IRB InvIT Fund (540526) Q3 FY2026 Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to the IRB InvIT call hosted by the company for discussing the financial results for the quarter ended December 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 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. Rushabh to give you an overview of the significant development during the quarter. Over to you, sir.

Thank you. Good morning to all. I would like to extend a warm welcome to all our investors and analysts joining us on the call today. I trust you had the opportunity to review our Q2 financial results and the accompanying presentation. During the quarter, we have successfully acquired 3 road assets with a combined enterprise value of approximately INR 8,400 crores and a weighted average concession life of 21 years. These acquisitions have strengthened our portfolio and enhanced long-term visibility. As a result of this addition, the portfolio's average residual life has increased from 14 years to approximately 17 years. Geographic diversification has also improved with expansion in 2 high GDP states, which is Uttar Pradesh and Haryana. We are pleased to inform that during the third quarter, the acquired assets have delivered strong operating performance with average toll revenue growth of around 14% on a Y-o-Y basis. In February 2026, we have completed the acquisition of Vadodara-Mumbai Package 7 HAM assets from the sponsor for an enterprise value of around INR 1,200 crores. The transaction is effective from 1st of December 2025. As the acquisition was completed in the fourth quarter, the asset is expected to contribute to the distribution from fourth quarter onwards. This acquisition was funded through debt raised at an optimal interest rate of 7.5% per annum. With the addition of VM7 HAM assets, the trust portfolio now comprises of 10 assets, including 8 BOT and 2 HAM assets. The cumulative operational length kilometers stands at 4,445 kilometers, length kilometers with a total enterprise value of around INR 18,000 crores. Coming to toll revenue performance. During the quarter, the existing portfolio has delivered Y-o-Y toll revenue growth of around 12% on a gross basis. The newly acquired projects, which are Kaithal Rajasthan project, Kishangarh Gulabpura project and Hapur Moradabad project have been part of the portfolio with effect from 1st of November 2025. These assets have performed strongly, recording a Y-o-Y toll revenue growth of around 11%, 16% and 14%, respectively compared to the corresponding quarter of previous year. Coming to the distribution part. With the expanded capital base, the trust has declared a distribution of INR 192.24 crores, translating to INR 1.5 per unit. The distribution comprises of INR 0.95 per unit as interest, INR 0.44 per unit as return of capital and INR 0.11 per unit in the form of dividend, which is exempt in nature. Since the VM7 acquisition was completed after the December quarter, this project will contribute to the NDCF from fourth quarter onwards. The trust continues to maintain a strong credit profile with its AAA rating reaffirmed by 2 of the leading credit rating agencies. The interest cost has reduced by 19 basis points as compared to the corresponding quarter of previous year. Coming to the financial performance, I will now walk you through the financial performance for the quarter as compared to the corresponding quarter of last year. During the quarter, we have added 3 BOT assets effective from 1st of November 2025 and 1 HAM asset effective from 1st of November 2025. Given this addition, the Y-o-Y numbers are not strictly comparable. The total consolidated income for the current quarter stood at INR 451 crores as compared to INR 282 crores for the corresponding quarter of previous year. The consolidated toll revenue for the current quarter increased to INR 369 crores as against INR 240 crores in the corresponding quarter of previous year. EBITDA for the current quarter stood at INR 373 crores as against INR 231 crores for the corresponding quarter of previous year. Interest cost, which includes interest for the 3 acquired assets stood at INR 153 crores as against INR 69 crores for the corresponding quarter of previous year. Depreciation, including the amortization on toll collection rights for the current quarter stood at INR 100 crores as against INR 61 crores for the corresponding quarter of previous year. The profit after tax for the current quarter stood at INR 60 crores as against INR 90 crores in the corresponding quarter of previous year. Now I request the moderator to open the session for Q&A.

[Operator Instructions] The first question comes from the line of Rushabh Sharedalal with Pravin Ratilal Wealth.

