolidated income for Q3 FY '22 has decreased to INR 1,498 crores from INR 1.95 crores for Q3 FY '21, a decline of 6%. The consolidated construction revenue for Q3 FY '22 have decreased to INR 991 crores from INR 1,100 crores in Q3 FY '21, a decline of 10%. The consolidated total revenues for Q3 FY '22 has increased to INR 507 crores from INR 495 crores for Q3 FY '21, registering a growth of 2%. EBITDA for Q3 FY '22 increased to INR 957 crores from INR 768 crores in Q3 FY '21, registering a growth of 25%. Interest cost has increased to INR 547 crores in Q3 FY '22 from INR 441 crores in Q3 FY '21 by 24%. Interest costs for Construction segment has increased by approximately INR 106 crores in Q3 FY '22 as compared to Q3 FY '21 due to onetime expense -- finance expenses of INR 66 crores on account of repayment of debt, which also includes the unamortized transaction cost and the redemption premium and also the interest on the foreign bond of approximately INR 40 crore on the bond transaction, which happened in the Feb '21. We have repaid the loan of INR 3,250 crores towards the end of December '21 and January -- early January '22, which will have an interest saving which will reflect in the Q4 of FY '22. Depreciation has increased to INR 192 crores in Q3 FY '22 from INR 191 crores in Q3 FY '21, up by 1%. PBT has increased to INR 218 crores in Q3 FY '22 from INR 135 crores in Q3 FY '21, registering a growth of 61%. PAT after loss of JV has increased to INR 73 crores in Q3 FY '22 from profit of INR 69 crores in Q3 FY '21, registering a growth of 5%. Now I request moderator to open the session for question and answers.

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

Congrats on these numbers and commission of the deal. So a few questions from my side. On the financials, the other income in this quarter was significantly higher than earlier quarters. So is it the interest that we accrued on the equity infusion by GIC, et cetera, that is compiled for it? Or was there some other exception item as well?

Vibhor, in this quarter, we had roughly fair valuation of gain on account of receivable from the private trust of roughly INR 170-odd crores. And this was part of other income. And same is also accounted as expense in the Private InvIT. And out of that, 51% share of loss is accruing to IRB. And net impact in books of IRB for other income is INR 86 crores. And further, as Tushar explained that during the quarter, we have incurred onetime finance expenses of INR 66 crores. That is because of the unamortized transition cost and redemption premium due to prepayment of the debt of the company. The net impact is approximately INR 20 crores pretax. So if I will share the calculation, INR 176 crores is the other income. And out of that, 51% belongs to IRB. So then if we reduce the 90% loss from the Private InvIT, that is a INR 90 crore and INR 66 crores onetime expense, then the net impact is INR 20 crores in the PbT. So on the PAT side, the net impact would have been on account of this onetime income and expense netted out would have been in the range of INR 15 crores.

Okay. So the other -- so just to get it right, the total other income that we reported in this quarter is around INR 207 crores. Out of that, how much was exceptional, INR 170 crores?

INR 176 crores.

Right. And the INR 96 crores loss that we reported from the share of profit, out of that, how much was exceptional, INR 90 crores?

Yes. INR 90 crores because -- out of the INR 176 crores multiplied was 51%, that is INR 91 crore. And this quarter, loss in the Private InvIT from the previous quarter would have been significantly improved because of the toll collection. But because of the loss from fair valuation loss, that loss has, in fact, increased if you compare the corresponding quarter of the last year.

Got it, sir. But again, if I look at the other income, it's around INR 207 crores. If I remove INR 91 crores, even then we are looking at around INR 120 crores of other income as compared to INR 35 crores to INR 45 crores that we generally report for the quarter.

So Vibhor, INR 175 crores is reflecting in the other income and INR 90 crores is reflecting in the share of the loss from the Private InvIT.

Got it. Got it. So sir, then my question is, sir, if I look at the overall numbers and if I let's say, remove the INR 170 crores or if I remove INR 90 crores and the INR 65 crores or exceptional items also, the other line items of the overall interest expense and our depreciation and all, those will continue to be similar range going forward. Interest, of course, will come down as we pay back the back of INR 3,200 crores as we mentioned by the end of the quarter. But other than that, I think most of the other line items would remain the same?

