INDIGRID — earnings call
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Prepared remarks
Unattributed
“India Grid Trust
Q3 FY '23 Earnings Conference Call”
January 30, 2023
MANAGEMENT: MR.
HARSH SHAH – CHIEF EXECUTIVE OFFICER AND
WHOLE-TIME DIRECTOR – INDIA GRID TRUST
DIVYA BEDI VERMA – CHIEF FINANCIAL OFFICER
- INDIA GRID TRUST
MEGHANA PANDIT – CHIEF INVESTMENT OFFICER
– INDIA GRID TRUST
SATISH TALMALE – CHIEF OPERATING OFFICER –
INDIA GRID TRUST
India Grid Trust
January 30, 2023
Moderator
Ladies and gentlemen, good day, and welcome to the India Grid Trust Q3 FY '23 Earnings Call
hosted by Axis Capital Limited.
As a reminder all participants 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
and then zero on your touchtone telephone.
Please note that this conference is being recorded.
I now hand the conference over to Mr.
Jiten Rushi from Axis Capital.
Thank you, and over to
Thank you, Inba.
Good evening, ladies and gentlemen.
On behalf of Axis Capital, I'm
pleased to welcome you all for the India Grid Trust Q3 FY '23 Earnings Conference Call.
have with us the management team of India Grid Trust, which has been represented by Mr.
Shah, CEO and Whole-Time Director; Ms.
Divya Bedi Verma, CFO; Ms.
Meghana Pandit, CIO;
Satish Talmale, COO.
We thank the management for giving us this opportunity.
shall begin with the opening remarks from the management followed by Q&A session.
I would like to now hand over the call to the management for opening remarks.
over to you, sir.
Harsh Shah
Good evening, everyone, and thank you for joining the call today.
Thank you, Axis
team to host us.
To start with as we have done, we would like to reiterate our vision on slide
We had set out to become the most admired yield vehicle in Asia.
And I think all
the actions and decisions that we have taken is keeping in mind to achieve this vision.
believe our strategy of focused business model, value accretive growth, predictable distribution
and optimal capital structure has contributed significantly on this vision over the last five years.
We continue to strive to live up to that.
Now coming to the quarter on slide five, where I'll have a quarterly update regarding the
highlights of the quarter.
In this quarter, particularly, it was an action heavy quarter with two-
three acquisitions of different types getting signed.
At one point, we have signed around INR
1,500 crores of acquisition of KTL (Khargone Transmission Limited) from Sterlite Power,
which is part of framework asset.
On the other side, we have signed a MOU with G R Infra Ltd
for around INR 5,000 crores of assets where we look to bid and eventually acquire these projects
So the G R Infra one where I was talking about the MoU for INR 5,000 crores of assets in work
where we'll bid for certain assets together, and we also signed a framework agreement for
specific asset Rajgarh Transmission Limited which was won by G R Infra.
And in the same
quarter, we concluded the acquisition of Raichur Sholapur Transmission Company Private
Limited from three developers.
So we see this quarter as a successful quarter with respect to the
business acquisition.
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January 30, 2023
On the other side on the financial performance, we have continued our robust performance,
where our EBITDA and revenue both grew by 4% year-on-year.
Collections have remained at
100% this quarter.
And DPU increased versus last year versus this year, we are at a 3.5% growth,
which we are confident to deliver this year, and we'll pay the INR 3.3 DPU this quarter.
Our net debt to AUM remains at 58%.
This is pre-acquisition of KTL, but significantly below
the 70% leverage cap as per SEBI, which provides us ability to grow without dilution.
operating performance side, our average availability remained at 99.76%, which is what
provides us maximum incentives.
Proud to achieve 2 million safe man hours and still going on.
On the DigiGrid platform, which we have developed, which is utilizing the earlier digital
investment, that is yielding a lot of results in terms of ability to optimize the cost and, I would
say, use even drone technologies to ensure that our long-term O&M cost remains lower.
the quarter three highlights as a performance.
Moving on to the next slide, slide number six is about the industry update.
In general, the power
sector remains strong, and it is one of the good high-frequency indicator of economic activity.
And in general, the demand growth has increased and has continued to increase.
honest, demand growth has surpassed the economy and what historically people have predicted.
So we do feel confident that the demand growth in India on electricity side will continue to grow,
on account of a variety of short-term and long-term measures.
And short term, maybe linked to
the economic activity, but the longer run, like “EV-fication" of transport might add a
substantially big boost in years to come.
On the transmission side, again, CEA recently released a report which showcases about INR
2,50,000 crores of capex required to modernize and set up the country for 500 gigawatt of RE
capacity and achieving energy transition.
