Good afternoon, everybody. This is Natalia Olmos speaking. I would like to welcome you to this conference call. You are now in the main conference. Line muted. The recent announcement regarding Ferrovial's agreement to acquire 24% of IRB Infrastructure Trust. Just as a reminder, the presentation is available to you on our website. I am joined here today by Andrés Sacristán, Cintra's CEO, who will be leading this conference call, Ernesto López Mozo, Ferrovial's CFO, and José María Béjar, Cintra's CFO. At the end of the presentation, there will be a Q&A session.
As in the last conference call, you will have the opportunity to ask questions live. For that, you will need to join the conference call channel and press star five on your phone keypad. If you prefer, you can send them through the forum included in the webcast, and I will read them out loud. Please note that the Q&A session will refer exclusively to the IRB transaction. With all this, I will hand it over to Andrés Sacristán. Andrés, the floor is yours.
Thank you, Natalia. Hi, everyone. Thanks for connecting to this call. We're going to describe the transaction we announced last week in India. In this transaction, we acquired 24% stake of IRB Infrastructure Investment Trust, what we call the private InvIT called IRB, for EUR 740 million. This transaction is a balanced risk-reward transactions with capacity to create value immediately. We try to capture the growth in India's market with direct exposure to new projects. And with this, we will and we will reach a better alignment of interests among our partners. And with all this transaction, we complete our investment strategy of acquisitions in India, and now we are ready to capture the growth of the market.
Let me go first, before entering into the transaction itself, to review what IRB performance has been since our entry in December 2021, when we acquired 24.86% of IRB Infrastructure Developers. At that time, the price of the acquisition was INR 21. Since then, the company has had an EBITDA, a healthy EBITDA growth, with impressive asset increase that has been reflected by the market along this time in IRB share price, as you can see in the timeline above. IRB has also had good access to capital markets. In a recent transaction, they issued a $540 million bond. Also, today, is top of India in its class in ESG rankings and metrics. And more importantly, their TSR to date has an impressive value.
Now, let's talk about the transaction and the private InvIT itself, in which we acquired this 24% from GIC. The trust has a portfolio of 15 concessions, and out of these 15 concessions, three of them are under construction. It has a remaining average concessional life of 21 years, and both construction and operation risks are held at IRB Developers level, having only traffic risk at private InvIT level. Now, let's focus on the growth we see in the market. India is the fastest growing economy in the world. The consensus is that the GDP will grow over 6% in the coming years. All this translates in a necessity for infrastructure, and this most immediate necessity is led by logistic competition, but also the need for demographic needs, with an important middle-class population accessing to vehicles.
Indian government is conscious about this and had put in the market an outstanding plan for total development of EUR 23 billion. Our teams keep working to identify the best value opportunities within this plan. Finally, let's see how we agree the price with GIC. As you know, our teams has been contributing since 2021 to the growth of this company, and this contribution is reflected in the price of the new five assets on the portfolio that we acquired at good value. And the remaining ten assets, we bought them at fair market value. You can see the details of each of the assets in an annex to this presentation. As the new five assets became operational, we are going to create value immediately with this acquisition.
To summarize, this acquisition has a balanced risk reward with immediate value creation capacity. We are now better positioned to capture growth from substantial pipeline in the Indian market, and with this, we complete our acquisitions in IRB group, aligning partners' interests towards growth. Thanks for your attention, and now, Natalia?
Thank you, Andrés. Now, we open the floor for a Q&A session. Thank you.
Ladies and gentlemen, we will now begin the Q&A session. If you would like to ask a question, please press star five on your telephone keypad. If you change your mind, please press star five again. Please ensure that your device is unmuted locally before proceeding with your question. Our first question comes from Luis Prieto from Kepler Cheuvreux. Now your line is open.
Good afternoon, Luis. Luis Prieto here from Kepler. Thanks for taking my questions. I have three, if I may. The first one is, I would like to know what the IRR of the investment is. I'm asking in the context of high double-digit equity cost of equity that you use for high complexity assets in North America. I just wanted to compare what you've done versus what you've been doing historically. The second question is why GIC is diluting its exposure to the vehicle? And the third one is if there is any intention to reduce the complexity of the structure by collapsing it in any way or even list IRB Infrastructure Trust at some point in the future? Thank you.