Yes. But as we have also discussed that the VM7 project has already started, we feel that going forward, the construction revenue will improve. And there should be almost a delta of INR 140 crores to INR 150 crores in the interest expense itself. So there will be almost INR 140 crores to INR 150 crores of interest savings. Out of that, roughly INR 75 crores, that is -- we have said roughly INR 3,250 crores, roughly INR 320 crores is interest for entire per annum and roughly INR 80-odd crores is the interest for the per quarter basis and around INR 66 crores was the interest for onetime expense. Both put together translates to INR 146 crores. So that itself will -- basically interest will decline and profit report tax will improve.

Got it. Got it. So at the end of the quarter, what was the standalone -- the holding company -- sorry, what was the holding company debt level?

By month of January, the holding company debt has come down to INR 3,000 crores, and that includes INR 2,200 crores of bond debt and roughly NCD of 350 plus 200 and plus 200, around INR 750 crores of NCD. So that translates roughly INR 3,000 crores of debt at holdco.

And that is what probably will remain going forward?

That will remain going forward.

Got it. Got it. Also, my next question was basically on the other projects, which are basically your Pathankot Mandi and the Palsit Dankuni project. So we received the financial closure, when would we be likely to receive the advantages for the same? Is it likely that it might present in Q4 itself or will start of execution still over to next financial years?

We expect the appointed date to come this month itself, maybe towards the end of the month.

Right. Got it. Sir, just wanted to basically a picture being a bit on the overall opportunity. I think this [indiscernible] project, I think, is a big opportunity for us that has, in fact, given us a huge boost to the order book. Going forward, sir, apart from the recurring projects HAM that we keep on bidding any other large ticket size opportunities that we are bidding at? I know the current order book itself raised a visibility of 15% top line growth over the next 2 to 3 years. But any other big opportunities that we are looking at or eyeing in the pipeline from the government side that you can talk about it?

The order pipeline is quite strong. As you know, a couple of BOT projects, couple of TOD projects have already gone down the hammer. We don't know the result of those. And in terms of HAM -- order pipeline also, the same looks very robust. So I don't see any birth of projects. But as I said in my earlier commentary, we are very well solved for the order book part for next 3 years, even if I assume no order book -- no order improvement from here on, still 16% to 18% of CAGR growth looks comfortably doable. So certainly, we will be very choosy in adding anything to the order book now that we have significant visibility of the same.

[Operator Instructions] The next question is from the line of Prem Khurana from Anand Rathi.

Congratulations on a good set of numbers. Sir, my question was again with respect to Ganga Expressway only. I think last time I was made to believe that you're looking at debt equity mix around 250, I think, which is there. It seemed that now you would look for a partner. So any progress and I'm kind of trying to rope in a partner with this project so that the capital...

Hello, we are not able to hear you.

Am I audible now? Is it better?

A little better.

So I was asking, I mean, for Ganga Expressway, are we planning to rope in a partner or are we planning to kind of have it as the part of our Private InvIT because I think the idea would be to kind of try and reduce capital intensity with this project, I think and easily we made to believe that, I mean, the debt equity mix would be 50-50. So which...

I got your question. Yes, the answer is yes. The project we are contemplating to execute under the same private equity construct.

Okay. Okay. So which is that, I mean, you would be putting 51% of the total equity requirement and the balance would come from the other partner. And how about the regional deal? How much of that money is yet to be infused. I mean, we were supposed to put in INR 4,600 crores and the partner was supposed to put in INR 4,400 crores. How much of that is yet to go?

That money has already come in.

The entire INR 9,000 crores between 2 of course is already come?

Yes. All the money has now come in and the project execution is also under -- having now for the 2 projects, which continue to be under construction.

And Anil, on the losses that were booked from associates, so if I were to adjust for this INR 170-odd crores number, what could be the quarterly run rate going forward? I think the last call we used it was around INR 40-odd crores, this kind of number. So I mean, if I were to adjust for the entire -- I mean, assuming the entire INR 90 crore is because of this onetime gain entry that you've done in your books and obviously, I mean, the contract would be there in the Private InvIT. Does it mean the losses have come down to 0?

