Ladies and gentlemen, good day, and welcome to the India Gridrush Q3 FY 'twenty one Earnings Conference Call hosted by AXIS Capital Limited. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Samit Kishore from AXIS Capital.
Thank you and over to you, sir.
Thank you, Lizane. Good afternoon, ladies and gentlemen. On behalf of Access Capital, I am pleased to welcome you all for the Integrate Trust Q3 FY 'twenty one Earnings Conference Call. We have with us today Mr. Harsh Shah, CEO and World Time Director of Integrated Investment Managers Limited, representing India Grid Trust on the call.
Is accompanied by Mr. Jyoti Kumar Agarwal, CFO and Ms. Meghana Pandit, Head, M and A and I at Integrate. We will begin with the opening remarks from Harsh on the operational financial highlights as well as the key updates for the sector. This will be followed by the Q and A session.
With this, I hand over the floor to Harsh. Over to you, sir. Yes. Thank you, Sumit, and welcome everyone to the quarterly results call. As I would just wish everybody a safe and healthy New Year as we enter into the 2021 calendar year.
Samik, I will go through the slides apart from the vision and the business updates and then I'll have my colleague Jyoti And Megha will run through the operations and the strategy ahead. In fact, we will keep time for cautionary answers. To start with on slide number 5, our vision means to become the most admired wheeled vehicle in Asia. We are focused on focused business model, which is in long term contracts, new operating risk and stable cash flows. 2nd focus area is to ensure value accretive growth, which is VPU accretive acquisitions on a year on year basis and create a growth pipeline for future.
Our 3rd focus is predictable distribution, which is we have been doing to now, which is a quarterly distribution and minimum 90% of net distributable cash flow gets distributed And focus on sustainability of these distributions. The last one is following an optimal capital structure, which is going to be a consolidated leverage drop of 70. We are accretal rating and we will ensure that prudent liability management is implemented. And we remain capitalized at any point in time. On slide number 6 is just the snapshot of what we are today.
Today, we are at INR 15,000 crores of size in terms of assets under management. We are present in 15 states and one UT. We have 30 lines approximately 6,400 kilometers circuit kilometers and 9 substations with approximately 12,000 AON year transformation capacity. We are a capillarated Envit from all 3 rating agencies, which is Nusil, India Rating, Vivekha. Most of our assets have perpetual initiatives, which means that we don't have a transfer in the end.
Our senior contract life of contracts of our assets is approximately 32 years of related average leases and we have 10,540 towers in our portfolio, which along with the conductor includes approximately 3,99 1,000 tonnes of Steel and Aluminum. This includes the latest acquisitions that we did in quarter 3, which is Which we acquired from Reliance Info as well as J2PCL which we acquired from Technoelectric and Cultural Transmission. Coming to quarter 3, on slide number 8 are the key highlights. To start with the financials, I think quarter 3 EBITDA has grown by 25% year on year basis on the back of robust operations as well as acquisitions that we have done in the year of 2020. Our net debt remains at 52% as on 31st December, which is substantially lower than the 70% cap under full year regulations.
Our rating is maintained AAA by creating agencies that rate us. In addition to that, I would like to add that this is one of the quarters where there is highest net distributable cash flow generation That has been achieved and Jyoti will cover that in detail in his presentation. The next section is on accretive acquisition. Quarter 3 has been Very active and interesting for us. We have signed for the 1st cost plus transmission asset called PKTCL from Reliance Infrastructure.
And this also happens to be a joint venture with Power Grid, where Power Grid continues to own 36% of the shareholding. The unique aspect about this acquisition is that this is a dividend story. This project will be on a cost plus basis and therefore it upstreams the dividends to Indigreed and then Indigreed will pass the dividends in the form of dividends to its investors. We also signed the first SPA for a solar asset with a company called FRV, which is a Spanish entity, which we are looking to acquire 100 megawatts of Solar Assets from FRV, which has a contract with Sekiq And has a good operational track record, which meets the criteria. With PKG Seal and FRE both put together, we would be crossing the AUM of The 3rd section is on steady operations.
Our collections has improved. In quarter 3, we have collected 112%, which reduced our DSO back to 70 days. And we are seeing in a 1 to 1 basis a stable collection track record and therefore this is a healthy reversal that we are seeing in comparison to the quarter 1. Our availability is maintained at over 99.5 percent for profitably, which is the important measure on which we are accruing revenue and we get paid. We also signed a multiyear collaboration with IBM to develop an AI based digital asset management platform, which we believe over a period of time would result in increasing our reliability, reducing the lifecycle cost of managing these The 4th, which is a new segment which we have discussed several times over last We approved quarterly calls, which is with respect to our capital raising plans.
The Indigreed Board has approved up to INR 1500 crores of capital via Right Decision. However, this is subject to regulatory approvals from semi and RBI. As and when we receive such approval, we will look to raise capital via rights issue. The last And the most important one is the DPU strategy. We have been maintaining the 3 to 3 DPU for over 8 quarters.
And Looking at number of acquisitions that we have done over last 4 quarters, As well as the NDCF that we have generated in this quarter, the Board of the Monitor has decided to increase the DPU by 3.3% to INR 3.1 per quarter. So this would mean that on an annualized basis, This would be INR 12.4 per year. We have done it after substantial consideration and acquisitions that we have And therefore, we are confident that this increase is sustainable with the existing portfolio and pipeline of assets that we have right now. So, cumulatively for YGDI FY 'twenty one, This will result in distribution of INR9.1 per unit despite the COVID challenges that we have seen over the last first couple of quarters in the year. I would like to pause here and have my colleague Jyoti, who is CFO of Indigreed to run through the presentation from number 9, I'll take you through the operational details of the results for Qratofu.
Thanks, Harsh. So I'm on slide number 9 now. So if you look at it,
we are
trying to show the COVID impact On the power sector in general and also on our collections, so I'll start with the right hand side of the slide first. Like everything else in the broader economy, power sector is also reflecting the normalization post the COVID, where we have seen a robust demand pickup both on the generation as well as on the demand side, where the peak power demand in the Q3 was at an all time record high of about 186 gigawatts. And while transmission tariffs are not really linked to the actual flow of power, but nevertheless, it's important that the overall health of the underlying sector in which transmission belongs is also robust. And to that extent, this is a very good sign for the broader sector and for transmission as such. Now coming to the collections, we have seen as we expected the normalization of collections on a quarter on quarter basis as well as on a year on year basis.
So this particular quarter, we have seen a collection efficiency of about 112%. This has been a marked increase compared to the Q1 where we saw the collection below 60%. And in terms of the average collection efficiency from a 9 month perspective, we are now in line with what we saw last year at about 93%. Our DSO days has also consequently been improving. And for this quarter, we have an outstanding receivable of about 70 days, which has been significantly improving over the sequential quarters from 100 days in Q1, 80 days in Q2 to 70 days.
We expect this to sort of trend to the yearly normal of around the 65 days by the end of the year. I'll go to the operational highlights for the quarter. Harsh has already pointed out that our average portfolio availability continues to remain robust at 99.5% and above. On most of the operating parameters in terms of whether it's strips per line, Whether it comes to training man hours, whether it's near miss reporting, we've seen a marked improvement on a year on year basis. We are also happy to report that there have been COVID incidents among all our operating Locations, we have a 600 people sort of a team, including the partners and there has been no incidents of COVID-nineteen in any one of them, thankfully.
We've been obviously compliant with all the statutory guidelines, social distancing, Need to know, attendance at work, proper quarantining facilities and also sort of implemented Awareness sessions across all our AMC partners on a proactive basis and all of these efforts are helping us in ensuring that we have 0 COVID impacted operations. We obviously continue to align our practices with the international standard. So we've been improving our Operating processes as well as practices, including focus on EHS guidelines, having a higher focus on digital initiatives, including the digital asset management that Harsh alluded to. And we are well on our way in terms of achieving the vision of being one of the best run investment trusts globally. Now go to the financial highlights for the quarter.