So all in all, I would say that in general, the
transmission network in India, we believe that is going to expand substantially first on account
of the general load growth, and second due to India's efforts towards energy transition.
believe that there is going to be a substantial amount of capex and we will have a reasonable
amount of business out of that.
With that outlook on quarter and the year, I would hand over the mic to my colleague, Satish
Talmale, who is Chief Operating Officer, to take you through the operating performance of
IndiGrid for the quarter.
Satish Talmale:
Good afternoon.
Happy to share quarter three operational performance for
IndiGrid portfolio of the assets.
So again, we focused our objective on zero harm on EHS
For the quarter, we had no major incident, no fatality, zero LTI, zero MTC
i.e.Medical Treatment Cases and zero first aid cases.
As Harsh mentioned, we are really proud
to achieve 2 million safe man hour milestone, and we'll strive to continue that performance every
On transmission availability performance, we have achieved portfolio availability of
Typically, quarter three and quarter four are the quarters for performing all the annual
shutdown activities.
As you can see on the right-hand side, there are a few assets where it is
January 30, 2023
slightly below 99.75%.
That is attributable to the planned shutdown outages, which we have
undertaken to improve the reliability of the asset and majority of the assets are on the track to
achieve 99.75% target availability.
On reliability, this quarter was one of the record quarter for us in IndiGrid history, we achieved
0.08 trips per line, which is, I think, best in industry at a peer comparison level and this is all due
to all the hard work which ground teams are putting to make sure the assets are reliable and there
are no defects in the system.
Digital Asset Management, as we updated previous quarter, all the assets in the portfolio are
operating via DigiGrid platform, and now we are working on advanced analytics, which will
help us to make fact-based decisions to improve the performance on reliability, safety as well as
on the cost optimization.
I'm happy to share that we completed our two solarization project at
Bhopal and Dhule substation.
Idea was to achieved net-zero auxiliary power consumption via
renewable energy sources so that we achieve our net zero objectives, which is part of our ESG
Again, as far as ESG framework is concerned, biodiversity is the major initiative, which we have
undertaken and all the action planning study has been initiated for all the critical portfolio assets.
On the left-hand side chart, again, the focus on training continued in the quarter.
As I said, there
were no lost time incidents in the quarter.
Unsafe condition reporting, there is a focus so that there is a culture to report all the unsafe
conditions at sites. “Near miss” helps us to prevent any future accident.
So that is also being
continuously reported.
Our solar utility 100 MW power plant has generated 46.32 million units for the quarter with a
performance of 21.97% CUF with an availability of 99.41%, and it is one of the best-performing
plants in the entire solar park.
So we are trying to achieve our consistent track record to maintain
superior availability.
With that, I will hand over to Divya.
Divya Bedi Verma:
Thank you, Satish, good evening everyone, we are on slide number eight.
Good quarter with a
stable performance as compared to the previous quarter, previous year, we have recorded a
revenue of INR 590 crores with a 4% growth.
EBITDA stood at 536 crores.
for the quarter was INR 294 crores.
And we are as per our guidance committed and board has
approved distribution of INR 3.30 per unit.
Collections for the quarter were good at 100%.
We collected 100% of the revenue, and although
for the previous year, similar quarter, the collection percentage was at 103%, but collections
have improved over previous quarter.
In quarter two, we were at 96% of the collection.
days stands at 63 days, as on December 31,2022, and that's month-on-month collection
January 30, 2023
efficiency for October, November, December, we have seen good progress, resulting 100%
collection for the quarter.
Coming on the next slide, number nine, DPU for the quarter is INR 3.30.
It will be distributed
in form of interest and capital repayment.
Interest is INR 2.80, and capital repayment is
approximately INR 0.50.
The outstanding units at end of the quarter is around INR 70 crores
and the gross distribution to all the unit holders at INR 3.30 is coming to INR 231 crores.
date for the distribution is January 31, 2023 and tentative date by which the unit holder will
receive the distribution is February 9, 2023.
NAV as of December 31,2022 stood at INR 133.
Post this quarter distribution, IndiGrid would have distributed INR 68.41 per unit with a total
distribution of around INR 3,646 crore distribution.
On the right hand side, we showcase the
trend of distribution year-on-year basis, which is stable and scalable growth of 3% to 4% year
We are on track to meet this year and the guidance of rupees INR 13.20 per unit.
Coming on the next slide, 10, which showcase a waterfall from our EBITDA to the NDCF
At an SPV level, we have a consolidated EBITDA of INR 530 crores.
finance cost, working capital movement, capex, taxes at SPV level, NDCF generated at SPV
comes to around INR 543 crores.
