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

Ladies and gentlemen, good day, and welcome to the Power Grid Infrastructure Investment Trust Q2 FY '26 Earnings Conference Call. [Operator Instructions] I now hand the conference over to Mr. Mohit Kumar.

Thank you, Guda. Good morning. On behalf of ICICI Securities, we welcome you all to the Q2 FY '26 earnings call of PGInvIT. 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 now hand over the call to the management for the brief opening remarks followed by Q&A.

Thanks. Good morning, everyone. On behalf of POWERGRID Unchahar Transmission Limited, the Investment Manager of PGInvIT, I Naveen Srivastava, Chairman, extend a warm welcome to all of you. We truly appreciate your presence here today. I'm joined this meeting by Shri Sanjay Sharma, Director of PUTL; Shri Amit Garg, Director of PUTL; Shrimati Neela Ras, CEO PUTL; Shri Gaurav Malik, CFO PUTL; Shri Shwetank Kumar, Company Secretary of PUTL and Compliance Officer of PGInvIT, along with other senior officials from our team. Let me begin by sharing a few key updates. On November 4, PGInvIT released its financial results for the quarter and half year ended September 30, 2025, along with distribution details for the quarter. These are now available on BSE, NSE and our website, along with detailed presentations for the investors and public at large. I'm pleased to share that our investor base continues to grow steadily from around 15,000 unitholders at the time of IPO, we now have over 2 lakh unitholders as of September 30, 2025. This is a significant milestone and we thank each one of you for your continued trust and confidence in PGInvIT. For our newer investors, a quick introduction towards the trust. PGInvIT is a infrastructure investment trust sponsored by Power Grid Corporation of India Limited, a Maharatna CPSE, and India's largest power transmission utility. POWERGRID Unchahar Transmission Limited, a wholly-owned subsidiary of Power Grid, serves as investment manager and IDBI Trusteeship Services Limited act as trustee. PGInvIT currently owns 5 special purpose vehicles, SPVs, namely VTL, KATL, PPTL, WTL and JPTL. We hold 100% equity in all the 5 SPVs. Together, these SPVs comprises of following: number one, 11 number of transmission lines spanning approximately 3,699 circuit kilometers; b, 3 number of substations with a combined transformation capacity of 6,630 MVA. These are fully operational revenue-generating interstate transmission system assets implemented under tariff-based competitive bidding, mechanism on the build, own, operate and maintain basis. Each of these projects are backed by a 35-year transmission service agreement with an average remaining life of around 27 years, offering a long-term visibility and minimizing regulatory risk on transmission charges. These assets have demonstrated a strong track record in availability, reliability, safety and are supported by availability-based fixed tariffs under long-term TSA. This ensures high predictability of cash flow, which is key strength of PGInvIT. Backed by India's largest transmission utility as both sponsor and project manager, PGInvIT is fully positioned in the sector and remains committed to delivering consistent, stable and predictable returns to our unitholders. Let me come to the Q2 FY '25 distribution update. On November 4, 2025, PGInvIT announced a distribution of INR 3 per unit for the quarter ended September 30, 2025. This represents the second payout for the fiscal 2026 and marks the 17th consecutive quarterly distribution since our listing. Unitholders will receive this distribution on or before 17th November, 2025. With this latest payout, PGInvIT has now declared a cumulative distribution of INR 52.50 per unit since listing against an IPO price of INR 100 per unit, translating into INR 47.78 billion distribution to our investors. As highlighted in our previous earnings calls, we remain committed to our target of INR 12 per unit distribution for the fiscal year 2026. Our distributions are guided by SEBI InvIT regulations and our internal distribution policy, which mandates that at least 90% of our net distributable cash flow, NDCF, will be distributed to our unitholders. Let us now turn to the operational performance. Our transmission assets continue to operate with high efficiency and safety with support of our project managers. In Q2 FY '26, the average availability across all SPV exceeding 99.75% based on the provisional data. This performance not only reflects operational excellence, but also maximizes incentive potential. We are currently awaiting final monthly availability certificate from the respective regional power committees under Ministry of Power for the months of July to September 2025. A notable