Ladies and gentlemen, good day and welcome to Capital Infra Trust InvIT Q4 FY 2026 earnings conference call hosted by HDFC Securities. 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 signal an operator by pressing star then zero on a touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Aditya Sahu from HDFC Securities. Thank you, and over to you, sir.
Thank you. On behalf of HDFC Securities, I welcome everybody to Q4 and FY 2026 earnings conference call of Capital Infra Trust. We have from the management, Mr. Hare Krishna, Chief Executive Officer, and Mr. Amit Kumar, Chief Financial Officer. I now hand over the call to Mr. Hare and the management team for their opening remarks, followed by the Q&A session. Over to you, sir.
Thanks, Aditya. Good afternoon, everyone, and thank you for joining us today. I am pleased to share that the Trust has delivered a strong performance for the quarter, led by positive contribution of three recently acquired SPVs, timely receipt of eight annuities aggregating to INR 407 crore. Additional inflow of INR 112 crore as change in law claim from NHAI. Stable routine operations of 12 projects. Lower cost of debt by refinancing external borrowings of INR 2,000 crore at 6.85%, and receipt of around INR 66 crore from sponsor towards indemnity payments. As a result, the Trust closed the quarter with a net debt ratio of 40.9%, improved NAV to INR 74.7 per unit, and the quarterly DPU of INR 2.4 per unit.
While we will discuss our financial performance in detail, I would like to briefly emphasize on our business strategy, which is to operate operational infrastructure assets in a risk-averse manner, which generates predictable distribution for unit holders. As such, we intend to continue to operate in annuity-based road assets, which have no external dependencies like traffic, toll rates, and have predictable revenue stream. Secondly, we intend to maintain a mix of fixed-rate debentures and floating-rate rupee term loans to diversify our debt capital. Our annuity profile is linked to bank rates, which provides a natural hedge in a rising rate scenario. On the cost side, a significant portion of our expenses is structured through fixed price or well-defined contracts, which limits inflationary pressure impact and supports margins.
Growth is driven in a standardized manner through a combination of ROFO assets from the sponsor and selective third-party acquisitions while maintaining asset quality, valuation discipline, and conservative underwriting. Consequently, even in the current market volatility, our operations continued uninterrupted as per the business plan, with no adverse financial impact on our inflows or outflows. Nor do we foresee any impact on our financials in FY 2027 due to our long-term contractual framework for revenue or expenses. Moving on to FY 2026 financials, our K1 grew by 42% year-on-year to INR 6,611 crore from INR 4,668 crore, driven by disciplined portfolio expansion. During FY 2026, acquisition of three HAM assets added INR 2,570 crore of enterprise value at 9.3% discount to intrinsic value and increased our portfolio to 12 operational HAM assets.
During the quarter, we optimized our external borrowing by refinancing and raising external debt of INR 2,000 crore at 6.85%. Rationalized additional fund raise, coupled with debt repayment of INR 108 crore from our internal accruals, has optimized our debt ratio to 40.9%. This has improved the cost and structure of our borrowing and enhances cash flow efficiency. Importantly, this provides headroom to fund acquisitions through debt, reducing reliance on equity issuance and limiting dilution. As of March 26th, our effective annualized interest rate was 7.33%, which has further reduced to 7.24% currently, and we will continue to optimize our blended cost of debt through active refinancing. As a consequence, our NAV increased from INR 72.3 per unit in the last quarter to INR 74.7 per unit.
The improvement has been largely on account of reduction in WACC rate due to lower cost of debt, receipt of outstanding claims from NHAI, and indemnity inflows from the sponsors. Going forward, our focus remains on stabilizing NAV through disciplined underwriting, attractive acquisition, and continued refinancing. We also note potential upside not captured in the reported NAV with the GST CIL indemnity value of INR 24 crore expected by Q2 FY 2028. Additionally, we remain optimistic on our acquisition-led growth strategy. During the quarter, our sponsor's ROFO pipeline pool has increased by three assets to 17 assets. Looking ahead to FY 2027, we have a strong visibility to our sponsor-backed ROFO pipeline with eight assets at advanced stages, and we are targeting acquisition completion around Q3 FY 2027, subject to approvals and closing conditions.
At our current AUM base, this pipeline, along with our discussions for third-party assets, provides clear growth potential and supports our trajectory towards the INR 10,000 crore AUM target in FY 2027. Beyond FY 2027, additional ROFO assets provide multi-year growth visibility, supplemented by selective third-party acquisitions where valuations are compelling.
Finally, on distribution, FY 2026 delivered a cash yield of 13.1%, based on the unit price as on 31 March 2025, with total distribution of INR 11.6 per unit. For FY 2027, we are providing DPU guidance of INR 9- INR 9.25 per unit, translating to an expected cash yield of 13%- 13.5%, based on March 26 price. This guidance is supported by asset-driven equity cash flows, disciplined cost and reserve management, and continued optimization of our cost of debt. Overall distributions remain predictable, sustainable, and are backed by recurring cash generation rather than one-off. Thank you. I will now hand over to Amit to take you through the financials in detail.
