Ladies and gentlemen, good day and welcome to IndiGrid Infrastructure Trust's Q4 FY 2021 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 concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Swarnim Maheshwari from Edelweiss Securities Limited. Thank you, and over to you, sir.
Thanks, Steven. 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 Kumar Agarwal, CFO; Ms. Meghana Pandit, CIO; and Mr. S atish Talmale, COO, who will represent IndiGrid Trust on the call. I'll just hand over the call to Harsh for his opening remarks, post which we'll have a detailed Q&A session. Over to you, Harsh. Thank you.
Thank you, Swarnim. Am I audible? Swarnim? Hello, am I audible?
Yes, now you are.
Okay. Thank you. Thank you, everyone, and as Swarnim Maheshwari mentioned, I really hope for safety and wellness of everyone who has joined on the call. This is a quarter four FY 2021 investor call, as well as conclusion of the financial year 2021 call. We have captured certain items for the full financial year, to give a perspective of certain items, as well as a little bit about our evolution over the last four years. To start with, on slide five, 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 four 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.
Second, value accretive growth, which allows us to do DPU increases on a year-on-year basis and create a growth pipeline for future. Predictable distribution. We've been giving guidance on a forward-looking basis and also providing quarterly distributions, which is predictable for our investors. The last one, which is our focus on optimal capital structure, which is at a consolidated leverage lower than 70%. Focus is on maintaining our triple A rating via prudent liability management as well as good quality assets. On slide six, we captured our evolution over the last three years. Starting from a growth track record in terms of assets. When we listed, we had eight lines, about 2,000 circuit km, two substations, about 6,000 MVA in four states and 10 revenue-generating elements, and approximately INR 3,700 crores in size.
Fast-forward today, we have 40 lines, about 7,600 circuit km, 11 substations with 13,500 MVA, and presence across 17 states in one UT, with 50 different revenue-generating elements, and with a total asset size of approximately INR 20,500 crores. We've 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 unitholder base, how it has evolved and diversified over a period of time. Starting again from IPO, we had a sponsor about 60-odd%. We had no insurance companies. Retail holding was about INR 445 crores and FIIs 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.
Nine insurance companies own about 8.6% stake, all of them coming along the way via secondary sale and subsequent rights issues. Retail holding has increased from INR 445 crore to INR 1,825 crore, and that is also evident in the liquidity that we see in individual lots of the exchanges. DII holdings have relatively come down in proportion to the FIIs, and the FIIs hold 31%, and if we add KKR and this together, it'll be a higher number. The third aspect of evolution, which is the market development. Since the time when we listed, InvIT market was in a 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 are seeing in the recent future.
We have, in line with our strategy, consistently raised capital to ensure that we maintain a healthy balance sheet and focus on predictable DPU growth. While we listed with INR 2,250 crores of IPO, subsequently we did a preference issue of INR 2,500 crore, and very recently, a INR 1,284 crores of rights issue. This is a unique aspect about InvIT in comparison to other equity listed companies. Considering that InvITs have a mandatory payout ratio of 90% of the cash it earns, 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 INR 5 crores to about INR 10 crores in 2021, which is clearly indicating the liquidity improving. Total returns delivered on a year-on-year basis have been substantially higher and has increased over a period of time. Our net debt to AUM has remained within the planned numbers to maintain a robust balance sheet. 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 as sponsor, and insurance and FPI lending to InvIT becoming a reality. All of this contributing to InvIT becoming a market of its own. On the next slide, which is slide number seven, it just captures the evolution of our financial performance over the years.
As one can see from different numbers, in general, we have grown anywhere from 50%-55% in terms of our compounded annual growth rate of all parameters, whether it's revenue, EBITDA, AUM, and DCF. Which effectively also has delivered a good DPU growth for the investors who have chosen to invest since listing. We believe we'll continue to focus on this DPU journey as we move ahead to ensure that stable distribution and consistent growth remains the focus of IndiGrid. Coming to slide number nine, on the snapshot of who we are today. We are today India's first power transmission yield platform with an asset size of about INR 20,500 crores. A presence, as we spoke about, in 17 states in one UT. With 40 lines and 11 substations. We are AAA-rated, and our residual contract life is about 30 years.
In terms of another dimension of size, we have 11,550 towers, and overall consist of about 430,000 tons of metal between steel and aluminum. Going to FY 2021 key highlights. The first aspect on the portfolio growth, we have acquired INR 6,900 crore worth of assets in FY 2021, which has taken our AUM to INR 20,500 crore, including the largest asset ever transacted in power transmission sector in India, which we executed called NRSS-XXIX in quarter 4 of 2021. Besides that asset, this year is special because we acquired three key type assets from different kind of counterparts, starting from a joint venture with Power Grid Corporation of India, which is a cost-plus transmission asset which we acquired from Reliance Infrastructure. A state transmission assets which we acquired from a JV of Kalpataru and Techno Electric, and signed the first 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 INR 12.4 unit, and up about 6% from the FY 2021 initial guidance of INR 12 a unit. This is important to note because this is adding to our trajectory of approximately 4% year-on-year growth in DPU that we have projected and delivered over the last four years. The next segment is on improving our balance sheet strength.
We have successfully managed the first wave of COVID-19-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 of 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, reduced the cost, and elongated tenors in the incremental facilities that we are undertaking. We have 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. Therefore, Sterlite Power in FY 2022 will not be pursuing the project manager role. However, we would be internalizing it within the IndiGrid 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. We are focused on building a world-class EHS and ESG practices across the portfolio. The last one is on industry stewardship. We consistently focus on reducing the lot size to allow maximum participation, increasing liquidity. As some of you would know already, IRDAI has come up with a circular to enable subscription to debt securities by insurance companies, and MoF has announced the similar measures for FPIs. However, we are awaiting the final circular from them. 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'll 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 solar cells 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 electricity in India has moved from just availability of a light to 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 would 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 EV will become a much larger market in the coming future.
The last one is the regulatory dynamism that we are seeing 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 delisting of distribution businesses, and many such like such regulations which are supporting a decadal growth in the electricity sector. At the cusp of these things, 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 dropped in 2021. As you can see in the green curve, we believe the moment the lockdown opens up, it will come back up. 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. We have seen it in 2020, our collections came back to normal and rather beating the historical average and ending the quarter four with 126% of quarterly revenue, which we believe is one of the best quarters that we have seen. Our FY 2021 revenues remain above 100%, which clearly showcase that the COVID impact of FY 2021 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 visible days, 41 days at the end of the quarter. The last section is on the resilient operation. I would have Satish, if you're 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.
