Ladies and gentlemen, good day, and welcome to the India Grid Trust Q1 FY 'twenty two Earnings Conference Call hosted by Edelweiss Securities Limited. As a reminder, all participant lines will be in the listen only mode And there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Swarnam Maheshwari from Edelweiss Securities Limited.
Thank you and over to you, sir.
Thank you, Malika, and good evening to everyone. I welcome you all on behalf of Eden Life. From the Integrated Management, we have with us today Mr. Harsh Shah, CEO, Mr. J.
P. Agrawal, CFO Mr. Meghna Pandit, Chief Investment Officer And Mr. Safise Selmeli, who is the CEO. I will hand over the call to Mr.
Harsh for the opening remarks Post which we can open the Q and A session. So over to you, Harsh. Thank you. Thank you, Swarwin, And welcome, everyone, on the quarter 1 financial year 'twenty two call of India Great Trust. We will go through and report to the presentation that we have uploaded into exchanges.
And to start with, stuck quickly on Slide number 3, this is our To become the most admired vehicle in Asia and focused on focused business model, value accretive growth, Predictable distribution and following an optimal cap structure. On Slide number 5 It's just a snapshot of what Indigreed is today. So Indigreed today is India's 1st power transmission yield platform With approximately INR 21,000 crores of assets under management across 18 states and 1 UT in India, we own 40, 40 lines, 11 substations And 2 solar power plants, approximately 100 megawatts. In terms of another measure, we are about 11,550 Towers and overall metal, if one was to count, it comes to about 4 lakh 35,000 metric tons of steel in aluminum. On the right hand side is just an depiction of our portfolio.
As you can see, we are part of majorly present in Central, Northern and Eastern India. Coming to quarter 1 performance highlights for us, I think first is to start with financials. We had Robust financial growth with revenue and EBITDA growing by about 53%, largely on account of acquisitions that we have done During the financial year or rather during the last 12 months since last year quarter 1, BP has increased materially between quarter 1 of FY 2021 and quarter 1 of FY 2022. In 2 steps of increases, One that we did during the mid of the year last year and 1 in quarter 4. That has resulted into the first Quarter distribution for 2022 at INR 3.19 a unit, which is about 6% higher year on year basis, which puts us about at about MXN12.75 of annual VPU forecast.
We remain well capitalized on our balance sheet. Our net debt to AUM is just about 58%. Our ratings are affirmed by 3 Important rating agencies in the country. We raised in quarter 1 Important part of our cap structure, one is the rights issue, which we spoke about in the earlier call, which was a And I would like to thank all our investors to participate in that. The second one was a public bond that we did, which also resulted into a tremendous success and that really opened up long term source of capital for Indigreed on that side.
We acquired our 1st solar project called FRV in the quarter, at about 6.660 crores Our PD, about 100 megawatt of plant. We continue to focus on Asset Management is to ensure that we are mitigating any risk that emanates out of operations and continue to maintain a reliable portfolio. Our availability was at 99.7% for the quarter 1. And the important point for the quarter is that integrated has now And this is an important time because historically, Starlight Power operated as a project manager for Indigreed and provided support in terms of operations. However, as we have discussed in several calls over the last 2 years, Indigida has built capabilities enough to continue the project manager or operations and maintenance on its own.
And with that in mind, we are transitioning to internalizing these operations. On the policy front, There are many important outcomes that were achieved in quarter 1 of this year. First one being That Sabia has now approved the reduction of trading lot, which Indigreed trades right now at 1701, 2 single unit for all publicly listed units. So we believe once this circular is notified, We will be speaking to exchanges and making our trading lot to 1. We are confident that this is going to result in substantial amounts of liquidity and access both for Integrate as well as for Integrate first year to invest in Indirect.
II VI during the quarter have enabled insurance EFRDA has done 2 important announcements where they've enabled NPS backed pension funds to invest in debt securities have been made just like insurance companies. In addition to that, they also relaxed the sponsor rating requirement, which So there, for investment by NPS backed pension funds into Indig units, and this restriction is only kept for the Indig itself. So Indig will be well within With restrictions, as indicated with AAA, we believe that a lot of NPS backed pension funds will look into integrate as a favorable investment target. Going to the next slide, Kevin, quickly to capture the impact of COVID. We all saw day 2 in quarter 1 of this year, just like the day 1 in quarter 1 of last year.
However, I think this quarter was And far better in terms of collections. So this quarter, we were about 69% collection versus 56% that happened in the last round of year on year basis. However, this is largely to the fact that quarter 4 FY 2022 was 126% collection and that's something which is impact has rolled over into quarter 1. And on average basis, we are doing fairly okay with DSO days just at about 60 days. Impact on demand is an important criteria while power transmission tariffs are not linked to demand and are only linked to availability.
However, we are clearly seeing power demand sharply the moment the lockdowns are opened again. And on our quarter 2 itself, we have seen a substantial growth between up 61%, 16.6% versus last year. And as you would have seen a lot of posts coming from the government themselves, the India's peak demand has crossed 200 gigawatts in July and consistently making new highs. So we are confident that the power consumption demand, which is the underlying factor in the sector, also remains pretty robust. Going to the next slide on operating performance.