Thank you, Luis, for the questions. Regarding IRR, we will keep our policy to be on the double digit. As in comparison relates, we always keep into account the market risk, and we, this is the case in this transaction. We took into account the India's market risk. So this is the adjustment we made to our policy to reach to the IRR of this transaction. Regarding to the rationale of GIC to sell to us or to diluting, I think that they appreciated from the beginning, which is our contribution to IRB with our knowledge and with our expertise. And I think that that's the main reason, because they sold to us.
They see, they see that value in that, and they see that, and the three of us together at private InvIT level , we will make the vehicle growth better. And regarding the complexity of the structures on IRB's board and the partners to discuss that, but today there's no discussions about that. Thank you.
Thanks a lot.
The next question comes from Sathish Sivakumar from Citi. Now your line is open.
Yeah, I got two questions here. So firstly, do you see further scope to increase your holdings here? Like, at some point, if GIC wants to dilute further, do you see scope to increase beyond your 24%? So that's one. And then is there any further lock-up involved with the GIC or the IRB, or post your acquisition, post your transaction? And then secondly, in terms of, do you have any visibility like, say, yeah, the concession life is 21 years, but if you compare with your other portfolio in North America, which have a longer concession duration, what is the, again, rationally your view go or see scope to increase the durational concessions, by bidding for the other projects here? Thank you.
Hi, Sathish, thank you for your questions. If I understood well, if we see further scope for GIC to keep selling us on private InvIT, we don't see that well today. There's no conversation on the table about that today. The second question, could you please repeat?
Yeah, any lock-
Because I didn't...
So is there any lock-up period for GIC? Is there any further lock-up period for GIC, just like not just to you either? They can't offload to anyone else for 12 months or 2 years. Just want to understand, just general lock-up.
You mean by lock-up, any veto or anything like that in the governance?
Yeah, it is more like in GIC, instead of selling it to you, can they sell it to IRB or someone else for the value at stake in the next six months or in the next three months?
No, there's no such thing in the structure.
They do have, like... There's no such restrictions on them. Yeah?
No. And the third one was about the term of the concessions?
Yeah.
These are market-driven, basically.
Yeah.
It's what high bids in the market, and that's what IRB has been tendering. I think that, depending on the complexity of the project and some terms of the concession are longer than others, but that's market driven. Thank you.
Okay, got one, one more side. Can I just ask one more? In terms of your cash investments into this structure, would you foresee, like, CapEx commitments coming through?
In terms of acquisition, I think I said that this is the latest and the last we have, basically, in our strategy. And in terms of CapEx to growth, private InvIT is cash flows, and it depends always on the speed and the size of the projects that will be awarded.
Okay. Thank you.
Ladies and gentlemen, I would like to remind you that if you would like to ask a question, you have to press star five on your telephone keypad. There are no further questions at this time. I would like to hand back to Natalia Olmos. Thank you.
Thank you. We have some questions from the webcast. First set of questions comes from Elodie Rall, from JP Morgan. What is the rationale of owning just 36% or a stake, and wouldn't be, wouldn't be better to consolidate the asset? It is adding to the complexity of the group for investors, especially U.S. investors?
Well, as you know, when we started to approach this in 2021, the current structure of the group was already there with these two companies, the Private InvIT and the Developers. Developers is listed in Mumbai, and the 24.9% is the top for going full takeover. So that's where we are going to stay. And equalizing our participation with IRB and Private InvIT is what makes sense from the point of view of the business. And collapsing or not, as I say, is a decision of IRB board, and there's no discussion about that at the moment. Thank you.
Next question from Beltrán Palazuelo from DLBB . What hurdle rate have you applied to the operating assets, and what hurdle rate to the asset in development? What rupee exchange rate have you assumed?
The question about Beltrán, I think the hurdle rates is to IRB to disclose is the one that we're not disclosing that. And, regarding the exchange rate, we use INR 89 per euros
Next, set of questions, from Gregor Kuglitsch from UBS. First question, does the asset pay dividend, and if so, how much?
