Ladies and gentlemen, good day, and welcome to India Great Trust Q1 FY 2021 results and latest developments conference call hosted by EDELWEISS Securities Limited. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance, during the conference call, please speak with an operator by pressing star 10 0 on a touch tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms.
Ashuri for Middleby Security. Thank you and over to you, sir.
Thank you, Mira. Well, hello, everyone. I welcome you all on the integrated cluster Q1 FY 2021 result. And detailed developments for conference calls. Thanks for giving us the opportunity to host this call.
I hope all the participants in the near ones are in the best of your health. From the management today, we have the person, Mr. Hersha, CEO of Indegrid, and he's representing the trust over there. So I would like to hand over the call to Mr. Hersha for his opening remarks and post which we can have a detailed Q And A.
Okay. Thank you, Sperdin. I hope you can, hear me loud. Is it fine?
Yes.
Okay. Thanks. So, thank you, everyone, to join us today evening. I'm just cautioning in case our lines dropped, we will dial back soon. The networks haven't been great in Mumbai.
So in case the lines drop. Chorus team will connect me again and we'll restart from where we dropped out. So welcome everyone on our call. This is the quarter one call for FY 2021, and we have just finished a board meeting and published the results today. I would be taking through the investor presentation, which we have circulated today evening.
And after that, we will take through question and answer subsequently. For the documents today, we have published investor presentation, results sheets, valuation report, and other details. So in case you have a question, we can refer to those documents, subsequently, once the investor presentation is finished. On quarter 1, slide number 3, as we, as we say, we are going to start with our vision and journey. And on slide number, 5, as we said, we our vision is to become the most admired vehicle in Asia.
We are focused on a business model with long term contracts, low operating rates and stable cash flows, focused on value accretive growth deliver predictable DPU to our investors and follow a optimal capital structure. This has been a vision and we believe we have been living that in the slide, as you can see, in detail, it is India's only power transmission unit platform. And some of the statistics that we have provided showcases. Our AUM is about 12,000 crores today with 20 lines and the 8 100, 30 kilometers for substation and 7700 NDA of transformation capacity. And our residual contact life is 32 years.
Key highlights, for quarter 1 FY 2021 is on slide number 8. Before I go through the key highlights of right numbers, 8 on quarter 1. I would like to, also sadly inform, our investors what we have already done to the exchanges that one of our board members, Mr. Shashikhan Pujani, I lost his life, in last month. He had been a key member of a board since the indie grade was conceptualized, and he has played a very crucial role in, formation of integrates as well as, building integrate from where it is, where it started and where it is today.
We are sad to lose him and, we, I think it will be difficult to fill his gap for us. Is that this happened in quarter 1? And therefore, before we start the business presentation, I thought, I would pay my attributes to mister. Coming to quarter 1 highlights, I think our financial track record has remained robust. Our EBITDA has grown 74% year on year basis, the quarterly EBITDA.
And this is backed on the asset that we had acquired last year. Our distribution payout, we have announced a 3 rupees a unit, including in the COVID cert uncertainty times, and we are paying, 3 rupees a unit entirely as interest. Our net debt to AUM remains at 50%. And, significantly below the 70% cap, put in by salary regulations. Are readings of, by all three rating agencies were confirmed after COVID times around April in May.
So we remain triple There are 2, announcements that we did during the quarter, 1 for acquisition of Jager Katy Transco Private Limited from Techno Electric And Culture. That share purchase agreement is assigned and we are awaiting regulatory approvals for that. We also took approval for from investors to acquire? On COVID times, I think, the most important point for us was that there has been no material impact on health of our employees and partners who work with us. Having zero COVID incidents on our portfolio, including with our vendors.
In general, power demand slope down for the 1st 2, 3 months, but that is recovered and low material impact is to be seen. We'll cover that in the next slide. And the collection track record, while it went down in quarter 1, it is starting to recover and we'll discuss those numbers in detail. On the regulatory side, there are 2 new updates, said they issued 2 circulars, one for induction of a new sponsor. In case somebody wants to become a sponsor or an investor wants to cross the shareholding beyond 25%.
And the second part of the Circular cohort, if, a sponsor wants to declassify themselves as sponsor, after that you lock in 1st 3 years, what is the process to be followed? So these are the regulatory evaluation that has taken place in quarter 1. On Slide 9, I would just reiterate on the COVID impact. On the right hand side, is the data published by Posoco, which is an low dispatch center. As you can see, March April were extremely low both in terms of peak demand.
The chart above and overall energy consumption, which is energy met in the chart below. However, as we can see, Once the lockdown is opened up end May, early June, we've seen electricity demand catching up. And if you just check the 1st week of August or the last week of July data over here, the both peak demand as well as energy consumption has slightly crossed what was there. In the same months in 2019. And we will continue to monitor this on a month on month basis to see if there is a recovery.
In terms of electricity consumption. While just to note that our transmission tariffs are not linked to power flow, and based on availability of transmission elements. However, in general, for the health of the sector, it is important that power demand is a good metric to be set. What we've seen in shared also the back on our collection, I believe this is a question which was asked several times in the calls before. So we have showcased the collections that we have received from the over the last 4 months.
In April, which is the peak of the lockdown, we received 40% in May 58th in June 80 4th. So gradually, it has increased. And overall, in a quarter 1 basis, we have received about 60% collection. Which we had thought about and disclosed that we
will be expecting about 50% collection in quarter 1?
And in July month, 1st month after the lockdown opened up, we have reached 104% of the collections. We believe it's a good sign of recovery. However, we would like to monitor this number on a month on month basis, on a quarter on quarter basis, and we will remain conservative till that time. The next slide is on operational highlights on slide number 10. As you can see from our track record, our availability for most assets that remained at the maximum and we have earned incentives.
On the safety side, we have ensured that, 100%, safe man hours have been achieved We are investing a lot in cultural and behavior based safety enablement for our employees as well as our partners. Considering that we operate in an electricity environment in a in a live grid environment, safety is something which is of highest order of priority for us. Beside safety and training for that, we have also shared some of the critical, parameter for operations and reliability, which includes hits per line on a quarter on quarter basis versus last quarter same year. It has improved marginally. And you look to follow the best, global standards to achieve better reliability in this regard?
On a COVID, especially we are putting additional efforts to ensure that, all people, including our partners and contractors and workers on the ground about 600 in all, remain safe and ensure 100% compliance with faculty guidelines, including that our succession facilities have been substantially quarantined to ensure that those people, who operate the substation remain, safe. On slide number 11 is the financial highlights of of this quarter. Revenue and EBITDA both has substantially increased versus the same quarter last year. And this is on the back of the acquisitions that we completed last year. Along with that, our DPU, as I said earlier, we are paying 3 rupees a unit as interest.
This is our 10th consecutive distribution as fee rupees a unit. And since listing, we are distributed now approximately 36.56 rupees a unit to invest us. DSO days are 101, as we discussed, our collections were low. And therefore, we are, we have stretched DSO days due to COVID delays in quarter 1 collection. However, quarter, 2, July month has been encouraging and we'll continue to watch that number.
The slide number 12 describes our, EBITDA to NDCF bridge. So on the extreme left is the income And after expenses at, SPVs, we have reached EBITDA of 331 crores. Of that, SPV level interest is minus the working capital has improved and would describe that's largely because of factoring We have chosen to sell receivables of quarter 1, which is called factoring to ensure that we are able to maintain NDCF as well as DTU for quarter 1. Our loan repayment of 5.7 crores are taking place and we have created reserves at SPV, with the factoring support to ensure that we can survive if there is a further delays of collection. Our NDC of Upstream by IGT, SPVs to integrate is 253.8 crores.
We have majority of the loans at Integrate where we have paid 80.7 crores of interest. And there are, marginal expenditures done at integrated as At industry, in the at integrated NDCF console, we have, 191.5 crores of NDCF. Of that, we have created reserves of 16 crores and decided to pay 175.4 crores as distribution. Which is equivalent to 3 rupees a unit. On Slide number 13 is a slide which we presented last time as well.