As you can see on the left hand side, our assets are performing As they are expected, all of them resulting into maximizing our incentives And the assets which are not at the maximization of incentives like NER, which is the asset that we acquired recently, is just going to the teething issue after the acquisition for the 1st few months. However, all these incentive losses are being indemnified by the sellers and being paid as well. So for commercial and tactical purposes, the integrated portfolio remains at 99.7% itself. In terms of some of the parameters, we have reduced number of trips per line, improved on unsafe conditions, Improved and solar generation, so all those factors which are important for the portfolio reliability, we are focusing on them to Increase reliability and sustainability. On the digital asset management that we've been consistently speaking about, which is our partnership with IBM Maximo to launch and transform the way asset management operated for transmission sector in the country.
We have gone live on 2 of our large assets, which puts about 20% of our portfolio is already live working on digital asset management. And we are hoping that by the year end, we would be converting the entire portfolio into DigiGrid, which would be one of its kind. On HSE, we have focused on 100% straight man hours for the quarter 1. And in terms of COVID, we continue to be careful in terms of COVID-nineteen approach to behaviors and focusing on health and safety of our key stakeholders. I would now invite Jyoti, Chief Financial Officer, to
Jotin, thanks Harsh. I'm on Slide 10, where we have put out the financial performance for the quarter. As Haarsh has already explained our revenues and EBITDA grew handsomely at 53%, backed by a couple of or 4 of acquisitions that we did over the span of the last 12 months. Our NBCO was lower, about INR 50 crores, INR 52 crores to be exact. But this was largely because we did a lower factoring of only about INR 50 crores this particular quarter compared to a factoring amount of INR140 crores in the corresponding quarter of the last year.
So against the INR 90 crores lower factoring, the NVCA was lower by only This is largely because we had a better collection this quarter of 69% versus 56% collection in the corresponding quarter of the last year. BPU, as Harsh mentioned, the Board has declared a BPU of 3.1875 of 3.19, which is in line with the increased guidance of 12.75 per year, which was up last quarter. And this DPU comprises of primarily of interest, almost 3.04 out of the 3.19 comprised of interest and about 15 pesa of the DPU comprised of tax fee dividend. This is largely the dividend that we have got Now this BPO of 3.19 on an expanded unit base of nearly 70 crore units post the rights issue translates into a gross distribution amount of INR223 crores this quarter, which combined with Distributions that we have done since listing will add up to nearly INR 2,300 crores of distribution of nearly INR 49 of distribution per unit that we have done since we got listed. The NAV for Q1 FY 2022 or at the end of Q1 FY 2020 I should say, was INR129 per unit.
This was sequentially lower as we had guided in the Q4 of last year Because of 2 primary reasons. 1 was an expanded capital base. We increased the number of units Those slides from INR58 crores to INR 70 crores and that led to a dilution of the NAV. And also We acquired the balance 26 percent equity of NER and we had to pay close to INR 500 crores because of that and that impacted the NAV for the rest. So we are well on our way to deliver on the increased EPU guidance of 12.75 for FY 2022.
I'll go to the next slide, which essentially provides a bridge from the EBITDA to the distribution amount. We did an EBITDA this particular quarter of a little higher than INR 500 crores. Now nearly 50% or about INR 240 crores of this was taken away by finance costs both at the SPV level as well as at the IGT level, primarily at the IGT level of about INR 214 crores and about INR 27 crores at the STV level. There was also a negative working This was largely seasonal in nature. As we've seen, Q1 is generally the weakest when it comes to collections against 126% collection in Q4.
This quarter was less than 70%. So that led to a reduction in the working capital related in this year by almost INR117 crores. There were some other minor items like CapEx and tax as well as debt repayments. We are also helped in this quarter by a release of about INR 49 crores of DSRA, which is the debt service reserve account. This is largely on account of some MCDs which got repaid for which we did not accept the DSRM.
So that got added to the NVCS. And at the end of Q4, we had a total NDCF reserve of almost INR 170 crores. So we dipped into that reserve to the extent of about INR 55 crores in this quarter to reach to the distribution amount of INR223 crores. Even after this dipping into the reserve, we still have a balanced reserve of INR 115 crores for the future, which is higher than the reserve that was there prior to Q4. I'll go to the next slide, Slide 12, which talks about the debt structure of Indigreed.
We raised a debt incremental debt of about INDiGRIID,000 INR400 crores in this quarter, largely for refinancing and funding of acquisition. This debt was nearly 10 years in tenure and came at an average incremental borrowing cost of 7.57%. With an average cost So debt of about 7.94, our marginal cost is significantly inside of the average cost, which should help reduce the overall average cost of debt as Going to the remainder of the year, we continue to remain AAA rated. We're carrying a good cash balance comprising of The SRAs, DPU as well as NDCF reserve, our net debt to AUM is much inside of the 70% regulatory cap for English. We have substantial part of our debt, which is fixed rate.
