IRB Infrastructure Developers Ltd
NSE:IRB
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
37.15
76.85
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
C
|
C3.ai Inc
NYSE:AI
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
IRB Infrastructure Developers Ltd
You don't have any saved screeners yet
Good evening, ladies and gentlemen. Welcome to the IRB Infrastructure Developers conference call hosted by the company for discussing the unaudited financial results for Q1 FY '20. We have with us on the call today, Mr. Virendra Mhaiskar, Mr. Sudhir Hoshing, Mr. Anil Yadav, Mr. Mehul Patel, and Ms. Poonam Nishal. After the opening remarks by the management, there will be a question-and-answer session. I would now request Mr. Mhaiskar to give you an overview of the significant development during the quarter. Thank you, and over to you, sir.
A very good evening to all of you. I would like to welcome all the investors and analysts on this con call. We have provided detailed synopsis of the deal as well as results on our website. I hope you have been able to go through our detailed numbers as well as the presentation by now. IRB has been at the forefront of evolving its business model to suit the changing industry dynamics and pace while emerging stronger for taking up meaningful and sustainable growth. We have executed over 13,000 lane kilometers of projects in the last 2 decades for the government of India, and we'll continue to participate in the large grid expansion and upgradation plan being envisaged across the country. Infrastructure development needs continuous infusion of capital. And in a growth phase, this amount becomes extremely significant. We are pleased to have GIC as our long-term investor in this journey. They will be investing INR 4,400 crores in a portfolio of 9 of our BOT assets through a private infrastructure where IRB will own 51% stake and keep management control. When complete, the trust will have an enterprise value of approximately INR 22,500 crores and GIC will be also acquiring 49% stake in the Investment Manager entity of this InvIT. The proceeds of this transaction will be used to part deleverage the portfolio and also to fund the balance equity for completing the under construction projects. The EPC and O&M contracts will continue to be with IRB in the capacity of the project manager. This deal marks great development for the company taking us to the next orbit of business model, making us stronger and sustainable. The portfolio of this 9 assets will have a potential to generate a total free cash flow of over INR 88,000 crores over its life. IRB and GIC plan to also explore future road -- develop road sector opportunities in India together through this InvIT platform, exhibiting IRB's strength and domain expertise as a market leader in Indian roads and highway sector. Coming now to our results for the quarter. We reported a robust 15% year-on-year growth in revenues driven by 2 new tolling streams getting added in BOT portfolio through Yedeshi Aurangabad and Hapur Moradabad project, even as Pune Solapur concession was completed and handed back to the government. The BOT revenues for 4 of our projects, Agra-Etawah and the 3 Rajasthan projects, were continued to impact it due to weak -- due to peak construction fees. As shared earlier, today, the project stretches face significant blockages due to various structures being under construction for the -- and the commuters have forced to take the less preferred alternatives. Once the construction completes and smooth momentum along these projects start, the traffic will come back to these stretches as we have had similar experience in the Kaithal - Rajasthan project where decongestion post completion has led to a 30% jump in collections. Strong execution continues across 6 of our BOT projects and 1 HAM project, which combined with O&M for operational and InvIT project led to construction revenues growing at 15% as well. Our confidence in near first strength of BOT model has found resonance in NHAI as well as ministry's approach going forward. The ministry has already declared its intention to come up with around 3,000 kilometers of roads to be awarded on BOT basis. Considering the upcoming opportunity in the space of BOT, TOT and HAM, we are well positioned to participate in the same. With this, I request Anil to take you through the financial analysis before addressing any queries and the subsequent Q&A session. Also, I would like to introduce Mr. Bajaj, who has been the great support and adviser to this deal with GIC, to be with me on this conference call.
Thank you, sir. I will present the financial analysis of Q1 of FY '20 versus Q1 of FY '19. The total consolidated income for Q1 of FY '20 has increased to INR 1,821 crores as against INR 1,583 crores for Q1 of FY '19, registering growth of 15%. The consolidated toll revenue for Q1 of FY '20 has increased to INR 600 crores from INR 523 crores for Q1 of FY '19, registering growth of 15%. The consolidated construction revenue has also increased in Q1 of FY '20 to INR 1,173 crores, a growth of 16% from INR 1,015 crores in Q1 of FY '19. EBITDA for Q1 of FY '20 has increased to INR 904 crores from INR 792 crores, registering growth of 14% over Q1 of FY '19. Interest cost has also increased to INR 363 crores in Q1 of FY '20 from INR 248 crores in Q1 of FY '19. Increase in the interest cost is on account of loan drawable for under construction project, like 4 to 6 laning project. We are drawing a date for the completion of the project. And also had a impact of Solapur - Yedeshi, and Yedeshi Aurangabad has become operational. Earlier, that interest was charged -- capitalized, now charged to the P&L account. Depreciation has also increased to INR 154 crores in Q1 of FY '20 from INR 134 crores in Q1 of FY '19. Depreciation has also increased because of the Solapur - Yedeshi, and Yedeshi Aurangabad has become operational. As a result of this, PBT has declined to INR 387 crores in Q1 of FY '20 from INR 410 crores, a decline of 6% over Q1 of FY '19. PAT considering the full taxation rate, PAT has declined to INR 207 crores, a decline of 17% from INR 250 crores in Q1 of FY '19. Now I will request moderator to open the session for question and answers.
[Operators Instructions] We have our first question from the line of Atul Tiwari from Citigroup.
Congratulations on completing this deal for the private InvIT with GIC. Sir, I have few questions on the deal. So these road assets both under construction and the operational, which are being transferred to the private InvIT, how much will be the total debt currently combined it on them as of now?