So 2 questions, particularly on -- so the first question is on the VM7 asset that is going to come. And I suppose that it is going to contribute to the NDCF from Q4 onwards, right? So can you just let us know that what is the NDCF that this asset is going to generate because I think it's an annuity asset. So we have a clear vision of what we are going to get. Apart from that, in the same context, the 3 assets that we have already acquired for this quarter, so one is the Kaithal Rajasthan, Kishangarh Gulabpura and Hapur Moradabad. Each of these, how much do they contribute? And what NDCF are we going to lose because I think Omalur Salem Namakkal is going to go out of the portfolio in January '27. So can you give me these 3 numbers? And based on that, how would the total NDCF look somewhere in 2027?

Yes. So I think I will take one by one. First, Omalur Salem that we were aware that this project will go away in the next financial year, middle of the next financial year. And in terms of the payout, VM7 is expected to increase the payout by 5%. So it means if we are paying INR 6, that INR 0.30 will increase on account of VM7. And since now the portfolio has expanded and there is intrinsic growth in the asset. And as Rushabh has explained that whatever the growth numbers are there in terms of toll, those are in double digit. So considering that the growth and we expect the growth to continue in future. And on the basis that we are expecting to the next financial year around INR 6.3 to INR 6.5 payout for next financial year, that is FY '27. And there on the -- considering the intrinsic growth in the asset, around 4% to 5% increase in the payout in FY '28 onwards as well. So I think next 5 years or so, the growth in the payout will be minimum 4% to 5% and the VM7 will be the additional payout which will be coming in. And after 5 years, I think by that time, there will be some debt will also get repaid. And on a larger base, we should be able to increase the payout by 10%. So I think if you look at near term around 4 to 5 years, from INR 6 kind of payout, minimum 5% kind of growth you can consider year-on-year basis.

Sir, so what I was trying to ask is that can you give me the 3 NDCF? So one, the Omalur Salem, which is going out of the asset, the 3 assets that have already come in, how much are they contributing to the net distributable cash flow? And what is the VM7 asset going to contribute? Can you give me the NDCF numbers?

Yes. So basically, if you talk about this quarter, the existing assets are contributing INR 100-plus crores kind of -- out of INR 192 crores kind of distribution, INR 100-plus crores is contributed by existing asset. Out of the MVR contribution is -- we'll share the MVR contribution, MVR contribution is around INR 60 crores to INR 70 crores. And in terms of the existing asset, close to INR 85 crores to INR 90 crores is the contribution from the new assets. So this is a broad contribution. And if I will take the 30% kind of distribution, around INR 40 crores to INR 45 crores kind of contribution will be coming from VM7.

Okay. So just let me know that if I understood it correctly. INR 85 crores to INR 90 crores is the current assets, the current -- the original 7 assets, they are contributing around INR 85 crores to INR 90 crores. And from that, I believe Omalur Salem is closer to 8% to 9% of the portfolio. So from INR 85 crores, we will come down to around INR 75 crores to INR 76 crores in that. And then we will have around INR 60 crores from the VM7, right, and INR 40 crores to INR 40 crores -- can you please just correct me where I'm going wrong?

Yes. So I think the broad numbers based on the current quarter, I think next year, which you can expect, I think, close to INR 100 crores kind of contribution will be -- I'm talking these numbers are on a quarterly basis. You have to annualize that. Around INR 100 crores kind of contribution will be coming from your new assets and around INR 10 crores per quarter will be coming from VM7 -- INR 10 crores to INR 12 crores and the balance contribution will be coming from the existing asset. So I think around INR 90 crores to INR 100 crores kind of contribution for next year also will be coming from the existing asset.

So around INR 200 crores of total NDCF we can expect per quarter, at least for the next 4 quarters. And after that, around INR 10 crores would go out of the portfolio, right, from FY '27 -- from January '27, in fact?

I think it will be remain through at least 2 quarters of the FY '27. It will not be there in FY '28. But by that time, the growth in these assets will be automatically take over whatever the shortfall will be coming on account of MVR. That will be taken care by the growth. If I can just explain to you, if you look at the overall gross revenue for the current quarter, Rushabh will...

During the quarter, the gross revenue was around INR 500 crores.