The net of the trust level expenses, interest cost, and tax, we
have generated NDCF of INR 294 crores, which is well above our guidance requirement, of
which we will be distributing INR 231 crores.
And this quarter, again, we are replenishing
reserves, so this gives us an upside of INR 63 crores of reserve.
With this, the total reserve end
of the quarter three for FY23, at the consolidated trust level is around INR 217 crores.
I hand over to Meghana to take the subsequent slides.
Meghana Pandit
Good evening, everyone.
I'm on slide number 11, giving a snapshot of the
balance sheet as on December 31, 2022.
We remain AAA rated by the three rating agencies and
our average cost of debt portfolio continues to be at around 7.5%.
We ended the quarter with a
cash balance of about INR 1,039 crores, which includes the distribution for this quarter, DSRA
and balance cash.
The mix between the fixed rate borrowings and floating rate borrowings across
the total gross borrowing of around INR 13,000 Crores continues to be tilted towards the fixed
rate of more than three-fourths of the book.
Net debt to AUM as of 31st December 2022 continues to be at around 58% leaving a significant
headroom for acquisition.
Interest coverage ratio remains at a healthy over 2.2 times.
incremental cost of debt in line with the interest rate cycle in the market for this quarter was
slightly higher at around 7.8% for the third quarter.
The pie chart on the right hand side provides
a mix of the sources of borrowing, which today stands on the bank loan side about 60-odd
percent, NCD is about 40%.
NCD is being subscribed by various investors of mutual funds,
corporates, retail, HNI's, insurance companies, and the banks- also between private banks and
India Grid Trust
January 30, 2023
The bottom chart provides the repayment / refinancing schedule of the loan book over the next
And as you can see that broadly not more than 10% to 12% of the overall loan book
comes up for repayment/refinancing in a particular year, ensuring that we are not going with a
bunched up of any debt maturity coming up in a single year.
Moving on to slide number 12 on the total return chart, as on 31st December 2022, we continue
to provide superior risk-adjusted return, annualized return being about 14% and total return of
Breakup of the total return between this and price change of 65% and 40%.
include the third quarter distribution.
On the risk basis, again, beta continued to remain very
close to zero and both on the debt side as well as on the equity side, we have continued to
outperform the indices and infra stocks.
Just to spend a couple of minutes on the next slide, slide number 13, on the framework agreement
with G R Infra.
This is an agreement to acquire Rajgarh Transmission Limited, which G R Infra
This is an interstate transmission tariff-based competitively bid transmission project.
project consists of the establishment of Pachora SEZ substation of 400 KV level and a
transmission line as well.
The scheduled COD for this project is expected to be by December
It is awarded on a BOOM basis, the payment will be under the interstate transmission
POC mechanism by CTU.
The levelized tariff for this project is about INR 41 crores with a TSA
tenure of 35 years.
IndiGrid will be acquiring this project upon its COD in the third quarter of
In addition to this, we have also signed an MOU with GR Infra to jointly build up to INR 5,000
crore of various transmission projects which are coming up.
The projects will be jointly bid for
identified transmission project.
The idea is both G R as well as IndiGrid will be working on
jointly on these bids and IGT will be acquiring these projects from G R Infra.
Going to Slide Number 14.
We signed a binding share purchase agreement with Sterlite Power
for acquisition of Khargone transmission project.
This is one of the framework assets that we
are acquiring and this constitutes 6 revenue generating elements.
It is again, an inter-state
transmission project, part of the POC mechanism with CTU and BOOM project with 35 years,
the balance life remaining for this project is about 32 years.
This has become operational and revenue generating, since December 2021 with the levelized
tariff being about INR 159-odd crores.
The size of the project from an acquisition perspective is
close to about than INR 1,500 crore and likely to add about INR 85-odd crore to the net
distributable cash flow for IndiGrid, on a yearly basis.
Post-acquisition of this project, the AUM
for IndiGrid will increase to about INR 22700-odd crore and completely fits in this IndiGrid
strategy of acquiring value accretive assets.
Unique feature about this asset, again, is there is existing synergy with one of our existing 765kV
networks in Bhopal Dhule Transmission Project.
So one transmission line terminates in the
Dhule sub-station, by which we are able to optimize on the operations and maintenance for
January 30, 2023
Khargone transmission post its acquisition.
I will request Harsh to take the next couple of slides
on the business outlook over the next few quarters, please.
Harsh Shah
Thanks, Meghana.
On Slide #15, we have tried to capture a historical track record and what
might happen in the future.
And I think some of you might have been investors since IPO or
even have been present around that time.