Thank you, Hare. Good afternoon, everyone. I will take you through the key financial updates for Q4 FY 2026 and for complete FY 2026. Coming to Q4 FY 2026 performance on standalone basis, total income for Q4 FY 2026 was INR 259 crore, with INR 129 crore in Q3 FY 2026, driven primarily by higher dividend inflows from the SPV contributed by newly acquired assets and a certain portion of trading income. Interest income on loans extended by trusts to SPVs stood at INR 146 crore during the quarter, compared to INR 102 crore in preceding quarter. The increase was primarily driven by incremental debt on lent to SPVs acquired during the December quarter, totaling to INR 1,780 crore. On standalone basis, standalone EBITDA was INR 257 crore and net profit was approximately INR 253 crore for the same quarter.
During Q4, the trust raised fresh term debt of INR 1,750 crore at a pricing of 6.85% per annum, which was utilized primarily towards refinancing of existing debt of INR 1,100 crore in our newly acquired SPVs and reduction of dissenting NCD holders to the extent of INR 650 crore. Further pursuant to the annual reset during March 2026, the coupon rate on one of the series of NCDs was revised downward from 7.6% per annum to 6.85% per annum, effective March 5, 2026. For complete FY 2026, trust reported total income of INR 790 crore, EBITDA, which is exclusive of impairment loss booked, of INR 784 crore and close at a PAT of INR 285 crore, which also included interest from these fresh acquired SPVs in December 2025. The impairment is on account of the difference in fair value and the book value of the investments.
On a consolidated basis, our total income for Q4 FY 2026 was INR 345 crore compared to INR 182 crore in Q3 FY 2026, reflecting stronger contribution from the expanded portfolio. EBITDA improved to INR 282 crore and net profit stood at INR 195 crore, reflecting normalized performance compared to Q3, which was impacted by modification-related adjustments. During Q4, the sponsor has indemnified to the trust for an amount of INR 66 crore, which is pertaining to shortfall receipt from NHAI towards the agreed GST CIL amount at the time of SPA executed during IPO, and certain amount was due to changes in expected inflows at SPV level. Moving to the distributions, as Hare already mentioned, the board has approved a distribution of INR 2.40 per unit for Q4 FY 2026, translating into payout of approximately INR 118 crore.
The form of distribution is INR 0.99 per unit as interest, INR 0.63 per unit as dividend, INR 0.77 per unit as capital requirement and INR 0.01 per unit as other income. Record date for the said distribution is May 22, 2026. At the standalone level, tax outflows remain efficient as distribution from SPVs continue to be largely tax-free, with taxes primarily attributable on tax treasury income only. From FY 2027, we are shifting the payment of investment manager fees from the trust to the trust versus the project SPVs earlier, in line with the industry practice. Further details are available in our investment presentation. We can now open the floor for questions. Thanks.
Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from the line of Sarvesh Gupta from Maximal Capital PMS. Please go ahead.
Yes, sir. Hi, and thank you for the opportunity. Sir, one broad question I wanted to understand on your DPU. We have seen a very checkered past in terms of how we have gone about distributing every quarter, unlike all the other InvITs in the industry. Now this time also, we see this cash yield sort of a figure, which is a sort of a new spin on the numbers. Subject to, of course, SEBI NDCF guidelines, but because you are repaying some debt, et cetera, also to optimize your balance sheet, what is the framework that you have right now to sort of do the DPU for every year from here on? Because honestly speaking, we have seen too much of volatility in the way you guys have handled this.
Yeah. On the DPU part, just to explain a little bit further, what we have discussed in the previous calls as well. The initial distributions were large. They were largely on account of the fact that there were cash with the trust along with the IPO, which we have then distributed initially. Thereafter, our operations are pretty much stabilized right now, and now we have quite predictable cash flows ahead of us. In terms of our operations, we receive our annuities twice a year. However, we need to incur the operational cost on a monthly basis to a project manager, and we need to fund our interest outflow for the principal repayments and interest cost as well. Therefore, we need to create reserves on a quarterly basis to meet the expenses in the project SPV level and to meet the debt obligations.
Beyond that, we are not creating any other different type of reserves. Therefore, from a NDCF perspective for this quarter, we have arrived at an NDCF of INR 118 crore, which translates into a DPU of INR 2.4. For this last financial year, for a moment, if I do not go into the cash yield, if I were to talk about the DPU only. We have distributed INR 11.6 crore in FY 2026, including INR 2.4 crore which we would be doing in a week's time. For the next financial year, we are looking at a guidance of INR 9-INR 9.25, which are largely based on the revenues which we will be receiving from our 12 SPVs and taking aside the operating expenses and the budgeted debt outflows.
Yeah.
Does that answer your question or you have a use-
Yeah.
Further-
I have one clarification. Even if we are now saying that, Q4 was a stable quarter, but next year guidance is below what we are distributing for Q4 also, right? FY 2027 run rate is lower than Q4. When are we achieving that stable sort of a DPU? Will you say that Q1 onwards we will achieve that, and from there on it would be stable to increasing sort of a DPU only, or where there will be further volatility in that?
