Good day, and welcome to India Grid Trust Q4 FY 'twenty one Earnings Conference Call hosted by Edelweiss Securities Limited. As a reminder, all participant lines will be in listen only mode and there will be an opportunity for you to ask questions after the presentation Please note that this conference is being recorded. I now hand the conference over to Mr. Swarniam Maheshwari from Edelweiss Securities Limited. Thank you and over to you, sir.
Thanks, Stephen. On behalf of Edelweiss, a warm welcome to all the participants. I hope All the participants are safe and healthy. From the management today, we have with us Mr. Harsh Shah, CEO, Mr.
Jyoti Agrawal, CFO Ms. Vigna Pandit, CIO and Mr. Saphish Talmali, COO, who will represent Integrate Trust on the call. From the I'll just hand over the call to Harsh for his opening remarks, Post which we'll have a detailed Q and A session. Over to you, Harsh.
Thank you. Hello, am I audible?
Yes, and now you are. Please proceed.
Okay, thank you. Yes. Well, thank you, everyone. And as Swamy mentioned, I This is Our quarter 4 FY 2021 investor call as well as conclusion of the financial year 2021 call. So we have captured certain items for the full financial year to give a perspective of certain items as well as A little bit of about our evolution over last 4 years.
To start with on Slide 5, I would like to reiterate our vision. Our vision is to become the most admired yield vehicle in Asia. We believe if we do the 4 aspect of our business model and execute them well, we'll be able to achieve our vision. First one being focused business model, which is focused on long term contracts, low operating risks and stable cash flows. 2nd, value accretive growth, which allows us to do BPU increase on a year on year basis And create a growth pipeline for future.
Predictable distribution. So we have been giving guidance On a forward looking basis and also providing quarterly distribution, which is predictable for our investors. And the last one, which is our focus on optimal capital structure, which is at a consolidated leverage maintain Consolidated leverage lower than 70%. We and focus is on maintaining our AAA rating via Student Liability Management as well as good quality assets. On the Slide 6, I've captured we captured our evolution over the last 3 years.
Starting from a growth track record in terms of Assets when we listed, we had 8 lines, about 2,000 circuit kilometers, 2 substations, about 6,000 NDA on 4 states and 10 revenue generating elements and approximately INR 3700 crores in fact. Fast forward today, we have 40 lines, about 7,600 30 kilometers, 11 substations with 13,500 MBA and presence across 17 states in 1 UT, with 50 Different revenue generating elements and with a total asset size of approximately 20,500 crores. We have been able to achieve this phenomenal growth based on execution of our promises of focusing on value accretive growth in the assets that we operated. The next important part of our evolution has been Our unique holder base, how it is evolved and diversified over a period of time. Starting again From IPO, we had the sponsor about 60 nought percent.
We had no insurance companies. Retail holding was about INR 445 crores and FPI is owning about 39.9%. Fast forward today, We have a change of sponsor or rather additional sponsor with KKR being Sponsor as well as owning about 24% of the units. 9 insurance companies own about 8.6% stake, All of them coming along the way in biosecondary sale and subsequent rights issues. Retail holding has increased from INR445 crores to INR815 crores.
And this is also evident in the liquidity that we see And indicate lots on the exchanges. DII Holdings have relatively come down in proportion to the FII And the SPIs were 31%. And if we add KKR and this together, it will be a higher number. The 3rd aspect of evolution, which is the market development and we've seen since the time when we listed in which market was In our state of flux and evolution, we believe now it has come to a status of its evolution that a lot many new issues that we have seen In the recent
future, we have,
in line with our strategy, consistently raised capital to ensure that will maintain a healthy balance sheet and focus on predictable DPE growth. While we listed with 2,250 crores of IPO. Subsequently, we did a preference issue of 2,500 crores and very recently at INR12.84 crores of rights issued. This is unique aspect about Invit's in comparison to other equity listed companies. Considering that Envix have a mandatory payout ratio of 90% of the cash it's earned, It requires raising of capital for its growth, because it is dividending out all the cash flow it accrues.
We believe it is a better corporate structure because it enables equity investors to have a stable yield, predictable yield with a Mandatory payout ratio and contribute capital if they feel they want to contribute and is the right decision at that point in time. Our average daily turnover has increased from about 5 crores to about INR 10 crores in 2021, which is clearly indicating the liquidity improving. Total returns delivered in year on year basis have been substantially higher and is increased over a period of time. Our net debt to AUM has remained within the planned numbers to maintain a robust balance sheet. And along the way, there have been several changes like leverage limit to 70%, lot size reduction to 1 lakh, RBI enabling, bank lending, induction of KKR sponsor and insurance and FBI lending to Enbridge becoming a reality.
All of this contributing to Enbridge becoming a market of its own. On the next slide, which is slide number 7, it just captures the evolution of our financial performance over the years. And as one can see from different numbers, in general, we have grown anywhere from 50% to 55% in terms of our Compounded annual growth rate of all parameters, whether it's revenue, EBITDA, AUM and NDCF, which effectively also has delivered A good BPU growth for the investors who have chosen to invest seamlessly, and we believe we'll continue to focus on this BPU journey As we move ahead to ensure that stable distribution and consistent growth Remains the focus of Integrate. Coming to Slide number 9, on Just a snapshot of who we are today. So we are today India's 1st power transmission yield platform with An asset size of about INR 20,500 crores are present as we spoke about in 17 states in 1 UT.
With 40 lines and 11 substations, we are AAA rated and our residual contract life is about 30 years. And in terms of another dimension of size, we have 11,550 towers and overall considered about 4,030,000 tons Metal between steel and aluminum. Going to FY 2021 key highlights. The first aspect on the portfolio growth, we have acquired 6,900 crores worth of assets in FY 2021, which has taken our AUM to INR 20,500 crores, including the largest asset ever transacted In our transmission sector in India, which we executed called NER SS2 in quarter 4 of 2021. Besides that asset, this year is special because we acquired 3 gs type From different kind of counterpart, starting from joint venture with Power Grid, which is a cost plus transmission asset which we acquired from Reliance Infrastructure, a state transmission asset which we acquired from a JV of Kalturu and Technoelectric and signed the 1st solar asset with FRV in the last year.
In general, last year growth was about 35% of revenue and 26% of EBITDA on a year on year basis. It is important to note that any acquisition happened in the last week of March and therefore has very limited Contribution to both revenue and EBITDA numbers of FY 2021. In tandem with the portfolio growth, As we have consistently increased our DPU in the past, what we are guiding for FY 2022 is for INR 12.75 a unit which is up from our earlier run rate guidance of 12.4 units and up about 6% from the FY 2021 initial guidance of INR12 a unit. It is important to note because this is adding to a trajectory of approximately 4% year on year growth in DPU that we have projected and delivered over last 4 years. The next segment is on improving our balance sheet strength.
We have successfully managed the 1st wave of COVID-nineteen related uncertainties on the business by maintaining adequate liquidity and reserves for the company. Our net debt to AUM has remained at 59% as of 31st March 2021, which leaves substantial headroom for growth. This does not account for the rights issue impact, which will be explained subsequently. We have substantially diversified our debt sources, Reduce the cost and elongated tenures in the incremental facilities that we are undertaking. We are focused tremendously on resilient asset management this year.
We are transitioning into an in house project management or asset management as the industry calls it. And therefore, the Starlight Power in FY 2022 will not be pursuing the project manager role. However, we would be internalizing it within the integrate teams itself. We have partnered with IBM for utilizing their global tool called Maximo to digitize asset management and increase reliability and efficiency of our operations. We have made investments into emergency restoration systems to ensure reliability of our portfolio and availability.
And we are focused on building a world class EHS and ESG practices across the portfolio. The last one is on industry stewardship. So we are consistently focused on reducing the lot size to allow maximum participation, increasing liquidity. And as some of you would know already, IRDi has come up with a circular to enable debt securities subscription to debt securities by insurance companies. And MoF has announced the similar measures for SEIs.
However, we are awaiting the final circular from our view. All of this has put together enabled us to contribute superior total returns, Maintain sustainable increase in DPU and steady operations. Going to the key power sector trends, I would just spend a few minutes here. As we believe electricity sector is truly at the cusp Of shift in demand patterns, technological disruptions and regulatory dynamism in India and globally. To give a perspective, technological disruptions would mean efficiency of SolarSense And in general, other solar technologies reaching grid parity levels, improvement in storage technology and battery technologies and evolution of electric mobility.