We've seen a robust increase in both the Revenues as well as EBITDA, revenues grew by almost 27% from INR 3.40 odd crores to INR 432 crores on a year on year basis. EBITDA also improved by 25% to just a little shy of INR394 crores. And given the robustness of the operations and the stability of the cash flow that we see in the business model, We've decided to increase the DPU, as Harsh mentioned, from INR 3 a quarter to INR 3.1 a quarter, which translates into an annual payout of
about INR
12.4. And we see good visibility of being able to sustain this kind of a payout over the foreseeable We have paid almost INR43, a little less than INR43 amounting to INR 1842 crores of rupees over the time since we got listed. This particular quarter, because of the 10 paisa increase, our actual payout will be INR 181 crores compared to INR 175 crores that you were tracking over the last few quarters. As I've already mentioned, the DSO days are improving and now down to 70 days compared to 80 days last quarter 100 days into Q1 and collection efficiency has been much better than 100% and is trending towards the long time average. Now I'll move to the next slide, which is the EBITDA to NDCF bridge.
So We have an EBITDA at the SPV level of about INR 400 crores, a little higher than INR 400 crores. And after accounting for the interest expense, Working capital and the CapEx and a reserve of about INR 33 crores, the available NDCF at the SPV level is about INR294 crores. Taking into account the interest at IGT level of about INR 101 crores, Other expenses at IGT and the reserve about INR8 crores. We do have a distributable NDCF of about INR 1.81 crores, which is what we are paying translating into INR 3.10 pesa payout per unit. Move to the next slide, Slide 13.
Now we continue to ensure that we maintain a good balance sheet, robust balance sheet, while we Embark upon our growth initiatives. We are very mindful of the AAA rating, and that's becoming very important. It's actually very important for us given that our leverage ratio is right now 52% net debt to ABN. We continue to term out our repayment profile. We've ensured that All incrementing financing that we are doing is beyond the 2025 year financial year because we see a little bit of lumpiness terms of repayment field then.
During the quarter, we did raise about INR 1,000 crores of debt, a combination of 50% through loans and 50% through NCDs and each one of these did take care of the need to term these maturities out. They were also done at an incremental borrowing cost of about 7.5%, so almost about 1% inside of what our average cost of debt is right now. As the book continues to churn and more and more new debt becomes a part of the book and the old debt gets paid out. We do expect the average cost of borrowings to trend down to below 8% in the next financial year and improving sequentially thereafter. We do carry a robust amount of cash in our books about just a little short of INR 1,000 crores.
And we also have access to short term capital lines, just in case there's a need to tap into them for any particular reason. Our book is all well balanced now, better than it used to be between, let's say, Capital Markets, which is now less than 50% and long term bank finance. And we are in active discussions with a few public sector banks to get incremental lines for them so that we will improve or increase the share of the bank loans in our borrowing mix even further. I'll now request Vigna to take over and take you through the rest of the presentation.
Thanks, Jyoti. Moving on to Slide 14, this depicts our total returns that Integrid has provided since the time we got in June 2017. The graph, if you can look at on a total return Indigene has provided 60% of absolute returns, breaking that into 40% of the dividend and 20% change in the price. Comparing this to on the right hand side with all the other equity indices as well as with the payroll returns on a risk adjusted basis. On an annualized basis also, this translates into 14% compared to all the other equity indices on one side.
And on the other side, the GSEP bond, which has provided 27% on absolute basis and 6.9% on Annualized return basis, on the risk level, as I mentioned, again, which is governed by beta, Integrid has the lowest beta compared to all the other indices in the market and GSEB bond on the other. So we have been providing repeated with congested returns since the time period lifting. Moving on to Slide number 15, this broadly provides the global yield curve overview wherein we have looked at how the other registered Yield platforms are performing across geographies. The x axis talks about the spread that these yield platforms are providing over the 10 year government yields in those particular markets and the Y axis provides the current dividend yields that these our trading platform that trading at. The size of the bubble basically talks about the size of the market, the market cap of that particular yield platform.
We have seen that there is some narrowing of yields which has happened in India, specifically with respect to Integral also. Indicatedly, I think this reflects the current interest rate cycle in the country along with the financial performance and the robust operational performance of Integrate Processing. Slide number 16 depicts the similar in similar metrics, but in a tabular format. So as I said, Indigrid, essentially, we have seen narrowing of the spreads to close to about 3.50 basis points compared to the other yield platforms across geographies. Moving on to the next On the fundraise and the dispute strategies, I'm on Slide number 18.
As Harsh briefly mentioned in her opening remarks, Our Board has approved equity issuance of up to INR 1600 crores through a rights issue. SEDITH had come out with the right circular sometime in January of 2020. And they have enabled both fast track as well as slow track methodologies for the right decision. As Harsh also mentioned, this is subject to regulatory approvals both from SEBI and RBI. So this is an enabling resolution that the Board has approved.
The way we are looking at the fund raise is we had done the last fund raise of 2,500 cores in May 2019 through a preferential allotment that we had not enabled the right issue guidelines at that point in time. Along with that fund raise, we had locked in close to about INR 12,000 crores of assets with Ster Life Power across 6 assets per se. Out of those, we have already acquired 4 assets for 7,100 through the framework agreement and the go forward, respectively. Across this is NRSL, OGPPL, EMIC and NGPPL. Now overall above the framework assets, We have also acquired INR 1200 crores of assets, both Judger as well as Badri Kaldum, as well as announced the solar acquisition of SRV.
So close to about INR1800 crores of assets we have stated to you have acquired and stated to acquire over and above The framework assets that we talked about. So the idea is to look at the fund raise in line with this additional assets that we have acquired. We are also looking at after all these acquisitions, including the balance to Krengorff Assets, the net debt to AUM will reach to about 65% to 67%, leaving sufficient headroom in place and at the same time raising preemptive capital in order to create significant higher headroom and look at building the other pipeline. We remain on track to acquire the balanced framework assets, as I mentioned. On the BPO strategy, on the back of the acquisitions that we have already done, I am excited to do, I think distribution of INR 12.4 per annum continues to be sustainable over a considerable period of time.
And this BPU we will be able to sustain even on the expanded capital base as and when we complete the price issuance. Moving on to slide number 19 on the business outlook. I think we remain focused on completing the FRV acquisition for which the definitive agreements have already been entered into. In addition to that, we are focusing on monitoring The other 2 framework assets, which is NPL as well as KPN, both these assets So we'll be close to about INR55 1,000,000,000. And at the same time, we are creating a pipeline on the transmission as well as As Jyoti mentioned that maintaining balance sheet strength remains a core area of our focus.
In addition to raising the equity funds through the rights issuance, I think idea is also to maintain adequate liquidity to ensure that any Uncertainties or any unpredictable scenario can be faced with adequate liquidity. On the debt side also, we aim to diversify the sources so that any lumpiness is not looked at. And at the same time, we focus on elongating the tenure and reducing the cost of debt. Robust asset management is another area of focus by maintaining the availability above 99.5% And at the same time, investment into technology, whether it is through the digital asset management that we have tied up with, predictive analytics and other emergency preparedness that we are looking at and at the same time implementing the ESG and the ESNIS framework that we have already initiated on. As one of the first in the power sector, I think we have been spearheading A lot of policy initiatives, whether it is reducing the lot size from 5 lakhs to current 1 lakhs or whether it is increasing the leverage from $40,000,000 to $70,000,000 And this continues to be another focus area, wherein we are working with the regulators on reducing the trading block size for those to bring it in line with the equity and at the same time, diversifying the debt sources for Invit, whether it is working with IRDA and TF RDA to ensure that Insurance companies as well as domestic pension funds can subscribe to the debt securities issued by Invict.
