IRB InvIT Fund (540526) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the IRB InvIT call hosted by the company for discussing the financial results for Q3 FY '23. We have with us on the call today, Mr. Vinod K Menon, Mr. Anil Yadav, Mr. Rushabh Gandhi and Ms. Swapna Vengurlekar from IRB InvIT team. [Operator Instructions] Please note that the duration of the call will be 45 minutes, and any queries left unanswered after the call can be subsequently mailed to the management for adequate response and resolution. Please note that this conference is being recorded. I now request Mr. Menon to give you an overview of the significant development during the quarter. Thank you, and over to you, sir.

Thank you. So good morning, everyone. I would like to welcome all the investors and analysts on this call. Hope you have reviewed our detailed numbers as well as the presentation. During the quarter ended December '22, we have observed robust traffic growth across all our projects. As compared to the corresponding quarter of the previous year, we have observed 21% growth in the toll revenue on a like-to-like basis, that is excluding Bharuch Surat, Surat Dahisar and Pathankot Amritsar projects. Toll collection on Amritsar Pathankot project was temporarily suspended on account of farmers' protest in the state of Punjab from mid-December. The project has recommenced the tolling on 15 January 2023. NHAI had also filed a writ petition before the Punjab and Haryana High Court against the said protest. The project SPV, of course, has filed claims under the force majeure provisions of the completion agreement. During the quarter, Vadodara Kim HAM asset has been successfully added to our portfolio. The project has received its first annuity from NHAI, along with the O&M payment. Recently, the project [ facility ] has been assigned AAA ratings by the India ratings. Considering the current bank rate of 6.5%, the project will be eligible for interest on annuity at the rate of bank rate plus 3%, that is 9.5%. During the quarter, the trust is also in the [ deep ] of AAA issuer rating from 2 of the credit rating agencies, that is India ratings and the CARE ratings. Now distribution in the form of return of capital was not considered as taxable since the same could be considered as a reduction in the cost of execution. Based on the recent Finance Bill, we understand that the distribution in the form of return of capital would be taxable in the hands of the unitholders. However, as per the said bill, distribution resulting into redemption of unit will be considered as reduction of cost of acquisition. This is an industry-wide issue, for which we have said that the industry bodies will make suitable representation to the government. From our InvIT perspective, we have created substantial distribution in the form of return of capital to the unitholders in the past few years. We have projects which are having long concessions. We will devise our new strategy to maximize the distribution in the form of interest, and we do not foresee any material distribution in the form of return on capital in the next couple of years. I would now request Mr. Rushabh Gandhi to take you through the financial performance of the quarter and the year. Over to you, Rushabh.

Thank you, sir. I would like to present the financial analysis for the quarter ended December '22 compared with the trailing quarter. The total consolidated income for the quarter ended December '22 has improved to INR 285 crores from INR 203 crores in the trailing quarter. The consolidated toll revenues for the quarter ended December '22 has improved to INR 209 crores as compared to INR 199 crores for the trailing quarter, September '22. EBITDA for the quarter ended December '22 has improved to INR 208 crores from INR 177 crores in the trailing quarter, September '22. Interest costs, which includes interest on premium deferment and in the current quarter, interest on [ premium deferment ] also stood at INR 58 crores from INR 36 crores in the trailing quarter. Depreciation, which includes amortization, for the quarter ended December '22 stood at INR 46 crores as compared to INR 48 crores in the trailing quarter. Profit after tax for the quarter ended December '22 has improved to INR 100 crores from INR 91 crores in the trailing quarter, September '22. I will now request the moderator to open the session for Q&A.

[Operator Instructions] The first question is from the line of Dhiraj Dave from Samvad Financial.

My first question is basically the Jan toll collection, which we've seen and which had been given on NSE. We see basically there has been decline -- in most of the assets, we see decline. Can you draw some light on what is the reason for drop in the toll collection in that?

I think if you are comparing with the -- if we compare with the corresponding month of the last year...

Considering December vis-à-vis sequentially, yes. Y-o-Y is growth, yes, but generally, what resulted to -- any specific factor or...

There is no specific factor, typically because of the December where the passenger car vehicle increased because of the holiday season. And during 1st week of Jan, school starts and other activities slows down, and that is the routine phenomena. And one has to compare with the corresponding month of the last year.

Fair enough. So there is nothing unusual. It's more kind of...

Yes.

Yes. Sir, the second perspective is basically, what would be kind of distribution henceforth? So basically, we are almost reaching fourth quarter. So what -- any guidance on FY '24 distribution?