More than 70% of our debt is fixed rate debt. We've also been able to diversify our pool of investors, we're roughly fifty-fifty between NCDs and bank loans, a little bit higher on the NCD side. But what is more important is that we've been able to diversify the nature of investors in both the NCD space as well as the bank loan space. We now have both public sector as well as private sector banks as well as some NBFCs who have given us loans. On the NCD side, Other than mutual funds and corporates and H and M who were already a part of our debt book, this particular quarter we saw 2 new investor classes getting added up.
One was the retail investor base and post our public issue of NCDs. The second was insurance. We now have almost INR 400 crores of our total debt book held by insurance companies, both life and non life. We've seen an increasing trend month on month of this Investor Day. And now with pension funds So being allowed by PFRDA, we feel that we have enough headroom to be able to further expand our investor base across this new class of investors.
If you look at the bottom of the slide, we've also been able to Smoothen our repayment profile over the years, something that we had guided the investors over the last few quarters. Other than FY 2023, now we have the amount of debt repaid in any year within our comfort zone of less than INR 1500 crores. And for FY 2022 also, we are taking proactive steps to ensure that we get an advanced debt tied up Significantly ahead of the repayment time. At the same time, we are also exploring whether there is any merit In prepaying some of these debt, which is coming in FY 2022, 2023 provided the cost benefit trade off is optimal for us. For the next slide, I would like to invite Meghna to take us through the next slide, please.
Sure. Thanks, Jyoti. I'm on Slide number 13, where we have compared ourselves on one hand with a pure play debt product, which is the 10 year GSEK bond. And on the other hand, we have also looked at how pure play equity and certain indices have performed. And in the graph, it's a combination of total return, which is the distribution per unit plus the change in the market price.
And as
you can see, both on an absolute basis and on an annualized basis, IndiGrid has outperformed Not just on the debt side, but also on pure equity indices like NSE 500, DST Power, DST Utility. More importantly, along with this total return, what is important is on the volatility side, How has Integrid performed, which is reflected by the beta? So on beta also, Integrid is amongst the lowest with 0.07, and this we have tracked since the time of listing till end of Q1, that is June 13. So on a risk adjusted basis, Integrid continues to outperform the equity indices as well as on the debt spend, combined on the back of the acquisitions that we have done and the sustainable DPU that we have delivered. Moving on, I will request Harsh to give a perspective about FY 2022, the outlook that we are looking at.
Thanks, Meghna. So starting on the Next slide, which talks about the outlook for the 2022. So we remain very positive about the commerce sector in general. There are a lot of new initiatives that are taken by government and regulatory agencies to come up with new technologies and Storage and several other path breaking initiatives on the your grid side. What that eventually will result into for us, we are expecting a sizable pipeline of interstate projects about INR 50,000 crores 45,000 crores The interested bids over the next 3 to 4 years, which will result into a healthy acquisition pipeline for the Digi deVinci.
This year itself, we are expecting about 15,000 odd crores of bids to come to Cushing. In addition to interstate projects, We are also seeing a traction on the renewable energy side and we would look to target our Select set of energy, solar energy assets that we are targeting in the sector, which will be with strong counterparties like GVNL, SECD or NTPC. On something which you already announced in concrete, the KTL, which is one of the last Limbach assets with Starlight Power, We believe that that is at the last stage of completion and it is going to be completed in this financial year and we will look to Acquire that in line with our framework agreement. And based on our current asset structure, we would continue to deliver the INR 12.7 On the balance sheet side, partly as Jyoti mentioned, our intention would be to reduce cost of debt, Diversify our source of borrowing and maintaining adequate liquidity to any uncertainties that may come up if the COVID wave continues to remain in the country. On the asset management side, our focus will remain to maintain high Availability, focus on self reliant O and M and many other initiatives like digital asset management and predictive analysis, will focus on that.
We will continue to focus on world class EHS and ESG practices on our portfolio. On the industry stewardship, I think we will look to implement as soon as the Sobeysheti notifies the Reduction of lot size, which we believe resulting to increased liquidity in Enbridge and Indigidd as well. And there are some other initiatives that we are recommending the government with respect to tax anomalies or further diversifying lending from FPI sources, That we continue to push within the government. But overall, we are extremely happy with the portfolio that we have. We are in the we believe we are in the right sector at the right time with stable assets and a critical mass of assets.
And our focus will be to continue to perform as we did in the past with respect to our assets, financing and acquisitions. So with that, we believe we'll be able to deliver superior return with sustainable and increasing BPU for investors in the coming future. And with that, I would conclude management
Thank you very much. We will now begin the question and answer session. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Mohit Kumar from Dhan Capital.
Please go ahead.
Hi. Yes, good evening, sir, and congratulations on a good set of numbers. So two questions. Firstly, On the business side, on the acquisition side, especially given the fact that we have only KTL left And the most of the transmission new transmission assets are being built either by the large players who may not be willing to part with. So does it mean that going forward, more and more renewals either will be the focus?