Yes. I think the losses should be in the range of around INR 10 crores to INR 12 crores per quarter.

Okay. Okay. And I mean, whenever Hapur Moradabad kind of comes into operation and will get some change in the numbers because initially there will be depreciation or interest because of -- till the time the toll collection stabilizes. So could there be a short-term drive in the losses and then again it will go down or it will have a new -- I mean, the number would go down from INR 10 crores to INR 12 crores for it to go down less or 0 or revenue turn profitable in all these critical aggregate basis?

With regard to Hapur Moradabad, it's the 4 to 6 laning project, and intereset is charged to the P&L. So today we are charging the interest to the P&L account. There will not be any additional charge on account of the Hapur Moradabad.

No, I was talking about the amortization part.

I think amortization initially -- because the long concession, the amortization amount will not be significant. And further on completion, the project will also go for the tariff revision. And recently completed projects, we have seen between 56% to 67% increase in the tariff.

So it will have a significant tariff bump up once the project is fully operational.

The next question is from the line of Mohit from DAM Capital.

Congratulation on closing the deal with the Ferrovial and GIC. My 2 questions, sir. What is the status of land acquisition for both the HAM and Ganga Expressway? And when can -- when -- likely the subcontract, when to expect the work to start on all 3?

I think the 94% land of Ganga Expressway is already in possession of UPEIDA. So in terms of starting the construction for us, I think it's only the financial closure which is the prime requirement. Rest, I think we will be able to start the construction pretty soon upon achieving the closure. On the HAM project, also Chittoor Thachur, we are in the advanced stage of achieving FC. There also the entire land is in place. And we will, in fact, be starting to move in and get ready to start execution there in as well. Same interest story may already partially mobilized for the Pathankot Mandi project. And even that we expect to start construction by end of this month once we have the appointed date.

Sir, can you please give us the breakup of funding of Ganga Expressway?

Ganga Expressway, as you know, has a grant component of INR 1,750 crores. And post that, we are right now in discussion with the banks on finalizing the debt equity mix. And once we have more color on this, we will share that with you.

And as far as the deal is concerned, as we have discussed about, we have -- we can go between 70-30 to 50-50 that equity.

I think this being a Greenfield project, the way we have put in our bid, we have assumed around INR 2,000 crores of equity for this project. So that's the kind of equity we envisage to be put in for the project. That is together, the entire equity. I mean, the split for IRB can get restricted to 51% of that.

And how much is the -- how is the ordering pipeline looking for us at this point in time, especially on the TOT, BOT and HAM. Can you just quantify what kind of things you are looking to put the bid for in Q4, especially?

As I said, 2 BOT and 2 TOT products, the bidding has just closed. We are yet to know the outcome of the same. And for the next few months, I think on the HAM side, there is good amount of visibility. So -- but as I said, now that the order book has improved to almost INR 19,000 crores on a consolidated basis, we will be very selective on adding any new order unless the same is able to give us good amount of margin visibility. So we will be choosy in adding to order book given the fact that we have very good visibility now for the next 3 years.

And have you heard something from the mystery on the BOT opportunity, sir? Do you think there is more tenders in FY '23?

Yes. We do expect at least 4 to 5 more projects to get bid out on BOT.

Lastly, sir, is there any update on Ahmedabad-Vadodara arbitration, can you please share that?

Ahmedabad-Vadodara arbitration, I think we had explained you about the interim award that has come through, and that has settled 2 of the key aspects of the arbitration. And the further arbitration proceedings are going on. So I think in the next 6 to 8 months, we can expect the final award to be in place.

The next question is from the line of Parikshit Kandpal from HDFC Securities.

Congrats on a good set of numbers. My first question is on the Board. Now you have 2 Board members from Cintra. So do you also have someone who represent both Cintra and GIC?

We don't have a Board seat representing GIC, but they have a right to appoint an observer to the Board meeting and they do exercise that.

And they have already appointed for you or they're in the process of appointing someone?