So we had showed this chart at that time, five years
ago, to showcase how the DPU chart would look like if there were only IPO assets, which is IPA
(Initial Portfolio Assets) assets as mentioned above.
Then there was a set of assets which we targeted to acquire, which is in the dark blue colour -
new acquisitions number one.
We concluded other two big asset acquisitions pre 2019, which
were ENICL+OGPTL+NRSS, which is shown in green.
And subsequently, we have been
continuously doing that.
Now what this chart showcases is that the way in which we can actually deliver predictability at
predictable growth is by acquiring assets consistently at the right price and right growth which
would enable us to not only streamline our DPU predictability but also increase it over a period
And that's why this chart is showcased to show that, if you look at FY '23 and behind,
it is the value accretive growth that has spanned out and year-on-year, we've increased by 3% to
And as we stand today in FY ’23, we not only have headroom to maintain what we have
distributed for a long time, but also ability to grow by acquisitions as well as the acquisitions
that we have done till now.
Going on slide 16, is the business outlook for us for the rest of the year and coming few months.
So on the portfolio strategy, I think we will remain to continue to maintain our assets well and
ensure that you know what we have committed and promised, it's delivered as a sustainable
distribution to our investors.
This year, we will look to deliver the DPU guidance of Rs. 13.2,
nine months of which we have already done.
We continue to acquire assets.
We have in all acquired about or signed to acquire about INR
2,000 crore over the last quarter.
And the future outlay that we see in the transmission sector,
about INR 2,50,000 crore is a sizable opportunity.
In addition, as and when the state assets
become monetizable, we believe that's going to be a large-scale expansion as well.
We are also proactively looking for other power transmission bids as well as at adjacent spaces
like utility scale battery storage, which do provide sustainable cash flows.
On the balance sheet
side, I think, as we maintain before, we like to remain in the mean and when interest rates were
falling too fast we didn't fall too fast, and when the interest rates were rising too much, our cost
of debt at a portfolio average level, it is going to pretty much remained lesser than the growth
that has taken place in the interest rate.
So we try to remain in the mean to ensure that there is
less variability in terms of our interest rate and cost, and we can provide predictable distribution.
India Grid Trust
January 30, 2023
On the asset management side, we continue to maintain maximum ability in our incentives.
lot of our portfolios we have done self-reliant O&M practices, which pretty much means that
there is no contracted AMC and our team members at IndiGrid are maintaining those assets.
addition to, we are looking at more business intelligence platform, which will further allow us
to optimize the cost and increase reliability.
We commit to and try to maintain the world-class EHS and ESG practices across our portfolio.
On the next point, while many of them are linked, especially the first two, is with respect to
certain amendments in the tax anomalies that we are seeing between InvIT taxation and others.
I think let's hope what the budget throws, but if there is something which we do believe that will
result into more liquidity and better liquidity for investors and in which, we can refer, attract
I think that's where we kind of end the short presentation for the quarter.
We can please open for
question answer.
Questions and answers
Moderator
Our first question is from the line of Mohit Kumar from DAM Capital.
Mohit Kumar
Sir, first question is on this framework agreement.
So have we identified the projects?
these projects going to bid out in next three months?
Or is it a slightly longer term in nature?
Harsh Shah
Yes, we have identified the projects, they are specific projects that we are working on.
the bid pipelines are too specific.
But they are ones which are already announced.
one of those projects.
Mohit Kumar
Like, what will be the leverage post all this transactions, all the acquisitions especially, once we
finish the KTL?
And how much extra limit we have to borrow and acquire the asset?
you look at the capital for FY '24?
Harsh Shah
Yes, So Mohit, I think that's a maths I can run or hazard a guess, but I think if you add in our
AUM and debt INR 1,700 crore will be adding between Raichur and KTL ,give that number.
But Meghana, do you have the specific number handy, which you can share?
Meghana Pandit
So Mohit, today, we are at 58%, which is after Raichur.
After acquiring Khargone
transmission, it will go to somewhere close to 61-odd percent, And that's the identified assets.
After that, post-acquisition, of course, we will add it both depending on the size of the
acquisition, it will get added to the debt as well as to the bottom line.
But even after acquiring
Khargone, you can see there is still a significant headroom that is available to us.
Mohit Kumar
Last question, sir, what is holding up the monetization of that Power Grid asset?
anything obstacle to bid the assets out, is there something you heard of?
Harsh Shah
So I don't know about the hearsay part, but whether Power Grid decides to monetize or not
remains to be seen.
Any public asset monetization, Sale of asset or concession should go through
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January 30, 2023
a competitive bidding process.