Moving on to the next few slides, I'm on Slide number 21, which basically talks about our journey since 2017 when we got listed with a 2 asset portfolio. And over the last In quarter, steadily, we have increased our portfolio from 2 to 12 and at the same time did a capital raise of 75,000,000 crores. Another major milestone was KKR becoming the sponsor for the Inbit. And Now we are fully geared to become the most admired vehicle in Asia and by targeting the AUM of about 30,000 crores and at the same time maintaining proclarated cash flow. Slide 22 talks about the portfolio on an asset basis with a detailed specification of number of lines, perfect kilometer, the COD availability since Your detailed date, the breakup of the assets under management and the metal quantity breakup of asset wise.
Slide number 23 provides the corporate structure wherein now we have KKR has been inducted as the On the Investment Management side also, we have KKR majority and the other 12 assets in the SCV with 3 sub holdco. Axis Trustee is our trust is the trustee for Inbit. Slide number 24, I think, talks about our shareholder base, and we have seen a very diversified shareholder base. Today, we boast of 9 insurance companies and mutual funds and to employee pension funds. And the total number of investors, we are seeing a significant increase in those also on the back of the log size reduction and a significant improvement on the liquidity part.
Moving on, Slide 25 gives overview of our experienced goals in detail. And I think that brings me to the end of the presentation. We'd be happy to host any questions specifically on the Q3 financial highlights or any other questions that anyone else currently has. Thank you.
Thank you.
Ladies and gentlemen, we will now begin with the question and answer The first question is from the line of Mohit Kumar from Please go ahead.
Good evening, sir. Congratulations on a good set of numbers and raising the TPU by 3%. So my first question is raising up capital, in what On Verizon, we expect to deploy this money. And related to that, when we expect this the KTL and NER to be acquired? And second question is on the given that we have a huge repayment, which will give you on In FY 'twenty three, have you started working on refinancing that particular Payment.
And where are the in terms of what is the expectation of interest rate for us now?
Okay. So thanks, Mohit. I think your first question was on VP increase in rights issue. I think the rights issue, as we mentioned, is linked to certain approvals. We are awaiting that.
And I mean, it's very difficult to put a timeline on when we'll get the approval because it will be at the bare hands of the regulators. And when done, this will be the first Public rights issued on by any English. So we'll be seeking certain clarification approval as and when that gets done, we would be able to guide better Because at the moment, the time is something which is not in our control. However, we are well prepared as and when the regulatory approval comes in. The next question was for MER and KTL.
Both the projects are at an advanced stage of Commissioning, many of our projects is already part commissioned, so is KTL. As and when they are getting commission, they look to acquire. We are already working very closely with Starlight Power and evaluating these assets in-depth. So that as and when they are ready to be acquired, we can Where's the acquisition, Shima? And the third question, if you can repeat, sorry, I missed that one.
The funding of the since
we have a decent end
So Mohit, I mean, I don't think anyone can prepare 2 years in advance of a refinancing in future. That's not practical as well as that is not No, possible. However, what we have done, as Jity mentioned, we are looking to increase our maturity. What we
are doing is we are
not Adding any more maturities in FY 'twenty three, 'twenty four, right, which enables us to keep that cap at that amount. On top of it, I would say we are opening up Different sources of financing, which would enable us better to refinance as in when we have to refinance those facilities. And the third one is that, yes, I mean, the question was with respect to cost of debt. So I think GP and we have to that are a kind of marginal cost Let's say the incremental cost that we have raised certain bonds and loans have come at an average of approximately 7.4, 7.5. So and then some of these bonds which are locked in which you see amortizing in FY 'twenty three are at 8.75% or 8.59%.
So there is a substantial in the money option. But then There is cost attached to it if you look to refinance those facilities today, which we don't think is in is it practical today. But as we leave closure to the repayment, we will look to refinance them before the maturity
The next question is from the line of Swarnab Maheshwari from EDWise. Please go ahead.
Yes. Hi, everyone. Thanks for the opportunity and congratulations on an excellent quarter really. Okay, so Couple of questions over here. The first one really is more of a macro question.
Now if you look at the current interest And the inclusion scenario, where do you see the tenure diesel kind of moving out? Do you see it stabilizing at about 5.9%. I'm sure you would have described it internally. So what's your color? I guess you can give your inputs over there.
Sure. Thanks, Varun. I think that's a very, very difficult question to address for management teams today. I think more than guiding on what we feel interest rates are going to be, I would take your answer question in 2 parts. 1 is what is our view and second is what we are doing about it.
So see our view Is that we come from a simple humble realization that we cannot predict interest rates. And therefore, we don't hold our business terribly On prediction of interest rates, because that's something where things can go wrong and we are a new platform showing stability is at the core. But I think where the overall global liquidity is, where Countries' priority on growth is we don't see a spike in interest rate in India itself. And the rationale being we have 1, India has restrained its a lot of firepower of liquidity or let's say printing money When the rest of the world has printed money. So I think I would say India has a little bit of fiscal room to Bring money when required to push growth.
So I think India has retained that firepower and therefore we believe that We don't see a substantial increase in rates in near future. However, this is just based on our understanding and then We don't try to implement this in our business strategy. So when it comes to business, as you said, our internal discussions are focused on The fact that we are not in the business of predicting interest rates and therefore, as and when possible, we try to do longer term lock in of rates, And therefore, we have locked in rates at 9% also and we have locked in rates at 7.25% also, right? So we have a mixed bunch of portfolio. And what that results in is that over a period of time, our portfolio is more insulated to interest rate movements up or down.
So And then you see interest rates coming down to 7%. Yes, we don't get the gain of 2% or 1% immediately because you locked in interest rates. On the other hand, if the interest rate were to go up by a couple of 100 basis points, we will still be insulated. So our focus is to walk the narrow path of Conservative interest rate management and lock in the interest rate when possible. And this is going to the fact that our business is stable, right?
Our revenue is not interest rate linked. It is largely stable, predictable revenue. So we would as a staggeringly like to hedge or like to lock in interest rate as long as practically In different interest rate digits? No, got it. I know that.
But there is a tough one I know. The reason actually I thought about that was that JT in his opening remarks, he did mention that From about 8.4 percent of our blended cost of debt right now, we are likely to go to less than 8%. I think that has to do with 2 things. First, I think the debt of the of our debt market itself, That's actually increasing for us because I believe we are now going from NCDs really to term loan also. And I think it's just a matter of time where The IRB also approved the insurance company really, so that will really give us some depth of the market.
And so that is where I was coming from that This 8% less than 8% kind of a blended debt for us, is that really a function of The lower interest rate scenario or this is more of a sustainable thing in nature because of the debt in the market? Okay. No, but that is an easy question to answer. I think Jupy will raise that. So we did see first is it reduced because we did 1,000 crores raising at a lower rate, right.
And I think there is, as you guided before, There are several refinancing opportunities that exist with us, some of them at SPV level, some of them at an individual level. And we are looking to acquire new assets as well. We think all of that put together, our incremental cost of debt is substantially, let's say, below 8, which Average is out. The total debt puts the average down below it. So that's what we feel that if we keep Raising capital at the current cost of debt, currently our weighted average cost of debt would come down below it.
And I think I would say that is a sustainable cost of debt because When the interest rates started reducing, our cost didn't come down as fast, Right, because we had locked in our cost of debt. But on the other hand, as we do refinancing and the incremental debt is lower, we'll see that impact. So that's what is actually right now. Got it. Got it.
Thank you. The second question really is on the Collaboration that we have done with IBM. So on this digital asset management platform, How will this really operating improve the performance? And what kind of cost savings can it potentially bring to us? In terms of you mean the cost of it?
