Ladies and gentlemen, good day, and welcome to the quarter three FY 2026 conference call of Vertis Infrastructure Trust. As a reminder, all participant lines will remain 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 the operator by pressing star then zero on your touchtone telephone. Please note that this conference is being recorded. Before we begin, a brief disclaimer.
This conference call may contain forward-looking statements about the company, which are based on the belief, opinions, and expectation of the company as on date of this call. These statements are not the guarantee of future performance of the company, and they may involve risks and uncertainties that are difficult to predict. Today, from the management side, we have with us Joint CEO, Mr. Gaurav Chandna, and Mr. Abhishek Chhajer, Chief Financial Officer. I will now hand the conference over to Mr. Abhishek Chhajer for opening remarks. Thank you, and over to you, sir.
Good afternoon, everyone. Thank you for joining the Q3 FY 2026 earning conference call of Vertis. Today, I will take you through a brief overview of the platform, our quarterly performance, capital structure, distribution, and outlook. Then at the end, we will move to Q&A. Vertis is a scaled and diversified road infrastructure InvIT or platform with 28 assets spread over 10 states, covering over 8,300 green kilometers with AUM of INR 265 billion or INR 26,500 crores. Our portfolio continues to remain balanced with mix between toll and annuity, where toll is 71% and annuity is 29%, supported by a residual concession life of 14.3 years. Net debt to AUM is approximately 41%, which provides adequate headroom to sup-
Ladies and gentlemen, we have lost the line of the management. Please stay connected while I reconnect the management. Thank you. Ladies and gentlemen, thank you for your patience. We have the management line reconnected. Sir, you can proceed. Thank you.
Apologies, first of all, everyone. Also, not sure who can hear me or not. I'll just restart. As part of this presentation, I will take you through a brief overview of platform, our quarterly performance, capital structure, distribution, and outlook. Then we'll move to Q&A. Vertis is a scaled and diversified road infrastructure platform with 28 assets spread over 10 states, covering 8,300 green kilometers with AUM of INR 265 billion or INR 26,500 crores.
The portfolio continues to maintain a balanced mix between toll and annuity, with toll at 71% and annuity at 29%, supported by residual concession life of 14.3 years. Net debt to AUM is approximately 41%, which provides adequate headroom to support the future growth while maintaining balance sheet discipline. During the quarter, we continued to focus on stabilization and integration of 11 PNC assets consisting of 10 HAM and one toll project acquired in H1 FY 2026.
These assets now have been smoothly integrated with existing steady-state operations. It is important to note that post-acquisition of these 11 PNC assets out of 12, only one HAM asset, which is Challakere-Hiriyur, is pending for acquisition and is expected to be completed before end of this year, which is 31st March 2026. On 6th March 2026, current month, Vertis successfully handed over the first Shillong Expressway to NHAI at the end of concession period. This is the first hand back of any SPV by Vertis. This SPV is currently under defect liability period in line with provision of concession agreement. Turning to roads and highway sector, NHAI awarding activity remains muted in near term, with only 102 km of the project bid out during the quarter. NHAI's increased focus on project quality, tighter bidder qualification norms, and ongoing procedural refinements.
We believe that this phase is structural rather than cyclical, aimed at improving long-term project outcome and reducing stress in the system. Having said that, government's commitment to road sector likely to remain strong. In the Union Budget, MoRTH has been allocated approximately INR 3.1 trillion, which is almost 8% higher compared to FY 2025. NHAI about INR 1.87 trillion, which is 10% higher compared to FY 2025, which is reaffirming sustained policy budgetary support for highways development and execution continuity. On the regulatory front, three developments continue to remain in focus.
I'll go one by one. First is with respect to WPI linking factor. The circular issued by NHAI revising the WPI factor has been placed in abeyance by the honorable Delhi High Court, and the earlier linking factor continue to remain applied. We continue to engage with industry bodies and will update the investors as we get further clarity.
Second, on the annual toll pass implementation, we have received compensation up to December 2025 for all NHAI projects, with partial receipt pending in case of three projects, which is STPL, UTPL and Jodhpur Pali, to the tune of INR 6.5 crores, which is also expected to receive in due course. Excluding our four state projects, which is Bareilly Nainital, Dewas Bhopal, Ahmedabad Mehsana, Vadodara Halol, annual pass scheme is applicable across all eight toll assets. During the December quarter, annual pass adoption was approximately 38% of car revenue, translating into around 9% of total revenue of the impacted projects. The third point on the wage code, as you all know, the government has notified Labour Codes with effect from November 21st, 2025. However, operational implementation is contingent upon individual states notifying their rules, which we are closely tracking.