Great. Hi, everyone. Good afternoon. On resilient operations, I think despite of COVID challenges, we could able to maintain the reliable power supply with a maximized availability. Across the portfolio, we have achieved 99.5% against our normative availability target of 98%. Of course, there were safety issues, concerns. We had to put lot of additional COVID related safety measures at our facilities, including in substation and in transmission lines. All the critical O&M activities continued with the restricted site teams, especially in substation operations, where we had to operate 24/7. We could able to sustain and manage the operations without any much larger impact. Yeah. Harsh, back to you.
Sure. Thank you, Satish. The next part was about on slide number 14 on 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. They were compensated by such regulatory authorities like MSRDC and NHAI, which requires us to move lines. In general, our performance on reliability measure is substantially improved. The number of trips per line in FY 2021 has come down to 0.31 from 0.48 in FY 2019. Further, if you 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. We would continue to focus on that.
Our safe man-hours have been good. However, we did see a fatality earlier in the year for a very rare incident of honeybee bite. We are truly committed to ensure that it does not repeat, 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. Our solar generation is very low at some of our substations in terms of our size. However, as you know, we have signed to purchase the 100 megawatt of solar facility, you will see these numbers growing materially. We also received ISO certification for 14,001, 45,001 from Bureau Veritas and 9,001 in the FY 2021.
As I mentioned in the summary, we are transitioning our project management agreement from Sterlite Power to IndiGrid, and IndiGrid will become self-reliant in operations and management. On the next slide is about the robust financial performance of Quarter Four and full financial year 2021. I would invite Jyoti, who is CFO at IndiGrid, to take this slide onwards. Jyoti, over to you.
Thanks, Harsh. On the back of very sound operational capabilities, we've reflected that in our financial performance, which you can see on slide number 15. For the quarter FY 2021, our revenue on a year-over-year basis increased by 39%, EBITDA increased by 37%. Our NDCF, however, increased only by 8%. This is because of a few one-offs relating to some SPA announce, as well as some one-off debt creation that happened during the quarter. Adjusted for that, the NDCF accretion has also been in line. Actually, it's higher than the EBITDA generation at almost 40%. For the full year FY 2021, our revenues increased by 35%, EBITDA and NDCF increased more or less in tandem at 26% and 27% respectively. As we have already announced, we have a 3.3% growth in the DPU per quarter from INR 3 to INR 3.10 over the course of the year.
This, of course, came into effect from the December quarter. For the full year, the corresponding DPU increase is a little bit lesser as the INR 3.10 was paid only for two quarters and not for the full quarter. The increase is half of 3.7 to 1.7%. It's showing 1%, that's a typo. On a run-rate basis , our DPU increase for FY 2021 is 3.3% at a 3.1 into 4, INR 12.40 for the year versus INR 12 that we used to pay before that. As Harsh has already guided, we plan to increase the DPU to 12.75 or roughly INR 318.75.
This will be a further increase of roughly around 3%. 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 crores, roughly INR 20,500 crores. We go to the next slide, which is essentially a bridge between EBITDA to NDCF. 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 ₹160 crores. This was on the back of an exceptional quarter in terms of collection. We collected the highest ever in a quarter compared to the last four years, at 126%. 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. Against a ₹451 crore EBITDA at the SPV level, our NDCF was actually higher at ₹475 crores. Adjusted for the interest for debt repayment, et cetera, at the IGT level. We generated an NDCF at IGT of ₹226 crores, all of which we intend to pay out the ₹217 crore of DPU actually, which is ₹0.70 on the expanded equity base of 70 crores.
It's important to note that for this quarter, we've created an NDCF reserve of almost INR 62 crores, about INR 53 crores at the SPV level and about INR 9 crores at the IGT level. For the full year, the corresponding reserve is INR 170 crores, about INR 143 crore at the SPV level, and INR 27 crore at the IGT level. This NDCF reserve will help us to tide over any sort of disruption in the collection cycle, which may or may not happen in the future. As of now, we don't see any challenges. Collections seem to be following the course. Should there be any challenges, then the NDCF reserve will help us to tide over and smooth out the predictable DPU that we have always envisaged to maintain. Can we go to the next slide? Harsh, you want to take the distribution strategy, please?
Sure. Yeah, thanks. I think on slide 17 on distribution, as we have decided, we are focused on delivering INR 12.75 a unit for next financial year. For the current financial year, the quarter four, we have decided to distribute INR 3.1 a unit, which consists of INR 1.51 as interest, INR 0.52 per unit as dividend, which is under the old tax regime, therefore tax-free. Capital repayment of about INR 1.07. You will also receive an advice with the similar numbers in your mailbox along with the DPU. I think with this, we have cumulatively delivered about INR 45.77 a unit and approximately INR 2,000 crores of distribution to investors since 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 INR 58.35 crore of unit outstanding, whereas in this quarter, in quarter four, we have INR 70.02 crore unit outstanding. We are delivering the same INR 3.1 a quarter for the entire unitholder base. The guidance of INR 12.75 will also remain on the entire unitholder base. Jyoti, you take the next one, 18, 19, or?
I can take the next two slides. The next one, slide 18, is the adjusted NAV. The way the Ind AS 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 ₹146.26. This includes 100% of both PKTCL as well as, more importantly, NER. For NER, while we've acquired 74% in tranche one, there is a plan to acquire 100% of the asset, and that transaction for the balance, 26%, is due to happen in quarter one of FY 2022.
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 acquire in this first quarter, which will lead to an adjustment in the net asset value to the tune of roughly about INR 8. There has also been a rights issue, as you are aware, INR 1,283 crores, which will have a dilutive impact because of the same valuation is going to be distributed on a larger number of units, and that impact will be about INR 6. On a pro forma basis, the INR 146.26 of NAV per unit would actually translate to about INR 132.18. 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.
Just to add on that, Jyoti, I think as you ended up rightly, this is as per the valuer report, our NAV statutorily remains INR 146.26. However, as we speak today, there are two, as Jyoti described, we wanted to be more transparent and disclose the quarter one events, which has a dilutive impact. We believe that's something which unitholders should be aware of. Therefore, it is provided that these are the two events which has impact on the downward side on the NAV that is published
To make it clear, NER is acquired, so 100% economic interest of NER is acquired and is accruing to IndiGrid. However, the payment which is not made at the moment, which is what Jyoti described, that we would be paying subsequently in quarter one or subsequent timeline as and when certain conditions are met by Kawai Power. Thanks, Harsh, for that explanation. I'll move to the next slide number 19, which talks about our finance structure, the capital structure on the debt side. 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 first week of April. In the quarter, we raised about INR 5,100 crores of debt, and this was primarily because of NER, which got consummated in the last week of March.