No, no, no, no. So I think in the presentation, we have We have mentioned that we have done some collaboration with IBM to develop some artificial intelligence, digital asset management platform. So what exactly is this? Okay. So let me see at the end of the day transmission is a function of O and M for transmission is a function of a few factors.
1, because there are no moving parts, there are way less operating parts and therefore It is slightly different than normal generation power plants. Point number 1 is focused on the assets that we have. Are we monitoring it on a regular basis? And whatever fractional changes are happening in the asset, are we addressing that in time? What digital asset management or Avaloksha collaboration with IBM allows us to do is that out of our 10,000 towers today And there are going to be another few 1,000 towers in future.
How do we ensure that what are the risky towers, what are not risky towers, what More maintenance, what requires less maintenance, etcetera, strategies are done in time, which enables us to optimize on our workforce, which eventually reduces the cost. So that is one and increasing reliability. So that is one aspect. So By implementing digital, we are able to deal with these physical assets in a way that we are optimizing our resources and increasing reliability by We have the right time at the right place. That's 1.
2nd is it may enable us to be inflation to some extent Because the more assets you have in the region, you are better off dealing with the same amount of manpower in that region Because you are reducing the frequency of monitoring of those technologies, whether it is via drone or something else, but if you have a physical footprint of each tower, It enables you to reduce your frequency of monitoring and eventually give you a better result. On the other hand, there are some critical towers which you know are weak on account of risky locations, then you increase the frequency there. So essentially, it allows us to To analyze our resources in the right direction at the right time. So that's the high level input that we it allows us to beat inflation over a longer time and allows us to leverage scale and use that to reduce our overall cost of ownership. So That's the real benefit.
The second one, which Meghna spoke about investment is with respect to our ability to restore power back So there there are several initiatives we are taking. For example, this year we are investing in ERS, which is called emergency restoration system, which allows us to restore the power back in toughest terrains within a few days instead of waiting to create new foundations and towers. So that adds to overall our reliability factor. Okay. So any potential cost savings That you would have asked.
I think as we do the FY 2022, we'll be able to comfortably communicate that. Right now, we are still assessing the overall savings we had set on implementation stage. So I would say even beating inflation is a large cost savings for this, right, for a For a 5 year deal, yes. Yes. Fair enough.
And just the third one, I mean, if you can really break up the 17 crores of incremental working capital in Q3 between the existing projects and ending this Okay. Jyoti, would you have that ready and if you can take that one?
Yes.
So basically, look, the working capital this particular quarter is largely on account of acquisitions, because we acquired 2 assets, JK TPL and GPTL. And to that extent, almost entirely 90% of the difference in working capital is because of acquired working capital from these two assets. Otherwise, on a steady state like to like same store basis, the working capital is more or less comparable.
Right. So, we'll be cash flow. Yes. Sure.
Thank you. We'll move to the next question that is from the line of Vishal Bararia from AVEVA. Please go ahead.
Hi. Just one question on the cable side. Among the amount that are pending, Is there any one amount, one large amount that is stuck with any particular state discount, something of that sort? Could you elaborate a bit on the composition of the
Okay. So I think we I mean, our data will be slightly dated because we received this data in little bit of from the CPU. But we have heard that there are not just one state, there are a few bunch of states which Sure, Rishi, this may be pending. And I think few of the names are like UP and J&K, which have slightly delayed the payments. So these are the 2 ones which we believe are the delayed ones.
But again, accuracy is difficult to get through the time we get that data from Powergrade, but this is what we believe right now.
Okay. And when you compare your transmission assets to solar PV assets, is there any key That you feel this is a key important difference that will there have been difference in terms of the risk of the leasing of that, sir?
No. There are different types of asset altogether. So there is a lot of difference between transmission and solar assets put together. In some cases, transmission is better. In some cases, I'd say, solar is better.
To give you a very high level view, I think Transmission has counterparty as well as a payment security mechanism, which is, I'd say, not just to show superior than most other sectors in the infrastructure. On the other hand, transmission are a chunky asset. So For the revenue of INR 600 crores, we have 30 elements of revenue generation that is happening in the country, at least 35 elements. So if on an average per element is INR 50 crores, INR 50 crores revenue, so when that element is down for any reason, you have a material impact on revenue or considering the exposure there across country or physical exposure is far more geographically Then solar. Whereas on the other hand in solar, your operating exposure is far less because you are within a cloud boundary And each panel of your overall power plant generates 500 watt as against overall size of 100 megawatts.
So that's a much more diversified portfolio in terms of assets and therefore the operating risk is slightly lower. On the other hand, Solar has a counterparty, which is SECI and the payment security mechanism is questionable if it is as good as Power Grid, right? So These are the two differences at a high level we see. But as long as we are factoring in, so we don't We believe solar is overall slightly more risky and therefore we expect slightly better returns in solar than transmission. It's directionally if that addresses the question.
Thank you very much, Harsh. With us, thank you.
Thank you. We will move on to the next Questions? Thank you. We'll move on to the next question. That is from the line of Dhruvan from HDFC
So one question was on the debt repayment for the next 2, 3 years. Now I see, for the last few years, the net debt repayment is not much. So any guide that you can give for the absolute The amount of debt repay that you will do for the next 2, 3 years. I'm just wondering why I'm asking if this is because I'm building in some debt repayment. If that does not happen, probably DPU can be higher.
So that
Sure. So I think, Dhruvam, there is we plan to do debt repayment post As and when we achieved, let's say, 65% to 68% of net debt to And why do I give that number is because that we believe on a sustainable basis at 65%. Also, there are tremendous Security and safety of debt coverages over there. So as and when we reach that, I think we would start amortizing the debt, so we don't count very close to 70%. And when we need 65% to 70% debt is a function of new assets that we acquired and the capital that we raised, right?
So it is difficult to give an exact guidance of 2 years because let's say With the framework assets, we are going to reach 66%, 67% and we would have started amortizing debt. But we are raising equity capital and acquiring more assets. So It's not possible to give exact correlation of the year in which we'll abort. But we can guide on the, I would say, Long term strategy is that we would be we're not comfortable beyond 65%, 68% of debt. And as and when we reach that, You would start amortizing that on a year on year basis.
Got it. Got it. So, sir, when you acquire a new asset, say, for example, even if you have raised equity, You acquired a new asset. That acquisition can be funded 70% through debt, right? I mean, then you are not constrained with that 50
Sorry, I lost your question.
So for example, you have reached all the equations are done and you have reached the 65%, 70% as you mentioned with EBT. You have reached the 65%, 74% AUM to debt ratio. And you acquired a new asset with the right issue happening after your right issue has happened. Then the debt portion on the new asset can be 70%. It is not restricted to that 50%.
Yes, yes. It is not restricted to 50%. I'm just giving the guidance that Yes,
yes, not at first.
When do we start looking at repayment? Otherwise, if we are trading at 52% debt net to AUM, It's commercially not wise to do net repayment.
Got it. So basically, okay, I get the point. And Secondly, it was a very probably it's a small point, but a conceptual question is, I understand the AUM to debt ratio that you have is based on the valuation The AUM number is based on the valuation report that you get, is it? Correct. And so for example, say today, 2 years back, you might have done the evaluation and you get a then you add that time of the GSEK, which you use as a base, that time was, say, 7.5%.
Now the GSEK has probably moved to 6% and your VAT changes, the valuation AUM increases. So does that also lets Allows you to borrow more because that 70% the base number for that 70% has changed?
Yes. Theoretically, you are right. But you need to also factor Turning to an meeting window that 2 years before you had a 35 year cash flow, now you have a 33 year cash flow. So the interplay between both counts, but if you keep everything else on the same day and change back, your valuation will increase. And your ratios are linked to the valuation.