Or do you think still think that there is There is a chance that we'll have some investments, some transmission projects coming up for sale. That's the first question.
Okay. Thank you, Mohit. I think right we see the growth in 3 buckets. First, as you mentioned on renewable energy side, we do see acquisition pipeline over there. However, as we have said, renewable energy would We remain in the size of 20%, 25% of our portfolio and we would not cross that.
But at this point in time, we are just about Few percentage points out, so about 3% of renewable assets in the portfolio. So there is both sizable pipeline as well as sizable headroom for us to acquire this. 2nd, with respect to, I would say, predictable acquisitions, which are for already built assets. One of them, as you recall, is KPL. 2nd, there is already there are already other assets available in the market, which are completed and revenue generating.
We would look to acquire them. However, it depends on when particular investors Look at monetizing that. It includes Stallite Power asset as well beyond KTL, which are sizable assets in itself. But also beyond Starlight Power as well there are assets which we are looking at within the transmission space. 3rd is with respect to the new bids.
New bids, as we have done in the past, is to partner with the developer like we had partners with Starlight Power and provided framework agreements, which gives visibility to exit to investors. We are looking to in several such partnerships, which would result into For the pipeline, even from the new build assets. So we are pretty confident about that between these three, We have sizable visibility of growth.
And are you open to acquiring interest rate sorry, Yes, interested transmission assets?
Yes, we are open to acquire interested transmission assets. We already acquired 1 interested Which is in Haryana. But however, that is case specific, right? Because interested TSAs are different, We need to dig into the which kind of agreements are in place, what kind of counterparties are there. So we are open, but it eventually depends on Size of the risk as well as type of the counterpoint.
Okay. Secondly, on
the working capital side, there has been large crowd in this particular quarter, which we haven't seen in the earlier quarters. I think earlier quarters more or less, they are in a small trouble or less, they are positive number from working capital. So do you think it's
a cause of worry or do
you think this will get addressed? And is the July collection far better than June in terms of your bidding?
Okay. So one, the way to evaluate the Quality of receivables and balance sheet is to look at days receivable outstanding. And today, that number is at 60. So on a balance sheet level, since COD, we are at 60,000,000 outstanding, which is not certainly a cause of value. That's the number to evaluate In terms of what is the outstanding, the rest is quarter on quarter, right?
Last quarter, as JP mentioned, we did 126% collection, which means that a lot of our, I would say, customers ended up paying in advance Because they received liquidity from somewhere, right? So the moment when you have a quarter like that where you collected 125%, next quarter when people are going to take a breather, it is just the quarter on quarter adjustment is what we think at the moment that is playing out. In addition to that, we believe that this quarter is also unique From the point of view that this is the 1st quarter under which CTU is operating independently of power grid because as you would know, About 2 quarters back, CTU separation from Powerhead has taken place and it's been operationalized in this which had resulted into operational, I would say, delays in raising invoices and coordinating because it's a completely new setup. And we are seeing the clear change in July and we have received in July over 90% of collections as a month. So I think it is a temporary phenomena or not even a phenomena, it is a quarter on quarter change.
Quarter 4 was Seemingly high collections, which means quarter 1 is slightly low, but we've seen the receivable trend increasing in quarter 2 already.
So one more question if I may squeeze in. On the lot sizes, just some clarification, Has the SEBI Board approved the lot sizes reduced for all units, right? And once This meeting gets published or notification gets published, we can apply for it, right? And how much time do you 52, this thing will materialize once it is not notified?
I think we should wait for the notification, but what we believe is that once the notification is made public, it is only a matter of our striking to Changes in some operational changes at the back end that will take place with exchanges. So it's just the exchange approval that will be remaining after that.
Okay, understood. So maximum 10, 15 days max, right?
That's right.
Okay, understood. Thank you, sir. Thank you and best of luck.
Thank you. Thank you.
The next question is from the line of Abhil Nasratale from Dalaland Brochure. Please go ahead.
Yes. Thank you for taking my question. Sir, I just had like we have done the I mean, we address equity and debt. So at current rate, how much AUM growth we can see over
Sorry, Bilasa, can you please repeat the question? I lost the last 10 seconds, sorry.
So we have raised through entities and rights issue, the our capital base. So I want to know that at current capital weighted, current debt level, how much maximum AUM we can
reach? Okay. So see, today our net debt to AUMB are close to about 58% of net debt to AUM. As you know, our Statutory regulated cap for leverage is up to 70%. So with that cap, our AUM can easily, we have Headroom to grow to the extent of at least INR 5,000 INR 6,000 INR 6,000 INR 6,000 INR 6,000 INR 6,000 INR 6,000 INR 6,000 INR 6,000 INR 6,000
INR 6,000 INR 6,000 INR 6,000 INR 6,000 INR
6,000 INR
Thanks. And the second question is our interest cost, whatever the new Debt we have raised that being at a lower cost, the cost of debt has gone down to 7.94 plus. And we have a large repayment next year. So like, see, This year, over the medium term, what kind of interest cost of debt will be the like average cost of debt we are Sure.