As I said, the enterprise value of this whole portfolio and completion of construction would be approximately INR 22,500 crores. And as we said, the equity portion of GIC would be around INR 4,400 crores, thereby, our value being INR 4,600 crores. Rest would be debt.
But sir, that will be the debt upon completion because according to few of them are still under construction, right? So I'm just asking, what is the debt as of, say, March '19 or whatever is the latest data available?
Yes. So as we said, there would be a part amount of deleveraging happening. So once the deleveraging is done, the deleveraging to the extent of INR 3,000 crores would be done. And then we would be also drawing the balance debt. That's why I was wanting you to give a correct picture at the end of the deal because that will make things easier for you to understand. So at the end of the deal, what I told is going to be the scenario.
Okay. Okay. And what is the time lines you're looking at?
For the closure of the deal, you mean?
Yes. Yes. For the completion of the deal and for the assets to move and the InvIT to be actually formed.
I expect another 3 to 4 months for consummating this deal.
Okay. And does IRB Infrastructure acting as EPC and O&M manager? So on what basis the EPC and O&M fee being charged? Is it a fixed number? Or how does it work?
It's not a question of fee. As I said, the EPC and O&M for the under construction projects, the EPC part. And the O&M for all the operational projects will continue to be done by IRB at whatever it is the price that we have agreed for the SPV when the deal transaction started.
Okay. So I mean what is the price? I mean what -- is it a fixed number? Or does it reference something? Or...
Yes, yes. So as we have been doing in the past, IRB does a fixed-price contract with the SPV always. And this -- if I'm not wrong, I think the EPC opportunity out of the total order book for these under construction assets would be approximately close to INR 7,000 crores.
Okay. Okay. Would you have handy the total debt on the SPV number? Again, say, as of March '19, on these SPVs? Is that number handy? Or should I take it off-line?
I -- it will be better if we can take it off-line because, as I said, there will be a INR 3,000 crores of deleveraging happening first.
So sir, what is this INR 3,000 crores deleveraging. I mean what does it exactly refer to? So like IRB is selling its stakes and getting that money, is it?
No. No, no. I'll make it more simpler for you. So out of the INR 4,400 crores that GIC will be bringing in, INR 3,000 crores will be used to deleverage the portfolio and INR 1,400 crores will be utilized towards funding the balance equity component, there being the 49%. The total outstanding equity is in the range of around INR 2,800 crores. So on -- as a 49% partner, close to INR 2,800 crores, is the total balance equity. 1,400 odd crores will be brought in by them, and the balance will be brought in by us.
So we have next question from the line of Ashish Shah from Centrum Broking.
Congratulations on the deal, sir. Sir, just wanted to go through the structure a little bit more in clarity so that we understand it clearly. We are transferring the 9 assets into the InvIT. And on -- upon the transfer, the assets -- the 9 assets that will be transferred would effectively get deconsolidated from our balance sheet. So there will be certain amount of debt, which will move out of our consolidated balance sheet and rest is InvIT. Is that -- first of all, is that understanding correct?
No. Ashish, what is happening here, we're not selling these assets. So IRB will continue to hold 51% stake in the private InvIT and thereby the consolidation. And also, we'll continue to have the management control with us. So as a result, the consolidation for IRB balance sheet will continue, and 51% stake also will be with IRB. So there is no sale happening here. We are inducting a financial partner into this particular structure, and the structure is going to be private InvIT.
Sure. So it will continue to be a line-by-line consolidation with a 51% stake.
That's correct.
Right. So then the INR 4,400 crores, the money -- which is needed infused, INR 3,000 crores will be used for reducing the debt, which exists in the assets at this point of time.
That's correct.
And 1,400, as you said, is for the 50-odd-percent share for the balance 2,800. So we will sell infused...
[indiscernible] before the balance equity on our.
Right. So the deleveraging that essentially that we are talking about on a consolidated basis to about 1.6 odd, this is on the account of the repayment of this INR 3,000 crores, which will immediately drive this deconsolidating -- deleveraging.
Yes. So INR 3,000 crores of deleveraging will happen, thereby giving us a saving of at least INR 300 crores to INR 350 crores annually, and the balanced equity of INR 1,400 crores will be infused into the under construction project over the next 1, 1.5 years period by GIC.
Sir, we seem to have lost the line of the participant who was asking question.
Ashish, are you there?
So we seem to have lost him.
Maybe we can move to the next question.
We have the next question from the line of Vibhor Singhal from PhillipCapital.
Congrats on getting this deal through. So just continuing on where Ashish left in the last question. So if I -- if we're getting this right, basically, INR 3,000 crores of the INR 4,400 that is coming in will be used to deleverage the SPVs themselves. This money is not going to come to IRB Company as such.
For the money to come to IRB, the projects are nowhere -- not going out of IRB in the first place. So the projects continue to be at IRB as I explained. So the consolidated balance sheet of IRB will continue to be the way it is except for the minority interest carve-out. And the total debt that will get reduced will also get reduced from the IRB balance sheet.
Fair enough. And sir, in these 9 projects, you mentioned that INR 2,800 crores is the amount of equity that is pending to be invested. If my calculation is right, we would have invested around INR 4,000 crores already. The total equity in these projects would be around INR 7,000 crores?
Pardon?
The total equity invested plus to be invested for these 9 projects would be around INR 7,000 crores?
Yes. Close to that.
Close to that. Right. And out of that INR 2,800 crores is yet to be invested. So approximately INR 4,000 crores, INR 4,200 crores is what we would have already invested in these projects.