However, for most debt investor, our covenants are not necessarily linked to debt pay period. They are also linked to DSCRs, How much net service coverage we have, how much interest service coverage we have, etcetera, which is purer, I would say, from debt credit
True, true. Got it. But I mean there are 2 benefits as such if you See, if the interest rates keep declining, is that the AUM increases that allows you to borrow more and probably give higher returns, a small portion of that And the interest cost also declined. So that's too
Yes, but you're right, Dhruv. But I think our strategy is not to keep borrowing more. Our strategy is to keep platform well capitalized, Right. So I mean, we are still at 52% and we are talking about raising incremental capital to ensure that we are capitalizing ourselves well for future. So theoretically, what you're saying is right, but our strategy is not to keep leveraging more and more and run the platform 70%.
Yes. I get that. I get that. And monitor the other ratios as well.
Got it. Actually, I'm coming from more from a modeling perspective because I model I get
this point. Thanks so much.
Thank you. The next question is from the line of Sudvesh Gupta from Maximal Capital. Please go ahead.
Good evening, Congratulations on a good set of numbers. So first question is, I'm referring to Slide number 18, where you have referred to the DPU strategy and said that the increase in DPU to be sustainable even on the Expanded capital base post rights issue. So now given that rights issue is typically at a discount, Basically, essentially you are saying that you are building in an increase in the yield from the current levels.
So let me answer and then based on what I understood. So most, If not all business tasks in which MLPs, as they are called, across the world Based on E plus growth, right? I mean, there is typically internationally a formula we use is E plus G, Like how much is the dividend and how much is the growth? And typically, that's all the value of business class, which has a track record. Now in our case, the way to look at it is that we've been doing 3 rupees per unit quarter.
So let's say, an annual dividend we are doing, let's say, 12 rupees a unit. We were doing 12 rupees a unit. And considering the acquisitions that we have done has resulted into increase of NDCF, which will result in or can result in increase of DPU. And therefore, we are going ahead with increase this year, which will, let's say, on an annualized basis is INR 12.4, which would mean going back to the original messaging that we have communicated during IPO that we plan to deliver INR 2 to INR 12 of VPU and 3% to 4% growth year on year. And if you look at since IPO, when we did IPO at INR11 a unit And now at a 12.4 run rate, we are approximately 3.5% growth On the CAGR, on the distribution itself, right, on the DPU basis, not on the share price, but on DPU basis.
So which is exactly what has been our strategy to focus on INR12 rock solid prediction plus grow it 3% to 5% as and when we get attractive acquisitions and we are able to raise So over last 3 years, we have done one capital raise and several acquisitions, which has enabled us to deliver this 11.4% gen, right, which is about 3% to 4% year on year. So now going forward as well, when we said sustainable basis, our idea is to communicate that this is not interim, this is not one time, right? So we acquired 4 assets over last 12 months and in this one we signed. We will have acquired 5 assets in this financial year, which has added a substantial amount of NDCF to our portfolio. And the increase that we are doing is not one time because it's quarter 3 or it's not one time and next quarter it will be different.
As per our plan is to maintain this 12 or maintain the 3.1 for a considerable future and we believe we have got enough assets which you acquired as well as there in the pipeline, which would enable us to project 12.4 over a longer period of time, even after raising capital. Because raising capital is the cost carry is not so dilutive because let's say instead of raising capital we would have borrowed, let's say 7%, 8% and We would have raised capital. The cost of carry difference between them is hardly a few percentage points, let's say, 34%. So it is not as dilutive because The ultimate was to raise debt, which on a balance sheet level may not be healthy. So we are creating capacity for future growth.
And even after creating that capacity for future growth, we are able to project that with the existing assets as well as pipeline assets, we'll be able to maintain 12.4 for a considerable period of time.
Okay. So essentially, if I'm holding 10 units, for example, today, And hypothetically, I am given an opportunity in the right issue to subscribe to 3 rights shares at INR 100. You are saying that on the 13 shares that I'll have post rights issue, I will get 12.54 on each of them and that Increment you will be able to sustain.
Yes, correct. So that's how
the yield increases in a way. That's what
I have.
Exactly. Yes. Okay, understood.
And second is this waterfall that you have mentioned for Q3. Now if I see that For Q1, Q2, Q3 combined, essentially around 100 crore sort of a reserve has been created at SPV plus IGT level. Is that the right understanding?
I think Jyoti can come in directionally. I can say that is the right understanding. Is that the right one, Jyoti?
Yes, that's right. About INR 108 crores of reserves have been created over the 9
Understood. And would you have the cumulative figure for the same as on 9M
FY Cumulative is also the same.
Okay. So there were no reserve essentially prior to
That's correct. Because we See, we did capital raise in 2019 and which means that there was an expanded capital raise. The assets of that expanded capital base are coming in FY 'twenty, right, most many of them. So therefore, the impact is coming in FY 'twenty, FY 'twenty one now. And That's when you see this excess cash flow getting paid.
Okay. And this FY 'twenty three repayment refinancing is scheduled on Slide number 13, which is around INR2500 crores. So now that this is like maybe somewhere around 18 months from now, Is there any possibility of sort of preponing the refinancing? And because the rates are lower, right, I mean, today, as you
can see, our rates have
come down. And given that you mentioned that you don't want to have View on GSEK as such. So if you don't have a view, then any absolute low number as long as it's making sense with respect to your project IRRs should would be very sensible way of doing it early, right?
No, no, you're right. Only point is that this is a Traded instrument, right? So while the cost of debt on this instrument may look 8.59, but it is trading at 110, right? So if you buyback or if you repay, you end up giving that much of penalty, right? Or let's say that much of Money that gets out of pocket, right?
So you borrowed 100, but you prepaid 110, right? That's the impact. So So net net, basically you
will have to follow the original refinancing schedule is what you're seeing because net of all the costs which will incur for Piyush?
Not necessarily. When you say it depends on the residual potential for a particular bond, right? If it is Only 3 months left, then you can refinance. The impact is negligible of the bond differential, right, and you can prepay. But if the impact is 2 years, it's going to be Magnified.
The impact can be higher.
Understood. And you So,
Deepa, may I just come in on this one? I think, Harsh did mention about all the various tools in the kit to tackle this 2023 sort of for tower that you see on the repayment bar. So one of them is this as well. Almost entire amount is NCD, it's not the loan amount, About 96% of this amount is NCD and because there's a mark to market impact for on an average 18 to 20 month of maturity, When we explore refinancing, it is not stacking up at this point of time. But as the remaining maturity is lesser, this will be another I think that we will be proactively looking at to take out some of the loans prior to the majority.
Apart from, of course, the other things that we talked about In terms of having proactive discussions and expanding our sources of borrowing.
Yes. And Jotin, if you just can help me with one more thing since you mentioned that you are looking to increase your bank loan portfolio as a percentage of your liabilities. So what kind of tenures and what kind of Fixed rates because our focus has always been on getting fixed rates to maintain the sanity on the DPU side So what kind of tenures and what kind of fixed rate are we getting these days?
Yes. So on the tenure side, these are long dated typical project finance type of loans, Upwards of 10 years, 15 years, let's say, average door to door tenure of these loans. In terms of the pricing, they are available at the sub-7.5 percent or the 7.5% pricing on a floating basis. Now there are many types of discussions we are having with the banks. Some of them are for, let's say, a 3 year fixed and floating thereafter.
And some of the other discussions we are exploring would be to take floating rate loans and do an IRS on top of it for at least a foreseeable future. Sure. But given that a bulk of these will be with the public sector banks, a more likely scenario will be that they will come in on a 1 year floater is typically what the public sector banks do. And we can explore on a Proactive basis, a hedge on top of it from an interest risk mitigation point of view.