And that would be the right thing to do because at the end of the
day, the assets are built with taxpayers' money.
And it's important that right transparent bid
process takes place for any monetization, be it Power Grid assets or others.
So I think that's our
view is, whether Power Grid decides to monetize or not remains to be seen.
Obviously, it's a
listed company with a separate board it's their choice and decision.
But I would rather say even
state monetization.
If you look at the AOMT guidelines, they are very, very clearly identifying
that it should be an auction.
And I hope that states come up with that process very soon because
that's where most amount of capital is also needed.
Moderator
Our next question is from the line of Rahul Marathe from ICIC Prudential Pension Funds.
Rahul Marathe
If you would like to take me through this MOU that you have signed with GR Infra.
wanted to get some clarity like are there any kind of greenfield risk that we would be exposing
ourselves to in this joint-bidding?
Harsh Shah
So I think, Rahul, I would say that the MOU is more like an alignment right?
There are different
projects under that.
And I would say that in the framework that we have signed for the Rajgarh
Transmission, we are not taking any greenfield risk.
But projects where we may have synergies
with like, let's say, an expansion or connecting bay with our own substation or a small lines, we
don't mind taking that risk.
We've already taken it in Kallam and that’s going well.
So both parties will need to agree to a
particular project and at the end of the day, what is the maximum value that both parties bring
That's what one evaluates to win in a competitive process.
So such MOU allows us to
talk freely and develop explore different options.
And one of the options can be that in a project
where IndiGrid feels, there is more synergy and more value for IndiGrid, you might pick under
construction risk as well.
Rahul Marathe
Sir, what would be the total exposure of such kind of risk in our total AUM?
have some risk management on that framework?
Harsh Shah
So I would say look, we have risk management framework, but that's not public and we can't
But there is a clear guideline of SEBI that we will never be more than 10%.
like a law for us.
We cannot be and we would not like to be even closer to that number.
exactly we do within which 10% is more a risk management framework at a management level.
Moderator
Our next question is from the line of Pratik Kothari from Unique Portfolio Manager.
Pratik Kothari
And congratulations for a couple of potential acquisition after a long time..
appreciate your sharing the indicative DPU chart.
As my first question regarding the MOU again,
this seems to be a very interesting opportunity for us, the method to go forward.
highlight any risks that we need to be aware of why do get into such agreement?
you confident of?
India Grid Trust
January 30, 2023
Harsh Shah
So, the MOU itself doesn't pose any risk.
As I said, MOU is a memorandum of understanding.
So we are working with a common understanding for a certain set of projects that itself will
never pose a risk.
But as I said, we will look to do different type of arrangements for bids, which
are more strategic or more lucrative to IndiGrid.
So there may be an under construction project,
which we undertake.
But then it only is decided by many other parameters.
So that risk as on
today is not there.
We may take it, but that will be considering if we are getting substantial
synergies over there.
Pratik Kothari
But in such MOU isn’t it that, in this case GR Infra would be the developer and once that is
done, IndiGrid takes on.
So where does this under-construction risk is coming?
Harsh Shah
So one is what you described as a framework type of assets which we have done before and
that's what we have done for Rajgarh project.
And when we say under construction risk, for
example, right now, we have taken Kallam transmission as 100% under construction with
While it's going well.
But there are projects in which we might have synergies and
have risks which are not suitable for IndiGrid, we might partner with somebody.
be with GR for one of the projects.
So it depends on where IndiGrid can add value in those
projects, you might take under-construction risks so as to say that we might bid for it.
Pratik Kothari
And just one small clarification.
You mentioned this term levelized tariff a couple of times, can
you explain what does that mean?
Harsh Shah
So any bid documents have a number which gets compared that whoever has the lowest number
will be declared a winner, and that number becomes public.
So the levelized tariff is that number.
We quote for 35 numbers in the model and then bid.
In order to compare with one number, the
bid process coordinator may use a discount rate.
It can be 10%, 12%, different, depending on
what they have explicitly stated in the bid.
So these 35 numbers gets discounted and there sum
is called the levelized tariff.
When they announced that this bidder has won this project at this
levelized tariff.
And there's a public announcement.
So that is the number that this levelized
tariff is referring to.
Pratik Kothari
And is it fair on our part to compare what you're seeing for this asset versus the leverage tariff
for that underlying assets?
Harsh Shah
Not for capex, yes.
One, there are two anomalies in that because levelized tariff will change
depending on what bid process coordinator took the discount rate.
It can be substantially
different than the other.
So the mathematics does not play out very well.
And second is we don't
pay for capex, as we pay for acquisition value.
