IRB InvIT Fund (540526) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to the IRB InvIT call hosted by the company for discussing the unaudited financial results for the quarter ended June 2023. 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 would 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 developments during the quarter. Over to you, sir.

Good morning to all. I would like to welcome all investor and analysts on the call, hope you have reviewed our detailed number as well as the presentation. We are distributing INR 2 per unit for quarter ended June 30, 2023. In line with the -- our guidance, we are distributing INR 2 per quarter. During the quarter ended June 30, 2023, we have received a tariff revision of 5% across 4 projects, that is Tumkur Chitradurga, Jaipur Deoli, Pathankot Amritsar and Talegaon Amravati, from 1st of April this year. As compared to the corresponding quarter of the previous year, we have witnessed 8% growth in toll revenue on like-to-like basis that is excluding Surat Dahisar project. The recently acquired Vadodara Kim HAM asset received a second annuity payment from NHAI, along with the O&M payment. The cumulative amount received from NHAI for HAM asset is [ INR 186 crore ], and this was for full financial year. The investment manager, on behalf of trust, continues to evaluate the potential investment opportunity. The net debt-to-value of asset of the trust is 0.3:1, providing sufficient debt capacity for acquiring new assets. And the trust continues to have AAA rating from 2 credit rating agencies. I would like to request Mr. Rushabh Gandhi to take you through financial performance for the quarter and -- for the quarter. Over to you, Rushabh.

Thank you, sir. I will now present the financial analysis for the quarter ended June '23 compared with the corresponding quarter of previous year that is June '22. The total consolidated income for the quarter ended June '23 stood at INR 269 crores from [ INR 295 crore ] for the corresponding quarter of previous year that is June '22, excluding the income from arbitration award of INR 423 crores accounted for in the first quarter of FY '23. The consolidated toll revenue for the quarter ended June '23 stood at INR 229 crores, as against INR 287 crores in the corresponding quarter of previous year. Excluding Surat Dahisar project, the toll revenue has increased to INR 229 crores from INR 213 crore, registering a growth of around 8%. EBITDA for the quarter ended June '23 stood at INR 227 crores, as against INR 253 crores in the corresponding quarter of previous year that is June '22. Excluding the Surat Dahisar project, which has been handed over to the authority, the EBITDA increased to INR 227 crore from INR 181 crores, registering a growth of 25%. Interest cost, which includes the interest on premium deferment, for the quarter ended June '23 stood at INR 68 crores from INR 35 crores in the corresponding quarter of previous year. This is mainly on account of the increase in interest costs from the newly acquired Vadodara Kim HAM asset. Depreciation for the quarter ended June '23 has reduced to INR 57 crores from INR 113 crores in the corresponding quarter of previous year. Profit after tax for the current quarter stood at INR 101 crores, as compared to INR 103 crores in the corresponding quarter of previous year. It would be worth to compare the toll performance with trailing quarter as well. As explained by Mr. Menon, we have received an approx 5% tariff revision which has been effective from 1st of April 2023. Normally the fourth quarter has better revenue number, as compared to the other quarters of the year. We would like to draw your attention to slide number fifth of the quarter presentation, which has been uploaded on the website, which pertains to the toll performance of Tumkur Chitradurga project, considering the average daily collection: for the month of April '23, which was around INR 11.2 million; May '23, which was INR 11.4 million; and June '23, which was INR 11.2 million. The average for the quarter ended June '23 works out to INR 11.3 million, which is around 5% higher than the average per day for the trailing quarter that is quarter ended March '23 which was INR 10.8 million. Now coming to the sixth slide of the corporate presentation, which relates to the toll performance for Jaipur Deoli project. Similarly, the average per day for the current quarter that is June '23 works out to INR 4.8 million, which is around 11.6% higher than the average per day for the trailing quarter that is March '23 which was around INR 4.3 million. Coming to the seventh slide of our corporate presentation, relating to Pathankot Amritsar project. The average per day for the June quarter works out to INR 4.5 million, which is around 2.5% higher than the average per day for the trailing quarter which was INR 4.4 million. We would like to draw your attention to eighth slide, relating to Omalur-Namakkal-Salem project. The average per day for the current quarter was INR 4.7 million, which is around 2.5% higher than the average of trailing quarter which was INR 4.6 million. Coming to Talegaon Amravati project, which is on Slide #9. The average per day for the current quarter works out to INR 2.4 million, which is 4.5% higher than the average per day for the trailing quarter which was INR 2.3 million. On the overall portfolio basis, which has been provided on Slide #10 of the corporate presentation, the average per day for the current quarter works out to INR 27.7 million, which is around 5% higher than the average per day for the trailing quarter which was around INR 26.4 million. Thank you. I would now request the moderator to open the session for question-and-answers.