The impact of these disruptions has direct result on the demand patterns. The focus on focus on electricity in India has moved from just availability of our Right. 2, reliability and sustainability of energy delivery. Electrification of mobility will further cause Huge shifts into the demand patterns in the country to the extent that If the overall electric mobility vision is achieved, it will eat into the oil and gas share of the energy and expand the electricity sector in a material way, which will have immense impact on equipment manufacturers As well as infrastructure providers like ourselves, storage requirements are becoming central to stability and reliability and such demand shifts, As well as the charging infrastructure for Elite, we will become a much larger market in the coming future. And the last one is a regulatory dynamism that we have seen in the government, whether it is with Support in form of PLI or support in terms of planning adequate and efficient transmission system, Revitalizing DISCOMS by some monetization as well as relicensing of distribution businesses and Many such bright touch regulations, which are supporting a decadal growth in the electricity sector.
At the cusp of these three, we believe that we are looking at a decadal growth and a transformational shift in the electricity sector in India, not only for the infrastructure companies, but also for companies associated with it in terms of manufacturing, technology and generation. Coming to the COVID impact on the business directly that we see on the next slide. The COVID per se as we have been showing this slide did not materially impact our business, While the demands subsequently materially dropped in COVID in 2020, it subsequently came back. It's dropped in 2021. As we can see in the green curve, we believe the moment the lockdown opens up, it will come back up.
However, the main thing to note over here is that the power transmission tariffs are based on availability and are not linked to power flow and demand. And we have seen it in 2020, our collections came back to normal and rather beating the historical Average and ending the quarter 4 with 126% of quarterly revenue, which we believe is one of the best quarters that we have seen. And our FY 'twenty one revenues remained above 100%, which clearly showcased that the COVID impact of FY 'twenty one was not there on the business per se, Besides the practical challenges of operations, in general, we are ending the year with one of the best receivable days of 41 days at the end of the quarter. The last section is on the resilient operation. I would have Satish, if you are on the call.
Satish to take through that section of resilient operations and reliability centered management. Satish, over to you. Hi. Can you hear me?
Yes. Yes, great.
Hi, everyone. Good afternoon. So on resilient operations, I think despite of COVID challenges, We could able to maintain the reliable power supply with a maximized availability. So across the portfolio, we have achieved 99.5% against our normative vulnerability target of 98%. Of course, there were safety issues, concerns.
We have to put lot of additional COVID Related safety measures at our facilities, including in substation and in transmission lines And all the critical O and M activities continued with the restricted side things Especially in substation operations where we have to operate 20 fourseven, we could able to Sustain and manage the operations without any much larger impact. Yes? Yes. Thank you, Satish. The next part was about on Slide number 14 on in general operating performance of the year And the quarter?
I think the quarterly availability, as Satish mentioned, has been as per plan, except for certain items where there are Shutdown events that we need to take, but they were compensated by such regulatory authorities like MSRDC and NHI, which requires us to move lines. In general, our performance on reliability measure is substantially improved. The number of trips per line in FY 21 has come down to 0.31 from 0.48 in FY 2019. And further, If we remove the indemnified components, which are in some of the lines, the TRIPS per line comes back to about 0.2, which we believe is one of the best in the industry and we Our safe man hours have been good. However, we did See a fatality earlier in the year for a very rare incident of honeybee bile.
And we are truly committed to ensure that it does not repeat and me and Satish and everybody at the team is focusing to ensure That we increase our training man hours to ensure that we do not see such fatality to repeat. Solar generation is very low at some of our substations in terms of our size. However, we as you know, we have purchased or signed to purchase the 100 Megawatt of Solar Facility and you will see these numbers growing materially after that. We also received ISO certification for 14,001, 45,001 from Bureau Veritas and 9,001 in the financial year 2021. As I mentioned in the summary, we are transitioning our project management agreement from Starlight Power to Indigreed and Indigreed will become self reliant On the next slide is about the robust financial performance Of quarter 4 and full financial year 2021, I would invite Jyoti, who is CFO at Integrate to take this slide onwards.
Jyoti, over to you.
Thanks, Harsh. So on the back of very sound operational capabilities, We've sort of reflected that in our financial performance, which you can see on Slide number 15. For the quarter FY 'twenty one, our revenue on a year on year basis increased by 29%, EBITDA increased by 37%. Our NDC, however, increased only by 8%. This is because of a few one offs relating to some SPA earnouts as well as some one off Desirard creation that happened during the quarter.
Adjusted for that, the NDCF accretion has also been in line, actually higher than the EBITDA generation at almost 40%. For the full year FY 2021, our revenues increased by 35% And EBITDA and NDCF increased more or less in tandem at 26% 27%, respectively. As we've already announced, we Have a 3.3% growth in the BPU per quarter from INR 3 to INR 3.10 over the course of the year. Now this, of course, came into effect from the December quarter. So for the full year, the corresponding BPU The increase is a little bit lesser as the INR 3.1 was paid only for 2 quarters and not for the 2 quarter.
The increase is half of 3.3%, which is 1.7%. It's showing 1%, that's a typo. But on a run rate basis, our DPU increase For FY 'twenty one, it's 3.3 percent at INR3.1 into INR4, INR12.4 for the year versus INR12 that we used to pay before that. And as Haarsh has already guided, we plan to increase the GPU to 12.75 or roughly INR3.1875. This will be a further increase of roughly around 3%.
So overall, an increase of 6% from the start of the year till the end of the year. Our AUM growth has been remarkable at 71%, and we are today commanding an AUM upwards of INR 20,000 We go to the next slide, which is essentially a bridge between EBITDA to NVCA. It is more or less explanatory, but I'll take you through some of the key highlights here. On the quarter, I'd like to highlight the working capital movement, which is a very big positive of INR 160 crores. This was in the back of an exceptional quarter in terms of collection.
We collected the highest ever in quarter compared to the last 4 years at 126%. And that led to significant drawing down of The debtors and cash coming into the books, that helped us for an NDCF at an SPV level, which was higher than the EBITDA. So against the INR 451 EBITDA at the STV level, our NDCF was actually higher at INR 475 crores. Adjusted for the interest cost, debt repayment, etcetera, etcetera, at the IGP level, we generated an NDCF at IGP of INR 226 All of which we intend to pay out the INR 217 crore of BPU, actually INR 1.3 percent on the expanded equity base of INR 70 crores. So it's important to note that for this quarter, we've created an NDCF reserve of almost INR 62 crores, About INR53 crores at the SPV level and about INR9 crores at the IGT level.
For the full year, the corresponding reserve is 170 crores, about INR 143 crores at the STV level and INR 27 crores at the IGT level. Now this NDCL reserve will help us to guide over any sort of disruption in the collection cycle, which may or may not happen in the As of now, we don't see any challenges. Collections seem to be following the course. But should there be any challenges, This NDCF reserve will help us to tide over and smooth out the predictable DPU that we have always envisaged to maintain. When We go to the next slide.
Harsh, you want to take the distribution strategy, please?
Sure. Yes, thanks. So I think on Slide 17 on distribution, as we have We are focused on delivering INR12.75 a unit for next financial year. And for the current financial year, the quarter 4, we have decided to distribute INR3.1 a unit, which consists of INR1.51 as interest, INR0.52 per unit as dividend, which is under the old tax regime, so therefore tax free, capital repayment of about INR1.07. And this will also be for your you'll also receive an advice with the similar numbers in your mailbox along with the DPE.
With this, we have cumulatively delivered about INR 45.77 a unit And approximately INR 2,000 crores of distribution to investors is listing. I think it is Important to note that this distribution and the guidance are on a much higher outstanding unitholder base. Earlier, we had 58.35 Crore of Unit Outstanding, whereas in this quarter, in quarter 4, we have 70 0.02 crore unit outstanding and we are delivering the same INR 3.1 a quarter for the entire unitholder base and the guidance of 12.75 will also remain on the entire unitholder base. There is Juthi would take the next one, 2018, 2019 or?
Yes, I can take the next few slides. So the next one in Slide 18 is the adjusted NAV. The way the in which regulations work is that when you acquire an asset where you are the majority holder, Then you consolidate the debt as well as the AUM or the value of the asset 100% in the books. Consequent to that, the NAV at the end of Q4 is at INR146.26. This includes 100% of both PRQTCL as well as more importantly NER.
