IRB InvIT Fund (540526) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q2 FY '24 Conference Call of IRB InvIT Fund September 2023 Results Discussion. [Operator Instructions] Please note that the conference is being recorded. I now hand the conference over to Mr. Vinodkumar Menon, CEO of IRB InvIT Fund. Thank you, and over to you, sir.

Thank you. Good evening, and belated Happy Dussehra to all. 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. We are distributing INR 2 per unit for the quarter ended September 30, 2023. During the quarter ended September 2023, we received a tariff rate revision of approximately 1.2% for our Omalur Salem project. We would also like to reiterate that with effect from 1st April 2023, tariff rate was revised by approximately 5% across the other 4 projects, that is Tumkur Chitradurga, Jaipur Deoli, Pathankot Amritsar and Talegaon Amravati projects. As compared to the corresponding quarter of the previous year, we have observed a growth of around 10% in the toll revenue. The key contributors to the toll revenue growth are Tumkur Chitradurga, Omalur Salem and Jaipur Deoli projects. We have observed some softening of traffic in Talegaon Amravati and Pathankot Amritsar projects. Considering the upcoming festivities and historical seasonal trends, we believe that the second half of the fiscal year would perform better as compared to the first half. The investment manager on behalf of the trust continues to evaluate potential investment opportunities. The net debt to value of assets of the trust is 0.1:1 providing sufficient debt capacity for acquiring new assets and the trust continues to have AAA credit rating from 2 of the rating agencies, that is CARE and the India Ratings. I will now request Mr. Rushabh Gandhi to take you through the financial performance for the quarter and the year. Over to you, Rushabh.

Thank you, sir. I will now present the financial analysis for the quarter ended September '23 compared with the corresponding quarter of previous year, that is September '22. The total consolidated income for the quarter ended September '23 has improved to INR 258 crores as compared to INR 203 crores in the corresponding quarter of previous year. The consolidated toll revenue for the quarter ended September '23 has improved to INR 218 crores as compared to INR 198 crores in the corresponding quarter of previous year, registering a growth of 10%. EBITDA for the quarter ended September '23 stood at INR 214 crores as against INR 163 crores in the corresponding quarter of previous year. Interest costs, which includes interest on premium deferment for the quarter ended September '23, stood at INR 68 crores as against INR 36 crores in the corresponding quarter of previous year. This is on account of the interest cost from the newly acquired Vadodara Kim HAM project, which was acquired in October '22. Depreciation, which includes amortizing of the assets, for the current quarter stood at INR 56 crores as against INR 53 crores in the corresponding quarter of previous year. Profit after tax for the quarter ended September '23 stood at INR 88 crores as against INR 73 crores in the corresponding quarter of previous year. I will now request the moderator to open the session for Q&A.

[Operator Instructions] The first question is from the line of [ Dhvaneet Savla from Savla Family Office. ]

Sir, congratulations on a good set of numbers and especially considering increase in our toll revenues for some projects. My question is mainly on the Talegaon Amravati project. Any particular reason why we have seen a decline in revenue or, in fact, decline in traffic movement on this road? And I also have a second question. This is with regard to the Pathankot Amritsar project. Is there any concessions or something receivable, still receivable from the government pertaining to the closure due to the farmers' protest happened last year? Or all dues have been cleared from the government side?

With respect to Talegaon Amravati, we have updated to the investor in the past also, because of the ban of the heavy vehicle during daytime in the city, the vehicles were taking different route, and that's lower -- because of that, there is a lower traffic on our corridor. And with respect to Amritsar Pathankot, I think we have received part of claim and part is still pending, roughly INR 40 crores to INR 45 crores is still pending to be received from the government.

The next question is from the line of [ Shrish Vaze from Moneylife Advisory Services. ]

My question primarily concerns the acquisitions that we have discussed in the past quarter that, from the sponsor, we are looking at 3 HAM assets to be acquired. Just wanted to know if there is any update or progress on the same and the timeline in which we probably expect these acquisitions to be completed.

So I think the -- when we talked last time, that time we have provided, there are 3 assets from the sponsor. And those will -- those can be acquired over the period of 3 years. And out of the 3 assets, the first asset which will get completed, will get completed in 6 to 8 months from now. Probably within the next 1 year, we can acquire at least one HAM asset from the sponsor. Apart from the asset from the sponsor, we are even evaluating the third-party asset. Once we'll reach to kind of -- some kind of conclusion where we can put forward for unitholder for their approval, then definitely we will reach back to the unitholder.

Got it. And sir, these third-party assets that we're looking at, so are we -- do we have a preference towards toll BOT assets or HAM assets? Going forward would we have a preference to any of these 2?

Basically both assets have different risk metrics. And depending upon the -- whether it's HAM asset, there, the cost of equity is typically lower. One is looking to acquire HAM asset. Typically, the cost of equity will be lower. But if one is looking for the BOT assets, then typically the cost of equity will be higher. So depending upon the kind of project is available in the market, we are not averse for the BOT as well, but only prerequisite which we are looking at that should not disturb the current payout to the unitholder. Either it should be breakeven or it should add to the current distribution.

Got it. I just have a last question. So in the past, like we have made some secured advances to the sponsor. So I think we had made an advance of 257 -- to the tune of INR 257 crores in FY '22, and a few years -- and in the prior years also, we have made some advances. Sir, just wanted to understand the nature of these advances. Were these in the ongoing line of business? Or were these something else? And would we -- do you sort of expect similar sort of advances to be made in the future also?

I think the year which you have mentioned, those years has a heavy major maintenance. And typically, major maintenance bill gets raised on a quarterly basis or a monthly basis. And there, the project manager has to do a deployment of machinery and manpower before start of the major maintenance. And as provided in the project management agreement, they can take a particular amount of advance. But that is -- those advances are secured. And secondly, that carries an interest. Typically, our cost of debt would have been in the range of around 7.5% to 8.5%. But we are charging almost 10% interest to whatever the advance we are extending to the project manager.

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

Mr. Menon, if you could give any update on the Tumkur Chitradurga arbitration, is there any progress on that, some light could be thrown on that, please.

Yes. Tumkur Chitradurga arbitration is in the advanced stage now. There will be written examination in the next month. And after that, the arguments will take place. So most probably by the end of March or by June, this would conclude.

Right, sir. And what is the deferred premium at Tumkur Chitradurga as of 30th September and the total cash at trust level?

Just a moment, Rushabh will get back to you on this. Meantime, we share the number with you. The contention of the NHAI was not with regard to the total deferred premium. Their contention was for, I think, around INR 15 crores or INR 17 crore only. So based on their calculation, we should have paid INR 17 crores additionally. And as of now, whatever the current deferred premium is there, that is as per the revised concession agreement signed with the NHAI. Rushabh you can share the numbers.

So the outstanding deferred premium obligation, including the in case thereof, is close to INR 600 crores as on 30th September. And the outstanding cash in bank balance is close to INR 240 crores, which will include DSRA of close to INR 115 crores to INR 120 crores.

Okay. Okay. And this also includes this distribution of INR 116 crores? That's part of...

That's correct. That's correct.

So effectively, about 9 -- about INR 10 crores will be balanced cash.

Absolutely, correct.

What is the exit rate of interest as of 30th of September, as of now, so for the trust level debt?

It will be close to 8.7%.