So, even if you look at right now for the next financial year, we are having INR 9.2, of which it translates if our INR 9-INR 9.25 guidance which we have given, which translates in a quarterly basis is INR 2.3. This quarter we have given INR 2.4. Therefore, I would suggest it's a similar range. I would not say there is a too much variation in this aspect. That's what I would like to summarize.
Now everything is settled in terms of the optimization, capital reflows being high. And now it should be stable and increasing sort of a trend as far as your DPU is concerned?
Yes. So right now the forecast which we are providing, that takes into account the cash flows from the [audio distortion] . Additional thing which I would like to put forward is, very shortly after June quarter, once we make the sixth distribution, we would be eligible to enhance our leverage up to 70%. Right now for us, the debt coverage is limited to 49% mark. Post-June distribution, we would be eligible to enhance it to 70%, which will permit us to undertake acquisition of one or two assets through external debt itself. For instance, we can easily acquire assets of INR 900-INR 2,000 crore of asset just by raising external debt and remaining compliant with the SEBI norm altogether. This will not require any further equity dilution. Our equity base will continue to remain same, and this will be further accretive to the current unit holders.
Therefore, the guidance which we are giving right now for the FY 2027, which is in the range of INR 9-INR 9.25, this is again going to increase by at least 10% in FY 2028, based on the factor which I mentioned with you right now. The second positive factor in our portfolio would be that we have equity-based inflows. Essentially, this is linked to the interest rates set by the RBI and RBI bank rate. Therefore, in FY 2028, if the interest rates are to go up, this will further increase our inflows and will help us in improving the guidance for FY 2028.
So in FY 2027 also, there could be some partial impact, positive of the asset acquisition, right? Is that a possibility that you will have that in FY 2027 DPU as well?
Yes. The current forecast which we have given, that is based on the twelve assets. So our objective is to complete acquisitions, or undertake acquisitions by Q2, Q3. Therefore, even in FY 2027, there could be a positive impact of new acquisition.
Okay. And within that DPU, sir, the other thing which is also very volatile is the way the DPU has been given. So from Q1, where 100% was capital repayment to Q2, where it was zero percent. So these in the heads have also undergone a complete reversal over the quarters. So how do we look at this? Because this determines the taxability of the various distribution heads. And will it be going forward?
Yes. In the current DPU, say of INR 2.4, around INR 0.78 is non-taxable primarily because it is return of capital. Correctively, if I were to look at FY 2026, then around 40% of distribution was non-taxable. For FY 2027, this would be somewhere in the range of 25%-30%, primarily driven by the return of capital. It may be staggered over the quarters because of the accounting treatment and things like that, but overall, in the financial year basis, it would be around 25%-30% would be non-taxable.
That should be stable quarter-on-quarter, or will it be as volatile as what we have seen in FY 2026?
It would be stable only, but what I am coming at is that there may be the configuration between payment of interest, dividend or return of capital may vary from quarter to quarter. Over the financial year, it will remain as per the target we are talking about.
Okay. Secondly, on your NAV, now we have already reached 40%, and as you said that we are close to the limit, but again, after some time, we will get further limit of debt. Now your sponsor has a large pipeline. How do we plan to. Because here now what has also happened that you are trading at a discount to NAV. So every time you raise money, you are diluting the NAV also. What will be your guidance on how you would want to treat your NAV itself? Will you be raising money? Because you will have to raise money eventually. If that is dilutive for NAV, how do we look into that?
Yes. I see. I take your question. So there are two parts to it. The first part is the NAV has improved from the acquisitions which we took in December because we were at almost 10% discount to the fair market value. It helps us in strengthening the NAV per se. Having said that, the equity capital raise does increases the base of the unit holders, and that does have a dilution impact. Going forward, at least for FY 2027, we are cognizant of this aspect.
When we are funding the future acquisition through debt, there is no additional unit being issued, and therefore, it is accretive to both the unit holder, existing unit holders, and the NAV growth as well, which we will try to achieve by December 2027. With regards to the equity capital raise, we will try to minimize so that for existing unit holders, overall return is accretive, and they are benefiting from the acquisition rather than any dilution over there. That is our plan. If there is any dilutive impact, then we will not go for equity raise at all. That is our plan.
Sir, where I was coming from was basically, I think we were able to increase the NAV despite fundraising at a lower valuation because I think the sponsor was able to give the assets to us at a discount to fair value, which you alluded to. Going forward, is the sponsor in line with that sort of a thought process that there should not be any NAV dilution, and hence, we have to, Pari Passu sort of compensate on the transaction value of the future assets from the ROFO pipeline to encapsulate that because we might have to raise money at a discount to NAV.
Look, to answer your question, Say, right now for the future acquisitions, we are yet to undertake diligence and yet to go through our board consent and even unit holders consent. But as a practice, Say, even for a third-party acquisition, we are going to negotiate and have some discount to the market value. We would avoid acquiring assets just as market value itself. We will always go and negotiate and have some discount from the fair market value. The quantum of discount may vary from deal to deal. That is something we won't be able to confirm today, but we would ensure that there is some discount to the fair market value.