On that one, Jyoti, you want to give a perspective?
Yes, thanks. So we've already indicated that the marginal cost of debt this particular quarter has been in the range of about 7.5%, 7.6%. And this is, by the way, our 10 year debt that we have raised in this That is the majority of the debt raised in this quarter is almost 10 years. At the margin, we do believe that the incremental debt cost For us, we only get better as more and more investors are allowed to invest in our paper, pension funds being the latest addition And as the market sort of appreciates our strategy and the outperformance a bit better. So we think we should be on our path to be able to continue to expand the average maturity and reduce the average debt cost by having more and more incremental debt in the 7.5% maybe between 7.5% 7.5% 7 quarter.
So look, I mean, for the rest of the year, whatever refinancing that we will be doing would be in the 7 to 10 year bucket. And I would hazard not notwithstanding any monetary policy surprises, Us to be able to do it inside of 7.5%.
Okay. Okay. Thanks. Thank you and all the best.
Thank you. The next question is from the line of Pradnyon Dalmia from Lanson Investments, please go ahead.
Hi, Harsh, Meghna and Jyoti, Excellent performance once again this quarter. My question, Jyoti, was regarding the factoring, which was That INR 50 crores was very low this quarter compared to the last. So just want to understand what determines the amount of factoring that we do every quarter? And what is the sustainable level of factoring one should expect every quarter?
Yes. Good question, Praveen. So look, I mean factoring or any sort of short term debt can be driven by 2 or 3 factors. One is, of course, the need to be able to sustain the cash outflows for the operations, whether it's O and M cost, debt or whatever. 2nd is also we are very particular about our DPU guidance to the market.
And this particular quarter, the amount of The thing that we determined was primarily to ensure that there are no net price surprises on the distribution front. As we realized End April that there is likely to be lesser collections, which is seasonal in nature. At the same time,
there were two factors that Harsh talked about. One was
the CTO migration and the second was this terrible second wave of COVID that hit us around the middle of April and right The end of nearly June, right? So based on these 2, we realized that the collections would not be as we had envisaged. We had MBSTAR at around 85%, 90% coming into the year, but we modeled at about 65%, 70% collections. And accordingly, we Determine the amount of factoring that we will need to do to ensure that we are good in terms of distribution. Eventually, the collections came at 69%, which was Very much in the ballpark and the amount of factoring was good enough for us to be able to meet the distribution guidance.
As such, we did not have any Shortfall of cash to sustain our operations as the reason to
do the factoring, but it was largely
to meet our BQ guidance. As we speak, almost half of the tax rate amount has already been prepaid because we saw collections normalizing. As Harsh was mentioning, In the month of July, we had 96% collection efficiency. So we've seen collection normalize very, very quickly. And to avoid unnecessary drag on the interest cost front, we've actually prepaid 50% of the factoring amount.
We expect to balance We'll repay the balance very soon. Based on current outlook of the Q2 as well as for the year, we do not emphasize Any challenges of cash flow to be able to get into packing again? But look, I mean, this is the strength of the model now that we do have various 2 things are key to be able to tide over any short term imbalances that might be there. So we have factoring, we also have an ability to raise short term money from the Commercial paper market, we are also trying to tie up sort of a permanent working capital line with the bank. So hopefully, all of these Tools will not be needed that much, but should there be a need, then we can use these to our advantage.
Factoring being one of them, which we have used successfully twice. Once was in the corresponding quarter of the last year, this COVID first wave And second, much lesser factoring amount in this particular quarter.
Okay, great.
So if I understand correctly, so factoring is going to be used as a tool if and when we TRING is
going to be used as a tool if and when we see any liquidity crunch or shortfall. And the amount of factoring is likely to change every quarter and there might be quarters where there is no factoring required at all?
Yes. So, yes, you are right.
I think factoring is an exception rather than the norm. I do not envisage Factoring for the remaining part of the year, it seems to pan out the way we are envisaging. This particular quarter, we had to do it, So it is in that we have just outlined. So factoring is not really a norm on a quarter by quarter basis, but more as an exception.
Okay, understood. Thank you so much. Thanks.
Thank you. The next question is from the line of Rusha Sher Bilal from Praveen Motilal, Share and Stockbrokers. Please go ahead.
Yes. Thanks for the opportunity. Just one question on the fact that do we as IndiGrid stand to benefit from the fact that Now there are power exchanges like India Energy Exchange in the listed Power Grid. So do we at IndiGrid stand to benefit in any manner?
Yes, let me take that. So I think as such directly, we don't get benefit. In the longer run, we do get benefit. And what do I mean by that is that most of the transmission planning in the country happens on long term open access agreements. What that means is that most amount of transmission lines are built When they know the buyer, they know the seller, they know the corridor and therefore they build additional lines.