It's an observer position. So anyone available from their team can always come on Board depending on the availability.

Okay, sure. My second question is once the Private InvIT project, once all these projects become operational and revenue generating. So do you envisage any launch spending or shortfall in rate of interest, are you seeing -- if you can -- if that is the case, then what could be the quantum, if you can just give some insights?

Sorry, I'm not able to get you. Can you be a little more clear. Your voice is not clear.

In the Private InvIT -- can you hear me now? Is it better?

Yes, it is better, Parikshit.

So I was asking, sir, in the Private InvIT, once all these projects become operational, do you envisage that there could be some lost funding in initial years for servicing the debt and interest? If that's the case, then you can quantify that number?

Yes. So private inbuilt one fully operational. On a consolidated basis, we don't see any negative cash flows. And it will be a self-sufficient portfolio.

Okay. So you will not be required to give any support from the parent company for the equity nation in terms of shortfall funding for these projects?

So we don't envisage it.

Okay. Another question is on inflation. So global inflation has been rising and even I think in our private -- Public InvITs we have taken decent price hikes to WPI. So if you can quantify any price hikes taken on the projects in the IRB portfolio? And do you see this trend be positive for the portfolio because this 9% price hike in Private InvIT was like quite big. So if you can just give some sense there?

Yes. So Parikshit, as you rightly mentioned that the rising WPI has been observed in the month of December, which is the basis for deriving the tariff hike for the projects starting from 1st April '22. So the tariff hike for the projects which we have in the IRB is AV which will have that tariff revision to the extent of 7% to 8% on account of WPI price and all other projects in Private InvIT will also have a similar kind of price. So therefore, the WPI benefit will come from the FY '23 onwards.

Have you calculated your valuation of the Private InvIT, are these numbers like much ahead of your estimates?

So Parikshit, what we factor as an inflation hike is around 4%, 4.5%. But this is a significant gap of around 8% for what we are assuming is a tariff price.

This is not yet factored in the...

Yes, this we have not factored with valuation, yes.

Okay, sure. Because this can give quite a lot of upside on the remaining tail of the project. This will stay there -- I mean, respective -- I mean this cannot get reversed. Okay. So what kind of volume growth you've been seeing on the project. Can you give some sense on the volume growth, given there has been a pickup in GDP? So how have you seen the traffic growing across projects?

I think the volume growth has been very good. The key asset in IRB, as you know, is Mumbai-Pune. And we have witnessed almost 11% volume growth because in this asset there is no tariff revision this financial year. So whatever is the revenue growth is only because of volume growth and that is almost 11%. So I think it's going to be a very interesting year going forward. They will have a very peculiar scenario of high volume growth because of the catch-up effect and endemic playing out, and also high inflation numbers resulting into a higher tariff realization. So it will be a very, very strong revenue growth that 1 can pencil in as a result of this combination.

Sir, I mean, the volume growth because of pent-up may be already factored in, right? I mean, because it's coming off on a low base plus there could be some pent-up. So -- but on a like-to-like basis, if I have to say, if you compare it maybe forward level, so you can give some sense on the volume growth what's available right now?

So I think the overall economy has been doing well. So I'm not betting anything on the pent-up demand. But I'm saying because of the economy doing well, we expect the volume growth to remain strong. And will be supported by inflation-led higher tariffs.

Because the products of the 2 can lead to a very large reset or maybe [indiscernible] maybe lower growth of 7% to 8% put together on total inflation can be a big driver for value. So do you think that kind of reset happening at least next year where the product of the 2 can really be 14%, 15%?

Yes, it's a very, very good possibility.

Okay. Sure, sir. And just last question, sir, if you can just give a breakup of further -- both at the parent level and the Private InvIT level. So what is your contribution to the equity over the next -- for the remaining duration of the projects which are under construction to be completed? So cost to completion equity requirement for both parent and the Private InvIT contribution for IRB?

Private InvIT, I don't think there is any much equity left to be put in. For IRB, I think, as you said, around INR 500-odd crores will be in Bengal, around INR 2,000 crores...

Can you please repeat because I just missed it. Sorry. Can you repeat?