Understood. Thanks a lot for patiently
Thank you. Ladies and gentlemen, in order to ensure that the management is able The next Question is from the line of Abhilash Asathale from Dalal and Broch stockbroking. Please go ahead.
Yes. Thank you for giving opportunity and congratulations for the good set of numbers. I have a question on Our collections have improved at 112% during the quarter. So and this is on the base of 56%. So I just wanted to know that how much was it at the end of Q3 FY 2020?
And usually in Q4, our collections are better. So are we seeing that trend But even this year also like do we expect our collections to be better in Q4? This is my first question and I'll just I see the second question also. So you made one comment in terms of the Payment discipline of PGCL against SECI. So could you just specify you meant in terms of the Number of days or EBITDA, the entity's overall Rating or in that perspective, could you just specify that point?
Thanks.
Hello?
Hello, can you hear me? Yes, yes, please. So last quarter, we ended the quarter with 80 days of DSO days as on Slide 11. And this quarter, we have ended it with 70 days, right? So that's the change that has taken place in balance sheet basis.
I think on percentage collection last quarter, quarter 2 was like 120 percent because the quarter 1 was very low, right? And therefore, the quarter 2 and quarter 3 Are the over collection that is kicking in between the two quarters? Yes. Just Sorry to interrupt. I'm just asking on year on year basis like how was it in Q3 FY 2020?
Okay, okay, okay. I'm so sorry.
Q3 FY 'twenty was 89% versus 112% this year.
Because Q4 FY 'twenty was again we ended up at around 110% or so. So like on this 112%, how are we seeing Q4 because that is Again, coming to that question, I think it is prediction, right? I mean, we all over last 5 years, quarter 4 has been typically good rather high. But this year is unique, where quarter 1 was 60 and then quarter 2 and 3 has been a catch up. So we don't know how it will pan out In terms of quarter 4, typically quarter 4 has been great, but we'll have to see on how it goes, right, in terms of collection.
In addition to that, in quarter 4, there is a new sharing regulations that is implemented where CPU is separated from Powergrade and the new billing and collection mechanism is put in place. So there have been procedural discussions happening that we will build new etcetera. So again, this is the first time billing in new guidelines that is taking place. So it is very, very difficult to predict quarter 4, right? So I would urge you to have patience and we'll communicate the results of quarter 4 after it's Done.
But yes, typically it's been better. Your second question, my commentary was not based on the track record. Even Seki's track record is extremely good and rather some of the outstanding are lesser in Seki as well. But My commentary was more from perspective of that Chetty being rated as a AA entity, AA entity versus Power is being a AAA engine. More of a general perception is what we were alluding to, not necessarily their track records.
Segi track record Has been equally good like a POCP record in terms of payment. Okay. Yes. Thank you.
Thank you. Thank you. The next Question is from the line of Mahesh Shah from EDWise. Please go ahead.
Hi. So just a Couple of questions. The first one was in terms of raising equity right now. Considering the interest rates are low, would you I prefer to first raise that and maybe look at equity a couple of years later. Remember, your leverage could be probably stretched to 60, 65 before you do that.
And the second question was in the solar assets. So, solar assets are also perpetually owned similar to power consumption assets?
Okay. So to answer your second question first, solar assets are not perpetually owned and it depends. Solar Asset Light is not so long because there are panels, there are glass, there are silicon cells. So even the life is not more than 25, 30 years. In many of the cases, the company owns the land, Which is a perpetual asset, but in many of the cases, if the project is in solar plant, we don't even own the land.
So the terminal value in such cases should be considered 0, right, because we don't own the land as well. So typically, there are 25, 30 years Assets we have owned, but the asset life itself may not be beyond that. So but in some cases, we do own land, which will result into No appreciation of the value over there. But is this case by case in Suraj? Yes.
The first question that I think
So, I have just one thing. So, the asset that we have bought currently, how is that from, the SBA that you're saying?
Okay. So, the SBA that we assigned is in the solar park. So the land is not land is owned by the solar parks. So at the end of the concession period, we will have to return the land to the solar park.
Okay, understood.
Okay. And the first question that you asked was on capital.
See, As
you put in rightly, I mean, in Excel, it is correct that you should raise equity when the interest you have peaked out your debt capacity. But unfortunately, I think from an experience perspective as well as business category perspective, We believe that we should not wait till that level because what is important is that We do not link our growth, which is asset acquisitions, to capital raising ability, because those two markets move Do not move in tandem, let me tell you that. So for example, when the interest rates are low and the liquidity is abundant, even the asset prices may get inflated, Right. And therefore, you're buying assets at an inflated price. Now if the cycle is to reverse, because your interest rates are higher, The capital flows are lower.
That is the time when platforms like us can purchase assets at a good price, Right. So at that price, if we are not ready with an acquisition capital at our hands, then we can get stuck in a cycle, right? That your capital comes expensive, asset comes expensive and or rather When the asset is ready, capital is not ready and vice versa. So I think from our experience at Indigreed as well as a study of most Successful entities across the world in the yield platform business is that you should raise the capital When you are not necessarily capital starved, right? So from our perspective, we are raising the capital to create future growth capacity.
But even if it is going to be, let's say, a quarter delayed, we are not going to be we are at 52%, so we'll still survive. So We do not want to link the 2 because if you are raising your debt at 65%, 68% and let's say there is a macro event, capital event in the world, You don't have the ability to raise equity capital at that time and you might be rather saving the credit crisis at that time. So we believe in managing balance sheet upfront to ensure that we always have capital available to grow.
Okay. Thanks guys. Best of luck for the next quarter. Thank you.
Thank you. The next question is from the line of Guarnab Maheshwari from EDWISE, please go ahead.
Yes. Thanks for the opportunity, Adient. So, 2 quick questions. If you look at the operational availability for this quarter, E and I sale was at 98%. So was there some planned shutdown or what are the exactly?
So yes, I think EMACL had certain planned Downs because we acquired this asset in April last year. However, these shutdowns are not paid by us Because there were certain punch list items which were supposed to be completed by Starlight Power, so these are indemnified items. So these planned shutdowns are taken to correct certain parts of the asset, which may continue for under quarter of 2. And When they take this shutdown given the revenue losses paid by Solar Power for United States specifically. All right.
The second one really was what are the incentive income during the quarter? Okay. Just Jyoti, can you comment on that exact income?
It was about 12 crores, sorry.
That's LPS. And then Harsh, we see that the last one really is that if you look at our cash reserves, okay, we are at Crozer Cobalt, we attended our growth. Of course, out of that, INR 180 crores needs to be distributed for Q3 and then another INR 200 crores for the data that you will be maintaining. If you would exclude, it's about INR 400 crores. And I believe the next two assets, They are broadly going to be 100% leverage.
And then we have this 15,000,000 crores of rights that will also actually You know, just going to our balance sheet. So, this INR 400 crores worth cash reserve, do you think that It's a bit really on the higher side and we might really not need so much of cash really for Some sort of contingency or some other things also. So how are we looking to utilize this meaning? Yes, yes. So Swadim, I think you're right.
I think this includes Couple of things. 1, this also includes part of the capital which we repaid on the 1st week of January. So we had borrowed part of the amount for refinancing, which got done after the quarter end. So there is a part of the cash of this which got repaid to certain loans in January. Plus some of the cash reserves also include interest payable, But I think that gets included because the INR 200 crores of IFRS number is slightly higher.
It's lower than INR 200 crores of IFRS. But I think the key reason of a large cash balance is on account of our Loan refinancing that we had done, which we borrowed at the end of the quarter and paid at the beginning of the next quarter. No, that's fair. That's fair. But I think still we're actually sitting a bit higher really.