There is no material change versus last quarter to this quarter except a few borrowings that we have done this quarter? We are, as I mentioned earlier, still rated triple a, by all rating agencies, weighted average cost of debt is at 8.6. We have reached 50% net debt to AUM. And as per se, regulations after crossing 49%, our level of disclosure have increased and therefore, you will see valuation report and other reports being available on a quarterly basis going forward. We have a substantial amount of cash balance.
That cash balance is towards the, which we have held for distribution for quarter 1. About 138 crores is also for Dessra, which is a debt service reserve account and the subsequent cash which we have borrowed for subsequent acquisitions. On Slide 14, it's just a performance track record since we listed the incentive presented on a quarter to 1 quarter basis. As you can see, there are 3 important points on this slide. 1 is the beta We've remained a very low volatility, stock in comparison to other comparable indices or stocks.
We have distributed as a total return 42 percent, to our investors. Out of its 34% is largely coming as a DTU and the 9% is a price change, till 31st July. That it represents. As you can see, there is substantially higher than comparable indices and investment alternatives to investors. And therefore, we believe that with a low volatility and stable return, we will continue to provide superior returns to investors.
Slide 15 is about recent development of which we recently announced disclosures on, this week. There was an agreement between esoteric 2, which is an affiliate of KKR and SPGBL to transact on 15% of integrated units. This agreement got automatically expired in June 2000 July 2020 on the long stop date. As the transaction could not be consummated by that date. In light of the above, esoteric 2 has also withdrawn its intent be designated as a sponsor of integrated.
However, on the writing side, we have stated some facts that equity capital required for the significant asset growth that we are foresee, especially the framework assets. Has already been raised by Indigo. And that is also one of the reason that Integrated Net Debt to AUM is, just 50%. Esoteric 2 remains still the largest unit holder at Indivate. And KKR, owns 60% of the investment manager and has also contracted to increase it to 74% by May 2021.
The next slide on slide 16 is just a comparable with the global yield platforms and how integrate positions itself, both in terms of size and yield as a spread over a 10 year g sec of the local local GSA. And I believe it offers a good risk return reward to investors, in comparison to global indices. And global opportunities to invest in such yield platforms. Select number 17 is just describing that data into a tabular manner we can address some questions if there are there on that. Looking ahead, I think for outlook for FY 2021, our focus remains on, providing superior returns, stable DPU and growth in NDCF.
We believe we can achieve that if We execute on a portfolio growth strategy to acquire, GPTL, KTL, and NER projects for which we have done framework asset. Also evaluate selective solar opportunities with central counterparties for which we took approval. And create a pipeline of transmission projects beyond framework asset services. While we do this, we will ensure that our focus on balance sheet spend is maintained. Considering?
Considering the fact that we are going through, a COVID environment in slightly uncertain, and unpredictable scenarios can pan out we would look to maintain sufficient cash balance and working capital lines and also it will aim to diversify our debt sources as we, look to acquire other projects. Our focus on operations will remain as of the most important priorities, will look to deliver 99.5 percent availability across the portfolio. As committed in our quarter 4 presentations, we'll look to invest in technologies, which enable better asset management including digital asset management predictive analysis analytics and, a better emergency preparedness. We'll look to increase our focus on ESG initiatives that we kicked off in quarter 4. And as we do that, we'll follow that we ensure that world class EHS standards and oriented practices are followed in our portfolio.
We'll continue to work with industry participants and regulators to ensure that overall market for in which and integrate for, say, grows. And, there is increasing investor awareness about it, also regulatory awareness about it. And we believe that, there are few policy initiatives which we have been publicly pursuing, which is to allow IRD and CFRDA to enable insurance companies and CF companies to subscribe to debt securities of we'll continue to pursue that. And we'll continue to look if there is an opportunity for, reducing the lot size to single unit. Well, this was approved last year when, 5 lakh trading lot was reduced to one point, 1 lakh trading lot by Seabee.
However, it was not made through at a single unit. We would look to focus on that as well with the regulators. With that, I would, actually, stop the initial, presentation from my side because I recognize that there is going to be questions around several points so that there is enough time for investors to ask questions on critical matters. So, Sharnim, I would, request you to take over and, open up lines for Q And A.
Thank you very much.
You.
Ladies and gentlemen, we'll wait for a moment while the question queue assemble. Anyone First question is from the line of Mohit Kumar from IDFC Securities. Please go ahead.
Congratulations on good evening, sir. The numbers. My first question pertains to the fact that of the the sponsors have, not, the the sponsor, can you not have name? And how does it affect, you know, such a business. And do you think that, you know, the the the the light or the sponsor are still looking for
an exit or a Zip or Can
you comment upon that? And and secondly, on the investor manager, does the KKR is still on the based on the the the path to acquire the another 14% or is there any other some kind of, you know, different understanding?
Okay. Thanks, Mohit. So to answer your first question on, the recent developments. I think, one is there is no impact on the existing business that we own. On the count of any of this.
This is between the 2 shareholders where the pack has not worked. So I would say that there is no impact from the business at the moment. Will Starlight look to exit as something a question probably better directed to sterlight, directly subsequently. And on the investment manager side, KKR retains has retained 60% of the manager and therefore majority. And at the moment, I'm not aware of any other developments in the contract, it is a contracted transaction between both parties to transact on 14% on a specified date in future.
A second answer on the on the resale resales issue. What how did resales have behaved from 20 to June 20 in, in in, in, in, in, in, in, later with that, is there any, change in plan for acquisition of the other 2 assets, which are planning required by the end of FY 2021 somewhere? The timeline change, I'll start to work.
Okay. So I think, first is, on the receivable side. So I think we have approximately And I don't have month on month exact gross number, but we have approximately 120 crores of monthly revenue, right? And therefore, we collected, in quarter 1, approximately 60%, which is approximately 200 and 20 crores or 3.60 crores, right, an approximate number, in terms of cash collection, which is about 60%. And I'm not counting July month in that right now.
So that's a quarter 1 collection. The second question that you asked was on acquisitions. Can you be specific which acquisitions, you were kind of So it's
a classic issue which you're acquiring from Mr. Light?
Okay. So I think the there are not 2 acquisitions on Star, right? There is one acquisition, which is with respect to GPTL, which is announced and we have taken, investor approval with respect to that. We don't have a signed SPA at the moment. So as and when we reach the closure of that, we'll make the necessary, announcement.
I believe that we had made fair amount of progress in the diligence and that is why we came to investors to take approval for that acquisition. That is the only acquisition that is for which we have announced the acquisition and taken in this referral. The other two projects, which is KTL and NER, about framework projects, where Integrated and Starlight Power has an agreement on. We are monitoring the project progress of both projects both the projects are not achieved commissioning at the moment. And therefore, as and when they achieve commissioning, we'll look to start the diligence and follow the process mentioned in the framework agreement.
Next question is from Sarvesh Gupta from Maxim Capital. Please go ahead.
So first thing, you know, this long stop date, which has expired between the two parties, So, you know, is it because, Stella wanted to transact at a higher price because it has moved from the initial price to the current market price. So why the long stop date has not been extended for KKR by Easterlight?
So, so this is Kunal, right? Mr. Ramesh, sorry. So, Savesh, I think, this is a question which I mean, I'm not party to Right? This decision is between 2 shareholders, independent shareholders.
And therefore, I do not have an answer to that. And, probably, You can address it to separately to Starlight and KKR beyond the call, but at the moment, I'm not aware of that, please.
But this is, you know, very important for the unit holders to understand, you know, who is going to be the sponsor because we don't know, as of now, if KKR does not want to become a sponsor, or they haven't been given an opportunity?