Yes. That's correct.
Sure. And just the deal announcement, circular also says that GIC will invest up to INR 4,400 crores. So is this INR 4,400 crores number contingent on something? Or is it a fixed number that this INR 4,400 crores is what the deal value is?
No, no. It's 40 -- its exact number would be somewhere around INR 4,392 crores kind, rounded out to INR 4,400 crores.
Yes. So -- but it's not contingent on end-up performance of any of the projects or any other condition.
No, no, no. Nothing, nothing, nothing. It's a very clear and very transparent transaction where they are bringing in INR 4,400 odd crores.
Fair enough. And sir, now just to, I mean, move away from the deal and getting back to the company's core business. So now, sir, again, this transaction basically leaves us with just 3 HAM projects. The other 3 BOT projects that we have will also get completed in the next couple of years itself. So going forward -- as you mentioned, there is more than 3,000 kilometers of opportunity on the BOT basis. Going forward, from NHAI, if we are looking at BOT, TOT and HAM, the order of our preference will remain same, that we would prefer BOT and then TOT and then HAM?
I think I would like to point out here that the dynamics for the company to look at the opportunities from here on will change dramatically. With having GIC to wanting to explore future or sector opportunities with us gives us a big wide window to look at more bigger and better opportunities. And in that sense, we will look at the opportunities going forward. So yes, the appetite will be much larger going forward.
Sure, sir. So just one small clarification in the end, if I can. Doesn't the InvIT regulation buying that are not more than 20% of the projects should be under construction? Or is it just for publicly listed in this, and it does not apply to private InvIT.
Yes. You are right. It is -- it applies to publicly listed InvIT, but not to private InvIT.
Okay. So Private InvIT, we can have more than 20% also on the construction.
Yes, yes, yes.
We have next question from the line of Ankita Shah from Elara Capital.
Congratulations on the deal. So firstly, this -- what would be the gross consolidate as on June?
Gross consolidate as of June is INR 15,600 crores, and we have roughly INR 1,400 crores of cash also available.
Okay. So as soon as this deal is done, we would get the INR 3,000 crores that will help in deleveraging this number?
Right.
Yes, that is correct. That is correct.
And the balance INR 1,400 crores will come over the next 3 years as in when the equity...
Around 1.5 years.
1.5 years.
Around 2 years.
Yes.
Okay. Around 2 years. So the number of balance equity requirement that you've mentioned in the presentation, it is total requirement, right, not our share?
It's total requirement including HAM.
Including HAM, but including these 9 assets also.
Yes. Total requirement including BOT and HAM portfolio that IRB has.
Okay. So if you can exclude these 9 assets and the INR 1,400 crores that will be brought in by the partner, what would be the -- what would be our outgo in terms of equity requirement over the next [ 2 years ]?
So I'll try to clarify here. The 9 projects outstanding equity is close to INR 2,800 crores. It will be shared in the proportion of 51% and 49% by IRB and GIC, respectively. And other than that, as we explained earlier, there are 3 HAM projects. Out of which, one is operational, the balance to -- we are yet to hear from NHAI. So as far as the balanced operational BOT project is concerned, the balance equity commitment would be max INR 100 crores.
INR 100 crores.
Yes.
But the...
The HAM project, I mean.
But this is only the one, which is operational or under construction.
That is right.
Okay. I'll take it off-line, but actually, I wanted all the projects excluding...
Only 3 HAM projects are there. There is no other balance including...
The other 2?
The other 2 BOT projects are completed BOT projects. There is no...
HAM?
There are 2 HAM projects. Together, will be another INR 150-odd crores of equity.
Okay. Okay. And -- okay. And sir, the pipeline for new projects. I mean we've been hearing that the new project awarding would start soon, and we are expecting a lot of BOT projects to come up for the awarding. Have you seen any kind of tendering activity started from NHAI side?
So as on date, if you ask me in terms of opportunity, BOT, not so much. But TOT, we see 2 transactions right now up for bidding. One is from NHAI, which is the TOT package 3, and also from MSRDC for the Bombay-Pune asset for 11 years.
Okay. And any other HAM projects from NHAI?
Not any of HAM at the moment.
When do you see it expected to start?
I think the NHAI chairman will be better poised to answer this, but my guess is another couple of months.
We have next question from the line of Ateet Bansal from Reliance Mutual Fund.
Congrats on this GIC deal. Just had one question. You also have another listed InvIT, right? What is the impact of this private InvIT on that listed InvIT, if at all?
Okay. Look, the public InvIT has been established with an objective to house operational projects and provide steady cash flows to its investor unitholders. Accordingly, IRB has given a ROFR to the public InvIT for acquiring future assets being sold by IRB. In the present transaction, IRB is not selling these assets, but roping in financial investors as GIC to create a platform for developing projects. So -- and also, if we look at the yield where the public InvIT today is, it will have to consider acquiring stabilized and mature asset so as to make the acquisition for the public InvIT yield accretive from day 1. So I think the focus, as far as I understand, for the public InvIT will have to be the last mile asset where you have 5, 7 years of concession period, and it can actually generate very good cash flows for -- as a yield for the unitholders. That is the kind of projects, which would make sense for the public InvIT given where the yields are in -- of our approximate 18%, 19%. So that's the understanding we have as far as the public InvIT is concerned. And as I said, IRB is not selling these assets, but inducting a financial investor through a private InvIT structure.
So essentially, from IRB's portfolio, the public InvIT will not get any further at this point of time because all these assets are already gone in a private InvIT.