That means a historical way of planning. So In that regard, it does not contribute directly whether there is an exchange or not. However, the rationale behind building a National Grid is also to facilitate, I would say, G and A or other open access without Long wait period. And therefore, if you want to buy power in Gujarat from Northeast or you want to buy power from You don't need to wait for 2, 3 years to make a plan in PPA and build a line and you should have access to be able to buy cheaper power from where you get it. And that in that scenario, exchange is a key catalyst.
So for example, While it is not concluded, but you would have heard about allowing distribution companies to Get out of the old PPAs that PSU's thermal and get into the new PPAs, which could be cheaper for them. In that regard, we would need to be able to buy power from exchanges or buy new PPAs. So New energy exchanges will play a vital role in that process, which would eventually result into healthy response and healthy sector, So it is a contribution of these energy exchanges into overall healthy sector, which would help transmission line owners like Indigreed, but no direct benefit
Okay, okay. Thanks a lot.
Thank you.
The next question is from the line of Ravi Chandra, an individual investor. Please go ahead.
Good morning, Mr. Harsha and the team. Congratulations once again for the excellent performance and continued growth. I have one query to Jyoti in the waterfall slide, Slide number 11. So, Reza, what you are telling, maybe just I'm clarifying, earlier it was shown in both SPV as well as at ING level.
So now you are showing there is a combined balance, dollars 11,501,000,000 is available. Is it right?
Yes, sir. You are absolutely right. The INR 170 crores that we had as a reserve was a combined reserve at the As well as at IGT level, we have dipped about INR 54.8 crores, but we have dipped only in the reserve at the STV level. So overall, The reserve between the ST and IGT that we are carrying forward at the end of this quarter is about 100 and 50 crores.
Okay. Yes, fine. I'm fine with the I think only one question, things are fine. Looking ahead for 1 unit, obviously, I think it will attract more retailers like me. Thanks a lot.
Once again, Harsha, congratulations. Thank you.
Thank you.
Thank you.
The next question is from the line of Hitesh Nayakumar, an individual investor. Please go ahead. Yes, Sir, please go ahead.
Yes. Good evening to the team of Integrid.
I just wanted to I have joined the Integrated as a member in the month of August 2020, and I was really impressed by the way things have been presented and the transparent way The data and information is shared. But as an individual investor, I just have one concern that I want to understand what are the counterparty risks To the business, because when the stock market crashed in the month of March 2020, The prices of this indeed also fell down drastically. If such type of event happens, I just want to understand whether the counterparty risks are there or it is just A euphoria that has happened and that is the best time to accumulate more units from the market. Okay. I'll share.
So, Itrzia, I'll one, these 2 are different questions. So the first question was on counterparty risk. And as we have discussed in earlier calls, I would have reiterated that counterparty risk is an important risk for Engleidry Because we are playing in a sector where our eventual customers are not financially healthy, Right. So this is an important risk to track. However, our contracts, our different security mechanisms are fairly strong.
And the I would say the last part that just because we are providing a monopolistic service As transmission at a very limited or a minor cost or a fraction cost, our customers who even are in a Voice financial situation, prepare to pay because it's a kind of a lifeline to evacuate and import power. So that's what has kept The sector or the transmission sector healthy even though the distribution sector haven't been healthy. Now Having said so, just to go back to the quarter 1 of last year and entire financial year last year, this is a test actually. In last 20 years, at least, I can say 15, 20 years, 2008, we didn't exit. But this is one of the worst disasters that one could have Expected for both country financials, everything put together, right?
In that as well, our collections Did not fall materially, right? So while the quarter one collections last year were 50%, that was not because people didn't want to pay. That is because people couldn't go to office for 1.5 months, couldn't raise bill. And so the whole cycle administratively got impacted. But After quarter 1, quarter 2, quarter 3, quarter 4, the collections kept on increasing.
And as a year whole, we collected A little bit more than 100% for the entire year. So now what does that say is that even in the most stressful scenario, at least in our lifetime that we've seen operationally financially, The contracts prevailed and the payments kept happening. So I would say that the last year has been a testament of that. So yes, it is an important risk, but it remains, I would say, minimal risk. On the other hand, price is something which so many factors are impacting the price, which is beyond control of the management to guide on, But I think if at all you look at the fall, you didn't need to look at the fall in relative terms to other Investment options as well.
So I think the quarter one was an important fall, a large fall that happened everywhere. But it is also linked to So many global events and domestic events that took place. And therefore, one needs to compare relatively, it impacted us lesser. And then yes, people who invested at that time in general everywhere they were rewarded eventually. But that's not That's very difficult for management to guide on that such fall will not happen because that's linked to the liquidity perceptions, Euphoria, opposite of euphoria whichever way, right?
So that's a difficult one for us to predict. But on the collection side, I would say we have a strong contracts
Okay. Thank you. Thank you. Thank you. Thank
you. The next question is from the line of Sunil, an individual investor. Please go ahead.
Hi, Harsh. Hello.
Yes, hi.
Hi. Congratulations on completing 3 years. And being a long term investor, I think this is one of my best investments. And my question is regarding your acquisition pipeline. And Particularly given that PG Ingrid doesn't have a ROFO with Power Grid, Do you think it is a way of government saying that private sector can bid for it?