So, Sumeet, what I can, I can explain is that, In which and let's say specifically for integrated, it is a manager driven entity? And, most of the decisions as well as business is run by the manager, investment manager where KKR is majority. And it's a professionally managed entity. On the sponsorship, I think the only, privilege, if I may say, of becoming a sponsor under English regulations is to be able to own more than 25% of, particular illness. Yes, at the moment, KKR has withdrawn the application.
And therefore, We do not have a financial sponsor who can earn more than 25%. However, on the business, will that have a immediate material impact, I believe as we stand today, the business is, as usual, right?
But it should have been a slight responsibility to get this approval for change of sponsorship, right? I mean, I could not understand why we have come to this impasse, because right now, there's so much uncertainty because So what will KKR, for example, do withholding 60% in the investment manager, which is having a revenues of few $1,000,000, if they are just a financial in the overall setup. So, you know, there are too much of uncertainty regarding the, you know, who is going to be the sponsor because technically now, Starlight can also sell because they are lock in period has ended. So if they sell, then then, you know, what is their role? Why are they in project management?
Why is KKR on the investment manager? So the I think I personally felt that it should have been the responsibility of Sturlite who has transacted with KKR on which basis, funds have been infused on which basis all the acquisitions have been done primarily for Sturlite promoter entity assets. So this clarity needs to be given to the unit shareholders because it
is very important for us
Yeah. No, Suraj. I understand. So I think just to clarify, the the manager, controls the invite, right, and esoteric 2, which is affiliate of KKR still remains the largest shareholder of, in the grid. And, investment manager where the decisions are made, the corporate governance is coming out of that.
And that's where they remain, the majority shareholder And therefore, I would say investment manager is, probably a way to ensure that the business decisions are made in a particular manner. Then the business in itself. However, it is a business in itself, but the core reason is to ensure that governance is followed over there. And that's where KKR is, remains majority. I think, I would kind of not comment on whose responsibility it is because, Sabi did come up with the regulations in July.
Could it be done earlier? We don't know. So I think at the end of the day, there were lack of clarity earlier. And on a responsibility side, something which we, you know, I'm not able to comment whether it's the right responsibility or take care, right? That is not, at least, we are focused on managing integrated.
That's how I would put it.
No. But going forward, what is the stance of a starlight? Are they going to hold this fifty 15% units, which their tech can technically now sell or not. Because if they can sell, then who will be I mean, what is the roles and responsibility of a sponsor going forward because there is a case now that nobody will be a sponsor if they decide to check out as well.
Okay. So, see, being a sponsor and amount of ownership are 2 different things. The deregulations provides for the sponsor is the person who forms the invite and takes it public. And the sponsor has a 3 year lock in requirement after that, there is no lock in requirements for sponsor to hold it. So, however, Sebi has clearly specify what are the roles or sponsors, which has largely to do with contributing assets at the initiation and providing disclosures around that.
Particularly to manage a business to run the index. And therefore, technically, even if Starlight sells, they will still remain a sponsor. And, the business would run totally as is because, the sponsor per se does not have a role in running the business, the manager is running the business.
Understood. Now on your receivable side, you have collected 220 out of 3 remaining 140 has been factored and if he has been at what interest rate?
Okay. So I think one is it is factored Yes. 140 has been factored. We haven't disclosed the interest rate in the in the results sheet for this specific transaction. And I will just check if it is disclosed.
If it is disclosed, then we can talk about. Otherwise, I can just say that it is linked to an interest rate is linked to Mclr of the bank. And, it is at a market term or a fairly reasonable term.
Understood. I just feel that if we can take this feedback from unit holders on this call to the to the sponsors, I think that would be useful.
Thank you very much. Next question is from Hitesha Rora from Unified Capital. Please go ahead.
Yeah. I have just a couple of questions on this in acquiring the balance 14% stake. By May 21. So why what's holding them from acquiring now and why do we have to wait till May 21? Is there any long stop date?
Anything to be worried about? What's holding them there? I believe the amount involved is quite small. Then, the second question is, could you let us know what is the, is the completion date of any other bigger assets? Is that on time, we will affecting it to be done by November of this year.
It's also worth forgetting. Is that on time? The third question was Could you throw some light on further expansion by beyond 18,000 crores? What is the plan there? How do you raise to look to raise you know, raise the funds, etcetera, timing, regulation, etcetera, if you could show light on that.
Okay. Fair enough. So I think to answer your first question again, you know, it is a agreement between the 2 shareholders of the manager to transact on a future date. And the It is nothing is holding up the transaction. The transaction is structured in a way that it was to be transacted.
This 14% was to be transacted 24 months from the date of first transaction. And therefore, that is how it was structured between the 2 shareholders of the manager. And, that's what is going to take place in 2021, May 2021. The second question was on NER. So I believe there are 2 things.
One is, we do get understanding of what is the project progress of NER on a time to time basis. We believe it is on time. However, we cannot share accurately because that is something, again, which is Starlight Power is executing on a project basis. However, I can say that at least the details that we had received or disclosure that we had received, that NER is our time. Of November or December that you mentioned.
But again, it is based on the inputs that you received from Star Lake Power. Your last question was on growth beyond 18,000 crores. So I think growth beyond 18,000 crores, one is we already capitalized the lithium 1000 crores, beyond 18,000 crores would require us to raise, further capital. And think there are a few modes available, both reference issues as well as rights issue, to in which to raise subsequent capital with raised as a preference issue last year. And, that is when, you know, large investors like, KKR or GSE participated.
And we could grow the portfolio. So I think beyond 18,000 calls, we wouldn't have to raise capital. So, you know, it is, it is difficult to commit at this point in time. I would I hope you appreciate because, you know, our shareholder dynamics of overall shareholding mix have also changed. So, whether we go over a preference issue or a rights issue, has to do with a few things.
1 is, certainty of a capital raise, right, that which method is going to provide certainty and speed up capital raise. 2nd is also wide range of investors who can participate and not participate. 3rd is speed and execution in I think you need to factor in all these few factors to make that decision. At the moment, we don't do that.
But the regulation allows, right this amount? Earlier, it didn't, I believe.
Yes. Regulations does allow. Right, Sushana?
And you have a, you know, you have a vision of 30,000 through the New What's your timeline there by when? Because that would also determine the time of the capital raise.
Yeah. Yeah. Yes, so I think I'll give it 2 directional views on that. 1 is you ask a rights issue, a preference issue. I think one important point to check between the 2 is a rights issue has a requirement that we need to have you know, at least 75% of the success, right?
And if it is lower than that, it's, anyways, can't go through. And therefore, we also need to see that whether our investor base or 75 percent of the investor base is subscribed or sale or will be able to raise capital via that, whereas preference issued to that extent makes it easier and the thresholds are lower. Timing is something which depends on the asset visibility. As and when we see more assets coming to a concrete stage of acquisition, we would look to do capital raise. Even there is a certainty of more assets coming in, we would have to look capital there.
But I think that depends on how, you know, overall, marketplace, how the growth plays, etcetera. So at the moment, we cannot comment on when we are going to raise capital. Yes, we have given a guidance that we have a vision to be 30,000 crores by 2022. And as in when we cross 18,000 crores, we would need to raise capital. When we will cross is something dependent on, you know, progress of framework asset acquisition of framework asset, more opportunities being available.
So I think it is linked to many market factors, right? So tough to provide a timeline on that. Okay. And just on the first question,
So they will do the, the the KKR will buy the 14% stake, in May 21, or they will buy May 21?
No. As per the agreement, it is, in May 21.
It is in May 21. Okay. That's central. So I hope there's no negative surprise here, like, nonstop agreement. Like, we had with the with this current issue.
Sorry. It doesn't say every agreement has a long stop date. But at the moment, there is no negative surprise that I'm aware about.
Okay. Thank
you. Thank you very much. Next question is from Hammond from Bearings Advisors. Please go ahead.
Good evening. Thanks for taking my call and I hope you've been safe. Since the last time we spoke, I had only one question on prospective asset acquisition. You made great progress over the last year and given the long term trajectory of reaching 30,000 crores in the UN versus where we are today. How are you looking at asset acquisitions?
