Powergrid Infrastructure Investment Trust (PGINVIT.BO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the PGInvIT Q1 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mohit Kumar from ICICI Securities. Thank you, and over to you, sir.

Thank you, Visakha. Good morning. On behalf of ICICI Securities, we welcome you all to the Q1 FY '26 Earnings Call of PGInvIT, or Powergrid Infrastructure Investment Trust. Today, we have with us from the management, Mr. Naveen Srivastava, Chairman; Mr. Sanjay Sharma, Director; Mr. Amit Garg, Director; Shrimati. Neela Das, Chief Executive Officer; Mr. Gaurav Malik, Chief Financial Officer; Mr. Shwetank Kumar, Company Secretary and Compliance Officer. Without much delay, I will start with brief opening remarks followed by Q&A. Thanks, and over to you, sir.

Thanks, Mr. Mohit. Good morning, everyone. On behalf of POWERGRID Unchahar Transmission Limited, the investment manager to PGInvIT, I extend my sincere thanks to all the participants for taking time out of their busy schedule to join this call. I am joined today by Mr. Sanjay Sharma, Director; Mr. Amit Garg, Director; Ms. Neela Das, CEO; Mr. Gaurav Malik, CFO; and other senior officials. On August 5, 2025, PGInvIT announced its financial results and distribution for the quarter end June 30, 2025. These have been disclosed on both stock exchanges and also published on our website. A detailed presentation on Q1 FY 2026 results have been uploaded on our website. In the interest of time, I will not walk you through the full presentation but we'll instead provide a brief summary of the key highlights. Let me begin with a brief interaction of the trust for our new investors. PGInvIT is India's first infrastructure investment trust sponsored by Maharatna Central Public Sector Enterprise, CPSE, Power Grid Corporation of India Limited. PGInvIT's units priced at INR 100 per unit at the time of IPO, were listed on the stock exchanges on May 14, 2021. Since then, our investor base has grown significantly from approximately 15,000 at the time of IPO to around 200,000 now. We are deeply grateful to our diverse group of investors for their continued trust and confidence in PGInvIT. Currently, PGInvIT holds 5 special purpose vehicles, SPVs, with 100% equity ownership in each of them. These SPVs operate transmission assets comprising of 11 transmission lines, spanning approximately 3,699 circuit kilometers and 3 substations with a combined transformation capacity of 6,630 MVA. The average remaining life of the transfusion service agreement, TSA is over 27 years. PGInvIT is built around a strong AAA value proposition that is AAA's, assets, assurance and advantage. Assets, fully operational, revenue-generating transmission assets with a robust operational track record and consistently high availability. Assurance, a 35-year contract period under the Tariff Based Competitive-bidding TBCB mechanism, ensuring stability and eliminating regulatory uncertainty. PGInvIT also benefits from strong backing of Power Grid, one of the world's largest transmission utilities, serving as both sponsor and project managers. Advantage, availability-based tariff offers high visibility on cash flows, while PGInvIT's low debt levels support a scalable debt-funded acquisition strategy. PGInvIT is committed in delivering consistent, stable and predictable returns to its unitholders. Distribution. Now moving to the distribution. You would be aware that distribution of INR 3 per unit has been announced on August 5, 2025, for the quarter ended June 30, 2025. This is aligned with our guidance of INR 12 per unit for fiscal '25-'26, as communicated in our -- in May 2025. This marks the first distribution for fiscal 2025,'26 and the 16th consecutive quarterly distribution since our listing. The distribution will be paid to unitholders on or before August 18, 2025. With this, the cumulative distribution by PGInvIT since listing stand at INR 49.50 per unit, translating to INR 45.05 billion distributed to unitholders since the IPO. All our distributions, including the latest INR 3 per unit are in full compliance with our distribution policy and SEBI regulation, which mandates distribution of not less than 90% of the net distributable cash flows and DCF to unitholders. I would like to reiterate that in line with our policy, distribution will continue to be declared and paid at least once every quarter. Now coming to the highlights of the quarter ended June 30, 2025. Operational front, leveraging the latest technologies, our project manager ensured the safe and efficient operation and maintenance of the transmission assets throughout the year. As a result, each of the SPVs, consistently achieved availability levels exceeding the target benchmarks. Based on the provisional data, the average availability during Q1 FY 2026 was over 98% across all SPVs. Please note that this data is provisional as monthly availability certificate for most SPVs covering the period April '25 to June '25 are still awaited from respective regional power committees, RPCs. I'm pleased to share that like the previous quarter, Q1 FY '26, was accident-free across all the 5 SPVs, underscoring our commitment towards the safety. In line with our focus on safe operations, we conducted regular fire and safety drills for our teams. Additionally, a range of functional training programs, including