I think, sir, our endeavor is to continue INR 2 distribution per quarter. Unless and until we acquire more asset, and by that account, we increase our distribution. As of now, we can only guide for INR 2 distribution per quarter basis.

The next question is from the line of Satinder Singh from Eon Infotech.

[indiscernible]

Sir, your voice is not very clear. May I request you to use the handset, please?

Okay. So congratulations for the stable set of numbers. Okay. So my question is regarding [ Talegaon Amravati ]. So one, the Talegaon Amravati, can you throw some light because Talegaon Amravati in this quarter that we are discussing, the revenue growth is about 14%, but 10.2% out of that comes out of the classic -- out of the tariff increases. So we proceed, traffic increase is only about 3%. In fact, in January, the revenue increase is only 5%. So still, we are talking about a traffic degrowth of almost 5%, 6%. So shed some light on Talegaon Amravati. It seems to be clearly struggling on the traffic side. We understand that there's already a tariff increase, okay, which is [ relatively high ].

I think Talegaon Amravati, we have discussed in the previous few quarters as well. Because of some construction work going on, traffic on that particular project was soft. In fact, in December quarter, we have seen some improvement that is close to 3.5% to 4% tariff improvement. And I think going forward, once the construction work for adjacent corridor and the metro work gets completed, probably we will see a further uptick in the traffic. But last quarter was quite encouraging, and we have seen some improvement if we'll compare with the trailing quarters for the year.

So there might be work on Talegaon Amravati [indiscernible] whatever activities, including other traffic. So these are the -- probably the work is already [ done ] as of last quarter. So...

No. I think there, last time, we have told that by December, the work should get over. And that's why we have seen some improvement in December quarter. Probably, we have to see 1 or 2 quarters more for further improvement of further traffic in the Talegaon Amravati. Anyway, this project contributes hardly 10% to 12% of the overall revenue of the trust. So that way, it's not a very sizable project. But because of the certain construction activity going on, there was a [ guard ] in the traffic. But because of the tariff improvement, we have got double-digit kind of growth in this project also.

On Pathankot Amritsar, sir, so we had a claim of about INR 80 crores here. This is for the previous farmer agitation, okay, and we received about INR 36 crores. So could you give, one, an update on what has happened with that arbitration? And second, what is the rough claim that we are raising for this 1-month [indiscernible], the value of the disruption?

Yes. So I think with respect to Pathankot Amritsar, first, I would like to update that what we have received. We have received equivalent number of rail extension in terms of concession agreement. And plus, we have received INR 36 crores of cash compensation for large closure. And for balance, as you rightly mentioned, we have moved in arbitration. And typically, as you know, that arbitration process takes 1 to 1.5 years to get concluded. So probably after a year or so, we can get some resolution on that aspect. Now with regard to the 1-month compensation, amounts around INR 6.5 crores to INR 7 crores, and which we claim, as Mr. Menon has already explained, that we have already lodged with the NHAI. And it's a small amount, and there will be a similar 1-month extension in the concession agreement.

Okay. And what is the [indiscernible] with regard with customers? Is that matter settled? Or what is the settlement for that? So the arbitration, we understand that the embargo has been lifted on the account -- on the escrow account, but what is the status of the settlement agreement?

[indiscernible] escrow account is now normalized. It is in the normal operation mode. So the arbitration is with respect to whatever claim that NHAI had on the advancement of some [ deferred period ]. So that arbitration is continuing [indiscernible], and arguments will be reached very soon.

Okay, sir. And what is the contribution of Kim projects [indiscernible]. Sir, how do you think [indiscernible]? So what is the indicative contribution of Kim projects of INR 2...

Sir, we missed the last part. Can you speak a little loudly?

Sir, what is the contribution of the Kim projects to the distribution of INR 2? So just wanted to understand for a like-to-like comparison that [indiscernible] new entrants at this time. So what -- how many [indiscernible] has it contributed and [indiscernible] to this distribution decline?

When we have talked about adding of VK1, VK1 was about to contribute close to INR 0.25 to INR 0.30 on per annum basis from FY '24 onwards. Because in this financial year, though we will receive INR 2 annuity, but there is a requirement of INR 50-odd crores of extra acquisition, which will be created out of the second annuity. So there will be hardly INR 18 crores of surplus which will be left, which can be total contribution of VK1 for entire financial year.

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

Two questions from my side, sir. Can you please make us know the date on the asset as of now and repayment for FY '24 and FY '25?