Because the investment manager's incentive structure is tied, somewhat to maximizing a US. Whether the unit holders is incentive structure is tied to maximizing distributions per unit. So how are you, looking at the asset acquisition landscape? And are you getting assets which will be acquired at or above the prevailing distribution kit?
Okay. So, thanks, Eman. Good question. I think I would just clarify, from investment manager perspective or, at least the executive perspective are incentives not linked to the AUM growth. Last year, incentives is to do with operating performance and NDCF of Indigrid.
In addition to that, even a long term incentive structure is largely linked to integrated value creation, and not with respect to asset growth, right? So that's just a kind of a clarification on that. Yes. Investment Manager as a corporate as a company. If the AUM grows, EBITDA grows on higher fee, However, you would see that our investment manager fees are fairly small, and we cover our cost with that.
And at the end of the day, for the assets that we acquire, large assets that we acquire, we need to raise capital as well, right? So as and when we raise capital, we'll have to prove the business case to investors to enables such capital raises or asset acquisitions. And there is enough checks and balances in the overall governance framework to mitigate that? The second question, do we see assets which will add to the yield. I would say yes.
But I think, overall growth depends on finding the right quality asset at the right price and also having, ability to have access to capital at the right time. So I think at the moment, I can say that we have visibility on the 18,000 crores of AUM for which we have raised equity. So capital visibility is there. And we have some kind of agreement with Starlight Power to have visibility on those assets, right? Beyond that, we will have to see, right?
At this point in time, we have a vision to go there, we will, look to acquire assets. We have already announced 2 acquisitions, which are not from Solid Power. So we will look to evaluate But to give anything concrete and the guidance on that is difficult for us today.
Excellent. Thank you for clarifying. That's very helpful. And, one question on the financing, given the low rate environment that is prevailing everywhere today, and given the credit rating. Are you sort of thinking about raising capital in non INR currencies?
Okay. We are exploring all the capital raising options. While non IR currency bonds have happened, the market was dislocated over the last couple of quarters, right, as you would appreciate because of COVID and other things. And also, we need some more regulatory clarity regarding in which to be able to do, I would say, offshore bonds, right? So we are exploring that like any other borrowing options that we do we keep exploring that.
Got it. And one last question from my side. And this is one on the POC terrorism with the power grid as a counterpart. Very, very nice to see collection sort of ramping up in the last three months. But assume there is a relapse of COVID and collection fall.
What are the protective mechanisms in place which will ensure that the collection period does not get extended beyond the 100 days that you've met.
I have a difficult question, Evan. I would say that, you know, COVID is uncertainty and you ask the question, what if uncertainty extends beyond the point and collections do not meat, right? So now I would say it depends on the balance sheet of the company and we have been conservative. And, we would need to watch our balance sheet and cash balances available. And, if the collection were to go bad, we will have to watch our cash balance and use from our balances to kind of survive.
Whether connections will go bad or not, all the mitigants are there already. So transmission charges are very small pool of the distribution customers and therefore, there is a fuss. We have not seen such even COVID kind of scenarios of 5 years in terms of collections dropping to 40%. So this is a black swan. And if the black swan expands to a year, I think think it will be less to do with POC, but more to do with, balance sheet and how much cash and headway we have to continue that.
Excellent. On that note, I I wish you well. And, a great progress over the past year, and, I look forward to, great progress in the future as well.
Thank you very much. Next part is from an individual investor. Please go ahead.
Hi, Harsh. I hope you're doing well. So I had a couple of questions and I know you talked a lot about what's been going on in Starlite and your limited ability to comment on it. But just on that note again, we understand that there is a pledge that steroids created on the integrated stake. And that pledge I believe is with a well known MDFC and it's up for payment rather soon.
Now, If the if starlight is liquidated or sorry, has canceled the agreement with TTR, what's their plan to, to liquidate their stake? I mean, they're gonna pay this money pretty soon. So are they going to be selling this in the open market? Once it's create a pretty large overhang on our share price or a unit price, And, you know, what I'm just and generally, I don't know what extent you can comment, is it's likely only reason here that we're seeing a disagreement between JTR and steroids.
Okay. So I think we have a lot of questions. I would simply put, yes, the units are pledged and we have made adequate disclosures last year on this, for the loan, integrated is not privy to the maturity date. So is not possible for me to comment on, when is the maturity of this loan. So I'm I'm not able to comment on whether it is soon or late.
And, what is the light strategies? Again, I cannot comment whether they are going to sell it on the market or otherwise. It's beyond me. And I think probably best answer, best telehealth, private label on that. The next question also, what you asked is, again, between 2 parties, right, KKR and satellite power, to work to transact and we have decided not to transact.
Now at least the information that we have, we do not have any rational or reason provided to individuals. So difficult for comment on that for me.
Okay. And just on the point on the investment, manager. So, you know, I believe the board is quite balanced in the manager. I think there's one appointee from KKR, one from Starlight and the rest is independent and yourself. And, I was just trying to understand what is the new dynamic going to be at the board level there.
Assuming take care and satellite, you know, aren't, necessarily seeing eye to eye. What is there any Is there any concern that we have of indecision or anything like that being out at the board? Can you give us some comfort on, on the fact that at least at the decision level the business will keep functioning normally?
So, sorry, Kunal, I think all of the board members, including me, have fiduciary role to make decisions in the stop, they invite, right? And therefore, it's a professional board and, we would look to continue to do that, right? So I I won't comment on, again, dynamics is good, bad. Actually, I I don't think both dynamics play a role over here. All of them are accomplished professionals.
And, we have a fiduciary role to perform. So we'll, we have done it for, you know, a long period and we'll do that.
Got it. Thanks. And last question, Ash, is there any, is this the right time for you to be giving us any BPU guidance going forward, or is this, this sort of an evolving situation and we should sort of wait and watch over the next few months' quarters?
Sure. I think we have retrained from giving guidance this we just want to wait out the collection scenario on how it pans out. As I as we showcase the July collection have improved, we would like to monitor it for a quarter more before being providing the guidance.
Understood. And,
by the way, congratulations on the sanction agreement that you've or mechanism that you guys have worked out very innovative structure that you guys have caught off in this time. You know, I know there's limited stuff you can comment on it, but what is the duration of the, of the factoring that you do? Is it like 180 days to 210 to 70? I mean, what is the period up to which we can up to which we, they come down to pay. And are we factoring 80% of our receivables, 100%, 80% and is the cost of the factoring lower than the overdue fees that the people that we will receive for late payment.
Okay. So simple answer, you know, doing typically is low duration. So this, it is starting from 30 days to 120 days factoring of receivables. We have not done all our receivables we have only done it in 2 legal entities called JTCL And NRSs. And therefore, we have not done it in all legal entities.
And just adequate to kind of pay in this year. And, last question, sorry, I missed your last question. If you can let me know.
I just wanted to make sure that the cost of the factoring is lower than the sort of overdue fees that we get, or the overdue interest that we get on late payments.
Oh, yeah. Oh, yeah. Certainly. So the overdue late payment sector is substantially higher than the, cost of, discounted. Correct.
Okay. Got it. Thank you.
Thank you very much. Next participant is Dhruv Machal from HDFC Asset Management. Please go ahead.
Yes, thank you. A somewhat related question to the earlier one. Just wanted to probably understand the basic structure of the investment manager you can please help
us understand that. I believe the key role
of the IIM is to, get and, approve new deals, and present activity goals. Is it right?
I mean, Dhruv, there is a much bigger role because, in this case, there is a very long schedule of ponsibilities with the investment manager. It is not just the new deals, for example, for ensuring that the assets run-in order ensuring the financials get reported in time, investor relations, capital raising. So it's in a normal parlance, if I were to communicate, If you take out the management team of a company, management team of a company, and how is it in a separate legal entity is the investment manager, right, as a parallel. So it's like any other company, most, the senior management team is also the investment manager, and they need to do all the functions which are required to run.