update on our SPV, PPTL. As you know, it is currently executing a project under the regulated tariff mechanism, the 400 kV line bay at 765/400 kV Parli new substation for early interconnections. This project was allocated by CTUIL and has received a transmission license from CERC. It is progressing well and is in the advanced stage. Project is expected to be completed by December 2025. Once completed, the tariff for the project shall be determined by CERC as per the prevailing regulations. Now let's look at the financial highlights. For Q2 FY 2026, PGInvIT reported a total consolidated income of INR 3,267 million, of which INR 3,166 million came from the revenue from the operations and INR 101 million from other income, primarily interest on deposits. Total expenses, excluding impairment, stood at INR 1,179 million. Now for the first half of FY '26, total consolidated income was INR 6,517 million, out of which INR 6,299 million are from operations and INR 218 million from other income. Total expenses, excluding impairment, were INR 2,382 million. The NDCF, the net distributable cash flow for Q2 FY '26 is INR 2,773 million and for the first half of FY '26 is INR 5,531 million. We are pleased to confirm that distribution amount exceeds the mandated 90% threshold and in line with the SEBI regulation and our policy. On the capital structure front, as on September 30, PGInvIT's outstanding external borrowing stood at INR 10,682 million. This is a part of the INR 5,756 million loan raised from HDFC Bank well in March 2022 to partially fund acquisition and INR 5,060 million loan, again raised from HDFC Bank in December 2024 to fund acquisitions. These are floating rate loans linked to the 3 months T-bill and the repo rate. Currently, the interest rate stands at 6.68% and 7% for the respective loans. Our net borrowing ratio is 4.8%, indicating ample headroom to fund future acquisitions entirely through debt. We continue to maintain the highest credit rating, that is AAA with a stable outlook from ICRA, CRISIL and CARE rating. As of September 30, 2025, billed trade receivables were INR 890 million with an average collection period of 26 days. Looking ahead, our growth strategy remains focused on acquiring operational transmission assets in line with InvIT regulations and unitholder interests. PGInvIT maintains a low leverage, giving us the flexibility to pursue debt-funded acquisition. However, we must acknowledge the key challenge, the limited availability of monetizable assets in near-term. This is a risk we have consistently communicated. That said, the sector outlook remains promising of investment of INR 9.16 lakh crores up to 2032 as per the National Electricity Plan. Between 2022 and 2032, India plans to add almost 1,91,474 circuit kilometers of transmission line and [ 12,74,185 ] MVA of transformation capacity at 220 kV and above. These investments will eventually become revenue-generating assets, creating acquisition opportunities for PGInvIT upon commissioning and successful completion of 1 year of operations. We are closely monitoring state level monetization initiatives. If state choose to monetize their operational transmission assets, -- it could unlock new opportunities. However, this will require sustainable policy advocacy and may take time. As shared during our previous earnings calls, PGInvIT is exploring a new avenue for value accretive growth by considering participation in the development of transmission project under tariff-based competitive bidding, TBCB, mechanism. This initiative aims to tap into the substantial pipeline of transmission projects currently at various stage of planning and bidding. In this regard, Board of the investment manager, PGInvIT and Power Grid has granted in-principle approval for forming a consortium with POWERGRID as a lead partner and PGInvIT as other partner to participate in up to 2 TBCB projects with a combined estimated project cost of approximately INR 500 crores. The modalities of the proposal is under discussion and PGInvIT will evaluate bidding opportunity as and when such opportunities arises in line with the regulatory limits and strategic priorities. With strong fundamentals, a clear strategic vision and robust pipeline of opportunities, PGInvIT is well equipped to navigate the evolving landscape and deliver sustained long-term value to our stakeholders. All potential acquisition will undergo rigorous evaluation, including operational history, regulatory compliance, governance alignment, and above all, suitability for inclusion in PGInvIT from a unitholder perspective. Now I want to thank you once again for your continued support and confidence in PGInvIT. We look forward to engage with you further during question-and-answer session. Over to Mohit.

