IRB InvIT Fund ($540526)

Good morning, ladies and gentlemen. Welcome to the IRB InvIT Fund call hosted by the company for discussing the financial results for the quarter and year ended March 2026. We have with us on the call today, Mr. Anil Yadav, Mr. Rushabh Gandhi and Ms. Swapna Vengurlekar from IRB InvIT Fund 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 Gandhi to give you an overview of the significant development during the quarter. Over to you, sir.

Thank you. Good morning, everyone, and thank you for joining us for the earnings call to discuss the performance of the Trust for the quarter and year ended March 31, 2026. We appreciate your continued interest in the Trust and hope you have had the opportunity to review the financial results and the investor presentation circulated earlier. Financial year '26 has been a landmark year for the Trust. Over the course of the year, we materially scaled up the platform through a set of strategic acquisitions, further strengthened the quality and duration of our portfolio, improved geographic diversification and continued to deliver healthy operating performance across our assets. This development reinforced the Trust positioning as a resilient infrastructure platform with visible long-term cash flows and a clear focus on delivering stable and growing distributions to the unitholders. During the year, we have completed the acquisition of 4 road assets comprising of 3 BOT and 1 HAM asset with a cumulative enterprise value of around INR 9,600 crores. These acquisitions have been consistent with our stated strategy of pursuing value-accretive opportunities that enhance the portfolio scale, diversify revenue sources and extend the duration of cash flows. With these additions, the average residual concession life of the portfolio has increased from around 14 years to 17 years, improving the long-term visibility of earnings and distributions. In parallel, our geographic footprint has also become more diversified with expansion into 2 new states such as Uttar Pradesh and Haryana, both of which offer attractive economic and traffic growth potential. With the completion of Vadodara–Mumbai Package 7 HAM acquisition in February 2026, which was effective from 1st of December 2025. The Trust portfolio now comprises of 10 operational assets, including 8 BOT and 2 HAM assets. Our cumulative operational lane length stands at 4,445 kilometers and the total enterprise value of the portfolio has increased to approximately INR 18,250 crores from INR 7,800 crores a year back. We believe this scale enhancement is important not only from a growth perspective, but also from the perspective of risk diversification, operating efficiency and long-term cash flow resilience. Operationally, the portfolio continued to perform well during the quarter as well as for the full year. The newly acquired assets have also integrated well into the portfolio and have performed better than our expectations. The toll revenue growth for the recently acquired assets was around 14%. The performance of these assets has been exemplary and the recent addition of assets, especially the HAM projects has led to 7% increase in the payout. On a consolidated basis, the toll revenue grew by 11% during the quarter and year as well, driven by both organic growth and recent acquisitions. A key priority for the Trust remains the delivery of predictable and sustainable distribution. The enlarged portfolio has strengthened our cash flow profile and enhanced the medium-term visibility of distributions. As the newly acquired assets begin contributing for a full period, we expect the benefit of scale and portfolio maturity to support further stability in the distributable cash flows. We are also pleased to note that the Trust continues to maintain a strong credit rating profile. Our AAA ratings have been reaffirmed by leading credit rating agencies, reflecting the stability of underlying asset base, the robustness of the Trust structure and our prudent approach to leverage and financing. During the year, we were able to raise acquisition financing at competitive rates, which underlines the confidence of lenders in the quality of our platform. Overall, the financial year '26 has been a year of disciplined growth and strategic execution. We have expanded the Trust meaningfully while preserving financial strength, maintaining operational momentum and remaining focused on long-term value creation for our unitholders. Looking ahead, we believe the Trust is well positioned for the next phase of growth, supported by our larger and more diversified portfolio, strong asset level fundamentals and a disciplined capital structure. We expect this to translate into sustainable growth in cash flows and distributions over the medium term. At the same time, we remain focused on ensuring that any future acquisitions are executed in a manner that is non-dilutive to our unitholders. Further, the Trust continues to have a strong future growth visibility through ROFO assets aggregating around INR 65,000 crores from IRB Infrastructure Trust, along with additional HAM assets from the sponsor. This provides a robust pipeline of potential acquisitions that can further strengthen the trust over the coming years and offer significant headroom for scalable growth. In addition, the Trust has received a preliminary and nonbinding offer from the private trust for a potential acquisition opportunity pursuant to the ROFO with respect to Solapur Yedeshi and Chittorgarh Gulabpura project, aggregating to 1,144 lane kilometers length with an enterprise value of INR 4,663 crores. We are in the process of evaluating this opportunity. Coming to the financial analysis, we would like to highlight that the year-on-year comparison is strictly not like-for-like given the acquisition of multiple assets during the course of the year. Accordingly, the current period financials reflect the impact of expanded portfolio, along with associated financing, depreciation and transaction resale effects. For the full year, the Trust reported a consolidated total income of INR 1,582 crores as compared to INR 1,110 crores for the previous year. Consolidated toll revenue increased to INR 1,270 crores, driven by healthy underlying traffic growth in the base portfolio and incremental contribution from the newly acquired assets. EBITDA for the year stood at INR 1,270 crores, reflecting both scale benefit and the inherent operating leverage of the portfolio. Interest cost for the financial year was INR 519 crores, whereas depreciation and amortization for the year stood at INR 380 crores. Profit after tax for the financial year '26 came in at INR 339 crores. In line with our stated objective of delivering safer and predictable returns to the unitholders, the Board has declared a distribution for the fourth quarter of INR 205 crores, which translates into INR 1.6 per unit, 7% growth as compared to trailing quarter. The distribution comprises INR 1.44 per unit in the form of interest, INR 0.12 per unit as a return of capital and INR 0.04 per unit as dividend, which is ex dividend. For the full financial year, the Trust has declared a cumulative distribution of INR 6.6 per unit. Operator, we can now open the floor for Q&A.