those on ESG practices and cybersecurity were organized to keep our operational team updated with the latest developments. You may be aware that one of our SPVs, PPTL, is currently implementing a project under Regulated Tariff Mechanism. The project titled implementation of 400 kV Line bay at 765/400 kV Parli new substations for RE interconnections. This was awarded to PPTL by CTUIL and CERC has granted the transmission licensing. I'm happy to inform you that this work is underway, and we expect to commission the project within the time schedule. Now let us come to the financial highlights. During Q1 of FY 2026, PGInvIT reported a total consolidated income of INR 3,250 million, comprising revenue from operations of INR 3,133 million and other income of INR 117 million, primarily from interest on deposits and surcharge income. Total expenses at the consolidated level stood at INR 1,203 million for the quarter. The net distributable cash flow, NDCF, calculated at SPV level has been disclosed along with the consolidated financial results on the stock exchanges. The trust received cash flow from SPVs in the form of interest income, dividend income and debt repayments. In line with SEBI InVIT regulations and PGInvIT's distribution policy, over 90% of the SPV NDCF was upstream to the trust by June 30, 2025. The NDCF at PGInvIT level for the quarter ended on June 30, 2025, stood at INR 2,758 million. A distribution of INR 3 per unit has been announced, comprising INR 1.76 of interest component, INR 0.37 of the taxable dividend, INR 0.07 of exempt dividend, INR 0.78 of repayment of SPV debt and INR 0.02 of treasury income. This distribution represented 99% of the NDCF at the PG InVIT level for the quarter, exceeding the minimum 90% threshold mandated by SEBI and outlined in our distribution policy. As on June 30, 2025, PGInvIT had external borrowing of INR 10,702 million raised from HDFC Bank to partially finance distribution in March 2022 and December 2024. These are floating rate loans linked to the 3-month T-bill and repo rate. As on June 30, 2025, net borrowing ratio stood at approximately 5.21% providing ample headrooms for future acquisition through debt. PGInvIT continues to maintain the highest credit rating AAA with stable outlook from all 3 rating agencies that is ICRA Limited, CRISIL Rating and CARE Rating. Bill trade receivables as on June 30, 2025, stood at INR 939 million, equivalent to 27 days of billing. Now coming to outlook. Regarding acquisition from private transmission developers, we continue to actively evaluate opportunity. However, current availability on the operational ISTS assets is limited. According to latest CEA report, there are 40 ISTS transmission projects under construction by private transmission service providers. Apart from above projects under construction, various projects are under planning and bidding stage as well. Further as for National Electricity Plan regarding transmission in October 2024, an investment of INR 9.16 lakh crores is planned up to 2032 for development of transmission system. This project will become viable investment opportunity for vehicles like PGInvIT once they are commissioned and completed 1 year of operations. We are also monitoring how state governments respond to the Government of India guidelines to monetize their transmission assets to support their capital expenditure plan. While this presents a promising avenue, it remains a nascent and evolving space, and we anticipate a longer gestation period. PGInvIT is actively engaging with various stakeholders to help open up the state transmission market for investment. In order to explore yet another method of value accretive growth, PGInvIT is looking to undertake development of transmission projects under TBCBs to capitalize on the huge pipeline of transmission projects, which are under different stage of planning and bidding. In this regard, the Board of the Investment Manager of PGInvIT and Power Grid have separately granted in-principle approval on the proposal of forming a consortium between Power Grid and the lead partner, and PGInvIT as other partners for participation in up to 2 tariff-based competitive bidding projects with an aggregate total estimated project cost of INR 500 crores. As you may be aware, InvITs are permitted to invest up to 10% of their asset value in under construction projects. Within the regulatory limit, PGInvIT will evaluate bidding for TBCB projects. We firmly believe that PGInvIT enjoys a significant competitive advantage owing to ample headroom for debt-funded acquisition and a robust and scalable investment platform and strong investor confidence from both institutional and retail investors. We would like to reiterate that all proposed acquisitions will be thoroughly evaluated for their suitability to PGInvIT based on the operational history in accordance with the InvIT regulation, compliance with statutory and regulatory requirements, alignment with the PGInvIT's corporate governance framework and overall benefit to the unitholders. As mentioned during our previous call, we would like to reiterate our distribution guidance of INR 12 per unit for fiscal 2026, consistent with total distribution made for fiscal 2025. Thank you once again. And with that, I would now like to hand over to the moderator for the next part of the proceedings. Thank you.