So is there case for the concern of our prepayment? Yes, exactly. That's what I said. We have done substantial amount of prepayment in January. Okay.
The prepayment happened 1st quarter. That's why you see the cash in the books, but the prepayment took place in January, 1st week of January. It happened already. So we are prepaid. Got it.
Got it. Yes.
But Swarni, to answer your question, I mean, the INR 300 to INR 400 crores of cash that we would carry. I mean, look at the size of the balance sheet. We are today at about INR 8,000 crores of overall debt, Right. So I think about a 4%, 5% of cash is not that high as well if you look at from that point of view. And we obviously continue to aim to optimize the negative carry, right, because this will have a 3%, 3.5% yield.
Now we've also as part of our initiative to expand our borrowing lines, we have set up some shorter working capital lines, including CP facilities. So once we get better comfort around our ability to tap into short term market, we may want to optimize this even further. But against the INR 8,000 to INR 9,000 crores of debt today, about INR 300 crores, INR 400 crores of cash is also not that high. I would like to bring that to your perspective as well.
Fair enough. Fair enough. Right. Thank you so much and wish you all the best. Thank you.
Thank you. The next question is from the line of Suneem Shah from TurtleStar Portfolio Amajesh, please go ahead.
Yes. Your commendable performance, entire team of integrated really great job done.
Sir, I
have just a few things I need to understand. So when we did the preferential with KKR and GIC, we had targeted about 17,000 crores of AUM and we are almost there. Now with our proposed rights issue of about INR 1500 crores, What is our internal target in terms of the gain on that we foresee that once we get the rights money and You know the commensurate debt that we can raise on that rights capital, how much would we reach to that EMEA? Because long term, our target is 30,000 crores. So Yes.
Will we reach that number or will be somewhere in between?
Yes. So I think thanks, Nielvi. I think our goal So I will just remind the question. I don't and as we have said before, we don't have asset targets because we have targets on, let's say, Appreciate growth. So asset itself is not the target for us, any of us.
So I would revise the question in saying that with this, let's say, Up to INR 1500 crores of capital, how much more can we do, right? If I take the question in that manner, with the current Capital build, we could have gone up to 17,000 crores, 18,000 crores. With this, we can add another 4,000 crores, 4,500 crores of capacity, right? So this would put us somewhere around INR 23,000 to INR 24,000 crores of capacity, right? It doesn't mean that is our target, right?
Our target is to acquire when the time is right, the business is right, the project is right, right? So we are not based on We're not looking to acquire based on size targets. But to give you a capacity, We can reach up to approximately INR 24,000 crores if we raise this much amount of capital.
Okay. So one more is, when we get into the debt amortization phase, when we reach that stage, We can take it that the CPU at that point in time will also not be affected.
I think you pay on the business plan overall, right? So right now, We are not seeing losses capital raise that stage to be achieved for a considerable period of time. And again, I think we've done that earlier, but substantially period of time, we don't any impact coming on this?
Okay. So just one point if I can chip in. Most of the people they are Just talking about the refinancing. So at this point in time, the only risk perhaps in the books of Immigrates seems to be on the Bunch up of refinancing in FY2023, 2024, 2025 and FY2021 was a real slowdown worldwide even in India everywhere. Now the world and everybody, everything is coming out in FY 2022 in terms of improving.
So, if in FY 2023, 20 24, 20 25 Economic and everything is robust and if interest rate increase at that point in time, so majority are worried about The refinancing risk which we carry, so if our marginal cost is at 7.4% today, can we lock in that See that 7.75 or something even higher, but that will do away with the risk is what I think most of us are worried about or
Yes. No, I think that's a very logical way of looking at things. And as Jithee mentioned, we do keep doing this calculation. Let me put it the other way around, right? Let's say there are a bunch of Pre payable loans or bonds in our portfolio, which we can do today, Right, instead of worrying about the 23, first.
So at this point in time, our focus has been on that, That whatever is the nearer term, so for example, let's say we had a facility with in an OGPPL SPV with a cost of debt of 9%. And we focused on that first and we replaced that with a cost of debt of 7.6%, With the same bank, right? So our focus is to ensure that we reduce the, Let's say cost of debt as well as the refinancing of what is near term, right? What is in hand right now, we can do it. And we are still keeping an eye on this FY 'twenty three and it is a matter of cost economics, right?
I mean, it's about INR 2,000 INR 2,500 crores. And if you see the differential of 1.5%, on an average, we are talking about providing 3% of margin to investors, right, or net to investors, Which would be INR75 crores in cash, which is a very, very sizable amount to take that refinancing. However, as we come closer to the date, we will see those numbers coming down and making it more palatable. So we are working on that, but I think it needs to make
Fair enough, sir. All the best and thank you very much
for this performance. It has been just ongoing. Thanks for your time. Thank
you. Thank you. The next question is from the line of Devamodhi from Adecco. Please go ahead. Yes.
Congratulations on a recent performance. I would just want to start by asking on what is the cost of the IBM collaboration that we have highlighted? And how does this help our optimization in terms of both cost and operational efficiencies?
Okay. So I think the first is cost wise, I mean, these are different costs starting from hardware, software implementation as well as a long term service contract. So on a 10 year basis, if I look at it because there's a long term agreement, we are spending approximately INR 22 crores, But this is on a 10 year basis, right? So let's say annually 2 crores kind of a cost that we are spending. 1st year maybe 3 crores because of your implementation cost, but subsequently in a 10 year basis about 2 crores per year.
The synergy or the efficiency that we are seeing because of this, As I said to the earlier question, you'll be able to do targeted maintenance in a much more reliable way and therefore avoid, I would say, I'll have to not avoid, but reduce the overall cost of maintenance that we are implementing on a year on year basis, Because let's say for example, for inspection activity, we deploy a particular number of people for a particular line. And for a higher risk line, it will require more people. But again, that is based on not Exact artificial intelligence and right data which is available on a digital platform, it is available based Experience as well as what people have seen on ground, but this knowledge transfer is not it can keep changing. So a digital asset management like IBM Maximo allows us to 1, keep the knowledge of the asset in house in the company instead of the people and the maintenance team. 2nd, it allows us to analyze that data for 15 states, right, in different geographical terrain what is happening.
And then with NOI, the right maintenance strategy across asset base, which eventually will reduce our operating costs and increase reliability.
So what kind of, let's say, cost I understand that there will be a lot of operational efficiency And energy and the downtime will be reduced significantly or that would be the expectation? What would be the cost impact in terms of today versus let's say 3 years down the line because of the
I think it's a future prediction right now, but I can tell you it will be It will be leaking inflation, right? So that itself is a saving. Typically, We have factored in 5% to 7% increase in AMCs in the past, right, of all the people related costs. Right now, our goal is to beat inflation first. So we're focusing on that those costs won't increase, right?
That itself is a big saving, assuming let's say the cost is today INR 50 crores and 2 years down the line it's going to INR 60 crores. Instead of that, we'll maintain it at INR 50 crores, right? So that's how one can look at it.
Okay. Sure. That would be a very big thing. So you're able to maintain cost to straight up you over the long term, probably The much lower rate of inflation than what the model would have been.
Exactly. That's an easier way to evaluate that, yes.
And just on this, currently we have around
let's say INR
5,200 crores of equity and we are doing the rise of INR 1500. And we have also mentioned in the PPT that we have around 15,000 crores current AUM and another 5,500 crores of acquisition lined up. So let's say if we compile all this information, we get that you will be reaching something around 21 or 1,000 crores AUM with Broadly close to 59% leverage. Apart from the INR 1500 crores equity raise, you use debt for the remaining So firstly, would that be roughly your current understanding that you will be close to your INR 32,000,000, INR 36,000,000 or something like that on around INR 31,000 crores?