While the code has not yet fully implemented across the state, we have proactively factored potential implication into our O&M planning and contractual framework. Net of operational improvements and other savings, we do not see any material impact on our operating cost. Now I will take you through the operational performance of the quarter, starting with distribution, followed by traffic and revenue performance, collection efficiency for annuity and HAM assets, and then management updates. For the Q3, Vertis has net distribution of INR 4.53 billion, which is INR 3 per unit.
Since listing in August 2022 of Vertis, we have cumulatively distributed INR 53.46 paisa per unit, amounting to INR 43 billion return to unitholders. It is important that approximately 69% of this distribution has been tax-free. On year-to-date basis for FY 2026, Vertis has distributed INR 8.37 paisa per unit, which reflects the consistency and extent of our cash generation.
Q3 FY 2026 saw a robust traffic and revenue performance across our toll portfolio. Traffic growth across the portfolio was 10.3% year-on-year, resulting in toll revenue growth of 14.2% year-on-year. This performance was supported by improved economic activities, including higher sales of both commercial and passenger vehicles post GST reforms in September, festive and holiday season traffic, continued strength in industrial and commercial cargo movements. On year-to-date basis, YTD December, traffic growth stands at 9.9%, materially ahead of our projected number of 5.5%. We have achieved over 76% of full year revenue projections. Operating revenue from toll assets for quarter stood at INR 10.8 billion. We continue to maintain strong operating efficiency with EBITDA margin of 90% for toll assets. Moving to the collection efficiency for annuity in hand. For Q3, Annuity income stood at INR 4.3 billion.
It may be noted that six out of seven annuity receipts during the quarter was received ahead of scheduled timeline, reflecting improved administrative process. While there are some hiccups in Q2 FY 2026 post PNC acquisition, we believe that same have been addressed. We have been able to address almost all pending issues and should be able to continue with maintenance performance standard for Q3 going forward. Before I move to maintenance and asset level update, let me briefly touch upon management developments during the quarter, aligned with increased scale and complexity of the platform. During the quarter, Mr. Jonathan D'Souza, John, joined Vertis as CHRO, Chief Human Resource Officer. John brings 20 years of experience in strategic and operational HR, including senior leadership role at Welspun Group. He will lead our efforts across the talent strategy, workforce planning, leadership development, and organization integration.
In addition, Mr. Pratik Desai has been appointed as Compliance Officer. Pratik has been associated with us for close to two years and brings over 12 years of experience in compliance and regulatory matters, further strengthening our governance framework. During the quarter, on safety side, we have also procured 20 Truck-Mounted Attenuators, TMA, which are impact-absorbing crash cushion designed to significantly enhance work zone safety during maintenance repair activities. With this initiative, Vertis becomes one of the few national highway operators in India to adopt this advanced safety system across its portfolio. Operationally, our focus continues to be on asset quality, safety, and life cycle optimization. During the quarter, for one of the HAM projects, which is Dausa Lalsot, we received appreciation letter from NHAI for our exemplary cleanliness, maintenance, aesthetics, and safety performance. This recognition highlights proactive maintenance and safety initiatives beyond our O&M activity.
The major maintenance and upgradation work, primarily at newly acquired PNC assets, are going on in line with our plan and within the budgeted cost. Now, let me move to the balance sheet. As I mentioned earlier, net debt to AUM stands at around 41%, which remains comfortable for platform of our scale, provide headroom for future growth. Our DSCR is approximately 3 x, providing strong cushion for debt servicing. The weighted average cost of borrowing, ROI, stands at 7.3%, and we have long visible maturity profile close to 12 years, with staggered payments that significantly reduces refinancing risk. Overall, we believe balance sheet is robust and well-positioned to support both stability and future growth.
Lastly, with respect to recent amendment in Union Budget relating to MAT credit, just to update that we are evaluating the detailed implication and will take appropriate steps in due course, and we will update if required. Going forward, our priorities include continued focus on discipline, cost management, and life cycle planning to ensure predictable and consistent distribution; continue optimizing our capital structure to lower the finance cost and enhance cash flows; pursue value-accretive acquisitions where assets meet our return thresholds and strengthening portfolio diversification. To conclude, Q3 once again demonstrated a strength of Vertis platform. We witnessed double-digit traffic growth, robust margin, healthy balance sheet and consistent distribution. Thank you for your continued support. With that, now I will hand back to moderator to open floor for the question. Thank you.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Ladies and gentlemen, a reminder, if you wish to ask a question, please press star and one. We take the first question from the line of [Raghved] from Neo AMC. Please go ahead.