How do you see that markets are for third-party acquisitions because you might be looking into various opportunities because the other thing which is happening is there is a lot of fundraise across private and public InvITs. A lot of IPOs are coming on. There is a lot of capital that is there, and everybody has to acquire to grow and all that. Given that, apart from your sponsor assets, are you able to find third-party assets at reasonable valuations in this sort of a market?
See, I think a third-party asset is always challenging. Not only you need to look at the financials, you need to look at the quality as well because you would be undertaking a long-term contract and operational maintenance is your responsibility. Having said that, there are multiple players even today, more than I would say, 15- 20, who have been allotted projects over the last two to three years which are ready, and they are going to contract. The competition in terms of capital providers is there. There are multiple players looking to seek or acquire such assets. However, we also have a strong ecosystem among the road players, and we have identified few players. We are in discussions with them. That is something we will update the group once we have reached a stage and then once we have concluded some binding discussions with them.
Okay. Sir, your cost of-
Sorry to interrupt, Mr. Gupta. May we please request you to rejoin the queue, sir, for the follow-up?
Sure.
Thank you. Next question is from the line of Dishant Garg from Edelweiss AMC. Please go ahead.
Hi sir. Thank you for the presentation. My question is on the rigid-
Dishant, your voice is very low. Please use your handset.
Am I audible now?
Yes. Please go ahead.
My question is on the rigid construction where you stand at 35%. Any plan to increase the rigidness on the construction quality because of the increased O&M expense given the cusp of inflation? Do you have any plan? As I can see in the presentation as well, and I have discussed with multiple analysts, it does not have major impact given that your O&M has been contracted as and when it gets converted into an asset into the InvIT. But will that also have impact on the O&M contract pricing going forward?
Yes. To answer your question, Say, we do have around, as of now, 35% of the portfolio having rigid pavements. Your assessment is correct that in the rigid, the annual operating expenses are less. See, however, during the course of the project, you cannot change this. These are something which are designed and approved by NHAI at the beginning of the project. Even in a project, on a selective basis for a certain portion, NHAI keeps on coming with design upgrades more from safety and other parameters and does issue change of scope, and does undertake such work. But we cannot unilaterally go ahead and ask NHAI to make such change. This is NHAI's discretion, and we have to abide by the concession agreement.
Having said that, our framework is beneficial for the InvIT. For the operations and maintenance, we have given fixed price contract to our project manager. Therefore, despite even the volatility in bitumen prices or commodities or vehicular movement, which is going on right now, our cost does not get impacted at all. Our cost remains the same, which is fixed as of today. Therefore, I understand your point of rigid versus flexible, but this does not impact our business plan or future operations negatively at all because we are operating in a fixed price contract.
What about the cost going forward on the O&M contracts?
Yes. So even the O&M contracts, the value has been finalized for the entire tenure of the concession agreement. Therefore, whatever with the fixed amount, we are not foreseeing any deviation whatsoever from the amount we have budgeted.
Okay. Thank you.
Thank you. Before we move to the next question, a reminder to the participants, to ask a question, you may press star and one. Next question is from the line of Ankit Tripathy from Kotak. Please go ahead.
Hello? Am I audible? Hello?
Yes, please go ahead.
Yeah, hi. A good set of numbers. I have few questions. On the growth aspect, if I look at your ROFO pipeline, Hare, can you please explain how much amount, or on a ballpark basis, if you have to acquire ROFO assets from your sponsor, what value would that be? Since we have a decent amount of ROFO pipeline.
Yeah. Ankit, there are around 17 ROFO assets right now.
Yeah.
Around eight of them will require completion status in FY 2027 itself. We have not gone in very entire detail of the valuation of these assets. As of now, the collective BPC of the projects which are there.
The eight assets to be ready in this financial year, their BPC is around INR 7,100 crore.
Okay.
Depending upon the diligence and the unit holders approval, we will be targeting to acquire at least four to five of them, depending upon the diligence outcome and how we progress. We haven't gone into the exact enterprise value of that amount right now. To answer your question, the gross BPC for these eight projects adds up to INR 7,100 crore. In BPC, essentially what happens is that at least 40% of that amount has been already received by the developer from NHAI. Only 60% of the value remains. This further increases based on the inflation index.
Okay. When we were speaking about the third-party asset acquisition, just from an acquisition standpoint, if you look at, let's say, IRR of the project which you will be acquiring, will that be value accretive versus a sponsor asset or it will be in line with your sponsor assets?
I would say from a trust perspective, the IRRs which would be acquiring, say even for the third-party assets which we are targeting. A lot depends upon what kind of indemnity we are getting from them and how we are fixing the risk associated with that. If we are able to box them completely and eliminate the entire indemnity risk altogether, then it would be similar to sponsors. But if there is certain risk which we have to assume going forward, then we would be seeking some premium over there. To summarize, I would be targeting IRRs of around 12% for future acquisitions.