Now for NER, while we've acquired 74% in tranche 1, there is a plan to acquire 100% of the asset And that transaction for the balance, 26% is due to happen in quarter 1 of FY 'twenty 2. While the equity value adjusted for debt has been consolidated 100%, There is a payout that needs to be made for the 26% that we'll acquire in this Q1, which would lead to an adjustment in the net asset value to the tune of roughly about INR 8. Then there has also been a rights issue, as you are aware, INR 12.83 crores, which will have a dilutive impact because of the same The same valuation is going to be distributed on a larger number of
units and that impact will
be about INR 6. So on a pro form a basis, the INR146.26 of NAV per unit would actually translate to about INR132.18. And we thought in the light of fair disclosure and full transparency, this is a fact that we wanted to bring to the notice of our unitholders to be mindful of.
Sorry, just to add on that, Jyoti, I think as you ended up rightly, this is as per the value of report, our NAV Statutory remains 146.26. However, as we speak today, there are 2, as Jyoti described, we wanted to be More transparent and disclose the quarter one events, which has a dilutive impact. And we believe that that's Something which unit holders should be aware of. Therefore, it is provided that these are the 2 events, which has Impact on the downward side on the NAV that is published and to make it clear NER is acquired, so 100 percent economic interest of NER is acquired and is accruing to Indigrip. However, the payment which is not made at the moment, which is what Jyoti described that we would be paying subsequently in quarter 1 or subsequent timeline as and when certain conditions are met by Starlight Power.
Thanks, Harsh, for that explanation. I'll move to the next slide, Slide number 19, which talks about our finance structure, the capital structure on the debt side. So we have a gross borrowing of roughly around INR 12,800 crores at the end of March. This is adjusted for some amount of debt which got paid in the 1st week of April. In the quarter, we raised about INR 5,100 This debt we raised at an average incremental cost of about 7.36%, Which stands very well compared to the average overall book cost of 7.93%.
So over the course of the entire financial year, we've been able To refinance debt at a lower level, so that average cost continues to go down, at the start of the quarter, our cost It was about 8.29 percent for the overall book, which now is less than 8%. And in the month of April, May, we have also been able to do a public NCB issuance, where we were able to raise about INR 1,000 crores For 7 years and beyond, average maturity of roughly around 8 to 9 years at a cost of about 8%. And what that has done is that has Medes capable of extending our tenures off the debt book so that we are able to raise incremental debt for 7 years and beyond at lower Today, as we speak, we are in a position to raise incremental debt between 7 to 10 year maturities At plusminus about 7.5%. And as more and more of our book gets turned over and new debt comes into the fold at that rate, our average cost So debt should also be going down from the current 7.93% to maybe trending down to 7.5% over the next couple of quarters.
We continue to be rated AAA. We have a fixed rate borrowing of more than 80%, almost 83%, 84%. And roughly 60% of our book is in the form of NCDs and the balance is in the form of loans. We're carrying a cash balance of about INR 9.65 crores at the end March. But this includes the DPU to be paid of INR 217 crores as well as restricted cash in the form of BSRA of about INR 200 crores.
So adjusted for that, The cash that we are carrying, which is sort of free surplus cash, is about INR 450 crores, which on a book of about INR 13,000 crores translates to about INR 3.5%, which The right of fair amount of cash that we believe we should carry given the overall size of the operations. Our net debt to AUM is at about 59%. Now this will be going down as because of the rights issue that we have done in the month of April. But as of 31st March, it stands at 59%. Our interest coverage ratio is actually 1.52.
There's a typo here. It should be 1.5 more than 1.5. It's It's about 1.52. In terms of the repayment schedule, which you can see at the bottom half of the slide, we Because of the ability to raise debt beyond 7 years that we have enabled, we should be able to refinance All our debt in that kind of a maturity bucket, an extensive maturity. So that but for FY 'twenty three, we believe by September, all the repayments in any financial year will not exceed INR 1500 crores.
That will be roughly around 12% to 13% of ARPU. And we believe that is the right kind of level of refinancing or repayment that are doing in every year that we should have and we would proactively ensure that it doesn't go above The INR 1500 crores mark in any particular year. As far as FY 'twenty three is concerned, there is a large amount of debt of INR 26 INR700 crores which is coming for repayment. This includes 2 chunky NCDs, 1 for INR 1400 and another for nearly INR 700 crores, which we can refinance now, but there would be these have been locked in at higher rates of interest. And so there would be a significant amount of break cost or prepayment costs that we'll have to bear.
So the way we will manage this particular refinancing is that we are proactively working with banks For an advanced tie up of a loan facility, which is longer availability period, which we hopefully should tie up during the course of the year, so that we have this facility in advance Rather than raise this money closer to the maturity date. We are also, to the extent possible, refinancing as much Of the FY 'twenty three debt piece and we should be able to do at least INR 200 to INR 250 crores over the next quarter. Harsh, you want to take the next slide?
Sure. And adding to what when Jyoti ended, I think where we are in terms of our ratings, the rate cycle and the opportunity, We believe that this INR 26100 crores in FY 'twenty three is a very good opportunity to reduce our cost of debt further Because these are the bonds which were locked in about couple of years ago with a much higher cost of debt and then our incremental cost So we believe that this is going to result into a good chunk of savings for the coming years too. On the next one, I think there are 2 strategic capital raise that we did and one Jyoti already spoke about. But I think some of the statistics on public debt is mentioned over here. I think the key objective of that was to diversify our source of debt, Extend the average maturities of a borrowing and increase the market depth for the capital raises.
And we saw that against a token of a smaller issue, we received a 25.10% demand of about 2,500 crores And we completed the INR 1,000 crores for the full green shoe subscription and over 11,500 applications were received for the debt issue. And majority, which is more than 80% of the subscription as we saw, has been in the 7 or greater than 7 year tenure. And that's something which achieved we believe achieved our objective of really establishing a long term tenure in the market for IndiGrid Papers. And the average maturity of allocation that we achieved is 8.6 years. And this also now includes 4 insurance companies who have chosen to purchase our papers in the longer payments.
And this is just important thing, this is just a few days After IRDi enabling such ability of insurance companies to subscribe to our debt papers and We are pretty encouraged and happy about such strong demand from long term capital. On the rights issue side, I think this was the first ever rights issue done by a public listed entity. And this is the first call after that we are talking about The rights issue to investors and our objective was to ensure that we preemptively capitalize ourselves to ensure that We are able to grow when the market is right. The price issue has helped us create leverage headroom for further growth and Also offered opportunity to all our shareholders to participate and contribute in the growth journey of Integrate. Our rights issue got subscribed by 1.25 times.
And what was heartening to know is over 90% of the eligible investors chose to subscribe to our rights issue and which we believe is a very good number, and then we see it as a sign of confidence in the integrated platform from our investors. With the capital that we have raised at the right issue, we would be able to acquire another 5,000 odd crores of assets while remaining within the 70% leverage that we have kept for ourselves. The next slide is More long term track record of delivering returns and as we have been consistently maintaining in which and especially integrated focused on delivering superior total returns, which consists of dividend distributions or other distribution per unit Plus price appreciation or change in price. As you can see with the comparable indices and stocks that we have been consistently Showing over last several quarters, we still remain at a substantially higher spread of what we have delivered in terms of annualized return over last 4 years since our listing. Important to note, But majority part of these returns are getting delivered by virtue of our stable distribution and not just the price change.
And that's something which also contributes to a lower beta or lower volatility in total return than the price of Indigo. Coming to Slide number 23, which is the outlook for FY 2022. We believe that there is about INR 50,000 crores of intrastate TBCB Pipeline is another INR 45,000 crores of intrastate TBCB business that is expected over next 3 to 4 years. This forms a very healthy pipeline For acquisition, within the interstate transmission bids, we see approximately 15,000 worth of Bids coming in FY 'twenty two. And additionally, about 26,000 crores are identified for 20 gigawatt of renewable power plant, which may come in the subsequent years.
Our focus will be on completing the acquisition that we have signed up for, called FRV, as well as converting the framework asset KPL into our portfolio by year end. We will continue to selectively evaluate opportunities in both solar and transmission sector. And the outlook is to increase our DPU to 12.75 and we'll work towards delivering the same. On the balance sheet side, we'll continue to further diversify our debt sources and elongate tenors. We will To mitigate current uncertainties and any unpredictable scenario that may pan out due to COVID or other than COVID over the next 12 months.
On the asset management side, we'll continue to maintain a robust availability and maximize incentives. We will be investing both in technology and people To ensure reliable and self reliant O and M, we will continue to Make investments into leading technologies like digital asset management, operative analysis and emergency preparedness to ensure that we are able to operate our assets reliably. We would focus on EHS and ESG practices for the portfolio in line with global practices for similar platforms. On the industry stewardship, we'll continue to Lear is with regulators and ministry to reduce the lot size at par with other listed platforms We are seeking for PFRDA to subscribe to debt securities for Envit and also actioning of MOS circular on FTI And ECB lending. And we are recommending government to streamline tax anomalies with respect to capital gains tax for InvITs.