About INR 1,000 crore we raised for the purpose of refinancing debt at the SPV level. 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%. Over the course of the entire financial year, we've been able to refinance debt at a lower level so that our average cost continues to go down. At the start of the quarter, our cost was about 8.29% for the overall book, which now is less than 8%. In the month of April, May, we have also been able to do a public NCD issuance where we were able to raise about INR 1,000 crore for seven years and beyond, average maturity of roughly around eight to nine years at a cost of about 8%.
What that has done is that has made us capable of extending our tenures of the debt book so that we are able to raise incremental debt for seven years and beyond at lower cost. Today as we speak, we are in a position to raise incremental debt between 7- 10 year maturities at ±7.5%. As more and more of our book gets turned over and new debt comes into the fold at that rate, our average cost of 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 of 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 965 crores at the end of March, this includes the DPU to be paid of INR 217 crores, as well as restricted cash in the form of DSRA of about INR 200 crores. Adjusted for that, the cash that we are carrying, just our free surplus cash is about INR 450 crores, which on a book of about INR 13,000 crore translates to about 3.5%, which is a right or fair amount of cash that we believe we should carry given the overall size of the operations. Our net debt to EBITDA is at about 59%. This will be going down because of the rights issue that we have done in the month of April. 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 about 1.52. In terms of the repayment schedule, which you can see at the bottom half of the slide. Because of the ability to raise debt beyond seven years that we have enabled, we should be able to refinance all our debt in that kind of a maturity bucket and extend the maturity so that, but for FY 2023, we believe by September, all the repayments in any financial year will not exceed INR 1,500 crore. That will be roughly around 12%-13% of our book. We believe that is the right kind of level of refinancing or repayments that are due in every year that we should have. We would proactively ensure that it doesn't go above the INR 1,500 crore mark in any particular year. As far as FY 2023 is concerned, there is a large amount of debt of INR 2,600 crore which is coming for repayment.
This includes two chunky NCDs, one for INR 1,400 and another for nearly INR 700 crores, these have been locked in at higher rates of interest, there would be a significant amount of break cost or prepayment cost that we have to bear. The way we will manage this particular refinancing is that we are collectively working with banks for an advance tie-up of a loan facility, which is a 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 2022 debt piece, we should be able to do at least INR 200-INR 250 crores over the next quarter. Harsh, you want to take the next slide?
Sure. Adding to what Jyoti Agarwal ended, I think where we are in terms of our ratings, the rate cycle, and the opportunity, we believe that this INR 2,600 crores in FY 2023 is a very good opportunity to reduce our cost of debt further because these are the bonds which were locked in about a couple of years ago with a much higher cost of debt than our incremental cost of debt. We believe that this will result into a good chunk of savings for the coming years too.
On the next one, I think there are two strategic capital raises that we did, one Jyoti already spoke about. 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 our borrowing, and increase the market depth for the capital raises. We saw that against a token of a smaller issue, we received a 25 times demand of about INR 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. Majority, which is more than 80% of the subscription, as we saw, has been in the seven or greater than seven-year tenor.
That's something which we believe achieved our objective of really establishing a long-term tenor in the market for IndiGrid papers. The average maturity of allocation that we achieved is 8.6 years. This also now includes four insurance companies who have chosen to purchase our papers in the longer tenors. Important thing, this is just a few days after IRDAI 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. This is the first call after that we're talking about the rights issue to investors. Our objective was to ensure that we preemptively capitalize ourselves to ensure that we are able to grow when the market is right.
This rights issue has helped us create leverage headroom for further growth and also offers opportunity to all our shareholders to participate and contribute in the growth journey of IndiGrid. Our rights issue got subscribed by 1.25 times. What is heartening to know is over 90% of the eligible investors chose to subscribe to our rights issue, which we believe is a very good number, and we see it as a sign of confidence in IndiGrid platform from our investors. With the capital that we have raised at the rights issue, we would be able to acquire another INR 5,000 odd crores of assets while remaining within the 70% leverage that we have kept for ourselves.
The next slide is more a long-term track record of delivering returns, and as we have been consistently maintaining, InvIT and especially IndiGrid is focused on delivering superior total returns, which consist of dividend distributions or rather 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 the last several quarters, we still remain at a substantially higher spread of what we have delivered in terms of annualized returns over the last four years since our listing. Important to note, Majority part of these returns are getting delivered by virtue of our stable distribution and not just the price change. That's something which also contributes to a lower beta or lower volatility in total returns and the price of IndiGrid. Coming to slide number 23, which is the outlook for FY22.
We believe that there is about INR 50,000 crores of interstate TBCB pipeline, another INR 45,000 crores of intrastate TBCB business that is expected over the next three to four years. This forms a very healthy pipeline for acquisition. Within the interstate transmission bids, we see approximately 15,000 GW of bids coming in FY 2022. Additionally, about INR 26,000 crores are identified for 20 GW of renewable power plant, which may come in 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 KTL into our portfolio by year-end. We will continue to selectively evaluate opportunities in both solar and transmission sector. The outlook is to increase the DPU to INR 12.75, and we will work towards delivering the same. On the balance sheet side, we'll continue to further diversify our debt sources and elongate tenors.
We will aim to reduce our cost of debt by refinancing. We will maintain adequate liquidity 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 would be investing both in technology and people to ensure reliable and self-reliant O&M. We will continue to make investments into leading technologies like digital asset management or predictive analysis and emergency preparedness to ensure that we are able to operate our assets reliably. We would focus on ESG practices for the portfolio in line with global practices for similar platforms.
On the industry stewardship, we'll continue to liaise with regulators and ministry to reduce the lot size at par with other listed platforms to ensure the liquidity increases and improves for InvITs. There are further changes that we are seeking for PFRDA to subscribe to debt securities for InvIT and also actioning of MoF circular on FPI and ECB lending. We are recommending government to streamline tax anomalies with respect to capital gains tax for InvIT. 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 session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use hand lifts for 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 DAM Capital. Please go ahead.
Yeah. Good evening, sir, and congratulations on a good set of numbers and raising the capital. Sir, two questions. Firstly, why we are maintaining such a high level of cash on our books? The related question is that, of course, we have around INR 24 billion of repayment due in FY 2023. When do you expect it to refinance, in the sense of business or timeline?
Sure. I think Jyoti did explain partly, but we'll try to do it again. I think the high level of cash, we need to reduce certain cash. Out of the INR 965 crores of cash, about INR 220 crores is the distribution held for payment, which would bring it to about INR 750 crores. Out of that, approximately INR 300 crores is a statutory. We maintain one quarter of interest cover every time, at any point in time, which reduces by another INR 300 crores. This is about INR 520 crores out of INR 960 crores is 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's one way to look at it. There is a reserve that we have created in this financial year, approximately INR 170 crores.