Understood. If I look at post QIP, the distribution seems to have stabilized and you have given a guidance of INR 9-INR 9.2 for FY 2027. But if I have to look at your current portfolio, let's say for another maybe next two to three years of cash flows, the distribution should be ballpark, at least would be in this range?
Yes, definitely. See, even this year we are foreseeing distribution of INR 9-INR 9.25. Thereafter, we will be able to have at least 10% growth in it, backed by the acquisitions which we are-
Sorry to interrupt. I am saying, excluding growth, so growth is there. That lever will come from your, you can acquire from debt because now you are at 40%. What I am saying is if I look at our current portfolio of 12 assets and there is cash flows from this assets. This INR 9, INR 9.2, the guidance which you have given, that is based on the cash flow of this 12 asset, right? You have not included any, let's say acquisition of assets.
That is correct. This guidance is solely based on the
Fair.
Asset. Yes.
Yeah.
We have-
Yes, growth effect is separate. I understand that. That is separate. Just wanted to understand because obviously the past cash flows has been volatile and incrementally we are looking at stabilization of cash flows for the last two quarters and you have done some debt repayment which seems to be in line. If at all from the current asset which we have right now, the trajectory of cash flows for next two to three years, maybe. Will this number hold for next two to three years?
Yes, absolutely.
Great.
If you look at slide 24 of the investor presentation. In the guidance, we have also categorized the annual inflows which we are looking at. Even in the current guidance, we are assuming some reserve as well, which is essentially if we are to repay any debt, any major maintenance, which we have to budget for. Therefore, we are quite confident of achieving this guidance for FY 2027 based on the cash flows of the project.
Great. Since you mentioned about maintenance reserve. Just want to understand, how many of our assets we would have started commencing major maintenance works?
For one major asset, we would be doing this year.
Okay.
The other assets, they would start in over next two, three years cycle.
Right now, only one asset we have MM, we have done the MM?
One asset, we will be doing in this financial year, FY 2027. All together for FY 2027, we have major maintenance target of INR 170 crore.
Okay. Understood. Just to be clear on the guidance which you have given right now, you would not have factored in higher bank rates, because there are news around that the bank rate might increase. This is based on the current bank rate, right?
Yes. This forecast is based on the current bank rate of-
That is upside. Okay.
Yes. That's an additional upside as and when-
Okay.
The cycle moves up.
Great. Thank you. That is it from my side. Hopefully, the trajectory continues, and all the best. Thank you.
Thank you.
Thank you. Next question is from the line of Priyam Poddar from Value Equity. Please go ahead.
Good afternoon, and thanks for the opportunity. I hope my voice is audible.
Yes, you are audible. Please go ahead.
Thank you so much. Just one question. As we are targeting an AUM of close to around INR 10,000 crore by the end of FY 2027, could you provide some insights into the key drivers that will help you to achieve this milestone? Additionally, how strong is your growth pipeline for FY 2028 and 2029?
Yes. We are looking to expand the AUM to around INR 10,000 crore by FY 2027. As of today, our AUM is around INR 6,600 crore as of March 31. We are looking to acquire at least INR 3,500 crore of assets over the next 12 months, which is largely backed by, we have pool of around 8 assets from sponsors, which would be ready for FY 2027. Of that around five to six we are looking to transact in FY 2027.
That is one pool which is available, which, as I explained earlier, we have not cut into the enterprise value of those assets right now because we are yet to undertake diligence. The second pool is the third-party assets. Before moving to third-party assets, the sponsor assets itself would help us in achieving the target of INR 10,000 crore. So INR 10,000 crore guidance does not include third-party acquisitions.
If we are to acquire third-party assets, it would further increase the base further additional to that. The way I mentioned earlier, we have around, the sponsors, have 17 ROFO assets. They could be maturing over the next two to three years from today. Around two assets, they have been allocated recently, which the concession agreements are yet to be finalized, which would eventually happen. Even for that, there will be a development cycle of around two years per se. Therefore, every year we would have some assets from the ROFO or from the sponsors, which are ready. Third-party acquisitions is equally important for us. That also we are going to pursue and we are pursuing right now as well.
Got it, sir.
Thank you.
Thank you. Next question is from the line of Manoj Bagadia from Equicorp. Please go ahead.
Hello. Sir, can you hear me?
Yes, please go ahead.
Yes. My first question is, you mentioned about the IRR of 12% for the acquisition, either from a sponsor or from the third-party assets. Is this at a project level or is this at a trust level that we are talking about?
The 12% what I was referring to, that's at the project level and not at the trust level. To answer your question, the 12% IRR refers to save when we are acquiring projects from the sponsor or third party, keeping aside the diligence findings, this is the [audio distortion] we expect.
The line for the current questioner got disconnected. We'll move to the next question from the line of Anand Mundra from MyTemple Capital. Please go ahead.
Hello. Am I audible?
Yes, please go ahead.
Yes. Hello. Thank you for the opportunity. Sir, I just wanted to get some understanding more about the NAV. While you have mentioned that INR 9 kind of payout APR can be taken as the base, on the NAV side also, can we assume INR 75 crore to be the base and in future this number would only go up?