The revenue was INR 500 crores. If I annualize that, INR 2,000 crores will be the revenue number for annual basis. And if I will take even conservative growth of 9% to 10%, we are talking about INR 200 crores kind of addition, which will come in on account of existing. Even MVR today, the total collection of MVR will be -- is around INR 180-odd crores. So even if I reduce the MVR, I think the growth itself will take care of the MVR going out of the portfolio. And just to share with you, very recently, we have raised the capital. And as the InvIT regulation provides that we have to provide the valuation for existing asset and the new asset as well. So there -- so those numbers are also in public domain. And based on those numbers also, if you look at, there will not be a decrease in the NDCF in spite of the MVR going out of. And the investor who has invested, almost we have raised more than whatever the capital was there. So I think investor has invested considering that MVR will be going out and there will not be any decrease in the DPU.

Right, sir. Sir, my second question is on -- so we have been listed for almost 6 years now, and this is the first time that we have done a sizable acquisition. So what I'm trying to understand is that what is the other pipeline that is there for acquisition? Because I believe that we have a lot of headroom as far as the debt is concerned, we can raise a lot of debt. In fact, the debt we raised currently has also been at a reasonably competitive rate. So can you just give us a vision of how -- which assets are you considering? And when can we see newer assets coming into the portfolio?

I think 2 things. We have intend to reach this InvIT to INR 4,000 crores kind of AUM. It is earlier before beginning -- at the beginning of this year, it was close to INR 8,000 crores kind of AUM. Now it's almost INR 17,000 crores kind of AUM. We have intent to take it to INR 40,000 crores kind of AUM in next 2 years. Now there will be consistent addition of the asset. And a couple of things which I can highlight you that definitely, as you rightly pointed out, we are getting debt at a competitive rate. And second, that any further addition, if we are required to dilute also, the dilution will be in such a way that those addition and dilution should be even -- it will not be decreasing the payout to the existing unitholders. Our endeavor is to improve the payout of the existing unitholder even if we are not able to improve, but we will try to maintain the payout to the unitholder. So that is the strategy and objective of the investors.

So sir, when you say that from current INR 17,000 crores, we want to move to INR 40,000 crores in next 2 years, I think that is a big ask that you are actually putting in front of you. So I believe that we have a decent pipeline. So can you just share when -- so we are standing in Q4, let's say, by the next Q4, how many assets can we see that would be getting added in the portfolio?

I think at the beginning of the year when we have talked about we will be doubling the size of the asset from INR 8,000 crores to INR 16,000 crores before end of the financial year '26. That time also there were some questions in some -- mind of some of the investors that how we will be doubling the size within a year. So I think that we have delivered. And we believe that we will be able to reach INR 40,000 crores. In terms of the opportunity which is available, we have ROFO on some of the assets where the size is almost INR 45,000 crores to INR 50,000 crores. So I think out of that, we will be acquiring some assets, and we will be exploring the third-party asset as well as and when those will be available. But as far as ROFO is concerned, that is also itself is close to INR 50,000 crores kind of stuff. And that is already in the public domain.

Right, sir. Right, sir. So just again, wishing you all the best and a request to the team to be aggressive in acquiring more and more assets. I believe that this InvIT is grossly undervalued as compared to the other InvITs. And I think we have a lot of potential going ahead.

The next question comes from the line of Nilesh Doshi with Prospero Tree.

First time I'm attending the IRB InvIT con call. So my question may be known to you. Sir, I have gone through the quarter 3 result, and I understand that all assets are acquired by trust from either own funds plus borrowed fund. And the trust has to repay the borrowed funds with the interest at a regular interval at a predetermined interest rate. So if I go through the quarter 3 result, there was an operating profit of INR 372 crores and finance cost was around INR 190 crores. So the amount left for the unitholder is INR 182 crores or out of which INR 182 crores the trust is required to make the certain principal repayment also. And at the rate of INR 1.50 DPU, the INR 192 crores is the total distribution amount. So that means INR 182 crores is LAP, INR 192 crores is the DPU. And so what amount the trust has repaid during the quarter or what amount can be repaid out of this because out of INR 182 crores, if the DPU is INR 192 crores, that number is minus INR 10 crores. So I don't understand how the trust will repay the principal amount? Or is there no repayment? What, please, kindly explain, sir?