No. As I said, public InvIT continues to look at a lot of opportunities, which are floating around where the last mile concessions are balanced. And in future, if this platform decides to sell any of its project, the ROFR guidelines will also be there for the public InvIT to look at it. Because today, these projects will not make sense for the public InvIT in any way because most of them are under construction, and they are yet to stabilize in terms of its cash flow given the long concession.
We have next question from the line of Aditya Mongia from Kotak Securities.
Congratulations for the deal getting done.
Thank you.
Sure. There were a few questions from my side. The first question is related to the deal. So I wanted to check with you that some of these projects obviously are under construction wherein the toll revenues may change over time. Is there any conditional rate on this agreement, which will compensate GIC in terms of additional shareholding if an adverse inventory in terms of traffic were to happen?
Aditya, No. No such guarantee has been given. The traffic risk will be shared both by IRB and GIC as per the economic parameters. There is no such adjustment formula to the deal at all.
Got that. The second question, if the deal was that -- obviously, the present scope of GIC's involvement is them being a financial investment in 9 projects, and this portfolio that you have basically carved out. Would GIC have any role to play in terms of funding any incremental projects that IRB want to ensue here on?
Yes. As I said, IRB and GIC's plan to also exclude future road sector opportunities in India. So yes, we will be looking together to bid on more opportunities going forward.
So how will that work? So basically, will IRB be bidding for projects? Or will this be a joint effort?
We do have a very clear understanding in terms of the role that one would play. So it would continue to be a 51-49 model where EPC and O&M for the project will remain with IRB. And GIC will plan to look at exploring the opportunity on a -- as a financial investor.
Understood. So let's say, if IRB were to win a few projects incrementally, which we have acquired, let's say, INR 100 crores or let's say INR 1,000 crores of equity, can you introduce play between these 2 entities while IRB will continue to do the EPC work and O&M for these projects also?
Yes. Yes. So IRB will continue to do the EPC and O&M. So suppose if -- let's look at it this way that IRB and GIC together putting a bid. Then in that bid, IRB will continue to have 51% equity, GIC would have 49%, and the EPC, O&M will be catered to buy IRB as per the agreed numbers that would have been put into the bid.
Exactly. And this deal in a way makes just the only way of IRB bidding incrementally. They can't bid by themselves. Basically, you have to bid in consortium.
There is no such restriction for IRB not being able to bid. Certainly, having a great partner like GIC, we are also enthused to have them with us, considering the long-term opportunity available in the sector. But in case, if suppose there is opportunity and if they are not comfortable with that bid, there are -- there is no restrain on us from bidding -- going ahead and bidding on the project.
Sure. Last question from my side, now that obviously you have the backing of a fairly sound financial partner, you obviously hinted at doing larger-sized projects incrementally. Should one be thinking to anything beyond roads at this point of time?
No. This partnership is solely focused on our road projects.
So we have next question from the line of Mohit Kumar from IDFC Securities.
Congratulations on the deals, sir. So I have two questions. Sir, what is kind of leverage are you looking for in this particular InvIT? Are we looking to go up to 74%? And what is the kind of IM fees and project manager fees we have -- is there in the deal?
So as I said, the enterprise value will be around INR 22,500 crores with equity component of around INR 9,000 crores. So that gives you the debt amount. And there is no need to increase this debt beyond these levels because this is the pricing at which we'll get the project portfolio completed. And IM fees will be very, very minimal given the fact that the EPC and O&M is being added by IRB as a project manager. So it would be more to do with the operational expense of maybe a 3, 3-odd -- INR 3 crores to INR 4 crores per annum, I think.
Okay, sir. Going back to Mumbai - Pune asset, sir, I think it was the -- there is a tender floated for 3 months. Am I right? You have until the time the MSRDC is warranted, but wanted...
Yes, yes, yes. Correct, correct. You're right.
So sir, has it the -- has the tender closed? Or what was happening there?
Yes. We have not taken up that. That has been backed by some local entity, and that they will be continuing the project from 10th of August.
For the next 3 months. Right, sir?
That's correct.
We have next question from the line of Inderjeet Bhatia from Macquarie Group.
Congratulations on the deal. My question is, if I look at your intentions on participating in opportunities, is it fair to say that IRB is now looking more to kind of acquire assets, which are already operational and kind of moving away from, say, build-operate toll kind of a model or until the time BOT is not available, you're looking at TOT or looking at Mumbai-Pune? And so that actually kind of puts -- you have a situation where we'll have 2 InvITs and then IRB itself looking to participate in that kind of operational. So if you could just clarify this whole structure, it would be helpful.
Okay. So I'll start with the public InvIT. Public InvIT houses 7 of our operational assets, which were sold to the public InvIT a couple of years back. And IRB continues toward 16% units in that public InvIT. As regards this particular transaction is concerned and the strategy going forward is concerned, we would be continuing to focus on upcoming BOT opportunities. And I mentioned the chronology is as BOT, TOT and HAM, and that would be exact chronology in which we would look at the opportunities. So IRB will continue to be the powerhouse who will execute these projects, undertake its EPC, undertake its O&M and also continue to hold 51% equity in these projects and control the -- and do the management control and run the project. And GIC would be partnering with us to the extent of 49% investment into those projects.
Sir, is there any exit clause for GIC out of this? Or how does GIC exit out of it?
I think they are very clearly looking at a very, very long-term investment focus here, and there is no exit clause that is a part of the definitive agreements. They are here with us for long.