Yeah. See, NAV for 31st March was INR 74.7 crore. Our asset base are an annuity thing, which essentially what happens is, as and when we receive the annuity, then the future cash flow reduces. Because the future stream of pools which is there, that is fixed and that reduces. Therefore, as and when we move up, there is a benefit of the timeline, but the annuity receipt reduces the NAV. However, going forward, we are looking for the acquisitions as well, without diluting the equity base partially by increasing the TER. That will support it in maintaining it at similar levels without diluting the returns or the NAV altogether. To answer your question, if we are not to acquire any asset altogether in future, then the INR 74.7 crore will gradually drop because of the nature of the asset profile which we have.
So that would gradually drop. That is understandable. But in that case, the payout will also go above INR 9, right? Because then you will be returning capital as well. If I have to sustain it at INR 9 over INR 75, is that understanding correct? Because INR 9 by INR 75 is about 12% IRR, as you mentioned, is the kind of return that you expect to deliver to shareholders.
No, absolutely correct, what you are summarizing. Therefore, what I am coming at is that if we are to discard any acquisition that we will do in future, if that was not a possibility, then the NAV will drop and we cannot stop it, then we will have to look at it differently. But we are going to acquire assets in FY 2027 itself. Therefore, on a combined basis, as of now, what can convey based on our pipelines which we have and our current debt ratio which we have, that the NAV will remain at a similar level and in addition, we would be able to make INR 9 distributions. INR 9 distribution.
Understood. Thank you. And sir, we have one of our board, I think the rupee term loan one-
Sorry to interrupt, Mr. Mundra, your voice is not clear. It is very low.
Am I audible now?
Yes, please proceed.
Sir, so the rupee term loan one that we have is linked to T-bills, whereas the interest on annuity that we receive is linked to repo. There is a bit of a mismatch here. Just wanted to understand why have we chosen a T-bill linked loan?
Okay. We were cognizant of that. Every bank have their own external benchmarks, and that is not negotiable. Having said that, we have picked it. That specific loan has turned favorable for us. We took it at 6.85%. Right now it is at 6.63% as of today. There is a benefit of around 22 basis points on that loan. I understand that three-month T-bill is not 100% aligned with repo, but it is similar.
Therefore, we have picked it, and we do not foresee too much of volatility in future. That is the one aspect. Second part is that right now we have approximately INR 2,900 crore of debt. Our intention would be to ensure that to around 30%- 40% is through debentures of varying tenor, and the residual is floating rate. Even in the floating, we did not want to go for G-sec link because there is a higher volatility. We wanted to have a mix of repo and three-month T-bill. That is what our plan was.
Okay. Got it. So sir, this interest rate is reset quarterly or it is biannual or annual on the T-bill linked loans?
For T-bill, it is quarterly. For the other facility, it is linked to movement in the repo rate but even that is quarterly.
Got it. Got it. Sir, one final question. There was some change in law claim that resulted in some receipt from NHAI this quarter and also some sponsor indemnity receipt. Are these kind of one-off gains that we have received or these are already a part of the cash flow that the valuer had accounted for earlier?
See, for the GST CIL claim, if I were to come, the two SPVs which we had acquired in December. Our initial budget was that this cash flow would come by September 2027, but we have already received the amount from NHAI prior to our initial budget. These are one-time items. This inflow is not recurring in nature. This is one time, and that has improved the balance sheet of the trust, and it was expected as well in the valuations even earlier as well. With regards to the sponsor indemnity, there were, again, two types of indemnities which were raised in the last quarter, one pertaining to a change in rock strain in the four SPVs, which were acquired at the time of IPO itself.
The second stream was pursuant to a Maneri project, which was pursuant to NHAI de-scoping certain part of the project from the project and categorizing it as a change of scope. Therefore, whatever was the variation in our future cash flows that we have adjusted and took indemnity from the sponsor.
That's it from my end. Thank you.
Thank you.
Thank you.
Next question is from the line of Manoj Bagadia from Equicorp. Please go ahead.
Thank you for the opportunity, sir. Sorry, earlier it got disconnected. Sir, my first question is, you mentioned about IRR of 12% as hurdle rate for new acquisitions. Is this at a project level or is this at a trust level? Because at trust level, 12% IRR means project level IRR would be much lower because of the debt financing.
I think you got disconnected earlier. What I was referring to is that this is 12% is a project level IRR, which we are talking about. Trust level IRRs impacts are different because it is linked to any equity dilution or not and at what price the new equity comes in. What I was referring to is the project SPV IRR of around 12%.
Yeah. Thank you, sir. My next question is, sir, you mentioned about FY 2027 major maintenance costs, one project, INR 170 crore. Can you also tell us about next three to five years annually, how much would be the major maintenance cost and which year it will hit in total for all projects?
See, that part we will have to collate, and we will get back to you separately. Because in each project, every sixth to seventh year, we have budgeted the major maintenance. We can share it with you separately. But right now, I do not have offhand.