Okay. And in this current, in our current structure, the majority will be from the KKR side, 60% of them supercibly represented it or you can make it in the current structure?
Yes, that is a shareholding, the the moment KKR is right to nominate 2 directors. They're chosen to nominate only one right now, but, it will be proportionate to the chef.
Okay. And, so, I'm just trying to understand, to currently sell it to own 30% probably it will go to 26 it will happen, assuming it happen. So what is the skill in the game? Assuming this is, of course, assuming that the 15% also comes in the market, if they are forced to sell. So what's the skill in the game?
I mean, what is the responsibility to to be act in a particular fashion or not act in a particular fashion?
So, as I said earlier, the skin in the game, let me repeat the question. The people who need to act in the interest of NDegrid is the investment manager. His role is to ensure that NDegrid runs well and the manner, provided disclosed and in a good governance manner. And therefore, whether satellite power owns 15% of integrated or own 0, investment managers role remains the same. And, we keep doing our roles.
So I think these 2 are distinct items. And, there is probably no linkage to that. And this is something which is for all in which it was very clear that a sponsor, is required to lock in 15% of the units only for the 1st 3 years, which took into account that the role of sponsor is limited and the role of manager is superior. And in case the majority investors believe that the manager is not doing their role well, they have right to replace the manager as well. Right?
So the skin in the game would be for the managers to ensure that you perform in a good way so that, integrated and then the trustee retains you as a manager. And if you fail to perform, then integrate, unit holders and the trustee put together can decide to change the manager. Mhmm. Mhmm. So,
the previous one for his applications in this is, personally in terms of compensation to the investment managers or probably to Starlight if it owns 40%. I mean, it's interestingly, after say, using it as a disposal of 10%, just remaining not remaining the sponsor, not owning anything in the trust, just as an investment manager, is the fee that it gets as an IIM representative? Is it or there's something else also the, there is other kind of compensation in terms of probably,
I'm not sure, but is that the only compensation that you did? No, that's correct. So I think one is that, TRALIC is 40% shareholder of the investment manager. And, that is one economic interest. The 2nd economic interest is that Stolite charges, are rather the indicator pays Stolite 10% of the overall O and M expenditure that it does.
As a project manager. And, this is again, part of the Shelby Regulations, which required a project manager to, and sponsoring a project manager has better relaxations that the project manager is supposed to supervise the O and M, and investment manager is supposed to supervise the project manager. And therefore, Starlight Power is today a project manager also. And, we pay 10% on our overall women's spends to Starlight Power. However, these sums are, fairly small in, overall size of things and fewer things.
To give you a perspective, are Our annualized revenue is approximately 12 100 crores, and the annualized O and M cost would be somewhere around 70 to 80 crores, and therefore, the like gets approximately 8 to 10 crores for providing this service. So
the economic interest in the IIM is not the key driver toward any state in the I'm?
I won't I won't jump to that conclusion, right, because it is a different legal entity. And, there is an economic interest in that now. Which one is higher or lower? It's something which is important. Not for me today.
Right? Yeah. And, the IIM,
from a governance such as the IIM reports to the board of the indie, in which.
So board of the invite is the Investment Managers Board is the integrated school. So, right, the board that we present is the Investment Manager Board. And, whatever decisions we take, as a board comes to either unitholders, if it is a material decision like rated parties, etcetera. And also, most of the decisions are ratified by the trustee. That this is in line with the, governance requirement of COVID regulations.
Okay. So in assuming a scenario where the the IIM has to be is to be changed, say, for instance, for, not performing to the market, whose responsibility is it? Is it, I mean, who does it? Is it be trustee? Initiated or is it the shareholders working?
Okay. So, okay. So let me first clarify IIM CEO of the IIM. Right? So let's say, if at all, we are not, doing a good job about 20% of the unit holders.
Need to Okay. And and call for an EGM via trustee and then call for a vote. And then based on that, what it can be decided that we want to change the English manager. This is just the procedure I'm explaining.
Understood. I think that's it.
Thank you very much. Next participant is Dipul Shah, an individual investor. Please go ahead.
Hi. Good evening, sir. I I have a question. Suppose there is a deterioration in COVID situation and your collections fall. Will there be a reduction in the DPO going forward?
Okay. So I would
say that,
look, It's again a forward looking statement, our business is based on collections largely. So If there is a fall in collections, that would impact our ability to pay the fee. Now will it fall, not fall is again dependent on the collections that we get, right? So if you say a wide scenario, if there is zero connection, then in that scenario, obviously, where are you going to pay from? So I think it's a hypothetical question if the, if, if, if, if, if, if, if, if, if, if, if, if, if, collection falls, will, I won't say it's a direct proportion, but if beyond the point collection falls in that scenario, there can be a risk of BPU falling.
Having said so, as I said, you know, July collection seems to be healthy. So, at the moment, I think we are looking forward to monitor over next a couple of months of the collection panel. Correct?
So, sir, if I ask you differently to maintain a GPU of 3 rupees, for next three quarters. Uh-uh. What percentage of your receivables you should receive?
Okay. I think that will require some maths of our financials. I won't have any information.
Yeah. Very rough rough estimate, sir.
So, see, we collect 3.60 crores of revenue a quarter, right, and about 3.60 crores of cash. We pay about 1.75 crores of BPU. Right, if we were to pay C rupees. And our outstanding borrowing and the interest calculations are showcased in the quarterly results. I'm not able to get the exact interest outlook, but you can just put multi plan set, cash collections, minus interest payments, minus O and M cost, minus, you know, collection.
We'll give you that number. So I think I'm just showing a way it can be calculated. I don't have the exact numbers right now with me to be able to make that scenario for you.
I think this question also has been asked previously, but I am curious to know about the terminal value of this unit. Beyond the 35 year agreement. So what will happen beyond 35 years?
Okay. So the I am
a individual shareholder. So please bear me if I are, but I'm very anxious to know what will happen after 35. Yes.
Yes, fair enough. I understand. So it's about the slide 6 of our presentation and this is something which you can increase disclosure we have started from last couple of quarters to help investors evaluate this, in the overall portfolio that you own today, there is 3 lakh 43,000 tons of steel and aluminum, okay? So, and I'll come to where this argument goes. So let's say we passed forward and reached 35th
year. Right.
Either government or other country who require us to be used as a transmission line, right, if it is the case, There are 2 scenarios. 1, government will provide us, probably a cost plus mechanism. There have been few parts circulars where there are directional, judgments of CRC. However, again, we need to see what is the commission that decides on that date. And therefore, probably, we would be able to work on a costless basis to extend that contract, okay, if we are if we were to be used as a continued as a transmission licensee.
Okay? The second scenario is that, you know, there is something that has happened and these lines are not required anymore after 35th year. Right? In that scenario, this material, the metal is ours. Okay?
Now what will be the value of this size of aluminum and steel is something, again, I can't predict 35 years down the line, but it is a fairly significant value today itself. Right? So if you forecast that in 35 years down the line with whatever inflation assumption you may want to take, probably that will be the scrap value that will be available to us. Right? And that is a significant number.
I mean, you can run that match based on the price that you want to, you know, assume, but that's a significant price. And therefore, either way, there is going to be a significant value of some kind, whether in form of metal value, or in form of extended contracts. Either way, there is a sizable value, which one would pan out how will it take place? I won't be able to commit because it is way too much in future. And the impact of that today on NPV comes again is very going to be small.
Okay. But that will be the only asset, with the unit holder. Right? In in the in the event of con contract not being extended.
Okay. That's that's that's good.
And what is the expected life span of this asset generally?
So, generally, the life span of these assets is approximately 50 years. So we do build these assets for other developers who build these assets for design standards, which are longer than 35 years.