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

First of all, congratulations on a good quarter, especially since this is exactly almost a year since 2 major assets have left our portfolio; and yet we have maintained a considerably good performance, especially on the DPU [ guidance ]. My first question is with regards to the Talegaon Amravati project. As we can see, this current quarter, we have increase in toll collection. I just wanted to know. How much of it can be attributed to increase in the movement of passengers? And -- or -- and how much can be attributed to the revision [ in toll ]? And secondly, I wanted to know: Is there any other projects which we are considering or is in the late stages of discussion for addition in our portfolio?

Yes. So with respect to Talegaon Amravati, if we compare with the trailing quarter that is Q4 FY '23, per-day average collection was around INR 23 lakhs. And this quarter, Q1 FY '24, it's around INR 24 lakhs, so there is a growth of almost 5%. And from 1st of April '23, there is tariff revision of 5%. If we'll compare with the trailing quarter, there is not any traffic increase, but typically if we'll compare the -- Q4 is the strongest quarter in a particular year, so if there is no degrowth, I think the performance is more or less in line with the expectation. And with respect to the asset addition, yes, we are looking for the third-party assets as well. And at appropriate time, we will bring to the unitholder for evaluation once it is approved by the Board. And with respect to the assets with the sponsor, there are 3 assets with sponsor. All 3 are HAM assets. And once the completion is done, those will be offered to the InVIT. And out of -- if I will share the stage of completion of 3 assets: 1 is almost 60%, 70% complete. And we can expect within 1 year that project will be offered to the trust. And on that -- which is the unitholder can decide on that particular project. And the balance 2 also will be -- we will be eligible to -- transferred in the next couple of years, probably 1 project within 1 year. And in next 2 years from now, there will be total 3 assets which will be eligible to offer to the InVIT. And based on the unitholders' approval, we can take it forward.

Okay, just a small add-up question. So is there any internal competition for the same project with the -- what we can say the private InvIT which has been listed? Or that is a completely separate matter.

So basically the private InvIT appetite is totally separate and as per regulation also. And they are based on their mandate also. They are taking a kind of development risk, and they are taking the under-development project. And if you look at -- the private InvIT was incorporated in 2020. And from '20 till date, there was no distribution from the private InvIT, so it's a more kind of asset play and it's a development platform. Probably we may see some distribution from the private InvIT coming, which will be -- get distributed to its unitholder. So what I will explain: That that's a development platform and there are -- most of the assets when the private InvIT was formed were under construction. Now a few are completed. Few are under construction, so then that InvIT is not comparable to the public-listed InvIT. Public-listed InvIT will scout for completed asset where risk is lower and where the asset can offer something to the unitholder.

All right. Just one small hygiene point. If possible, next time on the conference call, as something you can probably add in, an express joining invite. Because the -- it takes a while to connect to the conference call after you have initially dialed in to the universal number. That's it from my side.

Thank you. Thanks for your suggestion. Definitely, we will do that.

The next question is from the line of Dhiraj Dave from Samvad Financial.

Yes. Thanks for declaring INR 2 distribution, to the management. My question: One is basically on this HAM asset which we acquired. Just wanted to understand. So because basically we have seen INR 32 crore increase in the finance costs, as CFO mentioned over call. How much it -- we -- it could be attributed to the HAM asset? INR 67 crore in Q1 finance expense vis-à-vis INR 35 crore.

So I think a large portion of that is attributable to the HAM asset. And if you look at -- the HAM asset, in last full financial year, has provided an income of close to INR 184 crore to INR 186 crore. So considering that we have incurred of -- interest costs of close to INR 30 crore.

Okay. So as against INR 30 crore quarterly, which would -- assuming same interest rate, remains around INR 120 crore per annum.

I will request CFO to provide the exact detail on the same, what will be the approx cost on the same.

On the Vadodara Kim HAM asset, the quarterly interest will be close to around 20 crore, so debt is around [ 955 crores ], outstanding in debt [ et cetera ]. And the other part is there's an increase on premium deferment also, so -- which is linked to RBI rate plus 2%. So that rate has increased over last 1 year from somewhere around 4.25 to 6.75 currently. So [ even that ] increase has been attributable to this increase in finance costs.

Fair enough. So my question, what I was trying to understand was basically [ this ] HAM has contributed anything positively to our distribution. Because while I understand we had a Surat effect for 1 month or something last year -- and that has contributed, but the distribution [ remained, INR 2 to INR 2 ], to an extent interest rate has gone up. But how do management see HAM assets contributing positively to the distribution? That's something. Maybe interest rate remains same. What do you see? I mean you have given some guidance of around 50 paise to INR 1-something coming incrementally from that, so...

Yes. So this year, considering the -- a little higher costs, the HAM is contributing roughly 35 paise to 40 paise. And we expect around a 50 paise to 60 paise contribution coming from the HAM asset for the next -- for the subsequent year as well.

Okay. [indiscernible]. Secondly, on Pathankot Amritsar, why -- so we see some kind of decline, particularly in the toll details, traffic details which you have provided [indiscernible]. So any specific reason? Because this asset has actually not given the desired results which we wanted. So what is the -- [ mainly in agreements ]. What is the reason for decline in the traffic movement, if -- particularly in Pathankot Amritsar? We see significant decline in multi-axles vehicle, 312 to 277, Slide 20.