Okay. And lastly, is it fair to assume, given -- looking at the sector that the BOT opportunities unlikely in a large way in the near term because there are not too many players in the market with decent balance sheets to kind of participate in that. I think almost everybody is looking at deleveraging. So that mix -- is job that much more difficult for NHAI to award any meaningful number of BOT projects in the next year, a couple of years' time?
I respect your opinion, but what NHAI has gone on record and said is that they are looking at 3,000 kilometers to be awarded on BOT basis in the year coming forward. That's on record.
We have next question from the line of Prem Khurana from Anand Rathi.
Congratulations on consummating this transaction. Sir, the first question was on this transaction. So basically, I want to understand why is that we have not considered Ahmedabad-Baroda in this transaction? Is it because we have claims there and you won't settle it before you kind of transfer it to the InvIT or is it -- I mean the partner was not comfortable with this asset?
No, no. You're very absolutely right. Good question. So in Ahmedabad-Baroda, we have the issue of diverted traffic, which is being pursued with NHAI where we have got an interim relief from the courts where the premium is, the -- being deferred. So that thereby stopping the entire bleed that we had on the project. And we would like to offer any meaningful value to come out of that project because it's a large project, and we are not in any kind of a distress to somehow get that project off our balance sheet. So we would like to properly treat into -- treat that project, look at the required litigation -- mitigation and get the final resolution through arbitration and then only look at any meaningful resolution of putting it into a InvIT or selling it off or anything could be done with that. So we are not in a hurry to do anything of the kind. We will find a complete resolution and then look at monetizing the same.
Sure. And sir, on operations eventually, I'm in the number that you've given in your presentation on the equity requirement that you need over the next 2, 3 years, it says almost around [ 29-odd 50 ]. The number has increased on a sequential basis. The number that you've given in your Q4 presentation was somewhat lower. So does it mean, I mean, the -- we've seen some increase in some of these projects in terms of equity that you would have to commit now because it's the present conditions that you have in terms of liquidity situation in the market. So eventually, the idea was to understand whether the banks are kind of -- or landed up pushing it enough and increase your exposure to these assets or rather for that -- I mean, for all the assets that you get to have in the market. I mean is it that, I mean, lenders are now asking sponsors to put in more money, what used to be the case earlier.
No, no. There is no strain or constraint or distress or anything of the kind. The only increase is because of the delayed construction on certain projects. Because of this, the IDC component has gone up, incrementally increasing some part of the equity.
Sure. So it is to the extent of INR 260 crores. So this entire INR 260-odd crores, this would be essentially because of the IDC that you'll get to, right?
Most of it.
Okay. Okay. And just one -- I mean if -- sorry, I missed this, but will you help me with the construction margin. I mean, sequentially, there's a sharp jump in the construction segment in terms of margins, not on Y-o-Y, but on a sequential basis. Would you be, please -- I mean would you be able to explain this sharp jump in the number?
See, last quarter -- trailing quarter, that March 2019, we have explained that. We had almost INR 350-plus crores of utility shifting and change of scope work executed where the margin is very thin, almost there is negligible margin. And during this current quarter, we didn't had much of utility shifting or change of scope. That's why if you look, the margins are well comparable with the corresponding quarter of the last year.
Sir, just a small clarification on this. I mean I think, essentially, there was a perception that once you start working with hybrid annuity, the margin would not be to the extent of 30-odd percent, which we used to have earlier because your margin in hybrid annuity. I'm assuming -- I mean you are executing a project, I mean, at least on hybrid annuity side. Even then, the margins are around 30-odd percent. So...
So in hybrid annuity, we have started 1 project, and that hardly contributes 12% to 15% of your total construction revenue. It will -- the maximum can have a 50 basis point or 75 basis point impact on your overall margin.
Sure. And sir, any time line in mind in terms of the 2 hybrid annuities that you have? And if you could give us some sense on the land acquisition status on these 2?
Yes. Those 2 continue to be a usual concern for us because as we learn, NHAI does have issue with land acquisition and incrementally, going forward, they want to spend less on land acquisition. And what we hear is they also keep talking about restricting structures to 4 lane instead of 6, which would amount to the land acquisition getting restricted to 45 meters instead of 60. So we are carefully watching this space and wanting to understand as to when will they be able to give us the full land because the whole metrics is based on full land because it -- as you know, it has to be constructed in 2 years period, which is a very, very cut-to-cut period required. So we are watching this space and we'll keep you informed once we have full clarity from NHAI on this.
Sure. But there is no intent to give these projects back, right? Because -- I mean, eventually, it's been a while and the cost would have changed.
See, cost change will get mitigated because escalation is a part of the transaction being a hybrid annuity project. Major thing will be whether they'll be able to get the land.
We have next question from the line of Parikshit Kandpal from HDFC Securities.
Sir, congratulations on the deal.
Thank you.
Sir, what was the total project cost of these 9 assets?
As I said, on completion, these assets' enterprise value will be around INR 22,500 crores.
Sir, so what -- so to arrive at price-to-book value, so it will be like how much? My question is...
Maybe close to onetime book.
Onetime book?
Yes.
Okay. And any part of this money will come as OCD structure for the construction period?
No. No. No. There is no OCD structure.
So it's all entirely plain vanilla equity.
Yes. Yes. Absolutely.
Okay. And what kind of IRRs will this portfolio have after building?
I think the project IRRs will be in the range of close to 12%.
Okay. So on future projects, so now that a significant part of our portfolio goes into this InvIT, so what kind of cash flows do you expect from this InvIT? And so for future project, how will we fund the equity requirement?
Okay. So as I said, this portfolio will have a surplus cash flow of around INR 88,000 crores over the life of its concession. And around 1 lakh, 29,000 crores of our total revenue in around 20-plus years of balanced concession period, 20-plus -- EBITDA, sorry, EBITDA of 1 lakh, 29,000 crores.