[Operator Instructions] Our first question comes from the line of Nilesh Doshi from Prospero Tree AMC.

Thank you for declaring the higher distribution. Sir, my first question is related to the business because there is inflationary pressure is felt because the petrol and diesel prices are high. And so there may be a chance -- number of vehicle pass through our expressway will be less than we expect. And on the another side, there may be a chance of increment in the interest rate. So we -- most of our debt is floating. So what will be the -- how the business will be in the FY '27 in this respect, the inflationary pressure as well as the toll revenue may reduce because of the lesser traffic on our highways?

So basically, there are 2 parts. One was regarding the traffic. So during the financial '27, we have received a tariff revision of around 2.5% and in the month of April also, we have seen robust traffic. So our traffic revenue for the month of April was around 9%. So having a diversified portfolio gives that particular benefit to us. So geographically, diversified assets are there. So we believe that during the current financial year, the revenue growth should be in the range of 8% to 10% for the entire portfolio. And coming to debt part, we have a mix of fixed and floating rate. So our current weighted average cost of debt is around 7.75%, which has a mix of NCD part as well as the term loan, and term loan is linked to MCLR rate. So we don't foresee any significant increase in the MCR rate per se.

But because -- now the fuel price hiked by INR 3, and there is a chance that the further hike may come. And so there will be some impact on the traffic. So our toll revenue will reduce. And on the other side, if the interest rate -- our interest cost will be high, so then our net distribution cash flow may reduce. That is our concern, sir.

We do not foresee that particular challenge. But the positive part is we have fixed price O&M contract. So on the maintenance part we have fixed price context wherein the outflow are fixed. So, the fuel price may just fluctuation would be on the O&M part, but then having a fixed price context, [indiscernible] particular benefit and overall for financial year '27 we don't see a significant challenge, but may as and when we go through the year we can look in to this particular thing.

Okay, sir. And sir, you just mentioned that you have received a nonbinding offer from the private trust and enterprise value of that 2 projects is around INR 4,600 and something crores. And you also mentioned that further acquisition will be non-dilutive. It means the further acquisition will be through the debt and so will it be acquired in the current year, it is a proposal and so what will be our debt composition post this acquisition and what could be the interest rate on that debt.

Basically sir, we have received a nonbinding offer from the private trust for acquiring 2 assets. The enterprise value of these 2 assets is INR 4,660 crores and what we -- so the current leverage is around 43%. So we can go up to 49% as per the current debt approval part. And the acquisition would be an optimum mix of debt and equity. So we won't go entirely out of debt because the current leverage is 43%. But the current portfolio life is around 16 to 17 years.

So that may be a chance of further dilution because the 49% in the -- we acquire only through the debt, then we may reach the maximum limit also of the debt raised. So, is there opportunity for further dilution?

Ladies and gentlemen, the management line has been disconnected. Please stay connected while I get them reconnected. Thank you. Ladies and gentlemen, the management line has been reconnected. Nilesh, I would request you to repeat your question.

Okay, okay, okay. Fine. Sir, just you mentioned that the current debt level is the 43% and the maximum limit allowed is 49% and for -- suppose we acquired the proposed asset through debt, then we may reach the 49% or we will do some dilution and the part of -- part funding through the debt. Is it possible?

So currently, the weighted average life of the portfolio is around 17 years. And the assets which we are acquiring also around 16 to 17 years. So then if we go for this acquisition, it won't be dilutive for the unitholders. And we'll go for an optimal mix of debt and equity. It would be an optimum mix.

And both projects are the HAM project or BOT project, sir?

Both are newly built. One is situated in the state of Maharashtra and another in the state of Rajasthan.

Okay. And sir, my last question in April 2026, the toll collection press release, there was a one project Tumkur where you mentioned that April 2025, I repeat April 2025 collection, you mentioned the INR 344 million whereas in May 2025, in the press release it was INR 393 million. Why there was a reduction from INR 393 million to INR 344 million?

Yes. So in case of Tumkur project, so authority had provided us additional stretch or collection wherein we were only collecting the toll and we were remitting 97% of that toll collection to the authority. And 3% we were just retaining as a event for them. So from April '26 this particular stretch, NHAI themselves are collection. Accordingly we are not collecting that particular collection and so collection is net of that bypass. So if we consider the previous year also for the entire financial year, the contribution, net 3% contribution was around INR 1.5 crores only.

So INR 344 million belongs to the IRB InvIT only or still there is some component for the other party?

