IRB InvIT Fund (540526) Earnings Call Transcript & Summary

Good evening, ladies and gentlemen. Welcome to the IRB InvIT Funds conference call hosted by the company for discussing the financial results for the quarter and half year end September 2025. We have with us on the call today, Mr. Anil Yadav, Mr. Rushabh Gandhi and Ms. Swapna Vengurlekar from IRB InvIT team. [Operator Instructions] Please note that the duration of this 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. Rushabh to give you an overview of the significant development during the quarter. Over to you, sir.

Thank you. Good evening, everyone. I would like to extend a warm welcome to all our investors and analysts joining us on the call today. I trust you have had an opportunity to review our detailed financial results in the accompanying presentation. Coming to the acquisition of assets. During the quarter, the Trust successfully completed the acquisition of 3 road assets with a combined enterprise value of INR 8,436 crores. The acquisition was funded through an institutional placement of approximately INR 4,250 crores, marking one of the largest fund raised by any public listed InvIT. This was also the first capital raise since our listing in 2017 and witnessed strong broad-based participation from a diverse group of marquee long-term institutional investors, both foreign and domestic. The 3 highway assets acquired from IRB Infrastructure Trust with a weighted average life of 20 years include Hapur-Moradabad project, which is situated in the state of Uttar Pradesh, Kaithal Rajasthan project, which is situated in the state of Haryana and Kishangarh-Gulabpura project, which is situated in the state of Rajasthan. With this acquisition, the weighted average concession life of the portfolio has increased from 14 years to 17 years, enhancing long-term cash flow visibility. The portfolio now comprises of 9 operational road assets, which includes 8 BOT and 1 HAM asset, with a total enterprise value exceeding INR 16,000 crores, more than double the earlier portfolio size. The Trust has expanded its footprint in 2 high GDP states, which is Uttar Pradesh and Haryana, further strengthening its geographic diversification and growth potential. Coming to toll revenue performance. During the quarter, we recorded a year-on-year toll revenue growth of approximately 6% across our portfolio despite a heavy and extended monsoon across several regions of the country. This growth was driven by the continued strong performance by our key projects with Tumkur-Chitradurga project reporting an 11% increase, followed by Jaipur-Deoli projects with 6% growth. Additionally, the Omalur-Salem project saw a tariff escalation of 2.25%, which was effective from 1st of September 2025. Reset in distribution. With the expanded capital base, the Trust has declared a distribution of INR 192.24 crores, resulting in a payout of INR 1.5 per unit. This distribution primarily comprises of INR 0.9 per unit as interest, INR 0.48 per unit as return of capital and INR 0.12 per unit as dividend. We expect this level of distribution to continue going forward. Strong credit profile and capital management. The Trust continues to maintain a robust credit profile with its AAA rating reaffirmed by 2 of the leading credit rating agencies. During the quarter, we successfully reduced our average cost of debt from 8.5% to 8%, reflecting our strong financial position and disciplined capital management. Additionally, upon receipt of approval from NHAI, the VK1 SPV debt was successfully refinanced at the Trust level, resulting in complete consolidation of debt across the portfolio. This step enhances financial efficiency and optimizes our capital structure. In connection with the recent acquisitions, the Trust also raised nonconvertible debentures amounting to INR 1,150 crores with a tenure of 5 years, 10 years and 15 years with a coupon rate ranging from 7.35% to 7.4%. This structure provides long-term funding stability at competitive rates, further strengthening the balance sheet and supporting future growth. The quarter reflects continued operational resilience, disciplined capital management and a clear focus on sustainable growth. With the expanded portfolio and strengthened balance sheet, the trust is well positioned to deliver consistent distribution and long-term value to its unitholders. Having more than doubled our portfolio size through the recent acquisitions, we are now firmly on track to achieve an AUM of approximately INR 40,000 crores over the next 3 years, supported by a healthy pipeline of opportunities and robust sector outlook. Now I would like to take you through the financial performance for the current quarter as compared to the corresponding quarter of previous year. The total consolidated income for current quarter stood at INR 278 crores as compared to INR 270 crores for the corresponding quarter of previous year. The consolidated toll revenues for the current quarter increased to INR 242 crores as against INR 228 crores for the corresponding quarter of previous year. EBITDA for the current quarter stood at INR 233 crores as against INR 224 crores for the corresponding quarter of previous year. Interest cost, which includes interest on premium deferment for the current quarter stood at INR 73 crores as against INR 72 crores in the corresponding quarter of previous year. Depreciation, which includes amortization on toll collection rights for the current quarter stood at INR 72 crores as against INR 64 crores for the corresponding quarter of previous year. Profit after tax stood at INR 83 crores as against INR 85 crores in the corresponding quarter of previous year. Now I would like to request the moderator to open the session for Q&A.