With that, I would just conclude the call by saying we are really Happy to have such a wide participation and performance. We look forward to answer your questions now.
Thank you very much. We will now begin the question and answer 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 BAM Capital. Please go ahead.
Yes. Good evening, sir.
And congratulations on good set of numbers and raising the capital. I've got two questions. Firstly, why we are maintaining such a high level of cash on our books? And the related question is that, of course, we have around €4,000,000,000 of repayment during FY 'twenty three. When do you expect it to refinance in the sense of time line?
Sure. So I think Jyoti did explain partly, but we'll try to do it again. I think the High level of cash, I think we need to reduce certain cash. So out of the 9.65 crores of cash, about 2.20 crores is the Distribution held for this payment, which would bring it to about INR 7 INR 50 crores. Out of that approximately INR 300 crores is a statutory disrupt.
We maintain a one quarter of interest cover every time At any point in time, which reduces by another INR 300 crores. So this is about like INR 520 crores out of INR 960 crores is kind of either cash flow which we are distributing to subsequent investors and For debt service, out of the other INR 400 crores that you see, There is one way to look at it. There is a reserve that we have created in this financial year, so approximately INR 170 crores, That's a reserve that is created, which we can use subsequently. So we have approximately other than these 3, about INR 200 crores, INR 300 crores of excess cash, Which we depending on the opportunity, we can either use it or we keep it. That's a flexibility.
So I don't think we should look at it as a INR 960 crores of cash balance. The real flexibility on cash balance is about INR 200 crores to INR 300 crores. And we have upcoming acquisition also coming, right, for FRV that we have signed. So we will decide to use it for either upcoming acquisitions Or refinancing that may come up. So the next question that you asked was on INR 2,400 crores of repayment in 2023.
Both of them are coming for next financial year. So any refinancing that we do for that amount Would largely happen in the quarter 4 of FY 2022, because they are as Jyoti mentioned, they are locked NCDs and the breakage costs are higher. So we would be doing it somewhere in the quarter 4 of FY 'twenty two.
Okay. Understood. And sir, What is your debt equity post the acquisition of KTL and FRV In the sense that you raised also with the right issue is RUB183 crores, right? So post the KTL in India, at KTL and solar FRB, I think that should happen in the next 12 months. What will be the and also the NER, I think we need to pay something, right?
Yes. So after all paying all three payments to us, making all these payments, what will be the equity at the end of FY 2022?
Yes. So I would just say, 1, after the rights issue, our debt to net debt to AUM is at About 55%, okay, approximately. And considering the size of both the other assets, Overall, AUM would probably be in the range of 60% after these two acquisitions. Jyoti, if we can Does this seem right about 60%? 60%?
Yes, you're right. I mean, it
could be about that kind of a level.
Immediate visibility
is around 55% post this quarter because rights as well as FRV we are expecting to happen in this quarter. It will happen a little bit later, but it will be within the 60% threshold based on current visibility of the acquisition pipeline.
So there is a 10% extra margin available to us, right, for this? Yes. Understood, sir. Thank you. Thank you.
Thank you. The next question is from the line of Prashant Pandey from Birlasan Life Insurance. Please go ahead.
Hello, sir. So my query is basically on the return of capital, which you have given in this quarter. So how is it predictive? Was there any specific reason in terms of debt maturity was coming up for the loan, which was given to STDs? And also what is the future outlook?
How much capital return can we expect going forward? Okay. So I think This is not linked to any specific maturities, etcetera, as we have described earlier. This is linked to Primarily one that under the tax regime and the Invit regulations, We need to do return of capital or rather we need to distribute to our investors The cash that we receive from SPE in the same form as the other payment. So for example, in a particular year or a quarter, If one SPV generates more cash than the interest that it has to pay to integrate, in that quarter, we may see some capital repayment happening.
It is not a uniform, but some SPE will do it, some SPE will do it after 10 years. That depends on the capital structure of the SPV purchase. So whenever we receive A cash inflow into an SPV more than the interest payment that it owes to Indigreed, You will see this component coming in. It is just an accounting treatment. It is not a buyback or a Capital repayment in the true sense, it is just a capital repayment because subsidiary has returned the debt to Invit And Invit is paying back the same.
In this quarter, the number is relatively higher as You would have seen there is substantially higher collection that has taken place, right? So when you receive more collections, there is more NDCF. And the interest is accounting, so we can only pay X amount of interest. The rest of it comes to us as a capital repayment. On the outlook in future, there would be components of capital repayment, which would be there, but it is not It is very difficult to predict it on a year on year basis that it's very difficult.
So we are focused on Following the rules that is there in the semi regulations and the income tax, but prediction of that is difficult earlier. Okay, sir. Thank you. And my second and final question was on the NDCF. If you see on Page number 1516, the NDCF is different.
So I wanted to understand as in Why is there a difference? Is it because one is at the SPV level and another is at the Invit level? Correct. So there are 2 ways to look at it is, 1 is it at the in which level in terms of after creating reserves. And second is that what you see on the client number 16 is just a waterfall from EBITDA to NDCF, Right.
So how the lot of it changes, etcetera, it is not a technical formula of NDCF that gets followed under SEBI, Because SEBI requires to have 2 level of NDCF separately communicated. And so what is NDCF for IGP is after adjustment of 10% of reserve at SPV. So you need to make certain adjustments to map it to the FY 'twenty one We see above 917, which is the total cash generation that has happened in the country. So the 90% regulation is for the Lower amount is 7.75. 90% is on both amount, NDCF at SPV as well as NDCF at IGT.
Okay. Thank you.
So if I may explain in a simple way, both of them are actually representing the same number, the method of representation is different. So if you look at Slide number 16, if you take the distributed amount and just add the reserves for the quarter and for the year, You will get the total NDCF number, which is there on Slide 15. So Slide 15 is talking about the overall NDCF generated, including the results The breakup of that MPF is shown on Slide 16.
Okay. Thanks a lot.
Thank you. The next question is from the line of Anantal Thakkar from Alka Securities. Please go ahead. Hi. Thank you for the opportunity.
So, congratulations, Harsh and team on a blowout year and quarter after Such an unpredictable year. My question is actually in continuation to the previous one. So while I understand that the capital repayment may not have Predictability, but can we assume that the dividend will have a predictability going forward?
Yes. So on the dividend front, it is a very specific scenario which we can provide a little bit of guidance on. The dividend is coming from the joint venture called Parbatik Holdam, which we acquired from Reliance Infra, which is a cost plus asset. And in a cost plus regulated return asset, we receive post tax return from the regulator and the customers. So there is a specific amount of dividend that we receive every year from that joint venture.
And that Would amount to approximately MXN 50 a year kind of dividend for the platform, which is about MXN 30 to MXN 35 crores. And that is something which will continue
for a longer period of time.
So the dividend component will be more sustainable and more predictable In the range of INR0.45 to INR0.6 a unit per year. Okay, wonderful. And the second question I had, With
the increased guidance at 12.75 for FY 2022, the Q1 you are paying out 3.1. And therefore, would it be safe to assume that the balance will be caught up by the end of the year?
Okay. No. So, okay. So for the guidance, we are following an approval method. So the $3,100,000 that we are paying is for quarter 4 of last year.
So the $12,750,000,000 will be from the NTF of the financial year 'twenty two. So depending on how you account for it, it will go so quarter 4 DPU is 3.1, but quarter 1, FY 2022 onwards, it will be a higher DC.
All right. Sorry. My apologies. All right. So the next full year will be 12.75.
Wonderful. Thanks and keep up the good work.
Thank you.
Thank you. The next question is from the line of Sarvesh Gupta from Maximal Capital.
So after this tax rule which got changed for dividend distribution, many of the REITs which are listed once had Change the mix of distribution to their unitholders and also have given some guidance on the same on an increased distribution as a percentage of total distribution. So it seems that there is Some financial engineering and flexibility to sort of change the mix to the unitholders, which of course have been proven by all the listed REITs in India. So given that, do we also have that flexibility? Because it and hence, if we have that flexibility, Would we want to give any guidance on the mix of these three forms of distribution going forward? Yes.
No, I think that's a very good question. I'll just start from saying that REITs in which follow a different capital structure, it's directionally. What happens in real estate is that typically the asset value is much higher than the book value. And because of that, in any case, they have to pay dividend even earlier, even though it was taxable. So for them, what has only changed Is that from a taxable dividend, we are moving slightly and making it towards tax free dividend depending on the cap structure of different SPVs.