Most of our assets have a tariff curve publicly
So you can use a particular discount rate and then compare that to the cost of
acquisition that we have paid, not capex, cost of acquisition.
Moderator
Our next question is from the line of Chandra Mouli M, an Individual Investor.
India Grid Trust
January 30, 2023
Chandra Mouli
Sir, in INR 0.50 per unit which you are distributing this quarter as a capital repayment, is it tax
free to the unit holder?
Harsh Shah
There is a disclosure on one of our old website and exchanges for any tax treatment, I think it is
best to refer to that because tax is not our area of expertise and that how individuals will get
But we have taken a lot of advice and then on tax treatment, potential tax treatments, I
think best is to refer to that to check the tax treatment.
Chandra Mouli
So the next one is you had mentioned that the new acquisition will add about INR 85 crores of
NDCF from the coming years.
That means my understanding is correct that NDCF will go up
by another 8% to 9% from the current level.
So is it fair to assume that the distribution per unit
will also increase in that rate next year?
Harsh Shah
So I think the reason why we showcased the chart before was exactly that what can be done.
However, whether the distribution is increased or not, we have historically taken a decision in
the quarter 4 of the Board Meeting for the next annual year.
So we will be able to guide on that
only in the next quarter.
However, if you look at last five years track record, we have consistently
We apply two parameters.
One parameter is that when we increase distribution, we want
to increase it in a way that at least for next five, six years, even if we do not acquire anything,
our distribution still remains at that level.
And that is very important for our business model,
because we may not acquire assets in some years.
We may not acquire assets every quarter.
And our business should still provide enough headway
to provide distribution visibility to investors and our timing that when the market is right for
acquisition, we acquire at the right price.
So we keep that flexibility with us, but we compare.
Whenever there is an ability to increase distribution consistently and it will remain stable for
next five to six years, we look forward to increase that.
That has been our strategy and
historically we have done it.
Whether it gets done this quarter or not, it's the Board's decision
and we will take it up in the next quarter meeting.
Moderator
Our next question is from the line of Vishal Doshi, an individual investor.
Vishal Doshi
I have a simple question.
The presentation mentions in quarter three, FY '22 DPU of 3.19 and
3.30 in quarter three, FY '23.
So, if you see the breakup of the slide number 9 of the presentation,
it shows the distribution per unit 3.19 with a breakup of interest at 3.1137, dividend yield and
capital repayment at 0.18.
But if you total to this 3.11 and 0.18, it comes to a total of 3.29, vis-
And if you compare it with the payment of quarter three, which is 3.30, I think there
is barely any year-on-year increase in the distribution per unit.
So, I would request clarification
Harsh Shah
Sorry, if I get your questions right, what you're saying is that because there is capital repayment,
there is not enough increase.
Is that what you're saying?
India Grid Trust
January 30, 2023
Vishal Doshi
Yes, that was my second question.
But my first question is that is there any error in the reporting
Like, if you see the distribution per unit is 3.19, am I right?
However, if you see the
slide number 9, it shows that the interest has 3.11 and capital repayment has 0.18.
these two items, it becomes 3.29 rather than 3.19.
Harsh Shah
So I think first is that you are looking at quarter three FY '22.
You should have been looking
at quarter three FY '23.
Vishal Doshi
No, so I am comparing the quarter three FY '22 versus quarter three FY '23.
So suppose if my
quarter three FY '22 is not 3.19, if it is 3.29, if I compare it with 3.30, there is no 3.5% year-on-
year increase in the distribution per unit?
Harsh Shah
But quarter three, you are saying quarter three FY '22, 3.19, you are comparing with
Vishal Doshi
3.3, quarter three FY '23.
Harsh Shah
So 3.2 versus 3.3 is about 3.5% increase.
Vishal Doshi
Yes, but that 3.2 is exactly 3.29.
See, is it possible for someone in the office to maybe open the
presentation and make.
Harsh Shah
Certainly, I can look at it.
Because you are saying that 3.11 plus 0.1863.
So, I can tell you that there seems to be an error here. 3.19 is sacrosanct because that is what we
distributed as total.
Vishal Doshi
But if you total these two items then it is 3.29.
Harsh Shah
I understand, That is why I am saying there seems to be an error in FY '22, disclosure of 3.11
Give us a minute, we have Divya with us, she will just check in a second.
Vishal Doshi
So obviously you have correctly inferred my second question.
There is a rise in the capital
So I just wanted to understand, although we understand that there is some sort of an
EMI schedule value the loan gets repaid, your interest component gets decreases.
are still maintaining the maybe same level of the distribution per unit, but in terms of the interest,
I just wanted to pick up your thoughts.