Yes. So I think I will explain how the accounting of the road asset work. Road asset, typically after 5 or 7 years, there is major maintenance required. And as per Indian accounting standard, we have to make a provision for the major maintenance and which is a noncash item. So I think if you adjust that, that will be -- basically that will be the increase your EBITDA. Secondly, in this quarter, I think around INR 25 crores or so, there was some transaction cost. Typically when you take a debt, that time there are some upfront fees and other things and which is onetime kind of cost, which you pay to the bank. So I think that is the exceptional kind of thing, which will not be there in the future quarter. And in terms of being required by the regulation also, we provide what kind of repayment is expected in next 2 years or even what kind of repayment will be there in the future. So I think that we anyway provide those kind of broad repayment. But just to explain you, in next 1 to 4 years, there will be 5% debt repayment. And in next 5 to 9 years, there will be almost 40% of the debt will be getting repaid. And 10th to 15th year, 100% of the debt will be getting repaid. You'll appreciate that we have life of -- weighted average life of 17 years. And there are some assets which is even life is more than 22 to 23 years also. So our debt will get repaid in the next 15 years and asset will have a life of around 23 years. So I think as the typical road asset goes, your repayment is on a ballooning basis because your cash flow will be consistently improving. So across this kind of segment, if you look at any other InvIT in the same sector, there will be this kind of ballooning repayment which will be happening.

But sir, if the repayment increase after the 5 years, then the DPU will reduce because the NDCF will reduce. Is it my understanding, that is correct, sir?

No, sir. If I am collecting INR 100 toll and if my toll is going to increase 10% per annum basis, after 5 years, my toll collection will be INR 150. So that's why I explained that though the increase in the toll revenue is around 10%, my increase in the payout is only 5% for next 5 years.

So extra repayment will be taken care by the extra growth -- revenue growth and extra NDCF. That is the prediction of the trust. Is it correct?

Yes, absolutely correct. And secondly, you will appreciate that there is O&M cost also. O&M cost does not increase by 10%. O&M cost hardly increases by 4% to 5%. So automatically, there is the -- EBITDA will be automatically expanding even beyond 10%, considering the O&M cost is fixed in nature, and there is 4% to 5% kind of inflation already built in there.

Sorry I summarized my point...

Sorry to interrupt, Nilesh sir, I would request you to please come back in the queue for further questions.

Let him complete this and then he can...

So sir, I summarize that. Currently, there is a lower amount of the repayment. So the trust is able to distribute the INR 1.50. If when the repayment amount will increase, there will be a growth in the revenue and NDCF. So that extra amount will take care about the repayment. Is it the correct summarized understanding?

Yes, sir, but with minor modification, the extra growth will be partially used to increase the payout and partly used to increase the repayment.

But sir, growth is the combination of the value plus volume. And if there is a WPI 0 or negative, then also trust is able to raise the toll by 3% or it will be less than 3%?

Yes, sir, it's an intelligent question. There is 3% fixed plus 40% of WPI. And if you look at historically also, we have seen WPI going at 14%, 15% also and coming down to 1%, 2% negative as well. But if you look at long term 3 to 5 years, typically, even if you look at RBI prediction, they are also projecting around 4% kind of inflation. So I think even inflation remains benign at around 2% or 3%, then also we will get around 4% kind of tariff revision. I would like to highlight one particular thing. I think the lower WPI case will be very positive for InvIT on 2 accounts. Today, we are paying interest cost of around 7.5% to 8% and if the WPI remains lower -- on a lower side, the saving in interest cost will be there. If I can explain you how the logic will work, I think the WPI -- I will assume the WPI remains 0. So I will lose -- 3% fixed will be there, and I will lose 2% of the revenue, which will be close to INR 40 crore kind of impact on my revenue side. And even if the WPI remains 0, then automatically, there will be interest cost saving. 2% kind of interest cost saving will result INR 160 crores kind of saving. So I will be earning 4 -- the net earning will be 4x. The net saving will be 4x as compared to what I will be losing. So I think the lower WPI scenario is better. And that also helps in terms of typically what we have seen when the WPI is on lower side, there we have seen an increase in the volume growth. And if you look at the last 3 to 4 quarters, there is a consistent increase in the volume growth. Some assets are even delivering volume growth itself around 7% to 8%. And in terms of the -- typically, if the WPI comes lower, then even the expectation of the unitholder and fixed income kind of thing will also come down. So I think the lower WPI will be beneficial for overall unitholder.