So the revenue share part is not there. But nevertheless, there is a premium payment in Tumkur, which we are paying on annual basis. That is it, but this collection is on gross basis, which will accrue through a trust.

Okay, okay. Sir, last question. Sir, our distribution is not that bigger, because a large portion of the distribution comes as a interest out of the INR 1.66, INR 1.44 is units component and the net impact of post-tax returns is reduced. Is there a chance that we -- there will in the large portion of the dividends which is exempted in the hands of the [indiscernible] of the capital repayment, anything is there?

So typically, sir, for any portfolio when the underlying SPV generates cash flow, so the first preference would be dividend. So if that SPV generates good profit, then we go for dividend. Then thereafter we go for interest on the outstanding debt, the interest is paid to the trust. So currently for the entire portfolio, the debt in a trust level. So there is no external debt at the SPV level. So the second preference would be to distribute in the form of interest. And thereafter, we have to comply with the 90% regulation requirement. So that goes in the form of return of capital. So typically, when any asset comes to the fag end of the concession, at that time, it starts generating good profit and the distribution happens in the form of dividend, which in case of MBR was there. So thereafter, in case of HAM asset, if the generation is above the interest distribution, then we go in the form of return of capital. So typically, it would be in ratio of 80% in the form of interest and 20% may be in the form of dividend and return of capital.

[Operator Instructions] Our next question comes from the line of Rushabh Sharedalal from Pravin Ratilal Wealth.

Congratulations. Finally, we are seeing some traction coming back in IRB. I have broadly 2 questions. The first is on the current net distributable cash flows. So if I see your Slide 29, the FY '25 NDCF was around INR 480 crores and FY '26 NDCF is around INR 706 crores. Now what I want to understand is that assuming that we had not acquired the assets that we have already acquired this year, what would have been the comparable net distributable cash flow? And along with that, you have said that you expect a revenue growth of around 8% to 10%. That is what you said in your remarks to the previous participants. So what I want to also know is that how much of that would translate into the NDCF for FY '27? Yes, that's question number one.

Yes. So broadly, if you look at the NDCF for FY '27. So what we believe it would be somewhere around 6.5%. So 3% to 5%. So in the fourth quarter itself, we have started improving the NDCF. So from next year, the distribution for the entire year would be somewhere around INR 6.5 per unit. And with regard to the current portfolio, the current portfolio have performed but the acquired assets have performed better than the current portfolio. So our distribution would be slightly on the lower side as compared to what we have distributed in the earlier year. So if you look at the overall toll revenue growth perspective, so our existing portfolio has performed, but it's on a lower side as compared to the acquired assets.

So is it safe to say that the existing portfolios NDCF for FY '26 was more than INR 481 crores. Is it safe to say that?

It would be slightly on a lower side, because if you look at the revenue growth, it was corresponding with the premium obligation, other obligation are still there, even the debt obligation.

Okay. Right, right. The next question that I have is on the 2 assets that you are planning to acquire in Maharashtra and Rajasthan, the enterprise value of which is around INR 4,600 crores. So how much of this -- first of all, when do you expect this -- the assets to come into the portfolio and start contributing? That's question number one. Also, you have said that this will not be dilutive to the existing unitholders plus the asset life for them is also similar to what we have currently. You are confirming all -- both these things, right?

That's right Rushabh. So basically, currently, we are evaluating this opportunity. So we'll take it to our Board. And thereafter, if the Board founds it suitable, we can take it to the unitholders approval. And broadly, if you look at the time line, so somewhere in Q2, we should be able to acquire this asset and the cash flow should start contributing from Q3 onwards.

Right. So what I want to understand is that how much more net distributable cash flow can these 2 assets start adding from Q3 onwards considering that the Omallur-Salem-Namakkal goes out of our portfolio from this year onwards, right? So the addition that will be done by these 2 assets. And if you can just give us some color on where are they situated and which national highways are they exactly situated? And will they be able to compensate more than what we are seeing the outflow for the Salem project?

So it will be premature to confirm any NDCF number for the proposed acquisition, but both the assets are situated in a geographically positive state. And Solapur Yedeshi is part of the Maharashtra and the other project, Chittorgarh Gulabpura is the [ convenient ] state of our KT project, which we recently acquired. And they are part of the Golden Quadrilateral also.

Both the projects are part of the Golden Quadrilateral?

Only the Chittorgarh Gulabpura project. [ Solapur-Yedeshi ] situated in the state of Maharashtra.

Right, right, right. Got it. So what you are trying to say is -- and you confirm that there will be no further equity dilution, right?

Yes, it will be yield accretive for the unitholders. There won't be any dilution for the unitholders. That's what we are seeing.

Right, right. So my only request again to the management is that we are grossly undervalued asset. And I request that you add more and more assets to the portfolio considering the kind of debt headroom that we have. That's my only request. Thank you and all the best.

Thank you, Rushabh.

Ladies and gentlemen, that was the last question for today. I would now request Mr. Rushabh Gandhi to give you an overview for the closing remarks.

Thank you very much. Thank you for being on the call. 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 lines now. Thank you, and have a great day ahead.