Is there a possibility to have the higher interest income
and maybe in a similar fashion if you at the same time you want to have the objective of
maintaining the constant distribution per unit for next maybe say three, four, five, six as I
mentioned in the previous query?
Harsh Shah
So I'll just describe that in this there are two conceptual inaccuracies.
Point one, comparing the
interest in principle versus an EMI is conceptually not a correct assumption over here.
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January 30, 2023
99% of our assets are permanent assets.
And the reason why the second is, it is second anomaly
that it is not in our choice to decide what interest and principal.
The income from InvIT, rather
let say, income in the hands of InvIT are kept as a pass through and with that CBDT has required
us to act the trust itself as a pass-through vehicle.
And therefore whatever form and manner the
SPV can give up the cash to the InvIT, right, is the same manner in which IndiGrid needs to give
it back to investors.
So now what happens?
In some of the SPVs, let’s say there is more EBITDA than the interest
that you can charge.
So the residual EBITDA comes from SPV to InvIT in form of principal
repayment and therefore the InvIT needs to also provide that as principal repayment to investors.
Now this is not a repayment of your capital.
There is no pass value over here.
manner in which the money is being transferred to SPV to InvIT and InvIT to the investor.
whole reason to choose the trust as a vehicle was to provide this ability because in companies
you cannot do this to give it to investors.
You cannot take out the capital repayment away to
owners of the business.
And that is the conceptual change that is why we have chosen trust.
So one clarity I would like to provide that it is not in our hands.
It depends on we have 14, 15
SPVs, every SPV's capital structure is different.
Depending on that they will give up some
interest, some dividend, some principle, we just add it up at InvIT, make adjustments and
It is not in our ability to change that.
So that is one.
Second is, conceptually, this is not really capital given asset value, a day before the principal
repayment was also the same, today is also the same.
It is just a mode in which the money is
passed to the investor, because we have chosen trust as a platform.
As a government has chosen
trust as a legal entity.
So I think there is a, this is firstly we need to check this 3.19-plus that,
certainly we take that view, I think you are right on that, we will just double check and get back
But the second conceptually is that principal repayment is just a mode in which the
money is passed on to unit holder, not a conceptual repayment of capital.
Vishal Doshi
If I may allow maybe second question or relating to the same thing.
Should I go with the second
Can I go with the second question please?
So I also see that you have actually parked some INR 63 crore as not been a distribution and
parking it as reserve.
The reserve balance has increased to INR 217 crores, cumulative.
understand that it will be for some future acquisitions or for some future planning or maybe pay
out or stability point of view.
When I see the slide number 15 with respect to the same and see
the chart maybe you can just help us in understanding the same?
FY ‘24 and FY '25 onwards,
the DPU line is again 13.20.
So if you can maybe throw some light because you have the results
of INR 217-plus crore, as I said in the previous question that you might have an extra EBITDA
because of the acquisitions to the tune of around INR 85 crore.
So how does that actually really
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January 30, 2023
pan out which we are not able to see in the slide number 15 on guideline or the framework for
the distribution per unit?
Harsh Shah
Okay, so very long analysis, but let me describe what I understood then you say yes or no and
then I can answer.
Your question is that you are earning X DPU today with a set of assets.
acquire these assets and earn Y DPU which is higher than the X and you might have to increase
the DPU, but in the slide number 15, there is a chart according to them there is FY '24 onwards,
DPU is going up or can go up.
So how does this tally with each other?
Is that the question?
Vishal Doshi
And there was just one missing point was that you have the surplus reserve of INR 217
crore, which is yet to be distributed.
Harsh Shah
So first question let me answer on surplus.
Surplus has many uses.
is used to stabilize, surplus is used to keep liquidity for acquisition, surplus is used to fight
against volatility sometimes.
So it's a variety of uses for the surplus that we have flexibility to
We think that the surplus is extremely useful.
And we have seen that in two occasions, many
occasions to be honest.
But let's say the first occasion is in the COVID first quarter.
While our business was doing fine, we were confident on our collection.
But for that one quarter,
quarter one of FY '21, there was a dip in collection because nobody went to office.
So then we could dip into our reserves and pay from that.
In quarter two or quarter three
onwards, we recovered and then there was no issue.
So it is an important tool for management
to be able to provide you predictability.
So that is one.
It can be used in varieties.
I would not include reserve in this analysis.