Or If it is allowed, are you going to bid for it?
Okay. Very, very interesting question, Damil. And This question came earlier and I did not speak about it. So I would certainly clarify our views on that. So PG and EBIT coming into the picture is, I would say, is a good thing for India in general because more and more people are Aware of our transmission business and in bit now with such a large player coming and monetizing and putting it into in bit.
However, our view is that it is not government's role to run monetized assets, right? And Whichever way government choose to monetize such passive assets, the focus should be on maximizing value for those assets and selling them. 2nd, realizing maximum amount of liquidity that the government can get either via Power Grid or whichever way. And third is time to market or what is transparent bidding process, right, which can be run. So we believe That as a government, such a large monetization program as and when happens, it should not be done on a bilateral basis.
IPO is slightly different because IPO view the IPO and call for auction. But by virtue of Power Grid owning Only 15% in the in rate, it is not a PSU anymore, right. So any sale that happens from Powergrade or any government body to another government body or to an Ingrid, we believe should be done on a transparent basis via a global invitation of tenders instead of any bilateral rebate. However, we can only express our views, Right. That is the transparent way the auction should run.
If government decides to Do a transparent auction where we have an ability to wait for these assets, we will certainly wait for them.
Okay, great. Thank you.
Thank you. The next question is from the line of Roushav Sher galal from Praveen Ratilal, Share and Stockbrokers. Please go ahead.
Yes. Thanks for the opportunity again. Just a question on the operational front. Since Indigreed is a AAA listed Ingrid and we have lot of marquee investors now, even pension funds are investing. So just wanted to understand that the in which they are not In the list of approved securities by exchange, if so, any and RBI.
So is Indigreed taking any steps to ensure that we as in which are in the approved list of securities?
Okay. I'm not very aware of this point, but is your question towards can you pledge In which units are security, is that the question?
Yes, yes, exactly. That's exactly the question.
Okay. No, so I don't know, maybe Jyoti or Megha, if you have a few, but we're not aware about this term of approved list. But We are definitely aware that these securities can be pledged and there is a specific policy which SEBI has made for sponsors to pledge these securities. And I can tell At least in Indigrid's case, we may have already disclosed that Sterlite Power, who was the sponsor who started Indigrid, We've pledged their shares or rather we did pledge integrated units to borrow and so have other sponsors done for respective Engetsubash shareholding. So I'm very sure that legally it is allowed to pledge And we definitely know several cases where NBFCs and banks are lent against it and taken unit share security.
Exact provision of what prevents in RBI, I'm not very sure, but this can certainly be used as a security for borrow.
I just brought up this question because of the fact that we as retail investors have been unable to pledge it for some odd reason. So I just wanted to know if something that can be done on the integrate side, which So
we would consult With lawyers and understand if this can be done, this is largely an RBI issue, we'll see what can be done out there. I think We from company, we don't necessarily recommend to pledge for investment, but that's a personal decision. But we will certainly check with lawyers and RBI to see if something can be done on this.
Okay. Thanks. That's very helpful. Very, very helpful.
Thank you. The next question is from the line of Shobhit Gupta from Exite Life Insurance. Please go ahead.
Hello. Good afternoon, sir. I had a couple
of questions. First was, this
practice of using reserves to Maintain the DPUs. So as an investor, how do I look at in terms of though it's kind it looks to me as a way of smoothing DPUs, but from a long term perspective, Equity market sometimes are not favorable for you to raise. So how should we look at in terms of discipline? 2nd question was you, I think you spoke about the power exchanges. Now if that becomes reality in a bigger way, does it limit your opportunities for growth in a certain way in future?
And one third question, if I can ask is about the lending from borrowing from the REIT level and lending to SPVs. Now What I understand, there's a lot of arbitrage involved in that. I mean, you can borrow at 7.5% to 8% and lend at 14%, 15%. I'm not sure about the numbers. I'm just giving an example.
How should that also to be looked at from an investor point of view? It is the right way to use that arbitrage to pay distributions or it should be purely from the business perspective?
Okay. Yes,
cool. So we would try to give answers on that front. I think the first one on
the sector and second one
that you asked first on the I think the increased power exchanges, increased liquidity in electricity units will require a far more robust grade. Rich would eventually require a far more investment in transmission. So this is rather This is going to require much more investment in transmission because you would need to keep certain grid idling because somebody somewhere will want to use that grid at call of a button, right? So instead of focusing on the grid utilization, you would focus on Keeping the grid ready so that you can buy the cheapest power from where you want to buy, because the grid cost today is, let's say, about 6% of the total cost of generation, Right in the country or cost of sale. Now even if you double this grid cost 6% to 12%, if it reduces Just by 10% reduction in your tariff, you are still NPV positive.
So as a sector as a country, this is going to be Rather, contributing to more investment in transmission rather than reducing. That's the view that we have. On the reserve, I think what we are doing is extremely prudent. Let me give you an example. If we were distributing on an annual basis, right, the requirement of reserve may not have existed, Right.