The thing why I ask that question is, sir, because if it bunches up together in, say, two, three years time in a single year for multiple projects, then it could affect our cash flow and maybe the potential payout. That is why I was just trying to understand, if I look at payout for next three to five years, do you see any significant impact on a particular year from the major maintenance?
Yeah. Recently, even SEBI has revised the rules, and they have now permitted to avail debt in which to avail debt to fund major maintenance. This was a pain point earlier, that if four, five projects' major maintenance had to be undertaken in a year, then this could impact the cash flows. Therefore, we are cognizant of this aspect.
For our portfolio, the bunch is happening three or four years from today, not in the near term. We are planning it out, and we are accordingly looking at the debt repayment schedule and other things as well, so that the distributable cash flows remain consistent, and they do not vary too much. Just to answer your question, say, for example, for FY 2027, our major maintenance is INR 170 crore. In FY 2028, it is around INR 90 crore. 2029, it is INR 100 crore, and FY 2030, around INR 140 crore roughly. Even in our portfolio, because few of the assets are of different age profile policy, therefore, it's getting segregated across the year.
All right. And sir, when I look at the guidance we have given for next year, INR 9-INR 9.25, will it be similar across four quarters? Or there could be variation within the quarters actually, in terms of-
There could be minor variation across the quarter, but not too much, because, see, it's a function. Our annuities comes one in six month, a month. Therefore, there can be minor variation, but not too much.
All right. And sir, like some of the InvITs who have given medium-term guidance also, right? Is it possible for us to give guidance for next three to five years, saying that whatever is the minimum, like whatever INR 9.25 will maintain and maybe some increase per year?
See, we can target that, but you would have a better accuracy in talking about one year. Therefore, we are limiting it to a one-year guidance right now. We note your inputs. We will work towards it, and we will look into if we can provide a little bit medium-term guidance going forward.
Because that will add a lot of confidence actually to the investor. Right now, we are not very clear as to how it will behave actually in the medium term. Although the cash flow is pretty stable for us, right? Even asset addition plans are quite stable. If there is a confidence, you see the question is, you will have to dilute significantly going forward in next three to five years if you have to add assets, especially just even sponsor assets, forget about third-party assets.
So if you dilute at a higher level, like one of your peers have done it, came out with INR 100 IPO, and today they are at about INR 170, INR 165, INR 170. So there has been capital appreciation and dividend dilution at higher levels also. If that happens, then it will add significantly to the investor confidence. As of today, we are not sure of the dilution that will happen. Will it happen at the same level what we did last time, higher level, or even at a discount to the current level? Because a lot of players are vying for the same capital in REITs and InvITs. If you have to compete in that, I think there would be a strategy in our mind there, and [audio distortion] can talk about it.
Noted your feedback. We understand what you are highlighting. Just to come over here, even we are quite cognizant of we don't want to dilute our existing unit holders. We will always provide preference to them. Our endeavor would be to build, to have some more value creation right now, then only go for a substantial fundraising or anything. That's our plan going forward, and that's what we are working on at this point of time. So we take your feedback, and we will try to look into some medium-term guidance from subsequent discussions.
Next question is, sir, about the addition of about INR 3,500 crore in current year. When you do it in Q2 or Q3, at that time you would have finished six quarters of quarterly payments, right? Then you are eligible for up to 70%, and right now we are at 40%. If I do backward calculation, then out of INR 3,500 crore, you can fund literally most of it through debt. Maybe at least you need basic capital of between INR 500- INR 1,000 crore only equity, at best, if I go by the calculation. Is it the strategy that you will try and fund it mainly through debt and try to improve the value first and pay out for next year also, and then you go for the dilution next year when you need more capital?
Yeah. That's what I was trying to hint earlier as well. See, post June, we would be able to raise our debt level beyond 49% mark. We don't intend to go straight away to 70%. We will target somewhere around 57.5%- 60%, because it would be a range given the nature of the asset class. Definitely, our objective would be to minimize the equity dilution so that the existing shareholders are benefiting more, instead of going for a larger equity raise in FY 2027. That's our objective and that's what we are working towards.
My last question, sir, is about the NAV value as well as the annual cash flow. What is the interest rate sensitivity if it goes up by, say, 25 basis points? What will be the impact on NAV? Because it will affect our valuation and weighted cost of capital also. What is the impact on NAV as well as on the cash flow? Because you mentioned that cash flow, it is positive. At the same time, our cost will also go up, interest cost will go up. Net-net impact on the annual cash flow as well as on the NAV.
See, the NAV is largely based on the valuation undertaken by the valuer, and they have summarized the valuation sensitivities in their valuation report as well. Essentially, if you can just give me a second. I would suggest if you could refer it on the website. That would give you a range of sensitivity outputs based on the WACC rate, which they have done over there.
But do you see any significant-
Sorry to interrupt, Mr. Bagadia. May we please request you to rejoin the queue, sir. Thank you.
Okay, sure.
Next question is from the line of Sarvesh Gupta from Maximal Capital PMS. Please go ahead.
Yeah, sir. Thank you. So, one question was on your cost of debt. This time, our incremental cost of debt has been sub 7%, and that has reduced our overall cost of debt. Given all these geopolitical headwinds and the yield going up across the world and in India, how are you looking into your incremental and weighted average cost of debt in the coming year?