That's a reserve that is created, which we can use subsequently. We have approximately other than these three, about INR 200 crores-INR 300 crores of excess cash, which depending on the opportunity, we can either use it or we keep it. That's the flexibility. 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. We have our upcoming acquisition also coming for FRV that we have signed. We will decide to use it for either upcoming acquisitions or refinancing that may come out of it. The next question that you asked was on INR 2,400 crores of prepayment in 2023. I think both of them are coming for next financial year.
Any refinancing that we do for that amount would largely happen in the quarter four of FY 2022. They are, as Jyoti mentioned, they are locked NCDs and the break it cost is higher. We would be doing it somewhere in the quarter four of FY 2022.
Okay, understood, sir. Sir, what is your debt equity post the acquisition of KTL and FRV? In a sense, you raised also with rights issue is INR 283 crore, right? Post the KTL and solar FRV, I think that should happen in the next 12 months. Understood ANR, I think we need to pay something, right?
Yeah.
After making all the payments, what will be debt equity at the end of FY 2022?
Yeah. I would just say, after the rights issue, our net debt to AUM is at about 55%, approximately. Considering the size of both the other assets, overall AUM would probably be in the range of 60% after these two acquisitions. Jyoti, does it seem right, about 60%?
60%. You're right. 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 this quarter. KTL will happen a little bit later, but it will be within the 60% threshold based on current visibility of the acquisition pipeline.
There's a 10% extra margin available to us, right? Post this.
Yes.
Understood, sir. Thank you.
Thank you.
Thank you. The next question is from the line of Prashant Pandey from Birla Sun Life Insurance. Please go ahead.
Hello, sir. My query is basically on the return of capital which you have given in this quarter. Is it predictive? Was there any specific reason in terms of debt maturity was coming up for the loan which was given to SPV? What is the future outlook? How much capital return can we expect going forward?
Okay. I think this is not linked to any specific maturities, as we have described earlier. This is linked to primarily one term, 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 SPV in the same form as the other payments. For example, in a particular year or a quarter, if one SPV generates more cash than the interest that it has to pay to IndiGrid, in that quarter, we may see some capital repayment happening. It is not a uniform. Some SPVs will do it, some SPVs will do it after 10 years. It depends on the capital structure of the SPV per se.
Whenever we receive a cash inflow into an SPV, more than the interest payment that it owes to IndiGrid, 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. 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 very difficult to predict it on a year-on-year basis that it will be one rupee or two rupees. It's very difficult. We are focused on following the rules that is there in the SEBI regulations and the income tax. Prediction of that is difficult earlier.
Okay, sir. Thank you. My second and final question was on the NDCF. If you see on page number 15 and 16, the NDCF is different. I wanted to understand again, why is there a difference? Is it because one is at the SPV level and another is at the InvIT level?
Correct. There are two ways to look at it. One is it at the InvIT level in terms of after creating reserves. Second is that what you see on the slide number 16 is just a waterfall from EBITDA to NDCF. What are the changes, et cetera. It is not a technical formula of NDCF that gets followed under SEBI, because SEBI requires to have two level of NDCF separately communicated. What is NDCF for IndiGrid is after adjustment of 10% of reserve at SPV. You need to make certain adjustments to map it to the FY21 NDCF of INR 917, which is the total cash generation that has happened in the company.
The 90% regulation is for the lower amount, this INR 775.
90% is on both amount, NDCF at SPV as well as NDCF at IndiGrid.
Okay, thank you, sir.
If I explain in a simple way, both of them are actually representing the same number. The method of representation is different. 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. Slide 15 is talking about the overall NDCF generated, including the reserve, and the makeup of that NDCF is shown in slide 16.
Okay, thanks a lot.
Thank you.
The next question is from the line of Hansal Thacker from Lalkar Securities. Please go ahead.
Hi. Thank you for the opportunity. Congratulations, Harsh and team on a blowout year and quarter after such a unpredictable year. My question is actually in continuation to the previous one. While I understand that the capital repayment may not have a predictability, but can we assume that the dividend will have a predictability going forward?
On the dividend front, it is a very specific scenario for which we can provide a little bit of guidance on. The dividend is coming from the joint venture called Parbati Koldam, which we acquired from Reliance Infra, which is a cost-plus asset.
Okay.
In a cost-plus regulated return asset, we receive post-tax returns from the regulator and the customers. There is a specific amount of dividend that we receive every year from that joint venture, and that would amount to approximately INR 0.50 a year kind of dividend for the platform, which is about INR 30-35 crores. That is something which will continue for a longer period of time. The dividend component will be more sustainable and more predictable in the range of INR 0.5-INR 0.6 per unit per year.
Okay, wonderful. The second question I had, with the increased guidance at INR 12.75 for FY 2022, the first quarter you were paying out INR 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. For the guidance, we are following an accrual method. The INR 3.1 that we are paying is for quarter four of last year. The INR 12.75 will be from the NDCF of the FY 2022. Depending on how you account for it will go. Quarter four DPU is INR 3.1, but quarter one FY 2022 onwards, it will be a higher DPU.
Oh, right. Sorry, my fault. All right, the next full year will be INR 12.75.
Yeah.
Wonderful. Thanks, and keep up the good work.
Thank you.
The next question is from the line of Sarvesh Gupta from Maximal Capital. Please go ahead.
Hi, Harsh Shah. Thanks for taking my question. After this tax rule, which got changed for dividend distribution, many of the REITs, which are listed ones, had changed the mix of distribution to their unitholders and also had given some guidance on the same, on an increased distribution as a % of total distribution. 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. Given that, do we also have that flexibility? Hence, if we have that flexibility, would we want to give any guidance on the mix of these three forms of distribution going forward?
Yeah, no, I think that's a very good question. I'll just start from saying that REITs and InvITs 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. Because of that, in any case, they have to pay dividend even earlier, even though it was taxable. 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 InvITs or other, let's say, infrastructure businesses, typically the capital structure and book value are not materially different than real estate. What happens is that we have a lot of depreciation cash flow available to us, which on a real estate, the depreciation percentage of the overall asset value is lower.
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. We do not have the same kind of flexibility to move to a dividend structure, and we believe that is better for InvITs or other IndiGrid for sure, because if we were to move to that kind of structure, the overall cash flow will come down materially. Then we'll need to start paying 25% tax, to that extent, to be able to generate same amount of dividend. 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 our cost-plus asset. That's why we are being able to deliver that dividend.
Understood. The other thing is, basically for a further increase on DPU is, in a way, dependent on the incremental IRRs, project IRRs that we are bidding versus the cost of debt. 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 spreads for the newer things that you're bidding versus your cost of debt?