Because on an annual basis, you will receive a particular cash flow if you need. However, we have decided to make a conscious Now what that does is that the entire cycle Starting from our revenue, cost, financing and eventually distribution to investors becomes quarterly, right? Right. Now One can't predict possibly the quarter on quarter business operations, liquidity, seasonality, etcetera thing, right? So and in general, as this happens in all sectors in India, quarter 4 economy economic activity is highest and quarter 1 therefore is U.
S, right, in a sequential manner. And therefore, we are like any other part of the economy in India, we are, I would say, a saw, right? Quarter 1 goes low, quarter 2 is higher than quarter 1, quarter 3 lowers, quarter 4 is the highest, right, and then the cycle continues. So anybody who chooses to pay quarterly distributions, And want to maintain predictability should run with some reserves. So for example, last quarter, we had such a good collection that we accumulated under cover of reserve.
So we can use it next quarter or the subsequent quarter. So This is a quarter on quarter adjustment, right, which I think is healthy, prudent and that should be followed if we decide to do quarter on. If we do annual, we don't need to do. To question on what you should look at for the health of the business, right? Health of the business, you should look at the balance sheet And you should look at our receivables outstanding.
That gives you that as a balance sheet, are we collecting or use beyond this periodic portfolio, Right. Okay. And that gives you a picture, we are operating the transmission line and within 5 years our days outstanding is in 50 days only. So that means business as a health is doing okay. Quarter on quarter, 60 becomes 80, 80 becomes 40.
The quarter you are at 40, the next quarter is going to be 80, Because on an average, you will be around 60 days. Fair enough. And there is a third question you asked, I guess. So it was about the loan From the impact level to SPE? I think, see, simple concept over there is, Whatever interest we recover from SPE by charging at higher interest of unsecured loan, we distribute to our investors, right, In form of interest.
Investors pay tax on it based on their jurisdictions. And therefore, From a government or a tax perspective, nobody is using. You're charging SPV, you collected that and you paid to investors and investor paid tax. So that way it is a transparent method, even I would say Power Grid in which is following that, right? There is a Government of India in which is doing that.
So there is this So there is not a loophole that is kind of giving us a higher distribution if it goes one day and we don't see that kind
of flows coming back.
So that's not a risky foresee. So one is we don't see that kind of a risk, okay. And the second conceptual clarity is that in Invit you get Pat, just depreciation both things to you, right? Because these are not manufacturing plants that we need to build it in 5 years, right? These are kind of perpetual assets.
So We need to provide for depreciation for accounting regulations, but in reality, there is no depreciation of the asset, right? So how do we make this depreciation reach to investors in the bank account? That is why the Invitrix have given us a trust structure, right, that you can pass through. Now how do you distribute distribution to how do you distribute depreciation to investors? Because that is under a company that you cannot figure out another way.
So this method, when you charge 14% it includes depreciation, right? So PANC plus depreciation. And therefore, We therefore this eventually method is in favor of investors to suck out all the cash flows that can reach to the investors. Great. Thank you.
Thank
you. The next question is from the line of Swarni Maheshwari from Edeloy Securities. Please go ahead.
Yes. Ashok, in one of the replies, you talked upon That for the future growth, we will be looking to partner with someone for the day. So are we talking about participating through the ECB mode wherein we will be investing, say, 3% or 3% of our AUM For the new bits? Okay. So there are several types of partnerships, There is one partnership where there is a ROPO that we receive right of first offer, right of first refusal that we get, And we don't invest anything in that.
The second is type of framework agreements where we acquire the assets when they are completed and it is binding on both parties. And 3rd is, let's say, taking minority interest via consultants, right? So we explore all of them. But again, depending on the project size, risk, partner, it changes, the options are changing, but we are evaluating all of them. I would not say 2%, 3%.
The 2%, 3% of overall amount becomes fairly large, right? So we are just looking at what all partnerships can be formed including minority interest, but that will be a much smaller amount. Yes, but I guess The regulations actually allow us to park money at about say 10%, right, 10% of the Yes, yes. So the regulations are 10%, which is a very high number. Yes, yes.
I know, I know. That's a very high number in about 2,000 outcodes. It will be very high. Are we looking to go through the equity route at this point or not? No, so we don't have anything concrete signed at this point in time, otherwise, you'll But we are talking to several players to evaluate what is possible.
Right, right, right. Bharat, that's very clear to me. Thank you. Thank you so much and all the best. Thank you.
Thank you. As there are no further questions, I would now like to hand the conference over to Mr. Swadnim Maheshwari e device securities Limited for closing comments.
Thanks, Bhikad. So I would like to I would like to thank the Integrated Management for allowing us to host the call. Thanks Harsh for your detailed insights and thanks to the Undergrad team Thank you so much, Harsh. Any closing comments over here? No.
Thank you, Swamin, and Pretty excited about the journey till now and we are looking forward to continue to value accretive acquisition and deliver superior distribution plus growth to our investors. Thank you.
Thank you. On behalf of Edelweiss Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.