The first question is from the line of [indiscernible] from ICICI Securities.

My question is on your partnership with POWERGRID for you can build for 2 TBCB projects estimated within INR 500 crores. Can you throw some light on when can we expect that? And overall, how the transmission pipeline is looking at?

Actually, TBCB projects, which we see is a great opportunity for us and to get into that, but limited to our -- there is a limit for -- we can quote into that. So we have sort of come with our sponsors and our mentor POWERGRID and POWERGRID has agreed for that. Both of the Board of Directors have already cleared this and it is under further approval and agreement session. And we see that -- actually, let me tell you that when we see that our cash reserves is almost cash balance is around [indiscernible] crores. And we have been permitted to invest up to 10% of the value of InvIT, which currently stands around INR 880 crores. So we cannot go in these large projects as of now. So we have started -- we have thought of going in a low project first and which is maybe first 1 or 2 projects of INR 500 crores by forming a consortium with POWERGRID. As per qualifying requirement, the bidders must have experience of developing large -- at least project of INR 500 crores in the last 5 years. And now we are thinking of going in that way. And we are hopeful that in near future, maybe in this financial year itself, if it is stand out, then we will come out with 1 or 2 projects.

Understood. Sir, my second question is, are you looking at any assets from private players, not just in transmission segment, but as well as in renewables? Anything on the horizon right now?

Yes, there is no doubt that we are thinking in that direction also because we have to further see that we have to expand ourselves. So -- but one thing is that our strength is in the transmission business. And so we are thinking of in that direction only. And we are seeing that, okay, once opportunity comes out in the solar also, we can think in that direction. But our focus is basically on the power transmission because we are pioneer and we are -- our core competency on that. And we are -- that's why we are evaluating going internally also by quoting in the TBCB projects. But we are also in touch with various states also that if they are able to monetize their assets. So we are moving in that direction, let's hopeful. But you know that there is -- at present, you see from last 3 years, 4 years, not a single state has come out with the monetization. So we are continuously fighting for that, and we see if we can get in that.

The next question is from the line of Akshay Ashok from Tata Investment. As there is no response, I take the next question from the line of Vipin Kumar Shah from Sumangal Investments.

So sir, my question relates to our joint venture with POWERGRID for bidding these assets up to INR 500 crores. So what is the pipeline? Means has there been any progress on that front?

Progress, in the previous question also I have told that progress is that both the Boards have already cleared that and we are taking approvals and that agreement is in the pipeline. And once it is clear cut and then we can go in that direction. Further, we can see that these areas because POWERGRID is also -- once it is cleared in their Board and we are thinking that we have to monitor the market also. We get the projects, which is INR 500 crores and less, it's coming up. And I feel that because almost -- which I've seen around out of INR 9 lakhs, at present only INR 3.5 lakhs is only tendered. The rest is -- INR 6 lakhs is there in market. So we will go in that direction. Let me further explain in that. These projects will be predominantly financed through debt with a minimal equity outlay. In this consortium, POWERGRID will serve as a lead partner, PGInvIT will participate as another partner. [Indiscernible] project-based issues and further details will be -- I'll provide you once the agreement is done.

So it will not be a 50-50 joint venture?

No, no, it will not be. It's not a joint venture.

Actually, as per the standard bidding document, the guidelines through which the TBCB bidding happens calls for a lead partner, which mandatory is required to hold 26% of the equity in that new SPV, which is being acquired. So POWERGRID has been gracious enough to give the major chunk, leave the major chunk for PGInvIT. So we will be holding the major chunk that is the 74% and POWERGRID will be holding the 26%. And we will be relying upon the qualification requirement of POWERGRID to qualify for those projects and bid accordingly.

Okay, okay. Means in that SVP, PGInvIT hold 74% and POWERGRID will…

That is correct.