Right. No, I think it's a very pertinent question. First point, I think we acquired NER just at the end of the last financial year. 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 of which we are providing the DPU guidance. 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, it depends on what is the particular situation. Let's say whether there is a stressed asset or an operating asset or a particular asset in which you already have synergies on, et cetera.
It depends on asset to asset. In general, directionally, yes, competition has increased, spreads have narrowed down. That is when we believe platforms like IndiGrid 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. 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.
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. Last question on the acquisition pipeline now. We only hear what is actually accepted and closed. How often do you reject acquisition of an asset? Are the assets mostly homogenous, so all it requires is a good deal around it? Are there really assets which are bad as well? We keep hearing that everything that you're considering gets acquired in a way.
Yeah.
How often do you reject and what causes rejections, and if you can throw some rejection ratio, etc ?
Yeah. Okay. I don't have a specific rejection ratio, to be honest, to give you a specific number. I think I'll answer the second question first, which will address the first one. Assets are homogenous. If you look at our portfolio today, about 90, actually 95% of our assets are under the same type of contractual framework. Which is interstate transmission service. They see similar kind of cash flows, et cetera. Similar kind of technology, et cetera. 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, we don't need to reject the asset. The next level comes in terms of quality of work and execution.
Typically, there are about 2%-5% range of outcomes that we see in quality of execution between different projects, that gets adjusted in the value. That if you correct 2% of extra work, then the asset will become good. Those kind of changes. If it is an interstate TBCB 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 a TBCB. We have been very selective over there. We do not pick up assets with, I would say, relatively weaker counterparties. That ratio would be very high. Most of the projects that are there today have a substantial amount of state counterparty risk, we do not even pursue those projects.
I would say, I won't call it a rejection, but we filter it out. We 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 module, et cetera, 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 of correction, and maybe we are bidded out. 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 contract which cannot be corrected for any commercial measures.
Understood. What are the tangible and intangible benefit of this making the project management in-house? Would it be given to the investment manager or which entity?
Sorry, can you repeat that?
The project management which has been transferred from Sterlite 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. One, it is not with the investment manager. It is within the integrated entity itself, so there's no external economics going to any other person. In terms of tangible benefits, I would say there is no tangible savings on this account. We are anyways paying about 10% of O&M cost to Sterlite Power, and we would need to incur minimum that, if not more, to have a similar kind of platform working for us. 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 integrated teams instead of outsourcing it with external members or agencies. We needed to build that strength.
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. 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 a year. I think these are the three intangible benefits, I would say, for changing the project management.
Understood. Thanks a lot for answering all the questions, and all the best for the coming quarter.
Thank you.
Thank you. Next question is from the line of Ruhi Pabari from Reliance Nippon Life Insurance. Please go ahead.
Hello, am I audible?
Yeah.
Thank you. Thanks for taking my question. Firstly, congratulations on the good set of numbers. I have a basic question with respect to the DPU classification. 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. When an SPV is generating some amount of cash, and it is generating cash more than its interest payment, that's when this capital repayment is happening, is what I understood from the initial part of the call. When that is happening, why does my interest component in the DPU have to go down?
Okay. Very smart question. There are two concepts I would like to bring forward to explain that. One is a concept of reserve. At IndiGrid level, we have flexibility to do 10% of NDCF, 10% of reserve creation, half-yearly basis at SPV as well as IndiGrid. We do not need to completely translate into a mirror image of what we have received and exactly as is based. It can be proportionate because we create reserves. Second, there is a context of allocation of expenses that we need to follow from tax perspective. At a conceptual level, when an 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 principal, it needs to follow similar kind of principle of allocation, and same for dividends.
We internally follow a particular allocation method of expenses at InvIT level, which would mean that what is the attributability of that income and expense at InvIT level correspondingly, and then the residual amount is paid. 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. In reality, we have INR 170 crores of reserve also that we have created in FY 2021. That will also have certain amount of interest and principal repayment or capital repayment and dividend repayment that would be used subsequently as and when we utilize the reserves to pay for this.
Okay, understood. Right. Okay. In terms of the capital repayment, just one more thing I wanted to understand is that, is this capital repayment taxable at the marginal rate in the hands of the unitholders, or how does that treatment go?
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. Thank you so much for your answers.
Thank you.
Thank you. The next question is from the line of Sudhir Bheda from Right Time Consultancy. Please go ahead.
Sir, congratulations on super set of number. Sir, congratulations to you and your entire team for outstanding management and unparalleled return in the last three years, sir. Hello? Hello?
Yeah. Thank you.
Am I audible? Hello?
Yes, sir. You are audible.
Yes, you're audible.
Yeah. My questions are two questions. First, what is the reserve? You have created INR 170 crore for this year, FY 2021. What is the total reserve you have created so far in last three years or three and a half years?
It is INR 170 crores. It is same, INR 170 crores. In starting of FY 2021, we did not have any reserve. Now we have created that reserve.
Sir, my second question is there any inter-SPV transfer of loans? Suppose one SPV is some sort of liquidity, then another SPV with excess liquidity transfers the amount to another SPV. Those kind of transitions are there at SPV level?
No, we prefer, I mean, technically we can do it, but we prefer to avoid any such inter-SPV transactions. If at all there is a need, InvIT itself gives the loan or rather takes the loan back because InvIT itself carries a lot of liquidity.
That should be the way.
inter-SPV transaction.
Because other InvITs are doing like this, so I just wondered.
Yeah. It makes the accounting very complex and there are tax impacts and many other impacts, so we have been avoiding it.
Oh, that's good, sir. Thanks. Sir, thank you for taking my question, sir, and all the best.
Thank you.
Thank you. The next question is from the line of Mulay Sawla from Shah & Sawla LLP. Please go ahead.
Hi, congratulations sir on an excellent set of numbers and thanks for giving guidance for higher DPU. Most of my questions have been answered, sir. 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 four of last year, and rights were concluded in the month of April current financial year? May I just have some understanding on that, please?
Yeah. No, I think you're right. There's no rationale. We just followed the regulations as is. We could not have avoided those rights 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. 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 together. We can look at it both ways.
I think, sir, we could have had a separate IT number for the right unit. Probably, I feel that there will be some minority unitholders who may not have applied presuming that against one unit, one lot, I may or may not get one lot. There are chances that few of them may not have applied, and they may be deprived of this additional benefit.
No. I'm trying to understand why is it an additional benefit? Because even if the unitholder did not apply, they'll still get the INR 3.1 quarterly distribution. They're not getting lesser.
No, that's right. 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, you're right. That's what is the unfortunate reality of SEBI regulations. That we had to do rights issue within the lot size multiples.