Sir, but I mean, the cash flows are back-ended or like after the significant deleveraging which will happen...
So I think the portfolio will be cash flow positive from day 1.
Day 1. Because of the deleveraging, right?
That's correct.
Okay. Okay. So we can upfront it. So it will become -- it will be distributed as dividend? Or like how will be the cash flows from this?
Yes. It will be...
It will be distributed in the form of interest in a most tax-efficient manner as for the InvIT regulations. So it will be distributed in a ratio of 51:49. 51% will come to IRB, and 49% will go to GIC.
Sir, for the first year full operations, how much of that 51% will accrue to us? If you can give some rough numbers just to understand like what kind of equity requirement we can meet from these projects. For the -- or...
If I remember right, almost INR 800 crores will be the cash that we will generate over 2.5 years period.
From 2.5 years, the first year after 2.5 years?
No. No. No. In the next 2.5 years.
So combined cumulative, you are saying, next cumulative 2.5 years will generate INR 800 crores of cash flow?
Yes. The portfolio will generate cash flow of around INR 850 crores, INR 800-odd crores in next 2.5 years.
So out of which, how much you can distribute? And what --
INR 800 crores.
Okay. And what will be your part in that will be like? It's your part or like the...
No. No. No. 51:49. So we will get 51% of it.
Some INR 400-odd crores you will get from this on an annual basis.
No. I'm saying in next 2.5 years.
So on an annual basis, it will be INR 200 crores? INR 200 crores and on --
Around that.
We have next question from the line of Anupam Gupta from IIFL.
Sir, I just wanted some clarity on one thing. I had got disconnected. So you say you need close to about INR 2,900 crores of equity over the next 3 years. Of this, INR 2,900 crores is for the 9 assets. So what is for the other HAM for this?
As I said, about INR 100 crores.
INR 100 crores. Okay. So -- and effectively, INR 1,400 crores of this INR 2,956 crores goes away after the deal?
Goes away in the sense? I didn't get it.
So INR 1,400 crores will be invested by GIC, and we will...
Yes. Yes. That's correct. So INR 2,800 crores will be shared in the proportion of 51:49.
Okay. I understand. And secondly, what was the reason of keeping the single HAM project outside of this transaction?
No. Because this platform is majorly going to be on a BOT platform or maybe a BOT-TOT combination.
Okay. Okay. And you said the price-to-book is 1:1, so equity invested is also INR 9,000 crores approximately, close to INR 9,000.
That's correct. Close to 1 is -- close to 1x book.
We have next question from the line of Rakesh Vyas from HDFC Mutual Fund.
Congrats, Mr. Mhaiskar and the team. I had a few questions. First, I just want some clarity on the economics. So you said on the completion, the total EV will be INR 22,500-odd crores. And I'm assuming the total equity invested by then would be close to INR 7,000-odd crores. And if I see...
INR 9,000 crores.
Okay. So all these projects have higher than 70-30 debt/equity, is it?
Yes. Many of them.
Okay. Fair enough. And that's why it's 1:1. That's clear, this one.Sir, the second point is in relation to the upcoming opportunity. So I just want some clarity. Will both GIC and IRB work together right from the bidding stage for these opportunities, especially in the BOT? Or is it that IRB will work, and if they win, then the asset will be sold to the JV for any future transition?
We will work together on the bidding.
Okay. So only in case when JV is not interested to bid is when IRB will be keen to bid, if at all, they want, right?
Yes. If they are not particularly keen on any of the projects, the opportunities that we would be showing them, then we can bid on our own. There is no restriction or restraint from not bidding singly.
Fair enough. Lastly, sir, on BOT opportunity. So is it fair to assume that both of these entities put together will bid in the same equity-sharing mechanism? Or is IRB only going to be seen as a -- or they're mainly operating management part, essentially.
No. I think the understanding is very clear of 51:49, and that will be the basic tenet of the investment opportunity.
Okay. And is there any other support in terms of foreign currency loan, et cetera, that GIC will be able to provide you for better funding of these assets? Or if that's not the case, I mean, it will be on individual opportunity basis?
I think it will have to be looked at from an individual opportunity basis.
Okay. And lastly, sir, I think everyone is trying to understand -- just getting that clarity back. Is there any committed equity return or any mode of exit for GIC eventually to move out of the portfolio, which IRB has committed?
Okay. For one last time, let me clarify this. They have bestowed a good amount of faith in us and the project that we have, and they have come in as pure equity investors for long. And there is no committed return or exit or any other side arrangements, so to say, that have been worked out. This is a pure equity deal, fully on merits, where we stand shoulder-to-shoulder as investors in the proportion of 51:49.
We have next question from the line of Atul Tiwari from Citigroup.
So sir, just wanted to understand. Just some time ago on the call, INR 70 billion total equity investment in this portfolio number was discussed. So equity invested so far, plus INR 28 billion -- or INR 70 billion. Was that a right number? Or INR 90 billion is the right number?
No. No, no. On completion of these assets, the total equity invested will be INR 9,000 crores, of which, INR 4,600 crores, INR 4,400 crores will be the proportion of 51:49.
INR 4,600...
So as in INR 4,600 crores, IRB; INR 4,400 crores, GIC, a proportion of 51:49.
Okay. Okay. So there is no number like INR 70 billion? Because I think a number of INR 70 billion was discussed and causing some confusion.
I actually corrected in saying that it is not INR 70 billion, it's INR 90 billion.