Okay. Then okay. So the there won't be any value except scrap value because after 35 years, a residual, life will be 10 to 15 years only. That is what we are trying to say.
So either you will get cash collection for 15 years of new tariffs, right, which you will get. And the second is while the word looks you know, I would say, a minimal or bad, I would urge you to do the calculation on the metal price. Right? So it will be a significant scrap value.
Okay. Then is there any precedent in the developed countries where this, 30, 35 years have been run down and what has happened to those trials. Can you elaborate on this?
Yeah. So I think every is different days of regulation. I would just say that, you know, it works on what is the need of the R for the country or regulator at that point in time, right? We believe energy highlights are very important and maybe there will be continued to be used as electricity, energy highlights and you'll continue to get paid tariff, right? That's a simpler way to look at it.
So the scrap is a concept to take you to the extreme and say, okay, transmission is not required. What is the value? If transmission is required, then you will continue to get paid.
Okay. Okay, sir. It was very helpful. Still, I have some queries. I'll address it to your investor relations department.
Thank you very much, sir, and all the best for the future. Sure.
Thank you.
Thank you very much. Next question is from Pradeem Dahlmya from Lansong Investment. Please go ahead.
You know, clarifications thus far. I just have a few questions. Number 1 on, you know, this, transfer agreement between, it's a direct and starlight expiring. Can you, share the price at which this transaction was supposed to have happened and was that a price that was fixed?
Yeah. So this was a public announcement, and the price was This was to be conducted at 83.89 rupees a unit. And this was described as fixed for the contract period or till the long day.
Okay. Okay. Okay. So that may, I guess, be one of the reasons why is the trial I mean, because, obviously, the price has significantly increased So that could be one of the considerations. Anyway, so, you know, my next question is on our borrowing and factoring.
Can you please share your average borrowing rate, at the moment?
So it's there in our investor presentation of weighted average cost of borrowing today is 8.6%.
Okay. 8.6. You know, can you, talk a little bit more about this shrinking and, you know, where, I mean, what are the entities and, you know, how have you done this factoring? Is it through banks, in BFCs or other financial institutions, etcetera?
Okay. So we have done it through banks and we have done true for 2 legal entities called JTCLM NRSS, which are our subsidiaries. And the amount of value factoring we have done is about BRL140 crores.
Okay. And this has been done entirely through banks.
Yeah. Correct.
Okay. Great. And my last question, as one of our objectives is, ultimately, the growth in the LDCF, So, you know, as the NDCF rises and grows, you know, over the years, then isn't it, logical that the DPU should also increase and follow that growth. Because, you know, so far, we have maintained, a very constant, you know, a DPU of 3 rupees per unit ever since inception. But as the NDC grows, shouldn't the DPU also grow in in some manner?
No, it's a very valid question. And I think, once NDCF will grow, we will look to grow with you. This year, we'll have to see. So, just to give you a math math, 3 rupees, the DPU on our investor base is approximately 700 crores of NDC. Right?
That's what is required for India to be able to pay that. And we acquired last year the assets mid quarter and therefore, we distributed what we earned. And this year, you know, COVID has come So we would like to get in botch and see, where that where we end the year in terms of NDCF, right, to be able to repay. Right, to be able to pay higher, amount. In any case, Celli has put in a clear guideline that we have to anyway distribute minimum 90%, right?
So in any case, beyond the point, if the NDCF increases substantially, the few increase will have to happen.
Okay. Okay. Okay. Understood. And just, again, just, last question, again, on this 14% like stake, so you there is at present no indication as to whether they are going to retain the stake or sell it, or whether there are any other institutions who might be in the fray of, acquiring this stake, from them.
Correct. I mean, it's not for me to answer on behalf of Starlight, and it is it is completely their decision on that.
And as and when there will be any disclosures, then either Starlight as well as, your management will Okay.
Yeah. That is that is a compliance requirement, so we'll have to do it.
Okay. Great, Harsh. Thank you so much.
Thank you.
Thank you very much. Next question is from David Modi from Radical. Please go ahead.
Yeah. Hi, Harsh. Thanks for taking my question. So we are currently at around 50% net debt to AUM. And I understand that we can probably take it higher up to, let's say, around 70%.
So are there any rating challenges which would be there because of which we would have to chat a particular threshold and we would probably need to raise that point of time?
So, I mean, see, at the moment, the way we are this plan is structured is that, we have, taken rating rationales or rather it is called advanced rating rationale that if you buy assets, all the framework assets, which will take us up to approximately 68, 67% in that scenario, we would remain triple a having said, sir, all written valid and, they are chewed when we borrow. Right? So today's greeting are taking into account today's debt and potential future debt, right, which is about 68%. As in when we raise that debt, greeting agency will make a revised assessment, right, looking at, you know, several factors. So I cannot forecast that what is going to be rating.
However, I can say that today's rating already accounts into a business plan of acquiring the framework assets.
Sure. Sure. So, then next was that if, let's say, because of whatever development, let's say the price, the integrated unit price drops, and the year Ira rises to a particular level which is attractive from our perspective. Would there be a case for a buyback and what would be the cost available for such a buyback? And if at all, what is the key regulations that are applicable for us, towards policy?
Okay. So at the moment, by that regulations are not public or not announced by Citi. So I can't comment on that. At the moment, there is no way we can do about that.
Okay. Okay. And, the the thing was that you are you mentioned in your presentation that there are 8 in platforms. I mean, you know, 8 agent lead platforms and that you would like be probably among the most admired vehicles. You have mentioned some of the wave platforms in your presentation and, that you'll be among the most that you would want to be one of the most admired vehicle.
Right now, if you see, we are you are trading at the highest field and obviously, we have some way to go in terms of size. So what are, like, the top 3 to 5 factors in your view that would be key to achieving this. And, I mean, any particular platform that you feel is aspirational of that you would like to compare yourself to in Asia or the, in going ahead.
Yeah. So I would say, you know, I won't say any particular platform, but I would, I would definitely address what are the key factors probably which may help us. One of them is investor awareness, right? And therefore, it is extremely important and we spend disproportionate time and effort. To explain our business, right?
We recognize that enrichs are new and it's just 3 years of existence in track record. So we go a little bit extra and play investors, what do we stand for, what is our business, and, help people understand better, right? So that's one, purely is there. 2nd is the examples are from mature markets, right? Today in which of the market itself is very nascent in India.
It's been 3 years. So we believe that with the track record, it would naturally also, become comparable. Right? And, I would say the third one is, if if if we can continue to grow and become a larger size. Right?
So would say these three items are important besides the fact that we deliver our results and performance as planned for.
Okay. Sure. And finally, from what we can know, there are a couple of decent chunks of equations still remaining from SPGBL to be done. So given the current situation that is developed, would there be any concerns surrounding this acquisition that are in the pipeline?
So, I didn't see there is a framework agreement signed. It's not with KKR and Starlight Power. It's between integrate and Starlight Power, right? And those framework agreements are, are there to provide sufficient clarity and both parties have its rights and obligations under that. And, both the form, the professional form.
So we would look to, work on, line of those agreements and give it a check.
Correct. Correct. Correct. And finally, one just one last thing that if, let's say, we understand that right now, we are not having debt repayments to be done as a part of our cash flow because of the current structuring. So going ahead, let's say we have a net, we have a gross at around 1800 odd crores.
And if we normalize the right now, interest payments also, we are probably paying a little less because of some of the structures of the MLDs and all. So we have to normalize all the interest and debt payments. How do we continue to ensure the current DPU? And I mean, would it mean that probably, you will take more debt or refinance more debt at a particular level if you don't add any more assets.
Okay. So there are 2, 3 questions that you asked. So let me try to address that in a simple manner. Will we refinance debt? Yes, we will refinance debt to ensure the tenors are pushed ahead and longer.
Can we refinance that or rather can we take more leverage and distribute to investors, right? It is a simple question that can be tomorrow raise 500 Corodec and pay DPU? We cannot pay that. As per regulations, if our leverage is more than 49%, we cannot deliver more to just pay the fee, right? So that is a natural protection or other natural regulation around that.