Okay. So only last thing. Sir, interest cost saving is possible only if we have a large portion of the floating rate debt. Otherwise, in the fixed cost, how the WPI negative or lower WPI will help the company and the trust?

Yes, sir. very intelligent question, sir. Sir, last year, we were paying close to 8.9%. And in fact, Rushabh has covered in his opening remarks, you might have missed that. We have saved almost 90 basis points on that particular cost. 90 basis points translates around INR 70 crores to INR 80 crores kind of savings. And if you look at the InvIT today has 80% to 85% that is floating. And I think whatever the benefit will be coming on account of lower WPI, that will get passed on. And our rate is -- 80% rate is linked with the 1-month MCLR. The moment there is change in the MCLR, we'll be benefiting out of that.

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

Congratulations on a good quarter. So my first question is that this is the fourth quarter -- fourth month of consistent double-digit growth for the assets. So right from October onwards, we have been growing like 11%, 16%, 10% and now 13%. Just wanted to understand -- so does it mean that now if this trend continues, so we will see upgrade in NAV and also potential upgrade in the DPU? So is it running ahead of your assumptions, your own assumptions? And how does it translate into NAV upgrade and the DPU upgrade?

Parikshit, you are absolutely correct that if the growth is consistent, then automatically, it will improve the NAV. And as per SEBI regulation, we have to distribute 90% of the cash flow. As of now, we are ahead of our own assumptions. And in terms of the traffic growth is very healthy. And if this performance continues for some more quarters, then definitely, there will be increase in the payout.

So look, faster than expected. So what you have highlighted 5%, 5%, 5% and 10%, 10%, 10%, so that then you'll get little upfronted because of this?

Yes, Parikshit.

Okay. And so from the asset addition journey towards INR 5,000 crore plus, I mean you need to almost INR 20,000 crores, INR 25,000 crores of sales incrementally. So if you can help us understand break this down into financial year like '27, '28, '29, so out of the asset block incremental addition of INR 20,000 crores plus, how will this happen over the next 2, 3 years annually?

So I think, Parikshit, we have intent to add at least INR 8,000 crores to INR 10,000 crores kind of asset every year. So probably we'll be starting the exercise in next financial year. And by end of FY '28, we should be able to do 2 or 3 tranches of asset addition. And with that, we should be reaching close to INR 40,000 crores kind of asset.

Okay. And my assumption is that whenever you add assets, so it should be deeply accretive to the shareholders or the unitholders. So have you factored any of that accretion in your DPU guidance, which you said that next year, 6.3% to 6.5% and then 5% growth. So any of that upside is factored in this?

No, Parikshit, we are factoring only existing asset. We have not factored any kind of interest savings or any kind of asset addition, which will be improving the payout.

Generally, it should be, right, whenever you do it, so it should add incrementally?

Yes. So if the -- our endeavor is basically, whenever we are adding the assets, there should be some addition in the payout. That is our endeavor. And we'll not be adding any asset, which will be basically -- which will be impacting my payout to the unitholder.

So no dilutive asset addition to the unit distribution and maybe slight or some positive, something you leave on the table so that the investors would approve this transaction. That's a broad assumption, right?

Yes.

Okay. So the impact of this NAV rerating, so how soon -- so next valuation update, when is it coming and seeing that you're already in talk and discussions with the valuation has increased on this aspect. So there is some scope of NAV seeing some upside on account of this?

So Parikshit, as per regulation, we have to submit a report -- valuation report within 2 months of the acquisition. We have already provided and where NAV is close to 79.5. So I think as of now if there will be a GSI, there will be reduction in the GSI, automatically, those benefit and rollover impact will be coming in the coming quarter as well.

No, no, sir, I was asking more on the growth being higher than expectation. So next set of valuation will only happen when you do new asset acquisition is what you want to say?

No, no. So I think March, we will have to do the valuation again. And if the growth continues in the same manner, then definitely that will also improve the NAV.