Okay. Okay. And sir, just one more clarification. So in 4, 5 months, when this deal is consummated, the first leg of the deal, so the -- GIC brings in INR 3,000 crores into the InvIT and gets 49% stake. And that INR 3,000 crores is used pay down a certain part of the debt. And then over next 3, 4 years, as the construction progresses, GIC brings in its proportionate share, and you bring in -- and IRB bring in its proportionate share of equity. Is that the right understanding? Or is there some gap in that?
Yes. So the gap is INR 3,000 crores. First tranche will also be along with the first tranche of equity, which will be maximum equity of almost INR 1,800 crores coming in upfront -- together, I mean, so almost INR 900-odd crores. Because if you look at the equity commitment, majority of the equity commitment will be required over next 1 year. And so that will be raised immediately along with the tranche of INR 3,000 crores itself. And the balance equity that will remain this 1 year only will be for the Hapur project, which will be brought over the next -- another 1-year period. Majority of the equity will come in upfront.
Okay. So -- okay. But sir, this INR 900 crores of equity, out of the balance INR 1,400 crores, right? So proportion to that, IRB will also be injecting money, right?
Absolutely.
Right? Okay. So essentially, the -- for 49% initial equity stake, GIC is injecting INR 3,000 crores, and then the rest of the money comes in the proportion of 51:49.
That's correct.
Okay.
No. So if you're saying the valuation we are giving is INR 3,000 crores, that is not the correct understanding.
But sir, because for the balance INR 1,400 crores, IRB will also be injecting equity into the SPV -- into the private InvIT, right? So that kind of -- it should not be factored in the valuation, isn't it?
No. No. No. So that's why I'm saying, on completion, the total equity invested will be INR 9,000 crores, out of which INR 4,400 crores will be invested by them.
We have next question from the line of Ashish Shah from Centrum Broking.
Sir, sorry, but just one last question on the deal. What is the total quantum of equity that we would have invested and the debt as on, let's say, March or June in the assets -- 9 assets which are being transferred?
So Ashish, as I said, the debt number, you already have, and we will be deleveraging it by almost INR 3,000 crores. And then over a period of 1.5 years, we'll be drawing the balance debt on the under-construction projects. So if you add -- deduct and add and do the whole math, the end of the story would be around INR 22,500 crores of EV with INR 9,000 crores of equity in it.
Right. So you are saying that even at this point of time, the -- I mean, I'm just trying to understand what is like the EV at this point today. But eventually, it will be INR 22,500 crores. At this point of time, what would be the EV of the assets in terms of equity and debt invested and being transferred?
So the debt draw-down, 3 plus -- almost, you can say, INR 6,000 less.
INR 6,000 less?
Less.
And then INR 6,000...
So the debt of all balance would be in the range of -- yes, we can give you that specific number also. No problem.
Sure. That's all. I just wanted to know that debt drawn number as of date. That's all. Yes. Sure. Sir, secondly, on the [indiscernible] project once again. We have -- at this point, we are paying the premium only to the extent of what is supported by the toll collection. But there is a period of 3 months for which the court order is protecting us. So when does this 3-month period end? And what is the next course of action?
Yes. Ashish, very good question. It ended today, and we have got an extension from Delhi High Court on it today itself.
Extension of what period, sir?
Until the arbitration panel sits and decides the thing under the Section 17. So the court will be meeting on this again in a month's time. Although the stay continues is what I'm trying to tell you.
The stay continues until the arbitration panel is set up.
Yes. Because then it will have to be moved under Section 17 of the Arbitration Act, where they will look at extending this stay until the outcome of the arbitration.
So basically the panel will then take it forward and decide whether do you need to continue the stay or vacate the stay.
That's correct.
I mean it will left up to the panel after once it is set up.
Yes. Because we were pushing for this panel to be in place and decide quickly, but unfortunately, NHAI is yet to ascribe an arbitrator to the process. So we had again approached the court, and the court has been kind enough to extend this -- continue this stay until we reach that stage.
Sure. Sir, in the Thane Ghodbunder asset, we see a sudden spike up in the toll collection number. So is that some claim which has come in? Because I think the number is almost equivalent to your annual collection in the asset, a number which is very much [ on contract ].
We have received the reimbursement from MSRDC for STU buses, which is exempted from the paying toll.
Okay. So that is why the number has got spiked up. Otherwise, from next quarter onwards one could expect a normalized quarterly run rate.
Yes.
We have next question from the line of Vibhor Singhal from PhillipCapital.
Sir, just again -- I'm sorry to harp on that again. Just a small clarification again. You mentioned that INR 22,500 crores will be the enterprise value of these assets when they're completed. And out of that, INR 9,000 crores will be the equity that has been invested. Now assuming the -- so that would mean that at that point of time, the debt on these projects will be close to INR 13,000 crores? Is that understanding correct?
Yes.
And that INR 13,000 crores would be at INR 13,000 crores because we have already paid back INR 3,000 crores of debt as soon as this transaction commences.
So as I said, we will be deleveraging certain projects. And there are certain projects which are under construction where the debt probably is yet to happen. So as I said, if you do the total sum, total math, yes, you are right. The total outstanding debt will be what you mentioned.
Right. So sir, if this transaction had not happened, I'm just looking at that scenario, so then this INR 3,000 crores of debt that we are paying back would not have happened. The equity would have remained the same. Then that means that debt at the end of this construction period, if we had these projects to ourselves, then the debt would have been INR 16,000 crores.
Yes. You are right.
So that means INR 16,000 crores plus INR 9,000 crores is INR 25,000 crores. It would have been the enterprise value of these projects, which is a little...