I think Mohit, on VK1, we have roughly INR 955 crores of debt, and around INR 45 crores to INR 50 crores is repayment in FY '24 and similar amount in FY '25 as well.

My question was the entire debt on the entire InvIT group.

The enter InvIT level, our debt is roughly INR 1,588 crores, and the cost is a little less than 8%. And with respect to the repayment, repayment is around INR 55 crores, INR 60 crores in FY '24.

And this is over and above the repayment, which is scheduled for VK1, right?

Yes, correct. Next year, we will be paying, for InvIT and plus this VK1 put together, close to INR 105 crores to INR 110 crores.

Understood, sir. And any premium repayment for Tumkur Chitradurga Tumkur in FY '24 or FY '25, a number?

Close to INR 225 crores. It will be close to INR 225 crores for FY '24. And for FY '25, it will be INR 265 crores.

Understood, sir. And the last question, on the tax distribution, you said that the acquisition is in the budget. You're going to maybe, but still going to make a repetition. So can you please let us know what is the demand of the industry? Is it on the principal amount, they don't want any reduction? Is that the -- what you're talking about here?

I think so far, we have -- the industry, we were not able to discuss with the industry body because everybody was just busy with the quarterly numbers. But as a company, what principal issue we have, the -- whatever the principal repayment we are doing, that should be allowed or adjusted against the cost incurred by the investors. And if we are paying more than whatever the cost of acquisition by the investor, then whatever the surplus is there, that would be taxable, not the entire repayment per se. So that will be the -- our plea with the -- whatever the forum we represent. But anyway, for our InvIT, if it's not an immediate issue, because for next 3 to 5 years, it will be largely invest what we will be paying, and principal repayment will be very miniscule because we have all the concession, which is on -- which has a long period, almost 16 to 18 years life, yes, except the one concession, which is the MVR. But whatever the loan repayment will happen in MVR, similar kind of repayment is happening by this trust also to the third-party debt. So considering that aspect, we will not have immediate issue. But on a long-term basis, definitely, this is an industry-wide issue. And probably, once we will get a resolution on the same, post that, we can devise our strategy. But as of now, strategy remains that we will try to distribute maximum amount by way of interest only.

Understood. Can you, sir, repeat the numbers you said on the VK1, how much distribution expected to add in FY '24?

FY '24, it will add around INR 0.25 to INR 0.30 per unit.

The next question is from the line of [ Krishna Prasad ] from [ GoFrugal ].

I just want to understand if there are any updates on the buyback proposal, right? Because this is an industry issue. And is there any representation made and any updates on that, sir?

Sir, I think the federation has already met with the SEBI. But only issue with the buyback because the trust -- from where the trust will do the buyback because whatever the cash trust is generating, the trust is mandated to pay minimum 90% of the distribution. So from where the SEBI has came back saying that the trust is on to make a payment to the unitholder. And if buyback is not permitted out of NDCF from where the buyback will be done because if we -- they allow the payment of buyback from NDCF, then there will be only selected unitholder which will be -- receive the money in buybacks because no trust can buy back the entire unit. So that is the only tricky part over there. Apart from that, I think on regulation side, there should not be any other challenge, but only telling us how we will manage the buyback.

Sir, I understand that there are SEBI regulations. But if -- did the majority of the shareholders approve for such, right? Because if I look at the fair value as per your valuation report from the [ price ] bridge and also over the last 2 years due to COVID and other overhang, the price was very less. From a unitholder perspective, it would have added a lot more value to it, right? So that is the concern with which I ask this question.

Thank you. Moderator, can we move to the next question?

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

Congratulations, sir, on a steady set of numbers. So recently, we saw that there was a strong impetus on infrastructure spending by the government in budget. So what are the new set of opportunities which we are looking at or the deal pipeline which we are looking at for acquiring assets?

I think being in REIT and farm with object to pay distribution to the unitholders, we will be looking at the matured assets and probably the HAM asset will be best suited asset for the InVIT because HAM assets are contributing to the payout from year 1 because the payment in the HAM assets are evenly distributed over the life of the asset. So basically, as of now, we are eyeing for the third-party HAM assets. And probably, we will add HAM asset from the third-party. We are evaluating various projects. And once we reach to a particular level, then definitely we'll [indiscernible].

The next question is from the line of [ Sourav Sathri ] as an investor. Sorry, sir, Sourav is not connected anymore, so we'll move to the next question that is from the line of [ Ketan Shah ] as an individual investor.