Correct
which is beyond control of the company. In addition to that, we still need to follow the regulations of record date of dividend. Even in the company, if the rights issue was done early, the company cannot choose different dividends for different investors. Investors have the same legal right and standing, whether they have come via rights issue or preference issue. Unfortunately, the company does not have the flexibility to decide key rights issue investors should get less or more. The way the regulations are defined, the company could not do rights issue in a way that a normal equity rights issue happens.
I agree, but I'm sure the regulations, whatever they may be saying, if company would have thought of, probably company would have come up with the board meeting and the record date before the allotment of the rights unit or maybe rights unit would have had the different ID number.
No, let me explain it two ways. One, it is not prudent for company to take decisions based on the record dates. If we do that, we put the company at risk on market flows. What if after two months the markets are bad? We cannot take that risk. Second, this anomaly will accrue anytime we do the rights issue. For example, let us say the record date for this quarter is 2nd June. Today or let's say next few days. After record day, we announce a rights issue. Let's say 3rd June. Okay. The rights issue will get concluded by when? In next 30 days?
Right.
Right. Whatever allotment, et cetera. It will take 30 days. We will be standing in 30th June. July. 30th June. The same investors will get quarter one KDPU. The 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.
No.
That's a procedural law which a company can't change around.
All right. Excellent, and wish you all the very best for the work that is being carried on. 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 Kothari from Unique PMS. Please go ahead.
Hi, good evening, Harsh. 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, we would have received a higher amount as interest for this quarter?
Higher amount, let's talk %. In crore terms, you've got a little higher amount, but in % terms, it would be a higher interest component. That's correct.
Had the collection not been so high, it'd be 26%. Correct?
Exactly.
It's only because you have received a higher cash amount that you have chosen to create reserves and to use that reserves in future, whatever that may be, to return-.
Correct.
Fair enough. Harsh, my second question is, what would be our portfolio IRR or as a unitholder, maybe at INR 100 or at any level or at current price?
IRR is a very, I would say, floating term. Very difficult for me to guide on because of one, as you rightly put in, at what price. Second is at what leverage. Third is that which assets to include or not to include. For example, 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, this will be 60% levered, which is not an optimal case of 70%. IRR assumption is very materially between different people. It's tough to comment for us on IRR specifically. What we can guide on is obviously DPU and growth. Across the world, platforms with track record of delivering DPU and growth on the yield front get valued as dividend plus growth. What is the total return?
What is the distribution that is made by such platform plus the growth track record. 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, I think, an EPS to that extent, if one can think about it. It's like EPS or EPS growth. Similarly, in InvITs, it's DPU plus DPU growth, as a way of valuation. IRR per se is very floating. According to assumption, IRR numbers will vary so much that it won't make sense.
It is not possible to say what the IRR is as of, say, 31st March 2020 or when we close it. You make a dividend pay of INR 100, and every investor, based on their purchase price, can read it as the IRR.
No. We publish a valuer report. Our valuation report as on 31st of March 2021 has all the disclosures about the asset. The EBITDA, the revenue, the cost, everything is there. What we don't forecast is interest assumption, leverage assumption, repayment assumptions. That is something that each investor will have to make a decision on, because we cannot guide on that. Therefore, we cannot guide on IRR. You can construct the same model with a little bit of assumptions of your own side based on our guidance to create what is the IRR in the platform. 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. Which is not a management can guide on that.
Fair enough. Rightly so. Fine. Sir, my last question. In the presentation, you have mentioned some one-time adjustment on account of change in law in DPDP. Can you just explain what is that and the quantum of the same?
There is a one-time change in law income that we received, which we had to also give it to Sterlite Power because we acquired this asset from Sterlite Power. We received this income in our P&L and passed it on as an expense to Sterlite Power, which is a one-time, and therefore it is a comparable. Whatever your annual financial gets distorted with that. The specific number is approximately INR 60 crore of one-time income that we have booked and a similar number of expense that we would have booked.
Harsh,
the income that we booked is-
About 47.
Yeah, go ahead.
INR 42, the expenditure that we have booked is about INR 68. That is the one-off item that has been booked in this quarter.
Okay, fair enough. Sure. Thank you. Congratulations for such a wonderful performance, and all the best.
Thank you.
Thank you. The next question is from the line of K. Ravichandran, an individual investor. Please go ahead.
Yeah, Harsh. First thing is congratulations. I'm attending all the con calls since 2018. I remember you used to say that we'll reach INR 20,000 crores by 2023. It's excellent. You have done well within the planned or scheduled time. Second thing is, I appreciate your inclusive team now, like Satish for the project management included, which will give lot of intangible benefit like, okay, for next asset acquisition, you have that capability of managing yourself. I appreciate the inclusiveness because, of course, InvIT requires three major. One is debt ratio or debt interest reduction. Second one is managing, getting more AUM into the place, and third one is operation management. In all three, good job. Most of the questions are answered, but I have one more doubt. Till today, we are king. We are only InvIT, but now we have a competitor.
Harsh, will you think that this competition, one more InvIT is in the place, so further acquisition going from INR 20,000 crore to INR 30,000 crore will be a hurdle of competition in the AUM per se?
Okay. Thanks a lot, Ravish. I think first question is about the competition and growth. See, we do not have special hard-coded target that we have to reach a particular AUM number. That's what allows us flexibility to choose the right asset at the right cost of capital. Second, on the other InvITs, the competition is not just from InvIT. Competition is from non-InvITs also, strategics also. That, 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 market. That is something we believe is not the focus of public InvITs or our PSU InvITs.
We cannot comment on their behalf, but to a similar InvIT in case of an auction, with our track record, with our governance and our agility, our ability to turn around is something which is typically valued highly for sellers. 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 of transmission assets, other financial platforms. 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 InvITs coming, there is going to be better liquidity, better understanding about InvITs in the market in general, and it's going to overall help everyone.
Seems like we lost the
Okay.
line for the current participant. We move to the next question from the line of Mohit Kumar from DAM Capital. Please go ahead.
Hello. Yeah. Good, sir. You spoke about the number of policy initiatives which you are waiting for. Can you list out the last few of them? I think it's the last one where you said the anomaly to capital gains. What are you referring to, especially?
This is referring to the point that on listed InvITs, we pay on trading, there is a security transaction tax that gets levied and investors pay that. Typically, it is levied on the equity stocks and as InvITs are trading on the equity index, that is the right thing to do. However, when it comes to the long-term capital gains tax treatment, for InvITs, the period considered for long-term holding is 36 months, which is more akin to a debt fund than equity. For InvITs, at the moment, there is worst of both, that there is a security transaction tax like equity, but the holding period is like debt fund. We have been proposing to the Ministry and several regulatory bodies to similar anomaly, we believe it should trade at equity level.