However, for enrich or other, let's say, infrastructure businesses, typically the capital structure and book value are not Materially different than like real estate. So what happens is that we have a lot of Depreciation cash flow available to us. Rich on a real estate, the depreciation percentage of the overall asset value is lower. So we are kind of restricted to follow a particular cap structure, which would eventually result into a material part of our distribution coming as interest. So we do not have the same kind of flexibility to move to a dividend structure.
And We believe that is better for Invit or rather Indigit for sure, because if we were to move to that kind of structure, the overall cash flows will come down materially, Because then we'll need to start paying 25% tax to that extent to be able to generate same amount of dividend. So we have done those calculations and we believe that that's something not feasible for Indigrid. However, it can be case by case for different people. Even the dividend that we are providing is specifically coming from a cost plus asset.
That's why
we are able to we are being able to deliver that dividend. Understood. And the other thing is, so basically for Further increase on DPU is in a way dependent on the incremental IRRs, project IRRs So this spread, how are you seeing that in the market relative to previous years, Given the gush of liquidity everywhere in the world, are you seeing pressures on the incremental spread for the newer things that you're bidding versus No, I think very, very pertinent question. First point, I think we acquired Any are just at the end of the last financial year. So for the near term DPU growth, We are not dependent on new asset acquisitions because our high confidence guidance comes from the fact that we have the assets that we've already acquired on the back office we are providing the DPU guidance.
So our near term DPU growth is not dependent on asset acquisition. To answer your second question, certainly, the competition and in general, I would say capital availability in the country has increased and which would result into, I would say, relatively narrower spreads on acquisitions. However, I mean, it depends on what is the particular situation. For example, let's say, Whether there is a stressed asset or operating asset or a particular asset in which you already have synergies on, etcetera. So it depends on asset to asset.
But in general, directionally, yes, competition has increased, but they've narrowed down. That is when we believe platform like Indigrate are more competitive because of our rating, Because of our balance sheet strength, because of our track record of acquisitions, because we can turn around acquisitions faster and speed is definitely One of the criteria that we have seen has worked well in terms of competitive scenario, because eventually the sellers do want a solution that gets delivered to them Faster rather than waiting for a year because the economic situation can change materially in a year. So and the tax part where We can have a better IRR just because the way we are structured in comparison to a legal entity, which is structured differently. So I would say, We remain to be competitively well placed on account of our rating, balance sheet strength, turnaround capability and track record and Our tax structure. Understood.
And last question on the acquisition pipeline. Now we only hear what is Actually accepted and closed. But, I mean, how often do you reject acquisition of an asset? Are the assets mostly homogeneous, so all it requires is a good deal around it? Or are there really assets which are bad as well?
Because we keep hearing that everything that you're considering gets acquired in a way. So how often do you reject and what Specific rejection ratio, to be honest, to give you a specific number. But I think I'll answer second question first, which will address the First one is that assets are homogeneous. When you see, if you look at our portfolio today, about 90 Actually, 95% of our assets are under same type of contractual framework, This is interest rate transmission service, we see similar kind of cash flows, etcetera, similar kind of technology, etcetera. So Effectively, the filtration is very simple.
As long as it is this part of the contract, we like these contracts, we believe they are very strong. You don't need to reject the asset. The next level comes in terms of quality of work and execution. And typically, There are about 2% to 5% range of outcomes that we see in quality of execution between different projects. And that gets adjusted in the value That if you correct 2% of extra work and the asset will become good, those kind of changes.
So If it is an interest rate PVCB asset, which is clean operating asset, it is an easier decision for us. We do not need to reject it. Solar is slightly trickier and materially different than TBCB. So we have been very selective over there. We do not pick up assets with, I would say, relatively weaker counterparties, right?
So And that ratio would be very high. Most of the projects that are granted today has a substantial amount of state counterparty risk and we do not even pursue those projects. So there's I would say, I won't call it a rejection, but we filter it out, don't bid for those projects. Coming to The narrower pipeline, if it is a SECI project, well built project, NTPC project, well built, good quality modules, etcetera, then we pursue that project. Eventually, we may not get it on account of several things because let's say we don't like the quality of certain aspects.
We'll put a higher risk premium to it and a higher cost Correction and maybe we are sort of bid it out. But the criteria for rejection for us are largely around the counterparties that we don't like And we don't work with, as well as if there are material issues with the contracts, it cannot be corrected for any Commercial measures. Understood. What are the tangible and intangible benefit of this making the project Management in house and would it be given to the investment manager or who which entity?
Sorry, can you repeat that?
The project management which has been transferred from Sterling Power to I don't know which entity, What is the tangible saving per year and what is the intangible benefit of doing this? Okay. So one, it is not with Investment Manager. It is within the integrated entities itself. So there is no external economics going to any other person.
In terms of, I would say tangible benefits, I would say there is no tangible savings on this We were anyways paying about 10% of O and M cost to Starlight Power. And we would need to incur minimum that if not more to have a similar kind of platform working for us. So I don't think there is a commercial saving on that account. In terms of intangible, There are many advantages. One is, it's a large operation that we are running And the accountability should remain with the Integrid teams instead of outsourcing it with external members or agencies.
So We need to build that strength. 2nd, it also addresses our risk management that our own teams are managing our assets and we have better confidence, Better control and governance around it. And the third one is to ensure that If we invest in people over the longer term, then over a longer period of time, the cost of operations will go down. That's the third one, Instead of just changing contractors in ASG. So I think these are the 3 intangible benefits, I would say, for changing the project management.
The next question is from the line of Rohit Bavari from Reliance Nippon Life Insurance. Please go ahead.
Hello, am I audible? Yes. Thank you. Thanks for taking my question. So firstly, congratulations on the good set of numbers.
I have a basic questions with respect to the DPU classification. And I understand and if I may have just missed it earlier, I understand you said this is more of an accounting entry. There is no actual repayment, which is happening in terms of a debt. So when an SPV is generating some amount of cash and it is generating cash more than its interest payment, that's when this So, when that is happening, Why does my interest component in the DPO have to go down?
Okay. I think that's a very, very smart question. So See, we create there are 2 concepts I would like to bring to for to explain that. 1 It is a concept of reserve, right? So we at the integrated level, we have flexibility to do 10% of We see a 10% of reserve creation half yearly basis at SPV as well as in DB, right.
So we do not need to Completely translate into a mirror image of what we have received at exactly as is being. We can be proportionate because we create reserves. 2nd, there is a context of allocation of expenses that you need to follow from tax perspective. So when at a conceptual level, when And Invit receives its income in form of interest. It needs to set that off Against the interest expense that Invit incurred.
When it receives in terms of principle, it needs to follow Similar kind of principle of allocation and same for dividend. So we internally follow a particular allocation method of expenses at Which would mean that what is the attributability of that income and expense at enrich level correspondingly And then the residual amount is paid. So it's difficult to exactly match it on the call like this, but it is to follow an attributability Of income and expense concept at Invit level, which is what causes this difference. So in reality, we have 170 crores of reserve also that we have created in FY 2021, right? That will also have certain amount of interest and principal repayment or have a capital repayment And dividend repayment that would be used subsequently as and when we utilize these accounts to pay for them.
Okay. Understood. Right. Okay. Yes.
And in terms of the capital repayment, just one more thing I wanted to understand is that how is this any Is this capital repayment taxable at the marginal rates in the handset unitholders? Or how does that treatment go?
So it is difficult to address the exact taxability for me on the call, but I'll describe How? Because even the manager has received as an owner of IndiGrid Units this capital repayment. It goes out of the cost of acquisition for the buyer. Okay. Got it.
Got it.
Thank you so much for your answers.
Thank you.
Thank you. The next question is from the line of Sudhir Bedda from Rytm Consultancy. Please go ahead. Sir, congratulations on super set of number. And sir, congratulation to you and your entire team for outstanding management and unparalleled return In the last 3 years, sir?
Hello?
Hello. Yes. Thank you.
Am I audible?
Hello?
Yes, sir. Your audience is interested with your question. Yes. So my questions are two questions. First, what is the reserve?
See, you have created INR 170 So what is the total reserve we have created so far in last 3 years or 3.5 years?
It is INR 170 crores. It is INR 170 crores. So in starting of FY 2021, we did not have any reserve. Now we have created that result.
And sir, my second question is, is there any inter SPV transfer of loans? Suppose one SPV is some sort of liquidity then another SPV always with the
excess So liquidity transfer
the amount to another SPV, those kind of transactions are there in this our trust at SPV level?