What we do is in this
analysis, now coming to slide number 15, we calculate that if we do not do anything and we just
keep refinancing some of our liabilities and keep on operating the asset as is with the number of
assets that are in our hands, how does the DPU profile look for next five, 10 years.
look as on FY '23, where we are given 13.2, so if you do not do anything, the red curve was
So, if you do not acquire any assets also, 13.2 was fairly robust and ongoing, not an
Now, we acquired or rather let us say, we assigned to acquire right now is three assets, different
So, at some point in time in FY '24, FY '25, there is going to be sufficient
incremental NDCF that might get generated which we have to distribute to the unit holder.
when it happens, how much it happens within the 10% criteria also say, we need to maintain
It's a model that we run and we say okay, if your NDCF is more than let's say, 90% NDCF
you have to distribute and if we have sufficient cash that we have earned, sometimes you may
have to increase DPU, but it gets modeled every quarter, post results, post cash and post NDCF.
So this is more for an indication of how if somebody was to model our entire tariff curve which
are published in valuation reports, someone might read similar analysis.
It is more a guideline.
It is not an accurate prediction in which quarter and year the DPU will go up.
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Moderator
Our next question is from the line of Sunil Shah from Turtle Star.
Sunil Shah
Welcome, Harsh.
Always good to hear you, Meghana and everybody on the call.
much for this call and everything that you shared.
It's nice to have the slide 15 back in the
presentation deck.
Now, what I understand is the slide 15 is indicating all the assets which are
reasonably in place and which are more or less in the framework side as well, barring the new
So the MOU which we are going to sign off, those assets are completely going to
be future and is still not at all captured or envisaged in the slide 15.
Is my thinking clear on this?
Harsh Shah
The thinking is right and that's what we are not putting anything for which we have not
signed agreements or a confirmed bid or things like that.
This is based on, the orange line is
based on exactly the rights of Kallam and KTL.
Sunil Shah
Yes, so that's completely visible to us and so that's what it is, right?
Moderator
Our next question is from the line of Rajan Patadiya, an individual investor.
Rajan Patadiya
I would like to congratulate for your yield accretive acquisitions.
My question is this.
acquisition that we are going to do worth INR 1500 crores for which I have read the valuation
We are acquiring it around 8.5% ROI.
What will be our cost of interest for that?
if there is a little increase in rate of interest, it will not be that much yield accretive?
please throw some light on that?
Harsh Shah
I think it is a very important question and clarification.
So it is good to have this
The 8.5% that you may be referring in the valuation report is WACC and it is not our
rate of interest or cost at which we are buying.
What the valuation report does is calculates the
WACC takes the tax of 20% or 25% whatever is applicable and reduces the EBITDA of the
project to come to the value.
So therefore the 8.5% which is there as a WACC discounts the cash
flow after removing 20% tax from there.
Whereas in reality we don't pay 20% tax.
to calculate what is the rate of interest or the way you are trying to compare, you should just use
discount rate to come to the FMV that is there without tax impact and that number will be higher
than 8.5% for FMV calculation.
So coming to the interest side, I think agree your point.
So if I were to describe this, is it as a
spread at a cost of debt versus at the rate at which you have discounted the cash flows?
spread between them is sizable higher.
The moment you look at it, from an EBITDA discount
So we will have a good amount of spread between our cost of debt and the rate of
discounting at which we have purchased.
So I don't see it as an impact coming on us
And again, we are using the current cost of debt and capital, which is at, I would
say, I won't say peak, but at an elevated level of interest rates.
Rajan Patadiya
Yes, definitely not at bottom.
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January 30, 2023
Harsh Shah
Yes, definitely not at bottom, correct.
So I think even at this rate there is sufficient cushion in
terms of further variability and we will still be accretive on this acquisition.
Rajan Patadiya
And what will be our borrowing capacity left after this acquisition?
Harsh Shah
I think earlier somebody asked that question.
There would be significant, now I don't have the
exact number but one can calculate but anywhere from INR 2,000 crores to INR 3,000 crores as
So it's a sizable amount.
Moderator
That was the last question for today.
I now request the management team to add a
few closing comments.
Harsh Shah
And thanks a lot for hosting us and thanks all the investors to join the call.
really happy about the questions that have come to us, very important ones.
And I think I also
recognize one of the questions which was about an error on the DPU breakup for FY '22 which
we will correct.
But other than that, I think very important question.
We are glad that our
investors understand our business so well.
They understand the values by which we are living,
the flexibility like keeping reserve with us and doing creative acquisitions.
All of it, that courage
comes from the fact that our investors understand the business very well, and they do show
confidence on how we are running the assets.
So thank you, look forward for the next call.
Moderator
Ladies and gentlemen, on behalf of Axis Capital Limited, that concludes this
Thank you for joining us and you may now disconnect your lines.