With respect to IRB, per se, including the investment in Private InvIT for Bengal and Ganga, this year's equity requirement will be roughly $2 billion that is INR 200 crores; next year around INR 600 crores to INR 700 crores and similarly in the FY '24 as well.

And year after that, sir? Is it like INR 1,500 crores is the total requirement or after that also is it something less than '22?

There will be a very minuscule amount of around INR 100 crores-odd will be left out in FY '25 for Ganga.

And this Ganga Expressway is done through Private InvIT or you will have a different partner? Sorry, I missed. I think that question was asked earlier. You said you'll be having about 51 percent state, so balance will be from GIC?

Yes, we will be contemplating to execute this project on a similar platform of 51-49.

Okay. So the Private InvIT route only right?

Yes.

Okay. So these numbers, which I think Anil said now, is just IRB contribution about INR 1,500 crores, INR 1,700 crores of residual equity requirement?

Yes. This is the equity requirement assuming a 51-49, that we will have put in across the...

Over the period of next 3, 3.5 years.

But HAM will be done by us entirely, right? So it won't go through the Private InvIT, right?

Yes. So this equity requirement is including HAM also.

Okay. So HAM, but only part is it's 51% Ganga Expressway. So about INR 1,000 crores will be put in by a partner over and above this?

So just let me -- have to reexplain that. So Ganga 51-49, around INR 1,000 crores. Bengal, total equity INR 500-odd crores or around INR 250 crores and the balance equity on the Pathankot Mandi and Chittoor Thachur together will be around couple of hundred crores. So that is INR 1,600 crores, INR 1,700 crores of equity over the next 3.5 years.

The next question is from the line of Mehul from Quant Mutual. So there's a lot of disturbance from your line, Mehul. Can you please check?

So since we are targeting very niche kind of orders right now, we're choosing what orders that will be going forward for us. So can you tell me what is the kind of ROC that we are getting right now for new orders that you might bid for?

See I think it will be interesting to study our model. And you would have seen that we usually undertake BOT projects and if I have to look at the BOT project that we are going to execute going forward, then it's a 51-49 kind of split, would have around 10% PAT coming from the construction profit. And if you look at the realistic equity that would go into the project, I think the return on capital that the project will be able to generate assuming we sell the project in, say, period of 5 years will be almost 55%. And I can explain this number to you. If you assume INR 1,000 crores project with say EPC cost of say INR 920 crores assuming the balance to be interest during construction, and you assume a 70-30 technic debt equity mix, the EBITDA will be around INR 230 crores. And at the 10% PAT, the PAT will be INR 101 crores. So the net equity that will get invested assuming we are investing 51% would be around INR 52 -- INR 52 crores on a INR 1,000 crores project. And if I have to assume that in 5 years' time, assuming around 2.5 years of construction period, 6 months of financial closure and then 2 years for stabilization. So if I take a tenure of 5 years, roughly average investment period will be somewhere around 3.5 years. And even if we sell the project at say onetime book, the value realized would be almost INR 153 crores against the INR 100 crores that we put into it. So the return on investment on a totality basis will be almost 195%. And if you annualize it, assuming it's 5 years profit, it will still be almost 55%. That's the return of -- kind of return of capital that this project will generate as a construct. So if one has to look at ability of IRB to generate return on capital, one should look at 2 aspects: a, are we generating 10%, 11% PAT margin on our construction business; and b, are we able to sell our projects at a minimum onetime book. If both these parameters are being met, then the significant return that the business generates is clearly a done thing. And I think that is how I will conceptualize how the business is conducted and what is the value creation potential or capability that the business the way it is structured has.

Okay. All right, sir. So we'll be targeting the projects which like meet these criterias most probably, right?

Yes. Yes. That's what we usually do that when we bid for a project, we certainly try to ensure that we have decent margins on the project and comfortable IRRs and only then go for it.

So would you be able to give me a ballpark number of margins that we might be targeting going forward next 3 to 4 years from now?

I think we have steadfastly stuck to the margins on construction, and we have been very, very careful on ensuring that we don't build aggressively. And if you see, we have been able to report 10% to 11% PAT margin on our construction vertical.