Yeah. Hi. Am I audible, sir?
Yes, please go ahead.
Yeah. So a couple of questions from my side. First was on the new tax regulation that came up during this budget. So what is the understanding that we as an investor should take on the MAT credits, like the shifting from old regime to new regime? So that's the first question. And the second one is on distribution. We have seen that there is a good traffic growth and a good revenue growth that we have achieved as compared to the last quarter, or in general, a very good performance. As compared to last quarter, why the DPU is INR 3, which is constant? Those are the two questions, and I think I'll ask some of my questions later, maybe.
Sure. Thanks for the question. This is Gaurav Chandna. Let me take the second question first. First of all, when we are talking about traffic growth, not just this quarter, but the previous quarter and Q1 also had a similar level of growth. On an average, we have been clocking 10% odd traffic growth for the portfolio for first nine months. As you saw, this quarter is around 10.3%. Previous quarter was give and take around 9.9%. It is not as if this quarter is significantly above the previous two quarters. While your point is valid, in that maybe distribution could have been slightly higher compared to INR 3, not just for this quarter, in fact, even for the previous quarter.
For prudent cash management and maintaining enough liquidity in the system, we have distributed closer to 90% levels for this quarter, and the balance has been retained as a liquidity buffer for future operations. Also the fact that we need to always keep aside certain cash for the annuity SPV, especially the ones where annuity was received in the previous quarter. Because in this quarter there will be no annuity coming in to those projects. So we need to take care of the O&M embedded for those SPVs. At the same time, we will like to create or retain some amount of liquidity buffer in the system. As far as the first question is concerned, I think as of now, we would not be in a position to share details with you.
I think Abhishek broadly covered this aspect during his speech around the earnings call. What I can share with you is that most of our toll projects are currently in old tax regime, with the exception of Bareilly Nainital. There is one annuity project, which is Dausa Lalsot, which is under old tax regime. Obviously the projects which are already into the new tax regime there is no change. Neither we need to take any view on those. As far as the projects which are in old tax regime and there is some MAT credit which has been accumulated, that is where we need to take a call. See directionally from a SPV level taxation, obviously it was in the previous year as well as going forward, it was better to move to new tax regime.
There are reasons why we hadn't moved to new tax regime, because there are certain SPVs which still are under ATI. So being in old tax regime was beneficial. As I said, there were some SPVs where we were paying only MAT. So there was also a rationale of staying in old tax regime, plus the fact that for certain category of investors underlying SPVs being in old tax regime is beneficial because whatever dividend comes through those SPVs is tax-free in the hands of the investors or the unitholders. Of course, we will take a balanced view in terms of how going forward looks like from the point of view of both individual SPV level taxation as well as taxation in the hands of the unitholders. Based on that we will take a decision for the forthcoming financial year, starting with FY 2025.
Understood. Sir, just a follow-up. Do we have any clarity on for the assets which are in the old regime, do we have taken a decision that whether this will be transitioned or they would still remain in the old regime or there would be some mergers like for intra-SPV asset transfers to take the benefit? Any picture on this?
See, ideally we would like to keep each and every concession in separate SPV the way they are today. In any case, if there is any merger which has to happen will require an approval from NHAI. So those situations we are not envisaging in the base case. If at all that happens, that could be a potential upside for the investors. But there is nothing in sight as of now, just to be clear. Neither have we planned on that front as well. In fact, we will be taking holistically a group level taxation call over the course of next few weeks. And as I said, by end of this quarter, we would be in a position to form our views around how and when we want to change over from old tax regime to new tax regime.
Okay, sir. Thank you.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press star and one. Once again, ladies and gentlemen, if you wish to ask a question, please press star and one. We take the next question from the line of Neil Munot from Pico Capital. Please go ahead.
Hi, sir. Am I audible?
Yes, please go ahead.
Sir, my first question is with respect to the Macquarie bidding. Has the binding bids gone in?
We would not be able to comment on any particular transaction, actual or prospective, unless we have made a formal announcement on the issue. I think unfortunately, we would not be able to respond to this particular question.
But do we have a certain timeline, as in maybe three months, six months?
See, unfortunately, I can't even comment whether we are evaluating that transaction or not. Of course, there are some news articles which have taken on them, but we would not be able to comment on that at all.