Yes, yes. [ Obviously ] you are absolutely correct, though if we'll compare with the trailing quarter, the revenue per day was 44 lakhs. That has increased to 45 lakh, but typically the MAV is largely dependent upon the mining traffic. And if there are slowdown in the mining activity, then definitely that gets impacted. The MAV gets impacted. And due to some restriction on the mining, that has led us lower MAV vehicle in the Pathankot Amritsar.

Okay. And what is your view? Do you see any change -- and it would continue to remain like...

I think typically the mining activity increase in Q3 and Q4 and that -- and because of the monsoons, second quarter is muted, as far as mining activity is concerned.

Okay. And last one, which is if I may just squeeze. In fact, this time, we see a good amount of retention in the sense that distribution has been kind of [ -- NCD has been ] higher than the distribution amount, so any kind of guidance which you would like to revise in the context that you have indicated INR 8 for FY '24? But if we look at cushion last 3, 4 quarter, we had been distributing almost like 90% to 95%. So we have built up [ reasonable ] cushion, so in that context, do you see, I mean -- so any comment on that part?

I think the -- as I was explaining that, typically if we look at the -- historically also, Q2 is the weakest quarter amongst the -- all 4 quarters. And because of the monsoon -- and this time, the monsoon was very severe, as far as July is concerned. We have seen a lot of flooding and other stuff. There is no damage to our road projects as such, but definitely that flooding and other excessive monsoon basically lowers the traffic growth and even sometimes the overall volume as well. So considering that Q2 will be weak quarter, our endeavor will be try to retain INR 2 to the extent possible.

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

Mr. Menon and the IRB team, because -- much acknowledged you accepting our request that there'll be a time gap between the release of results and the call [ date ]. So thank you for that. Sir, any update on the arbitrations for Tumkur Chitradurga and [ Calcutta metro ], any update that you would like to share? Or it's still ongoing.

The matter is still going and to reach the finality. Once it reaches to the finality level, we will update you, and as of now, the arbitration is going on. Interim -- for Tumkur Chitradurga, interim arbitration award, which allowed to start the functions of the escrow account, the things on the project is on a routine basis going on. And once we receive the final outcome on Tumkur, we will definitely share. And Amritsar Pathankot, with respect to the farmers' agitation claim, that is also going on. And once we see some clarity, we'll -- definitely would like to share with the unitholders.

Yes, okay. What is the cash [ weighting ] at the trust as of 30th of June?

[ Well, on ] 30 June, the outstanding cash balance was close to [ 274 crore ], which included DSRA of 120 crore, even the current distribution also. And if we exclude the current liabilities, the balance would be around 15 crores to 20 crores, around 20 crores.

Okay, [ bhai ]. And what is the average cost of debt at this point in time?

[ 8.5 to 8.7 ], somewhere between that.

And on the -- is it linked to repo rate [indiscernible]? So what is the external benchmark our borrowing is linked to?

It's linked to the MCLR rate.

Okay. And have all the increases already come into our current [ 8.5 to 8.7 ] rate, or is this still there is some increase that has to happen? Because it typically happens with [ reds ], which is with a lag, [ okay ]...

So the increases have been taken -- all the increases have taken place.

All the increases [ have taken place ]. And what is the deferred premium on Tumkur Chitradurga?

It will be -- including the interest, it will [ be close ] to 500 crores.

Close to 500 crores, right. And sir, what is the expected...

I'm sorry to interrupt, but the audio is not quite clear in-between phase. If you could use the handset, sir...

Okay, yes, okay. So okay. I hope it's clear now. So sir, what is the expected cost of the Kim project ex of the NHAI grant? So what is the final settle amount of the project cost?

For which project, [ sir ]?

The HAM project, VK1, Kim project.

VK1, I think the settle cost is INR 1,412 crore.

Okay. So INR 1,412 crore is the settle costs, okay.

Yes. Just to touch upon: EV at which we have acquired it was INR 1,297 crores, and the settle cost with NHAI is INR 1,412 crore.

Okay. So we are getting this interest and our return of the original investment project cost at, all, INR 1,412 crores.

Yes. So it would be a decreasing balance, so as and when we get the...

I understand that, yes. I -- the original -- as of the start of the annuity schedule -- so there's still INR 1,412 crores. And now obviously it will be getting [ written-down ], okay.

Yes, yes. You are absolutely right.

The next question is from the line of [ Vivek Sureka ], an individual investor.

My question is already answered. Thank you.

Thank you...

[indiscernible].

[Operator Instructions] Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Menon for closing comments.

Thank you. I would like to thank all the investor and analysts for joining this call. We expect to speak with you in the coming quarter and post the coming quarter result as well. Thank you.

Thank you. Ladies and gentlemen, this concludes your conference for today. We thank you for your participation and for using Researchbytes' conferencing services. You may, please, disconnect your lines now. Thank you and have a great day.