Right. So would there be any increase in that? Or would we retargeting the same thing going forward?

If we look at the existing order book, we should certainly be able to retain that kind of margin.

All right. Okay. Just final 1 question. So how has been the toll collections for this quarter?

With respect to December, we have talked about that key asset Mumbai-Pune has witnessed 11% growth. And on Slide 20, we have provided a toll revenue comparison for the Jan compared with the -- Jan '22 compared with Jan '21. There also because of the omicron, some of these toll road which has larger passenger traffic, there we have seen some reduction, but reduction is not significant. It's a miniscule 2% to 3% lower toll revenue in the month of January. But as we are talking about the toll rate, most of the project already picked up as the government has already eased out the restrictions which was imposed early January.

And in fact, very recently government has also announced the -- some of the state governments have announced that the restrictions will be completely removed from the coming week onwards. From 14th. So this will also support the improvement in the overall traffic for the projects.

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

My question is, is there any plan to offload 1 of the assets of the HAM or BOT to Public InvIT over the next 12 months?

I would say that, look, if I have to analyze the business set up, I would say that IRB is bidding an execution vehicle and Private InVIT certainly becomes the development vehicle and Public InvIT can certainly be the ultimate place for the project once it is completely derisked where it can be for the rest of it concession-like. So if this philosophy of churning capital is to be believed, then most certainly, as you rightly said, with all the 9 projects becoming operational and construction getting completed, and earlier -- few of the earlier projects now having been fully stabilized, it will certainly be the right time to start and get into the process of churning capital at the Private InvIT level as well, whereby assets can be offered to the Public InvIT. And once we reach right decision on that, we certainly will come back and give you more clarity on the plan of how, what and how much unlocking can be done for Private InvIT and what kind of opportunity that will make available for the Public InvIT because we are also mindful being the sponsors for the Public InvIT that 2 of its large assets will go out in this coming financial year. So we would be mindful of ensuring that we are able to offer them enough order for them to grow as well. So I think it's a perfect fit that IRB is today where the Private InvIT will have the opportunity to consider and offer assets to the Public InvIT and use the capital that it will get to deploy that into the newer assets that will come its way as a result of the recent wins made with Ganga or the Bengal BOT project. And I think it then creates the perfect churn of capital. And if this churn of capital retrofits the way I'm suggesting, then the entire construction profit at IRB which we have been redeploying for equity in the project will stay completely free and available for the IRB shareholders to use it for deleveraging its balance sheet further or for distribution.

Sir, secondly, on the Private InvIT, how many assets which are still awaiting for full toll collection in the sense the...

Seven assets of the 9 are fully operational where toll is being collected and 2 of them are likely to be completed in the next couple of months.

Which ones are those, sir? Can you just please name them?

Hapur and Kishangarh Gulabpura are at the end of completion. And they would also undergo completion in the next 2, 3 months.

[Operator Instructions] The next question is from the line of Prem Khurana from Anand Rathi.

Just wanted to understand on this INR 176 crores of fair value gain that you have booked in this quarter little better. So what would have led to this fair value gain? I mean, is it much more confident traffic numbers, which is what would have led this or we've received extension and concession, which is what would have led the fair value gain that you have booked during the quarter?

Prem, with respect to the receivables, receivable based on NAS principles are accounted at fair value. And depending upon their clarity with regard to the receipt of the amount, those are discounted with the discounting rate. And if there is any change of the interest rate or in any particular project we have hired that claim and that particular claim is little bit on a higher side, then the fair valuation is subject to every quarter it to get revised. So that quarter, because of the -- in some of the projects we have filed a claim and discounting was also adjusted and that has led to gain of INR 176 crores.

Sure. So this eventually would pertain to that INR 3,500 crores, INR 3,600-odd crores rate of deferred payment that are reflecting in our books of account, right?

Yes.

Okay. And we would evaluate -- I mean, you would do this kind of similar kind of exercise on a yearly visit wherein we would review whether there is more fair value impossible. I mean, depending on the way the rates move, am I right in my thought process?