As I said, Private InvIT produces free cash flow, and it's subject to the, to the performance of the asset every year and to the decision of the, of the partners on, on the distribution. So we don't discuss that. We didn't do a multiple valuation here. We do discounted cash flows to our IRR. And there is an independent valuation, and there is an independent valuation on the, on the Private InvIT done by KPMG, and it's published in IRB website. IR can help you to find it.
Okay, second question from Gregor: What is the EBITDA multiple on the operational assets?
Sorry, I read through the script, so we're on the second one. We didn't do evaluation by EBITDA multiple. We do by discounted cash flow, so that's how we do the valuation of this acquisition.
Last question from Gregor. There was an independent valuation using cost of equity or IRR of 40% in local currency terms. Are you in line with this?
We're not disclosing the IRR. I mean, as I refer to what I said at the beginning about the double digit adjusted by market risk, and that's what we disclose. Thank you.
The next set of question is coming from José Manuel Arroyas from Santander. First question: What is the timeline for Ferrovial's equity ticket? Will the payment happen all at one time?
Thank you. Yes, we are expecting to do financial close in a few months or after approval by the Indian authorities. At the moment, the upfront payment will be EUR 706, and the remaining amount will be disbursed later on when as the construction progress on the projects and equity is needed.
Second question from José Manuel. Can you clarify the meaning of the sentence that this investment completes Ferrovial's investment in Indian market? Does it mean that Ferrovial rules out any additional equity contribution in the future?
It means that, we are not going-- we don't plan to do any further acquisitions. That, that's what I mean. This is the, the level of, investment we are, we are comfortable with, and, additional equity contribution will depends on a number of factors. As I say, speed and size of the projects, if we capture that growth, and the private entity is not able to, to fund by, by itself, with the free cash flow.
Next question from Filipe Leite, CaixaBank. Is there any tag-along right in the future potential transactions?
We don't disclose the governance, right, since they're confidential among the partners. So sorry, I cannot answer that one. Thank you.
We have a question from Avish Tanvi from Tribune Investment. Are the new assets already operational? If not, by when are they expected to begin operations? Does IRB have all the approvals required to get them operational?
Thank you. Out of the 15, there are only three under construction. All other 12, including two of the new assets, are operational. And the three under construction are expected to finish, and I'll say Palsit Dankuni, I think, is after the summer this year, and Pathankot Mandi and Ganga Expressway are expected to finish summer next year, summer 2025. Beginning and end of the summer.
Next question from Andy Jones, from HSBC. What is the distinction between projects undertaken by IRB developers and the IRB InvIT? It appears there is some greenfield risk in these new projects. What is the reason they are in the InvIT and not developers?
Well, basically, the mechanism is once IRB, which is the promoter, decides to tender a project, they propose that project to the InvIT investors, and it's on the InvIT investors to accept it or not. If they don't accept the to go to the project, and IRB still wants to tender that, they can go to the IRB board and approve that tendering, and if they are awarded, then that asset will stay in IRB. That's what's been the mechanics, and that's the mechanics of being InvIT. It's not a matter of risk. As I said, the EPC and operational risk stay in IRB. It's all, it's about the decision, and I cannot talk about the decision of the past. I will talk about decisions coming in the future.
Next question from Nicolas Mora, from Morgan Stanley. Good evening. Can you help us better understand the shape of dividend distribution from the infra vehicle, please?
As I said, the distributions will depend on performance and decision of the board, and I cannot speak now about this and give guidance about dividend. Okay.
Next question from Fernando Lafuente from Alantra. After this acquisition, could you please give us a reference of what is the remaining firepower of the company? Assuming Heathrow disposal is closed, do you foresee any additional capital increase at the infrastructure trust vehicle? Thank you.
Yeah. Hi, Fernando, this is Ernesto speaking. I mean, we always refer the firepower of the company to around 2x net debt to EBITDA, and the main component of the EBITDA would be the dividends from projects. So, I mean, that is the firepower that we may have. Okay, so just add that what you're saying, the Heathrow disposal on top of that will give you the firepower. If we foresee any additional capital increase at the infra trust vehicle was... And Andrés mentioned that this vehicle is pretty much self-funded with the dividends from the projects. If this is not the case, we'll have to assess it, but that is- that's the expectation. Thank you.