No, we prefer, I mean, technically, we can do it, but we prefer to avoid any such interest fee transactions. If at all, there is a need In which itself gives a loan or return takes the loan back because in which itself carries a lot of liquidity, but we avoid That should be the way.
For SCV transaction. Because other in which are doing like before, so I just wanted to
Yes, but it makes the accounting very complex and there are tax impacts Many other impacts, so we have been avoiding it.
So that's good. That's good, sir. Thanks and sir, thank you for taking my questions, sir, and all the
Thank you.
Thank you. The next question is from the line of Mulek Sawla from Shah and Sawla, LLP. Please go ahead. RTS, congratulations, sir, on an excellent set of numbers, and thanks for giving guidance for higher DPU. Most of my questions have been answered, sir.
But just a passing guidance from you, May I know what is the rationale behind distributing income even On the right units also, because as I believe the income is
to be distributed, as you said, for
the year, quarter 4 of last year. And rights were concluded in the month of April current financial year. So May I just have some understanding on that, please?
Yes. I think you're right. There is no rationale. We just followed the regulations as is. We could not have avoided the right issue owners to not receive the income because the Unitholders who are entitled for distribution are the unitholders who are there on the record date, whether rights or preference or any other unitholders.
So there was no way for us to exclude those investors or the alternative way to consider is to say rights Pricing of 110 would have factored this distribution also coming to them, right? So we can look at it both ways.
No, but I think, sir, we could have had a separate icing number for the right unit. And probably, I Feel that there will be some minority unitholders who may not have applied, presuming that Again, one unit, one lot, I will I may or may not get one lot. So there are chances that few of them may not have applied And they may be deprived of this additional benefit.
No. So I'm trying to understand why is it an additional benefit because even if the unitholder Not apply. You'll still get the INR 3.1 of quarterly distribution. They are not getting lesser.
No, that's right. But if they would have applied and they would have obtained the similar additional lot, they would have got higher dividend Or the higher distribution.
No, no, you're right. But that's what is the unfortunate reality of sebi regulation, right, that We had to do regulation we had to do rights issue within the lot size multiples, which is beyond control of the company. In addition to that, we still need to follow the regulations of record date of dividend, right, even in the company, If the rights issue was done early, the company cannot choose different dividends for different investors, right? Investors has the same legal right and standing, Whether they have come by rights issue or preference issue. So unfortunately, the company does not have these flexibilities to decide key Right issue investors should get less or more.
And the way the regulations are defined, the company could not do right issue in a way that A normal equity rights issue happened.
So in
both cases
I agree, but I'm sure the regulations, whatever they may If company would have thought of probably company would have come up with the Board meeting and record date Before the allotment of the rights unit or maybe rights unit would have had the different
No, no, no, let me explain it 2 ways, right. 1, it is not prudent for company To take decisions based on what do you call the record dates, right? If we do that, we put the Company at risk on market flows, right? Whatever after 2 months the markets are back, right? So we cannot take that risk.
2nd, this anomaly will accrue the anytime we do the rights issue. For example, let us say the record date for this quarter is 2nd June, Right, today or let's say next few days, right? So after record day, we announce the right issue, right? Let's say 3rd June. Okay?
The right issue will get concluded by when? In next 30 days? Right. Right. Right.
It will take 30 days. We will be spending in 30th June, July. 30th June, right? The same investors will get quarter 1 cut EPU. Same impact will repeat.
Whichever date you pick up for rights issue, whichever date in the calendar year, investors, we cannot time it exactly. Any time you pick up, The subsequent capitalized investors will have this advantage, right? Yes. So that's a procedural flaw, which your company can't change around, right?
All right. All right. But excellent and wish you all the very best for the work that It's being carried
on, so continue to carry on
the excellent work. Thank you. Thank you very much. Thank you. Thank you.
The next question is from the line of Pratik Kotari from Unique PMS. Please go ahead. Hi. Good evening, Harsh and thank you for the opportunity. Harsh, regarding the capital repayment, to put it in a different way, let's assume if the collection wouldn't have been so high, Our reserve creation would have been a smaller amount and we would have received a higher amount as interest for this quarter?
Yes. So higher amount, I mean, let's talk for percentages, right? In core terms, you would not receive higher amount, but in percentage terms, it could be a higher interest component. That's correct.
Had the connection not been so high, I mean, we did 26%. Correct, right?
Exactly.
It's only because we have received a higher cash amount that we have chosen to create reserves and to use that reserves in future, whatever that might be, to return
Got it.
Fine. Fair enough. And first, my second question is what would be our portfolio IRR or as a unitholder maybe at INR 100 or at NAV level or at current price?
IRR is a very, very, I would say, floating term, right, very difficult for me to guide on because of, 1, as you rightly put in, at what price 2nd is at what leverage? 3rd is at which assets to include or not to include, right? So for example, if we include If you only include the current assets or we include KTL or FRV or we don't include. Even if we include KTL and FRV, we'll be 60% levered, Which is not an optimal case of 70%. Right?
IRR assumptions vary materially between different people, right? So it's tough to comment for us on IRR What we can guide on is obviously DPU and growth, right? And across the world platforms with Track record of delivering DPU and growth on the yield front get valued as dividend plus growth, right? What is the total return What is the distribution that is made by such platform plus the growth track record, right? With now Such a long track record of performance.
I think what is more relevant is Distribution plus growth in terms of return parameters, it's almost stuck into an EPS to that extent, if one can think about it. It's like EPS plus EPS growth. Similarly, in which it's the few growth, right, as a way of valuation, because IRR per se is very, very floating, right, which Assumption from Natabik's IRR numbers will vary so much that it won't make sense.
But is it not possible to say share what the IRR is as of 31st March, 2020, on when we close it. And you may be given that that INR 100 in every investor based on their purchase price and the address?
No. So we published a value report, right? So our valuation report as on 31st March 2021, CalQ has all the disclosures about the asset, the EBITDA, the revenue, the cost, everything is there, right? But What we don't forecast is interest assumption, leverage assumption, repayment assumptions. That is something which each investor will have to take Because we cannot guide on that.
And therefore, we cannot guide on IRR. But you can construct the same model With a little bit of assumptions of your own side based on our guidance, right, to create what is the IRR in the platform because so there is enough material In the public eye for one to calculate IRR, but we cannot guide that what is the right IRR because then we are saying what are the assumptions of it, right, which is Not a management can guide on that.
Fair enough. Rightly so. Thanks. So, Harsh, my last question, In the presentation, we have mentioned some one time adjustment in account of change in loan BDCs. Can you just explain what is that in the quantum of the team?
So this is about there is a one time change in law income that we received, which we had to also give it to Starlight Power because We acquired this asset from Stellite Power. So we received this income in received this income in our P and L And pass it on as an expense to Solar Power, which is a one time and therefore it's a comparable quarterly annual financial gets distorted with that. The specific number is approximately INR 60 crores of onetime income that we have booked and a similar number of Expense that we would have booked?
Harsh, the income that we booked
is about About $40,000,000 And which year that we
have booked is about 68. So that is the one off item that have been booked in this quarter.
Okay. Fair
Thank you. The next question is from the line of Praveen Chandra, an individual investor. Please go ahead.
Yes, Hashan. First thing is congratulations. I'm attending all the Gong calls since 2018. I remember you used to say that we'll reach INR 20,000 crores by 2023, it's excellent. You are done well within the planned or scheduled time.
Second thing is, I appreciate your inclusive team now like Satish for the project management included, We can give lot of intangible benefit to like okay for next asset acquisition. You have that capability of managing yourself. So I appreciate the inclusiveness because, of course, INVD requires 3 major, one is debt ratio Best interest reduction, second one is managing getting more AUM into the space and third one is operation management in all three. Most of the questions are answered, but I have one more doubt. This until today, we are king.
We are only INVET, But now we have a competitor. Harshal, will you think that this competition, one more annuity is in the So further acquisition going from INR 20,000 crores to INR 30,000 crores will be a Huddle of competition in the area per case, right? Okay. So thanks a lot, Raveesh. I think first question It is about the competition and growth.
So, see, we do not have Special hardcoded targets that we have to reach a particular AUM number. And that's what allows us On the other Invict, the competition is not just from Invict, right? Competition is from non Invict also, strategic also. So that remains, I would say, remains the thing that we keep evaluating. However, we believe The focus of any PSU Invit is going to remain on acquiring assets from its sponsor, then really going out and acquiring assets from the That is something we believe is not the focus of public Invit or a PSU Invit.