Prem, typically, this happens once you file a claim for a particular project. If claim amount is much higher, then typically you will have fair valuation gain. And because of the change of the interest, the number does not change very materially. And we don't expect that number to have a very significant in coming quarters.

Sure. And just one last from my side bookkeeping sort of -- the EBITDA margin for our construction vertical seems to be on a higher side than usually what we get to hire from our organization. So any one-off in EBITDA margin this point? And what should be the number for the, let's say, FY '23 and '24, I mean, depending on the mix that you have in terms of hybrid and BOT tool?

Prem, with regard to EBITDA, if we compare corresponding quarter of the last year with adjusting INR 175 crores of this onetime income, the EBITDA margin is 29% as against close to 30% in the corresponding quarter of the last year. I will adjust the entire other income if I will talk about the operating EBITDA. So in fact, it has reduced by 100 basis points. And going forward, as we have talked about earlier also because of the HAM project, we will start execution, our EBITDA margin will remain in the range of 25% to 27%.

Sure. I have some different number on EBITDA side. I'll again -- actually offline I'll take -- I mean, discuss about working with it.

We take the last question for today, that's on the line of Alok Deora from Motilal Oswal.

Congratulations on good numbers. Sir, just couple of questions. Sir, one, I wanted to know about -- since you already have a very decent order book now. So going forward, we focus on the toll projects again or we are open to take the HAM projects also because earlier we were -- I mean, when the HAM projects were launched, we were not too comfortable taking that, but because of the slow BOT awarding, we took some HAM projects. So what's the strategy going forward?

Good question. The strategy is very clear that our preference remains BOT over HAM. And as you very correctly said, we did fill up the execution side by having 4 HAM projects now. What we observed right now is there is intense competition and a big cost cutting that people are venturing into while bidding on these projects, which, to my mind, is a great value destructor. And we would like to be away from such kind of a scenario where we're not sure of making any money. So we will continue to evaluate and participate in HAM selectively where we think that the size and the fit and the margins are realizable. We wouldn't say that we will not bid for HAM. We will bid for HAM selectively where we think it will be value accretive. But otherwise, the focus certainly will remain BOT. And that's the way forward now that we have a good visibility on the order book.

And sir, 1 question related to a question which was asked earlier about the asset addition in the public InvIT. So the InvIT launch has been done like 2 years back and we have not really added any assets there. And so what's -- how are we looking at this Public InvIT because earlier there was some plan of adding some HAM assets. But now here we are looking to add assets once it goes to the Private InvIT. So when do we look to really add any asset here? Because once couple of the big assets go out of that portfolio, the Public InvIT will be kind of left with little cash flow?

Without being in a position to diverge much at this stage, I can certainly say 1 thing that we are absolutely aware of these facts and are very much, what we can say, aligned to the process. And as a result, while the HAM project once completed, post 6 months can certainly be made available for the Public InvIT. Even the [indiscernible] arrangement gives us the opportunity to offer assets from the Private InvIT as they stabilize. And there will be every end of work to ensure that this capital churn linked to the reduction of risk from IRB to Private InvIT, Private InvIT to Public InvIT and the unlocking that it will unleash will be kept in mind and appropriate decisions will be taken and projects will be offered going forward to the Public InvIT from these platforms. And that will create an extraordinary unlocking of capital and will be a win-win for IRB, Private InvIT and Public InvIT, all the 3.

Sure. So anything we can look forward to in maybe, say, next 6 to 8 months from -- of that happening? Any project getting transferred to the Public InvIT?

As I said, I can't divulge the details right now, but certainly, there is work in progress.

Thank you. Ladies and gentlemen, with this, I hand the conference over to the management for closing comments. Over to you, sir.

So I would like to thank all of you for being here on this call, and we look forward to host all of you for the next call as well, next quarter. We wish you a good, happy weekend and look forward that we all stay safe and no more waves are experienced and things normalize sooner than later. So with that note, I would like to end this call. Thank you.

Thank you. Thank you very much, sir. Ladies and gentlemen, this concludes your conference for today. We thank you for your participation and for using [indiscernible] conferencing services. You may please disconnect your lines now. Thank you, and have a great day.