And in this year, sir, like even Timkur, Pathankot like older assets have also shown in this one, the growth of like 11%, 14% and the new ones are like growing 11%, 15%, 18%. So why such a big departure in growth like even on these 3 new assets, we are seeing substantial improvement in growth. And so what is driving this? And also if you can help us break this down into inflation and the volume impact? And when is the next set of inflation kicking in? I think from April, we'll again have some reset on inflation, right? So...

Yes. So last year also, we got a 3.3% kind of -- 3.2% to 3.3% kind of tariff revision. This year also, it is expected because it's linked with the December WPI, that -- WPI is already free. So we are expecting around 3%, 3.2% similar kind of increase in the inflation. Now there is significant increase in the traffic, not only on our asset, but overall across India. So that is on backdrop of the resilience in the Indian economy. We have seen, I think, probably the government machinery has started acting. And we have seen the increase in the traffic. If I will to discuss the segment-wise, the CAR growth is around 12% to 15% and in terms of the commercial vehicle also, we have seen a healthy growth around 6%, 7%. It's across segments. Some segments are outperforming, but there is growth across the segment in terms of the traffic is concerned.

But this is -- like I'm talking about 18% Hapur and 15% Kishangarh. So what is -- these numbers are like totally much, much higher than the expectation. So what is -- was more like [Foreign Language] 7%, 8%, you're talking about 10%, but these are 18% kind of growth?

So 7%, 8% is on a portfolio basis. So there Hapur, I can explain because it's closer to Delhi, their composition of CAR is much higher. And there are certain tourism places, since composition of CAR is much higher, that is leading this kind of growth.

And lastly, even in February, are you seeing a similar trend like double-digit growth and now we already have 11, 12 days. So if you're monitoring it, so is the trend still continuing or not?

Growth continues as far as Jan is concerned. And in fact, if you look at Jaipur Deoli, which was not in line with the performance. But because the Jaipur Deoli also has a mining traffic, so that gets impacted during monsoon quarter and if the winter is severe. If you look at the Jaipur Deoli also, we have witnessed around 18% growth in the month of January, and that trend is continuing.

So in Feb also this trend is continuing across the assets?

Yes, yes.

The next question comes from the line of Shubham Sonkar with Kotak Alternate Asset.

Hi, Anil, Rushabh. So my question is regarding the acquisition of new HAM asset, which you mentioned. So post this acquisition, where do you see the net debt to AUM, where is the LTV standing today? And from -- and the other point that I wanted to highlight is the valuation report assumed the cost of debt of somewhere closer to 7.3-odd percent for the acquisition of this asset. I think you mentioned that the actual cost ended up being 7.5-odd percent, which is a slightly bit higher. So what could be the impact of that in terms of overall IRR when you acquired this asset?

Just on the first part. So in the result, we have provided the net debt to AUM. So in that we have considered the VM7 HAM asset as well. So net debt to AUM as on 31st December is close to 44%.

And in terms of the debt cost, earlier, we got NCD at 7.3%. And we were also contemplating whether to go for the NCD or bank debt. So this we have taken a bank debt and bank debt is a floating rate. So I think what as a management we have decided, we believe that there may be a certain reduction in the interest cost. And being a HAM asset, if we get interest rate closer to 7% or below 7, at that time, we will try to lock in interest rate for this asset. Since the rate of NCD and rate of bank debt was similar, we have tried to close with the bank debt. And we don't believe that there will be any impact on the IRR of the project.

Understood. And one other question in terms of DPU, you mentioned 6.3% is what you are expecting somewhere from next quarter onwards because the acquisition is already complete for the HAM asset. In terms of NAV, post this acquisition, is there any upside that you see from this because since we have acquired it using -- primarily using debt only. So is there an upside to that 79.5% number that you mentioned?

Yes, there will be an uptake in the valuation considering that it's acquired through debt. So there will be some uptake. But considering the size, it hardly contributes less than 10%. So accordingly, the impact will not be that significant, but definitely, there will be an impact in the NAV.

Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments.

I would like to thank all the investors and analysts on the call. Hope you have a good weekend. Thank you.

Thank you, sir. 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 line. Thank you, and have a great day ahead. Thank you.