No. No. The INR 3,000 crores that you're adding back on the equity side, which would get repaid, wouldn't have been infused as equity. That would have been INR 6,000 crores.
Then the equity would have -- as Poonam explained, equity would have been lower to that extent.
So equity would have been INR 6,000 crores?
Yes.
It would have been lower by -- yes, INR 4,900. Yes.
But -- so INR 3,000 crores is the debt that we are paying, and the equity that GIC is paying INR 1,400 cores.
GIC is bringing a balance, INR 1,400 crores, for the balance equity, which is required by IRB. So that INR 2,800 crores, if GIC would not have been there, that would have been infused by IRB.
Right. So the equity requirement would have remained the same, right?
Yes.
The equity -- the INR 9,000 crores of equity that we require for these 9 projects remains the same?
No. No. The equity would have been INR 6,000 crores only. And debt, as you mentioned, would have been close to INR 16,000-plus crores. The enterprise...
See, what is happening is the portfolio mix is changing with more equity and less debt. That is what is happening here. So there is no need to get confused on this. The mix is changing in favor of more equity, less debt.
Enterprise value remains the same.
Fair enough, sir. I think I'm clear on what's happening right now. I'm just confused -- I was just confused a bit by the eventual enterprise value, how does that match with the current equity/debt. So...
So as Anil said, either -- if we have to look at the no-GIC scenario, the equity will have been less and that much debt will have been more. Today, that debt is getting balanced out with more equity and less debt.
Less debt. Fair enough, sir. Sir, just one last question. I mean, I don't know, I got disconnected in between as you answered that. Does the ROFR that the publicly-listed InvIT has on these projects still remain? I mean, tomorrow, we can still sell these projects with the approval of GIC, of course, to the publicly listed InvIT as well?
As so as I said as an answer to this question, that IRB in the present transaction is not selling the asset that is roping in a financial partner. Now as for the ROFR deal provisions, yes, if this platform in future decides to sell any of the assets, the ROFR guidelines will apply to it.
We have the last question from the line of Sriram Kumar from Spark Capital.
Congrats on the deal. I have a couple of questions. Sir, in this INR 3,000 crores debt repayment, is there any component that will come to IRR with parent? Because IRR with parent has infused some as debt -- some equity as debt. Is there any component that comes to IRR with parent?
No. No, no. This is purely third-party bank debt which we will be bringing down, thereby bringing in a cost saving of INR 300 crores to INR 350 crores.
Sure, sir. Sir, given these projects are under construction, if some of these projects require support financially, so both IRB and GIC will invest proportionately. Is my understanding --
I think it is very important to look at the aspect that, as I said, the whole portfolio is getting rebalanced with more equity and less debt, as a result of which, the portfolio will be cash-generating from year 1. So the support situation, I don't foresee at all. As I said, almost INR 800 crores, INR 850 crores of surplus cash is what the portfolio will generate over a period of next 2, 2.5 years.
Okay, sir. Sir, what is the IRR GIC is looking at, sir?
So the portfolio, as I said, will generate a free cash flow of around INR 88,000 crores over 20-plus years of balance concession. And the project IRR, if we look, of the portfolio, it will be in the range of around 11.75% to 12%.
Sir, is it safe to say that the equity IRR will be around 15% in that case?
No. No. No. It would be much lesser than that.
Okay. Sir, my -- the question -- or why I ask is that when HAM projects are available in the market, let's say, for an IRR of 12% to 15%, why would -- what is the benefit that GIC will get in investing in BOT projects when it has to take on [ traffic ]?
No. I mean, I know there is a certain set of people who like HAM projects. But there are investors who see value in BOT projects as well and the long-term upside that they can throw up. I probably feel GIC is one of them. And they have realized the potential that the sector has in terms of the BOT portfolio and might have looked at it because of that.
Okay. So final question, sir. Sir, in Hapur-Moradabad project, the project cost is around INR 3,300 crores and the equity investment, if I'm not wrong, is around INR 1,800 crores. So this is comfortably approximately 54 percentage of the project cost. So earlier, it used to be 30% equity investment and 70% debt. So what has changed in the funding environment that has forced us to invest 55% of equity as project cost?
So as you yourself said, the funding environment is such where banks want to have more equity and less debt. And that was one of the thought process, what we had on mind, that if you look at the potential of these projects going forward in terms of the meatier cash flow that they can throw up, we were more than comfortable to rebalance this whole portfolio with more equity and less debt. Because if I -- on a generalistic basis, if I have to say that today, whatever the government is signaling, whatever is the central bank is signaling, everybody is signaling at bringing in more equity, less debt, and a more sustainable development is what everybody is wanting to signal and telling the entrepreneurs. And we are wanting to do exactly the same.
Yes, sir. Sir, so to say -- then it is safe to assume that the future BOT projects that IRB is looking at will also will recur around 55% of equity in future, correct?
Not necessarily. I mean, times change. We have done deals at 15% equity, 85% debt in a BOT project as well. So it will depend on a project, its credentials, its cash flow, its feasibility. So applying 1 yard stick to everything will not be fair.
Yes, sir. I now hand the conference over to Mr. Mhaiskar for closing comments. Sir, over to you.
Yes. Thank you, everybody, for being with us on this con call and for your support. I look forward for your continued support and participation in our future endeavors, and have a great evening. Thank you.
Thank you very much, sir. Ladies and gentlemen, this concludes your conference for today. We thank you for your participation and for using Researchbytes conferencing services. You may please disconnect your lines now. Thank you, and have a great evening.