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

My first question is with regards to the 6% increase which we have seen in the toll collection. I understand that comparably it will be a little different because I think so the Pathankot project last year had given significantly less revenue because of certain ongoing issues with that. So this 6%, what is this mainly attributed to why is [indiscernible] revenue firstly? And secondly, these new 3 projects which we have taken, okay? I know it is still early, but can you give us kind of a guidance on what kind of revenues we are looking for? And is it going to lead to higher DPUs in the future or probably the same DPUs, but for a longer we are going to enjoy the same.

Yes. Thank you for your questions. I think the first question was on the growth of the revenue and the traffic. Hope you'll appreciate, which Rushabh has covered in his opening remarks that this year, we have seen excessive rain. And that was also -- there was an extended monsoon. So that has led some impact on overall traffic. And this is not with our -- if you look at -- I think there are so many InvIT are listed and there was an impact across. And another reason was that because if you notice that the government has on 15th of August of this year has announced that there will be a rationalization of the GST. And thereafter, there was a bit slower activity on the backdrop of that in terms of the movement of vehicle and other things. So that has contributed some kind of slower traffic. Having said that, now coming to your second question that with regard to the acquisition. So I think in terms of the acquisition, we are committed to expand the life and overall payout to the unitholder. And if you look at the life of the existing asset was declining gradually. And the life was reduced to almost 14 years. And there was consistent decline in the life and even in the unit price. And now we have added the asset which has a life of 20, 21 years. And with that, the asset size has moved from INR 8,000 crores to INR 16,000 crores and life has also increased from 14 years to 17 yes. Not only we have increased the life over 17 years, but if you look at the payout, definitely because if one is buying an asset with a longer life, then there will be adjustment of the DPU. Anyway, the DPU would have been adjusted post the M.V.R. project was about to get over in FY '27, there would have been adjustment. Now I think based on the current addition of the asset, we will be able to pay out INR 6 per annum for this financial year. So only 2 quarters are left for the balance 2 quarters, we will be paying close to INR 1.5 per quarter. And next year, this payout will be expected to increase by 5%. And we are -- as we have talked about in the last con call also that we are -- we will be adding one HAM asset without any kind of dilution to the unitholder. And with that HAM asset, the distribution is further expected to increase to 3% to 4% without any kind of dilution, then overall distribution will increase by that 3% to 4%.

[Operator Instructions] The next question is from the line of Mr. Sarvesh Gupta from Maximal Capital.

This reduction in DPU which has happened, so this is primarily owing to the acquisition? And how does -- is that right? And how does it change the YTM for the -- how does the acquisition numbers now that we have it, how does that change the YTM that we had originally envisaged before the acquisition versus after the acquisition?

Can you just elaborate YTM what you are referring? You are referring to the IRR or payout, if you can just elaborate on YTM.

So sir, I'm referring to IRRs basically, let's say, at this time, what we expected to get till the end of the life in terms of percentage, and I think somewhere in the previous calls, you had alluded that, that number is around 13%, 14%. And after the acquisition, how does that change?

Yes, Sarvesh, very good question. We will cover that. So if you look at -- as per InvIT regulation, we are supposed to provide the valuation of all the assets where the valuer has factored the numbers, toll revenue and the O&M also. Since we have fixed price contracts, we don't have any volatility in terms of O&M cost is concerned, that is operation and maintenance cost is concerned. If you look at, in fact, the private InvIT 3 assets are valuation are also in the public domain. Considering that both the valuation, as I was talking about this year around 6% kind of -- sorry, INR 6 kind of annualized payout that is translating at current market price around 10% kind of yield and that will be gradually increasing by 5% from next year onwards. And without considering any further asset addition, that will be consistently growing by 5% for next 5 years and thereafter 10%. So I think if you look at the IRR on current price, it will translate around ranging between 15% to 17%, depending upon what kind of growth number one factors in working out the numbers. But it will be upwards of 15.5%, 16% based on the valuation report, which is in the public domain.