[Operator Instructions] The first question is from the line of Aniket Nikumb from ABN Capital.

Hello, am I audible, ma'am?

Yes, sir, you're audible.

My first question is maybe a little bit in relation to the comments you made earlier. Could you talk and give us a little bit more detail on how are we thinking about bidding jointly with Power Grid on the 2 new proposed TBCB projects? And what would the -- what would our capital contribution potentially be? And how does that impact our growth prospects?

Regarding this bidding process, both the Power Grid Board as well as PGInvIT Board has given an approval to bid the project within estimated cost of INR 500 crores. We both are going to make consortium and we will be the -- will our first attempt to bid for the TBCB projects for the small projects. And as we tell you that Power Grid will be the lead partner and PGInvIT will be the other partner acting through a holding company. And we will see that this is within permissible applicable laws and rules and regulation surplus. And I already told you that Power Grid will be the lead and PGInvIT -- because PGInvIT alone will not qualify for the technical requirements outlined in the standard bidding documents of TBCB. So this way, we are going further and aggregated cost, which we are going to put it, it is around INR 500 crores.

Okay, sir, that's helpful. Would it be fair for us to sort of think of, this now has a policy where PGInvIT will be open to looking at TBCB projects potentially with other people as well and put us back on the growth path? I think 1 of the things even in previous conference calls that have been discussed is, how do we sort of go back on the growth path in terms of either acquisitions or new projects. So just want to understand how does the management think in terms of newer opportunities in that [indiscernible].

As in my statement, I already told you that InvIT are permitted to invest only up to 10% of their asset value and under construction projects. So these are the first steps we are going ahead. And surely, we will -- once we move in that direction, we will review in the -- with the other partners also.

The next question is from the line of Sunil, an individual investor.

I think in my opinion, I think given how government kind of flip flopped on providing POWERGRID's assets for you, I can understand your constraints, and you have tried your best to do whatever possible to maintain the consistency in Q. But having said that, I mean, you have pretty much similar borrowing rates as any other private InvIT. So I mean, there must be some private sector operational projects that are available in current situation that -- I mean -- like if you are able to get something, I mean, how -- I mean, is the process going to be long drawn or is it going to be quicker like any other private player?

As far as Power Grid, this is I can say that you must have listened to the Power Grid in the recent earnings calls. They have expressed that their preference for the separation over InvIT-based monetization as a fundraising strategy. So this is the -- what, as you all also told that part also. And as far as acquisition is [indiscernible], at present, we have a limited acquisition opportunity at present in the private sector. Most of the operational assets are with the long-term holders, but the sector may see more assets coming that INR 9.16 crores is going to be invested. And once it is completing 1 year of operation in the coming years, of course, it will be having a opportunity to us. And further, as -- some states are also thinking of their -- monetizing their transmission asset for CapEx and other fund requirements. We are looking in that direction also. Thank you.

Okay. Just to add 1 more question to that. So how long do you think the state government monetization? I mean, what do you feel like is it going to be in the next the fiscal year or another year or two, what is exactly your feeling so far based on the progress?