However, we cannot comment on the behalf, but To a similar in which in case of an auction with our track record, with our governance And our agility, our ability to turnaround is something which is typically valued highly for sellers. So we do not see it as an incremental competition, but doesn't mean there is no competition. There is already competition from other strategic owners or transmission assets, other financial So it is just continuing in that manner. We do not feel that there is an incremental competition because of an PSU Invit. Rather, we feel that with more Invit's coming, there is going to be better liquidity, better understanding
Seems like we lost the time for the present participants. We move to the next question from the line of Mohit Kumar from You spoke about a number of policy initiatives which you are waiting for. Can you list out The last 3 of them, I think it's the last one, it is the anomaly to capital gain. What are you referring to, Sashri?
So this is referring to the point that in which listed in which we pay on Trading, there is a security transaction tax that gets levied and investor pay that. Typically, it is levied on the equity stocks and that's In which are trading on the equity index, so that is the right thing
to do.
However, when it comes to the long term capital gains tax treatment, Yes. For Invit, the period considered for long term holding is 36 months, which is more akin to a debt fund than equities. So, for Invit, at the moment, there is worse of both That there is a security transaction tax like equity, but the holding period is like debt fund. So We have been proposing to the Ministry and several regulatory bodies to streamline the anomaly. We believe it should trade at equity level.
We believe it should be STT should be leviable, but then 36 months should not be a holding period to compute long term capital gains tax. It should be in line with the It will be long term tax statement, which is 12 months. Understood.
Are you expecting any other policy Changes which will over the next 12 to 14 over the next 12 months?
So I think our focus is just on enablement of Clear Capital also to get securities. That's one, but I don't think it's kind of Changing the game materially and the second one is reduction of lot size, which is one big initiative that we are working on. This is the 2 ones that I can think of.
Lastly, we have an asset with the power grid. Is there any chance or any talk The target that is to buy out the balance equity?
Sorry, can you repeat balance? Okay. Okay. The Parvati Kolam you mean? Okay.
Yes. No, we haven't engaged in any such conversation yet. And it's anywhere is a very small amount, hardly About INR 75 crores also.
It's a
smaller number, but yes, we have not engaged in that.
I'm asking this because there are large number of This is kind of a project which are there with the power grid. I think they are huge numbers, maybe around 10 to 14, if I'm not right down.
Okay.
So that's why the potential opportunity for us to go and source the deals?
Possibly, but I think this is too early. We just acquired the asset in The Q1 of operations, it's a joint venture. So maybe we'll explore, but it is too early for us to say anything on that.
Understood. Thank you.
Thank you.
Thank you. The next question? We take the last question from the line of Roushav Shere Dalal from PR Share and Stockbrokers. Please go ahead.
Yes. Hi, Harsh, and thanks for the opportunity. I really appreciate it. Just wanted to understand it on
the return on capital that is
a component of That is a component of our DPU. So you just said to one of the previous participants that if the SPV generates more cash Then what it requires to pay to integrate, then they pay that particular portion of distribution as return on capital to the subsequently to the unitholders. Apart from this particular Is there any other situation in which Indigrid pays any kind of Distribution as return of capital because I remember that only in the Q2 of 2018 and once in 2019, We paid some INR0.28 and INR0.12 as a return on capital. And one more thing on this only, whether It has any impact on the Net asset value of the trust?
Okay. So answering second question first, there is no impact on net asset value and how it's paid. And to answer the first one, I think there are few other cases in that scenario also one can see return of capital or other capital repayment. For example, we acquired a company along with cash, right. So let's say on the date of the acquisition, company had INR 20 crores of cash.
But that could not be upstream by the earlier seller, our earlier owner, because of whatever the capital structure Our external lenders didn't allow or any other issues. So we acquired the company and then upstream this INR 20 crores of cash, So it's only factored in the valuation for the seller, but then we upstream this INR 26, INR 20 crores of cash, which is the SPV pays to integrate the new order. In such case also, there can be a capital repayment, but that will be a one off, right? But there can be such one offs. But in most cases, you have to attend interest.
Hello. Hello. Hello. Yes, I just lost you in between. Yes.
So in most cases, it will be more cash than interest. That's when it comes to capital repayment. One off could be when we acquire a company along with cash.
Okay. So what exactly is the rationale behind giving this return of capital and not giving it for so many quarters and just giving it this time or Twice in 2000 once in 2018 2019. Was that the same rationale in those quarters as well?
Correct. Pretty much same rationale. It is not in our hands, right? It's not a decision making that we do that this quarter we want to pay distribution in terms of capital dividend. If SPVs have received more cash, then interest that it can pay, it will come in form of capital repayment.
Or If you acquired an asset with an inbuilt cash, so I believe the last time in 2018 was the case when we acquired Patran Asset from Technoelectric That already has INR10 crores of cash, which we paid for. So that INR10 crores of cash was upstream at that time. So upstream as in SPV paid to the IndiGrid as a principal repayment after acquisition. So these are the two cases largely it will pan out and none of them are BAU, every quarter it will happen, right? It depends on the quarterly cash flow and any such events that can happen.
Okay. Okay. That's very useful. Thanks a lot. Thank you.
Thank you.
Thank you. The next question is from the line of Nikul Shah from Sumangal Investment. Please go ahead.
Yes. Thank you for the opportunity. I think congratulations for a very good set of numbers. My first question is, is there any precedent what will happen beyond this 30 year concession period globally? Means what will happen to the unitholders when the concession period And is there any global precedence for this?
Okay. So just to correct, Vipulji, I think You're mixing 30 years, 35 years with the unit itself.
So I'll
try to explain both. Okay. 1, at an asset level, There are 2 possibilities that can take place. 1 is that the Asset contracts will be extended further because we believe electricity will be needed beyond 35 years. And the owners of The assets are us, it's not a concession, so there is no transfer.
And we'll continue to get paid and this will be continuing as planned. 2nd, in case there is no extension of contract, as in the early part of the slide I explained, there is a Significant chunk of metal, about 4 lakh tonnes of metal that is there in our portfolio today. While the word doesn't shoot scrap, but even if you calculate the scrap value of that in today's term, in today's value term, It will be a significant chunk of today's price. If you were to close the business today, there is a significant chunk of steel and aluminum In the company today, so whatever inflation numbers you can assume that will be the value that will be Scrapped in the business and paid to all the unitholders. That is the second scenario.
3rd scenario. But which is
the sorry to interrupt you, Mr. Hoss, but Which is the more likely scenario, means globally what has happened in other countries?
Okay. So globally what happens is nobody scraps Infrastructure that is built, right? And you have extension of contract. That's what happens reasonably.
So that is the most likely scenario?
That is the most likely scenario, right, that we believe that should happen. But again, at the end of the day, 30 years is a long time. We don't You know in what contractual framework it will take place, right? But what we know is that what assets we have, they have a significant value. Now whether we'll realize it in form of operating those assets and earning income or scrapping that metal and pay it, in either case there is a significant value.
Now we are not a decision maker at that policy level that which direction should it go to. If you ask my personal view or professional view, I believe Infrastructure, which is built with so much difficulty should be continued to operate, because the incremental asset building is going to be Far more expensive. For example, the assets that we have built right now, 5 years ago, if they were to be built again now, They will cost at least 50% higher, right. So imagine the scenario 30 years ahead, if government want to build a new line, it's going to cost Multiple times higher than operating the same line with a little bit of improvement and better tariff, right? So that's how we think that it should take place.
The last question that you do clarity on that is actually at this is why I described that is an asset level. Units are a growing concern. There is no end of unit lag. It is like an equity. It's an ownership right.
It is no Principal repayment and after that day the unit ceased to exist. So like in equity, if some in which business ends, Right, after 15 years, 5 years, 30 years, etcetera, and they are not growing, they are not buying for projects, etcetera. You can Delisting InvITs also, just like delisting units, equity shares, right? It is a complicated process, but the SEBI regulations does provide for it.
Okay, okay. Thank you very much for explaining it in detail. And lastly, again, I will return to the distribution of This quarter, as one previous, I didn't I understood the rationale for returning the capital, But I didn't understand the rationale for reducing this interest payment component. Means What I want to convey is instead of this 3.2, it should have been 4.2 or something like that.
You're right. I think if the Integrate Board would decide to give INR 4.2, they could have given INR 4.2, but we believe it's not prudent. We believe predictability has more value than Suddenly, 1 quarter we increase by INR 4 and next quarter it goes to INR 2, right? So there is a business in this business, there are seasonalities. In some quarters, there is great collection, but maybe in the next quarter, it will be lesser.