We believe 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 equity long-term tax treatment, which is 12 months.
Understood. Are you expecting any other policy or changes which will over the next 12 months?
No. I think our focus is just on enablement of PF capital also to debt security. That's one. I don't think it's changing the game materially. The second one is reduction of lot size, which is one big initiative that we are working on. These are the two ones that I can think of there.
The last year, we have asset, which is Power Grid. Is there any chance or any talk with the Power Grid that is to buy out the balance equity?
Sorry, can you repeat? Oh, okay. The Parbati Koldam you mean. Okay.
Yes.
No, we haven't engaged on any such conversation yet, and it's anyway a very small amount, hardly about INR 75 crores or so. It's a smaller number, but yeah, we have not engaged in that.
I'm asking this because there is a large number of this kind of JV project which are there with the Power Grid.
Yeah.
I think there are huge numbers, maybe around 10-14.
Correct.
very wrong.
Correct.
That's why the potential opportunity for us to go and source the deals.
Possibly, but I think this is too early. We've just acquired the asset. It's the first quarter of operations. It's a joint venture. 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 Rushabh Sharedalal from PR Share and Stock Brokers. Please go ahead.
Hi, Harsh, thanks for the opportunity. I really appreciate it. Just wanted to understand it on the return of capital that is a component of our DPU. You just said to one of the previous participants that if the SPV generates more cash than what it requires to pay to IndiGrid, then they pay that particular portion of distribution as a return on capital subsequently to the unitholders. Apart from this particular situation, is there any other situation in which IndiGrid pays any kind of distribution as return of capital? I remember that only in the second quarter of 2018 and once in 2019, we paid some INR 0.28 and INR 0.12 as return on capital. One more thing on this only, whether it has any impact on the net asset value of the trust. Thank you.
Okay. Answering second question first, there is no impact on net asset value and how it's paid. To answer the first one, I think there are a few other cases in that scenario also, one can see return of capital or other capital repayment. For example, we acquire a company along with cash. Let's say on the date of the acquisition, company had INR 20 crores of cash. That could not be upstreamed by the earlier seller or earlier owner because of whatever the capital structure or external lenders didn't allow or any other issues. We acquired the company and then upstreamed this INR 20 crore of cash. It's already factored in the valuation for the seller, but then we upstreamed this INR 20 crores of cash, which the SPV pays to IndiGrid, the new owner.
In such case also, there can be a capital repayment, but that will be a one-off. There can be such one-offs, but in most cases, it's cash than interest.
Hello?
Hello?
Hello. Yeah, I just lost you in between.
In most cases, it'll 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.
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, once in 2018 and 2019? Was that the same rationale in those quarters as well?
Correct. Pretty much same rationale. It is not in our hands. It's not a decision-making that we do that this quarter we want to pay distribution in terms of capital repayment. If SPVs have received more cash, then interest that it can pay, it will come in form of capital repayment. Or if we acquired an asset with an inbuilt cash. I believe the last time in 2018 was the case when we acquired that Patran asset from Techno Electric that already had INR 10 crores of cash, which we paid for. That INR 10 crores of cash was upstreamed at that time. Upstream, as in SPV paid to the IndiGrid as a principal repayment after acquisition. These are the two cases largely it will pan out, and none of them are BAU, every quarter it will happen.
It depends on the quarterly cash flow and any such events that can happen.
Okay. That's very useful. Thanks a lot. Thank you.
Thank you.
Thank you. The next question is from the line of Vipul Shah from Sumangal Investment. Please go ahead.
Yeah, thank you for the opportunity. Hearty congratulations for a very good set of numbers. My first question is there any precedent what will happen beyond this 30-year concession period globally? What will happen to the unitholders when the concession period ends? Is there any global precedence for this?
Okay. Just to correct, Vipulji, I think you're mixing 30 years, 35 years with the unit itself. I'll try to explain both. One, at an asset level, there are two possibilities that can take place. One is that the asset contract 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. We'll continue to get paid, and this will be continuing as planned. Second, 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 tons of metal that is there in our portfolio today.
While the word doesn't suit scrap, even if you calculate a scrap value of that in today's term, in today's value term, it will be a significant chunk of today's price. If we were to close the business today, there's a significant chunk of steel and aluminum in the company today. 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.
Sorry to interrupt you, Mr. Harsh Shah, but which is the more likely scenario? Means globally, what has happened in other countries?
Okay. Globally what happens is nobody scraps infrastructure that is built. You have extension of contract. That's what happens reasonably.
That is the most likely scenario?
That is the most likely scenario. We believe that should happen. Again, at the end of the day, 30 years is a long time. We don't know in what contractual framework it'll take place. What we know is that what assets we have, they have a significant value. 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. We are not a decision-maker at that policy level at 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, five years ago, if they were to be built again now, they will cost at least 50% higher. Imagine the scenario 30 years ahead. If government is going to build a new line, it's going to cost multiple times higher than operating the same line with a little bit of improvement at better tariff. That's how we think that it should take place. The last question that you-- The clarity on that is that we-- This is why I described that as an asset level. Units are a going concern. There is no end of unit life. It is like an equity. It's an ownership right. There is no principal requirement, and after that, the unit cease to exist.
If some InvIT business ends after 15 years, five years, 30 years, et cetera, they're not growing, they're not buying more projects, et cetera, you can delist the InvITs also, just like delisting equity shares. It is a complicated process, the SEBI regulations does provide for it.
Okay. Thank you very much for explaining it in detail. Lastly, again, I will return to the distribution of this quarter. I understood the rationale for returning the capital, but I didn't understand the rationale for reducing this interest payment component. What I want to convey is instead of this 3.2, it should have been 4.2 or something like that.
Correct. Right. I think, if the IndiGrid board would decide to give 4.2, they could have given 4.2. We believe it's not prudent. We believe predictability has more value than suddenly one quarter we increase by INR 4 and next quarter it goes to INR 2. In grid business, there are seasonalities. In some quarters, there is great collection, but maybe in the next quarter it will be lesser. It's not that 126% will remain always 126%. That is not possible. If in one quarter it's 126%, that means there is some quarter somewhere where it will be 64%. To average out to 100%. 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 of 26% to ensure that the volatility can be met in volatile months.
That's the philosophy under which we are operating. Therefore, we keep this INR 170 crore as a reserve, and maybe in next quarter, the collections are lesser, then we'll use out of this reserve. This is to ensure that the predictability of DPU remains. That's why we are focused on maintaining that.
Okay, sir. Lastly, you said you made some payment to Sterlite Power to the tune of INR 68 crores and you received INR 42 crores. That is what I think your CFO said. Can you explain it in a layman's language what has happened?