So we can only pay effectively with you from the cash that we have called.
Okay, okay. Sure. That's it from my side. Thanks.
Thank you very much. Next question is from Sunil Shah from Total staff out for your managers. Please go ahead.
Yeah. Yeah, commendable performance from the entire team of immigrants. Thank you very much for doing a great job in this time. Sir, I'm just doing a follow-up on the previous question as well. In terms of the 3 framework assets, GPTL and KTL ADR, Sir, is the valuation in place winning, you know, the accretion price at which will be acquiring those assets, which will take us from 12,000 crores to 18,000 crores.
Is it in place or, or it's going to be perfect? And we are not sure about our acquisition price as well right now?
No, so I think if you look at the if you look at our disclosures last year when we did in May 2019, it included the disclosures around the base value on which we have decided to conduct. However, there will be adjustment both upwards and downwards. With respect to several critical factors, including interest rate or any other diligence findings. But the base value on which we assigned the framework agreement is captured and disclosed also.
Okay. So any upward or downward revision of price would also be driven on a formula basis. It wouldn't be a subjective valuation from the seller site. Right? That's the only clarification I wanted to speak.
So, okay. So, see, I mean, we have tried to capture in the framework agreement whatever can be done with the formula. Right? However, the, the, let's say, you know, the diligence finding cannot be addressed in the formula, right? So that is something which we'll have to take case by case.
But, whatever the number up or down is, we endeavor to address it before we come for EGM approval. Right? So we try to capture the updates in the, approval of investors. So we do release even for framework asset. And, EGM notice for investors to work for, right?
Okay. And therefore, that was a closer date of any final adjustment also. That gets disclosed, both are further down there.
Fair enough. So so this acquisition will take us to 18,000 crores of AUM. Correct?
Yeah.
Yeah. And just one more point, hypothetically, assuming the assets are required, then our previous guideline and all the guidance that was there that He retained the DPU of 12 rupees for a 8 to 10 year period barring the coming quarter. Long term hurricanes because if the acquisition happens, then, at 18,000 crores, also we are reasonably certain about 12 to be BP for the 8 years period. That's correct.
That is what we had guided, last year. Again, you need to factor in the event like COVID, if it happens, obviously year on year quarter on quarter, there can be changes because of such black stone events. But other than that, directionally, you are correct.
Yeah. Fine. Thank you very much, and congratulations for a super, super, super job. Thanks so much.
Thank you very much. Next question is from Subir Beira from Right Time Consultancy. Please go ahead.
Yeah. Thank you, sir, for taking my question. Sir, with the guideline of exit giving the exit option to the investor. So can you show some light on that? Hello?
Yeah. I understand that.
That is number 1. And, second question, We are just drawing our file, and everything is doing except the details. So barring this COVID situation, assume that things will be normal in the next day, 1 or 2 quarters. So what are the chances of, you know, growth in the nuclear itself? So as a investor, we are looking for that.
So these are the 2 questions.
I think to answer your second question first, right? It's a it's a very, very forward looking statement assuming things will be okay. I think, we'll need to wait for a time, right? Today, we are in an uncertain environment. And therefore, I think it is not appropriate for us to give a comment that think we'll be okay and what will happen if things are okay.
So we'll have to wait and watch how things improve over the next two quarters if it does. And we'll be in a better position to provide our guidance at that
point in time. See, my point is whether when we are growing our business, whether these things are in mind to grow the GPU. That's what So that is the thing.
Okay. So to answer your question, simply, if we grow our AUL, if our NDC grows, which which will grow, then BPU will grow. But, we like to factor in events like this and if there is uncertainty, if asset acquisition is delayed or if working cycles, working capital cycles are extended on account of even COVID like scenarios.
Correct.
In that scenario, there can be impact on the GPU, okay? The first question that you asked
service guidelines for, exit, option to register.
So, so, I think process is a liquid trading instrument. So if at all retail investors want to sell, they can sell on the exchange as well. But besides that, the exit option is only applicable. When there is a incoming sponsor with or somebody crossing 25% units, they have taken in the approval and have not been able to garner 75% of the investor appears. Only in that scenario, investor have been offered an exit option.
If the incoming investor or sponsor is able to garner sufficient votes, then there is no exit option. But in any case, this is listed for retail investors. So in case they want to sell, they can probably sell it on the exchange anytime.
And, sir, congratulations and you are really doing good work, sir. Congrats.
Thank you very much. Next question is from Sunil Kotari from Unique Asset Management. Please go ahead.
Hi. Good evening, Harsh, and congratulations on the performance. My first question on the the permission which KTR had to receive to become a sponsor from the CB. Have they received this, even the post 15th July?
Sorry, can you repeat that? I'm sorry.
So, KBR, when they acquired this week, it was mentioned that they also need to get permission from CB to become a co sponsor. Along with Peter Lake. That was also pre requisite for them to take this kickoff from 23 to 37 or 38. So have they received this permission from CV?
So, see, Sabi published a guideline. Or how somebody can become a sponsor in July, okay? So, I won't say there is a permission provided by Sabi and not by Sadiq, there is a there is a a process that Sadiq has clarified in July 2020. And, anyone, not take care of anyone who wants to become a sponsor will have to follow that process. So there is no one shot approval that is required said, there is a process to be followed and which means that they need to take approval of approximately 75% investments And if they can't achieve that and still want to become sponsored, they need to provide exit to the declining unit holders.
So there is a process which is laid down by city.
Okay. And one of the requirements, there also mentions that we need to have more than 25% stake. Correct?
No, this is the requirement is not to have more than 25%. If one wants to cross 25%, one needs to do it. You can try to become a sponsor if you are not crossing 25%. Again, I'm just reiterating regulations.
Fair enough. But then why the removal of intent from KTR site to, not become a sponsor anymore? Because earlier, it was maybe, it was dependent on CB regulation, etcetera. Now that it is received. So KKR is not dependent on applying this additional 15% stake to become a sponsor.
They can become a sponsor right now based on whatever holding that they have. So why this change in intent from
Yeah. So I would say yeah. So I would say, see, all these transactions are linked in May 2019. Right? If you have applied or expressed their interest of, becoming the sponsor, and they also signed the agreement to acquire 15%.
And to give effect to acquisition of 15%, they would have to become a sponsor. Right? And if the 15% transaction is not happening. In that scenario, it is KKR's choice. It is not a requirement of study that you need to become sponsored to acquire that.
And therefore, they have exercised their choice now. Can they do it technically? Yes. Why did they not do it? I cannot answer on their behalf.
No, fair enough. I respect. That's fine. Hassan, second question on the interest costs that we have, So since, I think, 2 years back, since we came into the market, I think our average cost of funds has been in the similar range, whereas the yield has gone down today in the RPA policy meeting, the governor also said that the differential between a typically rated corporate yield and G SAC has gone down from some two 50 bps to 50 odd bps. But for us, that yield has the differential yield has rather gone up, so from maybe 100, 1 to 3 bps to about 250, 300 right now.
And given that our loans will also be asset backed. So, I mean, any scope of improvement in wider yield differential has gone up.
So, see, we, as a year back or 2 years back, people used to ask that interest rate can go up and down. We hedge our interest rate risk. So, we used to say, yes, we have fixed our interest cost or substantial portion of our portfolio has got fixed interest cost because we lock in interest rates as we acquire projects, right, to to starting from 3 years to 5 years to 10 years, different range and different transactions. So when you lock in an interest rate, when you acquire a project, after that interest rate can go down or it can go up. Right?
Assuming that interest rates are going down right now, you are seeing a higher spread. But our business is not of, you know, speculating on interest costs going up and down and creating that much extra return. We see interest cost as a risk And therefore, we need to try to mitigate that risk by managing it. And therefore, as and when we have got ability and chance to hedge this risk for longer, we have tried to fix our interest costs. Now if after such fixation, if interest rates have gone down, I don't think we as management team look at it as an opportunity loss because it could have gone up as well.