So it's not that 126% will remain always 126%. That is not possible. So if in 1 quarter it's 126, that means there is some quarter somewhere where it is 64%, right, to average out 200%. So as a business, we need to be able to act prudent and in the quarter in which there is 126% collection, We should create a reserve order of 26% to ensure that the volatility can be met, right, in volatile months. That's the philosophy under which we are operating.
And therefore, we keep this 170 crore as a reserve and maybe next quarter the collections are lesser than we'll use out of this reserve. So this is to ensure that the predictability of DPU remains. That's why we are focused on maintaining that.
Okay, sir. And lastly, you Say, you made some payment to Sunlight Power into the tune of INR 68 crores and you received INR 42 crores. That is what I think your CFO said. So can you explain it in a layman's language what has happened?
Yes. Okay. Sure. So what has happened is, what Jyoti explained is There's INR 43 crores income that is coming, which is on accrual and there is a INR 63 crores of cash that we have paid. The difference between the two is that the amount that we paid to Starlight Power is 70% of the NPV of incremental tariffs that we will receive.
INR 43 crores of the amount that we have booked in the revenue is the cash we have collected already in arrears. In any of these regulatory settlement, when the regulator issues the order, you get paid earlier starting from COD. In this case, it was 5 years ago. So we received INR 43 crores in cash, again which against which we have paid the same amount 70% of that cash and the residual amount It is a 70% of NPV of future tariffs we'll receive on account of this tariff order.
Okay, okay. Got it. Thank you, sir, and all the best for the future. Thank you.
Thank you.
Thank you. The next question is from the line of Jiten Roshi from Axis Capital. Please go ahead. Yes. Good evening, sir.
Thanks for taking my question and conversations and good set of numbers. So just few questions from my side. So as you said, the project management will be done internally. So my understanding is correct, it will be done at the SPV level, sir?
Okay. So not SPV level, we have intermediate holding companies also. We are going to make a entity called India Grid Limited 1 as another entity, which will be project manager for all SPs.
Okay. So that will be so this will be with effect from FY 'twenty two, right?
That's correct.
There was a contract between us and the Starlight, which has got expired and this has resulted in creation of This entity which will be doing the O and M book?
No, no, Shah. The entity was already created. We were anyways doing project management work internally For all assets which we acquired other than Sterlite, like for example, PRKTCL, JKPTL, PTCL, all those assets we are doing project management on their own. Now the contract has not expired. We have bilaterally decided that we want to do our O and M on our own.
And therefore, we are transitioning out. So it's not that the contract that has expired. It is out of our choice that we have decided to do it on our own.
And what would payment structure here like as a percentage of revenue? How will it work, sir?
No, it is intercompany in any case. So we'll continue to maintain a percentage of O and M cost to be paid to India Grid Limited 1, but it's 100% subsidy of India Grid Trust. So on a controlled basis, there is no external payment that is getting
made. And sir, on the KTPL deal now, sir, when do you expect this to happen? Because now because of the COVID, we understand That would be some extension of time.
Correct.
So what is the deadline now where we can see it's kind of getting consumed here?
So KTL is still an under construction asset. It has about 60% revenue generation that has started, but it's not completed yet. So tough to predict with the COVID uncertainties on when will it get completed, but we are watching it. As for our contract, it is valid up to December 2022. So that's kind of an out of date for us, sir.
December 22, yes. And sir, on the acquisition side, Yes, as I understand, it looks like the SBA should be concluded next month from June only. And now with the COVID And there could be some asset which can get distressed because of the equity component. The original developer couldn't get the cannot invest equity into the system. However, the asset is they have been must have been of a good So are you looking for any such kind of acquisition wherein we have the ability to acquire such under construction and that obviously it can be a limited portion of your AUM?
Are we looking out for some acquisition like
this? Yes, certainly. We are looking for acquisitions like that, But in a limited way, I don't think there are many such projects, but we are looking for such acquisitions if it makes commercial sense.
Okay. So any new acquisitions expected this year or just we'll stick around with KTL and FRB?
Sorry?
Any new acquisitions lined up like talking about?
Yes. Okay. No, no. So there may be new acquisitions, but that's not at a
And so one last question, just wanted to understand. So this return of capital will also have In fact, on the cost to the investor, I see if I have invested INR 100 rupees, if I'm getting INR 1, 2,000,000 back, my cost will come down to $19,000,000 if I understand correctly.
That's correct.
Okay. So that's it from my side. On to this. Thank you.
Okay. Thank you.
Thank you. We take the next question from the line of Kiran Maik from Modi Pincap. Please go ahead. Mr. Naik, your line is in Tom.
Kindly go ahead with your question, please. Mr. Kiranayik, your line is in talk mode.
Let's go to the next one, please.
Thank you. The next question is from the line of Manushya from Laxgaard Investment. Please go ahead. Yes. Just for this question, Nishtha, regarding this return of capital, as we were saying that if somebody has invested in your rupee And you gave him a INR 1 as return of capital.
So how for that investor, if it is a retail investor, how it will get accounted for The tax purpose
because dividend and
interest are more or less taxable now In the marginal tax bracket, so how this will be treated?
So this will be slightly different and I'm kind of you should consult your tax Adviser, but I'm just explaining at a conceptual level. This would be removed as Jiten said on earlier question. If you have acquired a unit for INR 100, your cost of acquisition will become INR 99, so it will be a balance sheet adjustment. And as and when you decide to sell the unit, let's say you sell at INR140 today, then The profit or capital gains will be calculated based on selling price minus $99 versus selling price minus $100 So basically, this component We'll get impacted on the capital gains tax instead of a marginal tax. That's the way to look at it.
But it will be taxed When you realize that gain as per the tax law, but that's the directional input. Just to clarify, The dividend is not on the marginal rate because this dividend is coming from the SPE, which is paying in the old tax regime.
Okay. So because earlier, if I understood, a dividend was actually in the hands of the investors in case of the equity shares, okay? Now it has become taxable?
No. Only if the company that issued a dividend is following a new tax regime. If the company is continuing to follow old tax regime, you still have a tax free dividend for that company, subject to your dividend not exceeding 10 lakhs and other provisions Yes,
yes. That's it.
So it is to do with the choice of company in terms of old tax regime or new tax regime. The company that we have acquired is following the old tax regime. And therefore, this dividend is given as a tax pay dividend from Invit.
Okay. Just coming back to the return of capital. As you said, when the Investors sell, it will be calculated as a capital gain. So it will be more like a debt capital gain for like a 36 month period kind of
Correct. If you sell after 36 months, then it will be a long term capital gains tax, the way whatever the rate is. Like what we get in a debt.
Like what we get in a debt, sale of a debt.
No, no, no. Your capital gain will be like equity, just the holding period is like debt? 36 months.
Okay. Fine. Because a lot of this regulation sustained, so it was getting a little bit different. Yes, I know.
At least we can help with issues and best to Take our advice up or tax adviser on this.
Yes, I can understand. Maybe for just further lay on understanding, can you go for a website that can help a lot of So
we have a website where on our website, there is a tax query issued. You can probably refer to that also.
We'll take the next question from the line of Kiran Naik from Ojib Pankaj. Please go ahead. Thank you for giving me an opportunity. Sir, I
have only one question. Are the companies planning any more anticipated in the coming years? As we have said that we want to refinance some of our existing debt, including the Maturities that is coming in FY 'twenty six. So we would certainly be doing certain amount of capital raising for refinancing of debt. Size and tenor, etcetera, probably we can only talk about 20 of dollars.
Okay. It will be similar, which are came in March, April for retail investors also?
Not sure. Tough to comment on that because there are long process to issue anything to do a public debt. We have just done one. So we would probably do private placement for some more debt for some time.
Okay. Thank you, sir.
That's all. Thank you.
Thank you. As there are no further questions, I now hand the conference over to Mr. Swarnam Maheshwari for closing comments. Over to you, sir. Yes.
Thanks, Steve. So thanks, everyone, for participating in the conference. Harsh, would you like to have any closing comments over here? Thanks a lot for everyone who has joined the call and continue to exist because it's a long call. But I think It deserves an annual call, does deserve that much focus and clearance.
So we are very helpful. We are very thankful for all the to join the call and showcasing confidence, be it in rights issues or public debt issue that we have done To wholeheartedly subscribe that, we are committed to a vision and strategy that we have put together for unitholders of Integrate. And we will continue to execute that with 2 things in mind, which is
Thank you. Ladies and gentlemen, on behalf of Edelweiss Securities, That concludes this conference. Thank you all for joining us and you may now disconnect.