Okay, understood. And sir, the second question is with respect to the annual pass. How do we read that 9% impact on revenue? As in, is it 40-
It's not a 9% impact on revenue, to be honest. It's a 9% impact on the working capital cycle. So effectively, you have to assume, while on paper, we are supposed to get that money back or reimburse that amount in 10 days' time, but we are assuming that in base case, it will be a one-month kind of a working capital cycle. So the impact is only towards the working capital cycle. It's not a revenue-level impact which is there. So in fact, we have also spoken about this in our results presentation, that all the money due to us, except for one project, which is Jodhpur Pali, has been received up to 31st December, and the balance outstanding for 31st December is basically INR 6.6 crore. That is the kind of money which is outstanding, which is basically equivalent of 1.5% revenue for the overall portfolio.
Sir, then what would be a lifetime revenue impact?
As I said, there's no revenue impact. It is just a working capital impact. Instead of getting money on T+1, we will be getting this money on T+31 days. To that extent, one way to look at it is the impact is only lower treasury income for us for the period of that one month. So 9% for the impacted portfolio. On an overall portfolio basis, the working capital requirement would be around 3.5%-4%. Whatever you assume as post-tax treasury income, let's say 4% as an outer limit. So the impact on our cash flows is 4% of 4%, which is something like 0.0016%. It's an insignificant impact, I would like to say.
Understood. Sir, what is our IPO timeline, if we have any? Public IPO.
As you would have seen, we have taken a board approval for the same, and we have just initiated our planning around it. We are still thinking through what all work needs to be done around that, because, to be honest, there's no particular InvIT which has so far converted from a private InvIT to public InvIT. We are just trying to understand all of the nuances, and I think next earning calls probably should be a right time for us to discuss this.
Okay. Understood. Thank you so much. That is it. Thank you.
Thank you. We take the next question from the line of [Raghved] from Neo AMC. Please go ahead.
Sir, I still had two more questions, so I joined the line once again. One was on the debt side. I can see that there is a lot of debt which has to be repaid or refiled in 2027. Do you have any clarity in how much of it is going to be refiled?
That is INR 700 odd crore, right?
That is around INR 700 crores in June and another INR 500 crores in January 2027. It is well spread. This INR 700 crores is the commercial paper we have taken. We have the option either in the month of June, we can convert into long-term debt, and this constitutes only 6%-7% of the entire debt. We can continue with the CP also. In terms of the January 2027, we will refile with CD of ID and CD at that point of time.
As far as liquidity is concerned, we distributed INR 450 million this particular quarter. If we assume that similar levels continue going forward, on an annual basis, we would have INR 1,800 crores of distributable surplus, despite retaining some money for liquidity purposes, as we spoke about. Even if something like INR 700 crores kind of repayment has to be done by us, we can comfortably do it through our free cash flows.
That is how we structure our short-term borrowing. By short-term borrowings, I am talking about any paper which has less than three years of maturity, and an annual incremental repayment of INR 600 crores-INR 700 crores if required. While of course, the base case is that they will be rolled over. Even if the market is tight and we are not able to roll it over, we will always have sufficient cash to take care of those repayments.
Understood, sir. Thank you so much. I think some of my questions have already been answered. Thank you so much.
Thank you. We take the next question from the line of Neil Munot from Pico Capital. Please go ahead.
Hi, sir. Just a follow-up question with respect to the WPI revision. If that happens, the 3% of toll revenue that we are talking about, that is lifetime revenue, or how does that work?
I guess you are referring to the WPI indexation issue, right?
Yes.
You are right. That is a lifetime impact. Every year, revenue basically will get impacted by those levels. Impact on a compounding basis. First year, revenue goes down by 3.1%, then the next year revenue goes down by another 3.1% on a compounding basis. That is the level of impact.
Okay, understood. And sir, do we have dates with respect to when is the next hearing or any clarity on that?
See, technically, it's not supposed to be next hearing. The court judgment essentially was that NHAI and the industry should get together, consult, and come up with a solution. There is one round of meeting which has happened between the industry body and NHAI. Now we are basically waiting for some suggestion to come in from NHAI. If that solution is acceptable to us, if it appears to be fair, of course, we'll accept it. If not, we would always have a right to go back to the courts.
Okay. Understood.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press star and one. As there are no further questions from the participants, I now hand the conference over to the management for their closing comments.
Thank you everyone for joining the call. After this, in case you have any queries and questions, please feel free to touch base with either Komal or myself. I am happy to answer. Thank you for attending the call once again. Thank you.
Thank you. On behalf of Vertis Infrastructure Trust, that concludes this conference call. Thank you for joining us, and you may now disconnect your line.