Okay, sure. What has happened is, what Jyoti explained is, there's INR 43 crore income that has come in, which is an accrual. There is INR 63 crores of cash that we have paid. The difference between the two is that the amount that we paid to Sterlite Power is 70% of the NPV of incremental tariff that we will receive. INR 43 crore 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 arrears starting from COD. In this case, it was five years ago. We received INR 43 crore in cash, against which we have paid the same amount, 70% of that cash.
The residual amount is the 70% of NPV of future tariff we will receive on account of this tariff order.
Okay. Got it. Thank you, sir. All the best for the future. Thank you.
Thank you.
Thank you. The next question is from line of Jiten Rushi from Axis Capital. Please go ahead.
Good evening, sir. Thanks for taking my question and congratulations on the good set of numbers. Just few questions from my side. As you said, the project management will be done internal. My understanding is correct, it will be done at the SPV level, sir?
Not SPV level, we have intermediate holding companies also. We are going to make an entity called IndiGrid Limited One as our mother entity, which will do project management for all SPVs.
Okay. this will be with effect from FY 2022, right?
That's correct.
Sir, there was a contract between us and the Sterlite Power, which has got expired, this has resulted in creation of this entity which will be doing the O&M work?
No, sir. The entity was already created. We were anyway doing project management work internally for all assets which we acquired other than Sterlite Power. Like for example, PKTCL, JKTPL, PTCL, all those assets we are doing project management on our own. The contract has not expired. We have bilaterally decided that we want to do our O&M on our own, therefore we are transitioning out. It is not the contract that has expired, it is out of our choice that we have decided to do it on our own.
What will the payment structure here, like as a percentage of revenue? How it will work, sir?
It is intercompany in any case. We'll continue to maintain a percentage of O&M cost to be paid to IndiGrid Limited One. It's 100% subsidiary of IndiGrid Trust. On a consolidated, there is no external payment that is getting made.
Got it. Sir, on the KTL deal now, sir, when do you expect this to happen? Now, because of the COVID, we understand there could be some extension of time.
Correct.
What is the deadline now where we can see it finally getting concluded?
KTPL is still an under-construction asset. It has about 60% revenue generation that has started, but it's not completed yet. Tough to predict with the COVID uncertainties on when will it get completed. We are working it. As per our contract, it is valid till up to December 2022, so that's kind of an outer date for us now.
December 2022?
Yes.
On the acquisition side, as far as I understand, the SPA should get concluded next month, in June only. With the COVID situation and there could be some effect which can get dispelled because of the equity component. The original developer cannot invest equity into the system. However, the effect must have been of a good quality. Are you looking for any such kind of acquisition wherein we have the ability to acquire under-construction asset obviously it can be a limited portion of that area. Are we looking out for some acquisition like this?
Oh, yes, certainly. We are looking for acquisitions like that. 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. Any new acquisitions expected this year, or just we'll stick on with ATL and IPAL?
Sorry?
Any new acquisitions lined up like probably?
Yeah, okay. There may be new acquisitions, but that's not at a scale that we can certainly say it happening this fiscal.
Okay. One last question, just wanted to understand. The return of capital will also have an impact on the cost to the investor. If I invest INR 100, if I'm getting INR 1 back, my cost will be coming down to INR 99, if I understand correctly.
That's correct.
Okay. That's it from my side. All the best. Thank you.
Okay. Thank you.
Thank you. We take the next question from the line of Kiran Naik from Modi Fincap. Please go ahead. Mr. Naik, your line is in talk mode. Go ahead with your question, please. Mr. Kiran Naik, your line is in talk mode.
Let's go to the next one, please.
Thank you. The next question is from the line of Manusha from Laxco Investment. Please go ahead.
Yeah. Just wanted to understand regarding this return of capital, as we were saying that if somebody has invested INR 100 and you gave him a INR 1 return of capital. 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. How this will be treated?
This will be slightly different and you should consult your tax advisor, but I'm just explaining at a conceptual level.
Yeah.
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. It will be a balance sheet adjustment. As and when you decide to sell the unit, let's say you sell at INR 140 today, then the profit or the capital gains will be calculated based on selling price minus 99 versus selling price minus 100. Basically, this component will get impacted on the capital gains tax instead of a marginal tax. That's the way to look at it. It will be taxed when you realize that gain as per the tax law. That's the directional input. Just to clarify, the dividend is not on the marginal rate because this dividend is coming from the SPV, which is paying in the old tax regime.
Okay. Because earlier, if I understood, dividend was tax-free in the hands of the investors in case of the acquisitions. 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 from that company, subject to your dividend not exceeding INR 10 lakhs and other provisions around that.
Yeah. That's the part.
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-free dividend from IndiGrid.
Okay. Just coming back to the return of capital. As you said, when the investor sells, it will be calculated as a capital gain. It will be more like a debt capital gain for a 36 month period kind of thing. That's how it has to be looked into it?
If you sell after 36 months, then it will be a long-term capital gains tax, whatever the rate is.
Like what we get in a debt. Sale of a debt.
No, no. Your capital gains treatment will be like equity, just the holding period is like debt. 36 months.
Okay. Fine. Lot of this regulations have changed, so it was getting a little bit.
Yeah. These are complex issues and best to take advice of a tax advisor on this.
Yeah, I can understand. Maybe just for the layman understanding this, can you quote for a website which can help a lot of retailers?
No, we have a website. On our website, there is a tax query issued. You can probably refer to that also.
Fine. Okay. Thank you.
Thank you.
Thank you. We take the next question from the line of Kiran Naik from Modi Fincap. Please go ahead.
Thank you for giving me an opportunity. Sir, I have only one question. Are the company planning any more NCD in the coming year?
As we have said that we want to refinance some of our existing debt, including the maturity that is coming in FY 2026. We would certainly be doing a certain amount of capital raising for refinancing of debt. Size and tenor, et cetera, probably we can only talk about when we have done it.
Okay. It will be similar as we had 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. We would probably do a private placement for some more debt for some time.
Okay. Thank you, sir. Best luck.
Thank you.
Thank you. As there are no further questions, I now hand the conference over to Mr. Swarnim Maheshwari for closing comments. Over to you, sir.
Yeah, thank you. Thanks everyone for participating in the conference. Harsh, would you like to add any closing comments over here?
Thanks a lot for everyone who has joined the call and continued. It's a long call, but I think it deserves an annual call as there was that much focus and query. We are very thankful for all the investors 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 our vision and strategy that we have put together for unitholders of IndiGrid, and we will continue to execute that with two things in mind, which is a predictable DPU and consistent growth. With that, I would just sign off and thank you.
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 your-