Yeah. See, right now, this is what I was trying to explain earlier as well, because all our assets are annuity-based. Therefore, in all of the 12 assets, we give interest on the annuity receipt, which is linked to the bank rate. If the interest rates are to go up, my revenue for all the 12 projects will increase substantially. It will increase link to link changes in the bank rate in future. See, my cost of debt is because my leverage is only, say, 41% right now. Therefore, my cost of debt is less compared to the revenue which I would be receiving in a financial year. Therefore, in any financial year with movement in the interest rate, we are always going to benefit than losing it out.
Right now, in terms of about INR 300,000 crore of debt, INR 1,000 crore is in term of debenture, approximately, of which the substantial portion we will reset in another two years from now, the debenture itself. Then the floating rate continues to be a variable interest rate. Going forward, when we are doing acquisitions and when we are acquiring the new assets through debt itself, in that scenario as well, we would be optimizing this debt profile in such a manner that we are balancing out fixed floating, and we are optimizing our net inflow given our revenues are linked to interest rates and our interest rate environment.
Okay. The way I understand your acquisition strategy broadly is that in FY 2027 you would want to reach 60%-65% debt to AUM and acquire assets primarily by debt. Then for FY 2028 acquisitions, you would want to do fundraise to the extent of 30%-40% of the incremental assets that you will be taking up from a sponsor. Is that a broadly right understanding, sir?
Yes. No, slight correction over there. What we are coming at is that post-June, we would be touching 57.5%-60% debt level, not 65%. That is not optimum. Our intention would be somewhere close to 57.5%, and thereafter we would maintain that at the same level. Although 70% mark is permitted by SEBI, we do not intend to go and have a very high leverage in the trust.
Okay. Given the valuations where they are, have you also explored rights issue as one of the ways to raise equity capital in the company?
No, definitely, we will consider that as well as a source of capital raise. Once we reach this stage of equity dilution or equity fundraise, for sure we are going to consider rights issue as well this time.
Okay, sir. Thank you and all the best.
Thank you. Next question is from the line of Anand Mundra from MyTemple Capital. Please go ahead.
Hello, thank you for the follow-up. Sir, in terms of organization building, just wanted to understand, are you trying to build a team that could evaluate different asset classes from the one that you're currently in? Like, say, BOT or maybe some kind of power transmission assets. Because currently, we have a strong ROFO pipeline, but beyond that, in order to elongate the life of the InvIT, we will have to explore certain kind of assets as well. Some color on this.
Yeah. See, right now we have a team which is specialized more into the road sector. We do not intend to move out of the road sector and step in power sector right now, as of now. As of now, we want to continue to focus on the road sector itself. Even in toll versus annuity assets, in the near term, our objective is to continue with the annuity assets.
We don't just want to onboard one toll assets, one or two. If we come across a decent pool of assets which are accretive in nature from value as well, then we may look into it. But our primary, we are targeting even the third-party assets more in the annuity mode right now. For next 12 months, our focus would be more on the annuity-based road assets, because this is what our strength is, this is what we have good hold on, and that's what we want to continue with in the near term.
And-
Sorry, Mr. Mundra, you are not audible.
Hello? Yeah, I am not-
No, your voice is breaking.
Is this better?
Yes.
Sir, does the promoter have any BOT assets?
As of now, sponsors don't have BOT assets. NHAI had made changes in the bidding process for the road assets last year. What I understand, they are evaluating BOT assets as well.
All right.
They are in the bidding stage right now for new allocations from NHAI.
Would those automatically, in case the sponsor wins some BOT assets, would they automatically form a part of the ROFO?
Yes. Any assets which are structured asset in nature, which is operational, once they develop and it stabilizes, then we will benefit from ROFO on that.
All right. Sir, just one final question. On the reserve side, are we maintaining both a maintenance reserve and a DSRA reserve?
See, as of now, no maintenance kind of reserve we are keeping. As of now, for last quarter, DSRA reserve we have to maintain because that's anyway it's a debt requirement. So that we are maintaining. In addition, for Q4 2026, what we have maintained is only the regular reserve to meet the operating expenses and the debt obligations which are over the next two, three months. So we have maintained reserve of these two types.
All right. This is not a requirement by the authority or the banks to keep a maintenance reserve?
No. Our loans are not at the SPV level. Our loans are at trust level. Therefore, there is no specific requirement of bank loan that we need to maintain in reserve DSRA. When you are taking borrowing at the SPV level, then that requirement comes into play. In our portfolio, all the borrowings are at trust level. Therefore, we are not-
Okay.
Yes.
All right. That is it from my end. Thank you.
Thank you. Ladies and gentlemen, we will take this as the last question for the day. I now hand the conference over to the management for the closing comments. Over to you, management.
Nothing else to add from our side. Thank you all for joining and sharing your feedback and comments. Look forward to connecting again in the next quarter. Thank you very much.
Thank you, sir. On behalf of HDFC Securities, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.