Yes, sir. Sir, in that one more question was that when I have seen some of these reports in the past, we had assumed almost a high single-digit, sort of low double-digit total revenue or total toll revenue increase, including the inflation increase, which was also earlier higher than what we are doing now. So when you are saying 15%, 17%, have we adjusted to the newer realities where we are able to get maybe only 5% overall revenue growth instead of 8%, 9%, 10% overall growth. So what is the assumption that we have in built because inflation has also come down. And secondly, like-to-like, if you are seeing the toll revenue increase also, for example, ex of Pathankot, even in the latest month, which was -- one asset was disrupted. If I ex out that, then the revenue growth is only 2%. So inflation is anyways down and the overall toll revenue growth is also, I think, ex of the disturbances is not very high, so as per the current reality is this 15%, 17% or as per the earlier 8% to 10% toll revenue growth, it's coming to 15%, 17%.

I think if you look at the valuation, valuation report, the current number that is the first number is dependent upon the actual revenue realized. In terms of future projection, the traffic and certain factors what was the historical growth. If you look at the historical growth for this project, the historical growth would have been in the range of 5% to 6%, and if you add the inflation, if you talk about 5 years or 6 years inflation, it was upwards of 5%. So the growth was around 10% in terms of revenue. But as you rightly mentioned that valuer factors 9.5% kind of growth in the overall revenue growth. And other thing we have to look at the inflation we have got in some years around 10%, 11% also in some projects, 14% also. So automatically, if you have higher growth in few years, then automatically, there will be an adjustment of the inflation. Good thing about our project is that our inflation is 3% fixed plus 40% of WPI. So even if WPI remains benign, then also there will be a 3% fixed rate, which we will be getting. And just to give you a right context that if you look at 1 year, the trust was paying around 8.9% kind of interest cost. Now the interest cost has come down to almost 7.9% -- weighted average interest cost has come down 7.9%. This is including the total debt. And now the total debt will be around INR 8,000 crores. And 100 basis point -- 90 to 100 basis points kind of saving will result almost INR 80 crores kind of saving in the interest cost. That is number one. If you look at the even 1% delta in the revenue will be around INR 18 crores. So the saving in the interest cost is much higher as compared to what would have been the reduction in the revenue. So considering this aspect, in fact, the valuer consistently factors the reality in their valuation report on that basis, they value the asset. So I think if you look at the valuation report, those considered the realistic number. And if you look at the little, short to medium-term kind of horizon, we believe that those number is achievable.

Okay. And sir, on the breakup of this, so this time we have also got in some capital repayment. So going forward, what sort of a mix is supposed to be there?

I think historically, if you look at 66% to 75% we were paying in form of interest and balance was in form of dividend and capital repayment and which is expected to remain in the similar pattern, roughly 2/3 or 3/4 will be interest and 1/4 will be a kind of capital repayment and dividend.

No, sir, just capital reduction part of it, if you can give some guidance on that because that is treated differently from a tax perspective compared to dividend.

Even the dividend also, dividend is exempt in the hands of the unitholders. I will request Rushabh to just provide you the explanation why the dividend is exempted.

Sure. So basically, in our case, all the SPVs, except for VK1 are following the old tax regime. So as per the income tax law, if the underlying SPV, which is providing the distribution to the trust is following the old tax regime, then the distribution in the hands of unitholders will be exempt. So in fact, the 3 assets which we have acquired, even those 3 assets are following the old tax regime. But typically, the asset in the -- for BOT asset, initially, they have a book loss because of amortization and finance cost. So in case of MVR, it is on the fag end of the concession, accordingly, it has started generating book profit. So that particular book profit, we are distributing in the form of dividend, which is exempt in the hands of unitholders.

So just to clarify that since we are -- all our SPVs are following old tax regime, whatever the dividend is paid will be exempt in the hands of the unitholders. This is what is our understanding of the income tax.

Okay. So broadly, you are saying that for the remainder of the year, you will pay INR 3. And then next year, HAM asset would also be acquired. So next year might be INR 6.5 or thereabouts. Is that the right understanding?

Yes, yes, absolutely correct.

The next question is from the line of Mr. Saurabh an individual investor.