Let me tell you, sir, you must be knowing that on December 6, 2024, CEA, Central Electricity Authority in the collaboration with PGInvIT, has organized a workshop also. And where they have told that monetization of transmission assets to be done by state transmission utilities also. And we saw a participation of almost over 20 state representative. And that way, we are moving towards that. Further discussions are being held and various stakeholders, they are putting their key concerns somewhere, and we are under discussion with them. And really, if your state level monetization of transmission give traction, it will -- could create a new opportunity. It's going to be a good opportunity for us because they also require funds for their projects also. And -- but I can say, one, it is the policy decision of the state. It requires -- it's having various factors also. But we anticipate that procedure may take -- will surely come out some time. I cannot tell you any date like that. We do not expect that 1 year or something, but we should see that really in 2 to 3 years, there should -- there will be some traction in that.

The next question is from the line of Kavyan Shah from ICICI Prudential AMC.

So my question is with regards to the -- from the NDCF statements of the SPVs. Our cash flow from operations for this quarter comes to around INR 276 crores, whereas for quarter 4, it was around INR 355 crores. For Q1 also, Q1 FY '25 and Q1 FY '26 are more or less on par. So was this -- what was this uptick in Q4 FY '25 attributable to?

There were 2 factors -- there were 2 factors for this. First, being that we acquired 26% balance stake in 4 of the SPVs during December '24. So that was the one thing. And the other thing was that earlier we were accounting or upstreaming the dividends from the underlying SPVs during the quarter wherein the distributions were being made. So from April 1, '24, it was changed so that you can account for the dividend even in the next quarter. You can receive it in the next quarter and account for in the -- for the NDCF purpose for the current quarter. So those were primarily 2 reasons which created that kind of a differential. Going forward, it will not be that different. So that was the one-off thing which has been done and dusted.

Okay. So that -- with the 26% acquisition as well as the dividend distribution that you mentioned, would that number be reflected in the cash flow from operations level in the NCDF statement? Or is that a subsequent [indiscernible].

No. If we talk about the [Technical Difficulty] NDCF at the stand-alone level, so at the stand-alone level, it will almost remain same because what we account for in the NDCF on majorly 3 things: one, being interest; second, being dividend; third, being capital repayment. So all these 3 factors will not undergo a major change unless and until there is a major dip in the revenue, which is expected post effect from '27-'28, so it will be in the same range only. There might be minor differences to the extent that sometimes we feel that a bit more has to be capped at the trust level. So there might be some minor differences going forward. But majorly, it will be in the same line.

The next question is from the line of Nilesh Doshi from Prospero Tree, [ PMS ].

Am I audible, sir?

Yes.

Sir, my question, maybe -- it may be the repeated question. But what I would like to say that since the listing of PGInvIT, no asset is acquired except the balance stake in SPV. And now the interest rate is favorable. Our debt equity ratio is around 5-point-something percentage against the some listed competitor in the same field. Our debt-to-equity ratio is more than 60%, but no acquisition was made. And repeatedly, it was mentioned by the management in each and every con call that no operating asset is available, so they could not acquire. But sir, if no asset is acquired, then the -- how the distribution can sustain at the current level, how the business can grow? And if the distribution is not maintained at the current level, then the unitholder may lose their wealth creation proposition. In that case, how do you think about the for the [indiscernible] plan for the InvIT itself?

All right. Doshi G. I understand the things which we are -- what you are telling also. But I can say very well, I have told in my opening remarks also, yes, we are looking forward by seeing the National Electricity Plan of INR 9.16 crore investment, we can see that part. There will -- massive investments are coming for equity, if they will require, they have to further monetize their assets once the 1 year has passed. Secondly, I already told you in the state level, we are under discussion. CEA and others are also putting up the [indiscernible] circulars to monetize their assets to the states also, we are looking at that also. Now we have made a consortium with Power Grid, we are planning to make it. And now both the Board of Directors have approved that. And we are in the process of that, 1 or 2 projects we are going to [ win ], see that we are take up to INR 500 crores. Further, we are going in RTM projects, which I already told in Parli, it is INR 25 crores. I tell you that we are further moving in that direction. And I'm sure that you will see some good results within 1 year or 2. Some THE -- once these projects will end the operations and then the 1 year will pass, surely, it will give a lift to our asset growth. That is from my side.