Okay. So you're saying yes, I think you said about 59%, 60%, right, close to the recent acquisitions?
Yes, yes.
Yes, that seems like that seems Calculate calculation, I think, obviously, AUM keeps changing. But if we add current AUM plus 5,000 crores, 21,000 crores and what we weigh in the equity, It would be approximately 60% of the QAUM.
No, in fact, it is 68 percent of percent is because you will be at around 5,200 plus 1500. So when you will look at the rights issue of 15 100, we can necessarily assume that the whole amount can be calculated in one go, right? I mean
No, no, it won't be 68%. I doubt it will be 68%. I think there is some error there. We will be approximately 60% to 62%. So the way to look at it is today we are at let's say 15,000 crores of AUM and our debt is Approximately INR9,000 crores, right?
You're talking of net debt.
Net debt, yes. Okay, okay. So it is approximately INR 9,000 crores. So the incremental asset that we will add is INR 5,500 crores debt, if you were to do INR 5,500 crores, that will bring our debt at INR 14,500 crores. But we are raising let's say, we raise about INR 1500 crores equity that will reduce the debt to INR 13,000 crores.
So INR 13,000 over the days of whatever INR 1500. Yes. So it would be around 62% to 63%, yes, not 68%.
Sure. And what is a good yield to consider in terms of the revenue yield on the entire AUM in the long term, considering that currently we will probably only have, let's a little bit of Solan in this. And I understand that the deal will change from year to year because of the various trends that will be there in different transmission assets. But generally, is it good to take something like 12% to 13% ballpark to be a good revenue yield on the entire AUM?
I am sorry. We've never done Evaluation based on revenue yield, that's a tough one. I think you'll have to think about it on a revenue yield Because operating costs are different. There are curves in tariffs. So it's tough to evaluate this business on a revenue yield basis.
Okay, okay. Sure, yes. That's it for my first one.
Thank you.
Thank you. The next question is from the line of Mohit Kumar from Dhan Capital. Please go ahead.
Hello. Thanks for the opportunity once again. So I have one question. How much you have paid for the acquisition of Parvati to Parvathi
Goldham. Sorry, can you repeat the question?
How much you have paid for the acquisition of Parvathi Goldham?
Okay. Meghna, can you come in and share the exact numbers for the acquisition value?
Sure. The implied EV including debt is close to about INR900 crores So, Mohit, on the acquisition.
Ma'am, my question is how much You're scared for the equity consideration?
I think equity consideration. So net of cash, that
will be that will
be close to about INR360 crores.
And what is the regulated equity for that particular asset?
Just a second. Mohit, let me come back to you on that one.
Sure, sure. I think I think what is the timeline for acquisition of the solar asset?
I think we have signed the agreement. We are doing the closing related work. So it will take, I would say, a couple of months for us to close it.
Okay. And lastly on this rights issue, what kind of approvals are required?
So okay, with respect to rights issue, okay. So with respect to rights issue, we have We are evaluating between the Fast Track and Slow Thras process. In the Fast Track process, we do not need steady approval And there are certain criteria has to be complied in the Fast Track issue. And the Fast Track approval, if we go, will need steady approval. Besides that, there are certain, I would say, clarification and approval needed from RBI, especially from SEMA perspective, because this is a first time rights issue of the public in it.
So RDA approval is in both cases and steady approval is depending on whether it is fast track or slow
Maumee, there are certain process related aspects also because this is the first tritization sign in bit. So it entails exchanges of processes with the exchanges and as Harsh rightly mentioned, the approvals from these regulators.
Okay, understood. Thank you.
Thank you. The next Question is from the line of Danish Mishri from Investor Force Advisors. Please go ahead.
Yes, hi. Good evening and thank you for taking my questions. I've been on the call throughout and I just had one question. You've mentioned that you're looking at a INR 1500 crores rights issue, capital raise through rights. And so that implies about a 16% post money dilution.
And if I heard correctly, you also guided saying that post dilution also you will continue to maintain the INR3.10 paisa distribution per quarter. So I just wanted to hear whether I heard that correctly or did I misunderstand it?
Yes. So, no, I think first Point, I would correct slightly. We're not saying we are raising INR 1500 crores. It's probably the up to number. So depending on the price and I would say, right ratio, this number can marginally change here and there.
The second question is, yes, The guidance is post capital raise also, the 12.4% will continue.
Okay. So just seen that you have enough of visibility To give you that comfort when you're assuming this kind of dilution essentially.
Yes. Yes.
All right. Okay. Thank you so much. Thank you.
Thank you. The next question is from the line of Roshap Shere Dalal from Praveen Ratilal Shares and Stockbrokers. Please go ahead.
Yes. Hi. Thanks for the opportunity and congratulations on good Just wanted to understand on the price of the rights issue, if you can put on some color what sort of Price, will it be more than or less than NAV?
So I think tough to give a color on that right So, Rishab, we have not yet finalized the rights issue detail as we said that we are. Our Board has only approved today the capital raise, which is kind of intermediate step as an in principle approval. The pricing as well as the final sizing is going to take place, I think, once we have certain approvals in place. So we know the predictability on that front. So Unfortunately, we don't have the answer for that right now.
But I think directionally it's the right issue, so people would get chance to participate.
Right, right. Okay. And just wanted to understand one more thing on your corporate structure, Where I'm referring to Slide number 23, a couple of quarters back you were also in consultation with Then NCLT, do you know remove IGL, IGL1 and IGL2 from the structure so that you can give the distribution in the form of dividend, which is more Better for the investors. So any progress on that front, if you can just highlight that?
So I think, Vishal, you've these 2 different points. 1, We are evaluating the new intermediate holding companies as well as merger of assets. But that is A very large merger of INR 10,000 INR 15,000 crores of assets with regulatory approvals, tax impact, etcetera. So we are evaluating that right now. However, that is not with the objective of creating dividend out of the portfolio.
That is with an objective of making a simpler operation, simpler compliances and overall governance structure. Having IGL 1, IGL 2 has no impact on the dividend, We are paying interest as majority part of our distribution or all part of our distribution because The majority capital is invested by Indigreed in the subsidy directly as a debt. Even if we were to merge these assets into 1 together, that capital structure is not changing. That would still remain the same. So these 2 are different aspects altogether.
And as we have described in certain earlier If we start providing dividend, there's going to be a 25% tax at the end of the level, right? First of all, it's extremely difficult to reverse this capital structure. But even if it was to be done, there is a 25% tax that will be There is the SPV level. And then the dividend would be provided to investors and that will be in the hands of investors also taxable. So I don't think that dividend arbitrage, which people thought about in the past, exist after dividend started being taxed.
Okay. Okay. Okay.
Yes. Thanks a lot. Thanks a lot. I think that's very useful. Thank you, Harsh.
Thank you.
Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Soumit Gishore for his closing comments.
Yes. On behalf of Axis Capital, thanks a lot for giving us the opportunity to host this call. Sash, do you have any closing comments? Yes. Thanks, Suneet.
And I'll just I just thank everyone for joining the call. And just say our focus, as I mentioned earlier, is to Focus our strategy on simple business model, which is on stable, predictable operating cash flow increase, increasing over a period of time And maintain a healthy balance sheet. And I think this quarter marks the another term event in our history When we have increased the BPU on a quarterly basis as well as decided to announce a capital raise in the coming future, which is closely linked to our strategy of providing predictable DPE to our investors and growth, which is distribution and growing the distribution and supporting that with a healthy balance sheet by raising capital at the right time. So we are on a path to success what we had envisaged few years ago. And I would like to thank all the investors and stakeholders for participating in that.
Thank you.
Thank you. Ladies and gentlemen, on behalf of AXIS Capital, that concludes this conference call. Thank you for joining us and you may now disconnect your lines. Thank