And It is extremely difficult or challenging for somebody to predict and take decisions on that basis on a fixed revenue kind of business, right? So We would like to hedge our interest cost, most of the time.
We move to the next participant. Before we do that, duty time constraint, we request all the participants to restrict to one question Next question is from Ravi Chandra, an individual investor. Please go ahead.
Yes, good evening, Raja. It's an excellent presentation. I think, maybe in last but last but one to ask one simple question. And the slide number 12, you might take some time to go to slide number 12? Yeah.
Yeah. Yeah. In the slide number 12, I can see there are 2, one is we are telling that it is at SPA11. Basically, you answered that question. This 288 is a fluctuation in a collection.
And there is a 1 more Rizarro at IGT itself. That's right most. So could you please explain once again about the second Rizarro IGT? On 62 slides. Okay.
So, okay, so I would first explain the study that the regulations require us to distribute 90 percent from SPV to INVIT. And when INVIT 2 investors, we need to have another 90% distribution, okay, minimum. These are the minimum requirements. So we have ability to create reserves at both SPV and that in the level, depending on the cash flows that get approved at both entities. So for example, to simply explain this, we could create a reserve of 28.8 crores at SPV level.
And still remained complied by distributing 90 percent of BPU from NDR to Enric. And after that, we could create reserve of 16 crores at in the grid and pay 175 crores. So study regulations provide us the ability to create reserves at both level. Okay. And again, these are not accounting reserves, etcetera.
These are just cash reserves, which are the 10% of the NDCF that company can retain for either growth of a further volatility.
Right?
So at both level, there is a ability to do approximately ten Is that just a question?
The line for the participant dropped.
Please go ahead.
Next question is from Sharad S from Avendes Capital Private Limited. Please go ahead.
Hi, thanks for the excellent presentation. I just want to understand because of the new regulation or new tax changes, which has happened where dividend is tax free at the hands of investors, while interest is are you looking at changing the way cash flows work, not immediately, but maybe now a couple of years or 3 years kind of time?
Sorry. Can you repeat that question? I missed that, sir.
In terms of distribution, currently the distribution and tire based interest, but whereas, the tax favorabilities towards dividend? Are we working towards some of these cash flow coming to the investors, unit holders? Being more dividend and less of interest?
Okay. So I think we look at the overall tax liability on the starting from SPV to investor. On a full basis, okay? So, we believe that even if you, even if you look at as a dividend paying platform, we'll have to pay a corporate tax at the activity to create profitable reserves and then pay dividend out of that. And if we go for a new tax regime, okay, the dividends will also be taxable in the hands of investors, right, the marginal rate.
So with The new tax regime, the distinction between dividend and interest are actually completely narrowed for most investors. I won't say for all. But dividends are taxable at a normal rate. And to go back to the old tax regime will be a substantial tax loss at the STB level itself. So I think what we attempt to do is that if you are 100 rupees, we try to maximize what can reach investors, on a post tax range from EBIT.
After that, different investors have got different tax treatments, right? And therefore, believe at this moment, what we are doing is focusing on distributing maximum as interest, which based on our shareholding mix today seems to be the most optimal thing to do. And considering the new tax role where the dividends are also taxable, that's something which we don't see in a foreseeable future to be followed
Okay. Thank
you. And just want to understand, what is this from the receivable side? Is it the state and city boards or, is this something else?
Sorry. Can you who are the receivables from?
Yeah, which are the receivables from, which are under risk for us.
Okay. So, I mean, I can't give you which are the specific receivable under risk from us, but our customers include state distribution companies, private distribution companies, state gencos, private gencos. It's a mix of, customers.
Okay. Thank you very much.
Thank you very much. A request to all the participants Please proceed to one question per participant. Next question is from Nirajah from Dalen Broja. Please go ahead.
Hi, sir. Congratulations on the results. I'd like to understand one part in the portfolio that we have going ahead. So from my understanding, we have 3 different assets to be acquired, and one is under, share purchase agreement. That is JP JTL, right?
No, JTL has already been acquired. Sorry, sir. Can you so we have 3 assets of framework assets to be acquired for GPTL, NERSS and KTO.
Okay. And for these, the capital raising is not done. That will happen in the future after the process, after we monitor the asset transaction, right?
Yes. So the equity capital that is required to be able to remain within the leverage ratio has been raised. The debt capital will be raised as and when we look to complete the acquisition.
Okay. And any timeline on these acquisitions?
I think that is dependent on the completion of the assets. So it hasn't come to completion, there is a process, mentioning the framework agreement, the diligence, then the follow the framework agreement and make the proposal an offer and then we go to acquire that. So it the process starts when the asset is completed.
Okay, sir. And so, this, JKETN is the asset that has been recently acquired. Right?
We assigned the SPA for that, but, we require approval from the regulator. So we are awaiting that approval.
So, the capital raising for that is done through debt?
Oh, yes. This will be a debt acquired asset. But we'll not raise the decade. So, as in when the regulatory approval comes in, we'll look to acquire.
Okay. So, basically, there are 4 assets in line that is JK PTL GPTL and the, NRSs and KTL. Right? Correct. Okay, sir.
That's it. Thanks a lot. Thank you so much.
Thank you.
Thank you very much. Next question is from Sanjay Gupta, an individual investor. Please go ahead.
Thank you for taking my question. My question is more on the operational side. Whenever these dues over the syllabus are overdue, I mean, is there a rate of interest that they pay for the overdue or It is part of the price. They don't pay for the overdue interest. No.
No. So they do pay late payments at charge. And the late payments surcharge is approximately 18%. So per month, about 1.5% if they pay after the due date, which is 45 days. Okay.
And, during the COVID time till 30th June that late term in such as reduced from 18% to 12%. Okay? And that was also one of the reasons that people chose to not pay because it was a lesser late semester charge. So we believe post 31st July, there's a new with 18% that is being levied. And therefore, there is a substantial difference to delay.
So some amount of delay healthy for the bottom line. Some amount, though. I won't, say that because, you know, the Liquidity. Payments such as are not easily recoverable. Right?
Okay. Okay. And
therefore, I can assure you that only on cash basis, sir. Okay. Bye. And next question, which I have a small question is on this. I mean, if there are delays on all, is there more right in the agreement to just stop the electricity flow?
I mean, that's a extreme way of putting it, but, there is a regulation called regulation of power supply. Which expresses the procedures to be followed in case a transmission license is not paid. But it is not as simple as that key turn off the switch. It needs to go through procedures with regulators and low dispatch centers. Yes.
Okay. Thank you very much. Yes. Thank you.
Thank you very much. Ladies and gentlemen, that was the last question for today. I will now hand the conference over to Mr. Swannen, Maheshwari for closing comments.
Thank you so much, Harish. So we have any closing comments over here? Yeah. Thank you, Salin. So I think, the closing comments remain, I think we are focused on our business and the quarter 1 was a challenging
quarter considering the COVID scenario both from operations, health and
safety collections. And I think we are happy that we have been able to maintain our portfolio assets at a higher availability and addressed to the O and M requirement as and when it arrests during the COVID scenario as well. We are kind of also happy about our robust business model that our revenue remains intact. And this was the first time when the collections went so low in this quarter. And, we're confident that we have a strong balance sheet and we started the COVID scenario with a strong cash position with us.
And therefore, we could survive and keep the balance sheet strong. In addition to that, we also did factory to ensure that, our track record that we have built by paying 3.50 GPU continues. And our investors earn the expected yield out of that. So I think overall, it was an eventual quarter of from markets and company growth perspectives. And we look forward to continue to be the same and hope that overall COVID situation improves in the country and wishing everybody safety on that.
Bye, Dasha. Thank you so much, and wish you all the best. Thank you. Thank you.