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IRB Infrastructure Developers Ltd
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Ladies and gentlemen, good day, and welcome to the IRB Infrastructure Developer conference call for discussing the unaudited financial results for the quarter ended June 30, 2022 and recent developments. We have with us on the call today Mr. Virendra Mhaiskar; Mr. Dhananjay Joshi; Mr. Anil Yadav; Mr. Mehul Patel; Ms. Poonam Nishal; Mr. Sudhir Hoshing; and Mr. Tushar Kawedia. [Operator Instructions] Please note that the duration of the call would be 45 minutes and any queries left unanswered after the call can be subsequently mailed to the management for adequate response and resolution. Please note that this conference is being recorded.
I now hand the conference over to Mr. Virendra Mhaiskar, Chairman and Managing Director of the company. Thank you, and over to you, sir.
Good morning, everyone. I would like to welcome all the investors and analysts on this call. Hope you all have gone through the detailed results as well as the brand new presentation prepared in consultation with Cintra, India. IRB, as you know, is a well-funded integrated developer with a strong balance sheet. Our focus for new projects continues to be BOT, TOT and HAM in that order. As an integrated developer, our business model is focused on developing an asset and riding through its journey over the next 20, 25 years. As the associated project risk call sold as the discount rate for computation of the net present value from the free cash flows generated by the project. We benefit from the expansion in cash flows of the assets as it reaches the stable and mature phase. We have tried to share this perspective in the presentation.
Typically, even at a conservative revenue growth of 8% to 9%, a BOT project can yield an equity return of over 11x at a modest 70-30 debt equity ratio during its operational lifespan apart from the initial construction return. So the beauty of the process lies in the fact that with every new asset one, a strong visibility of returns for next 20, 25 years is virtually guaranteed at a robust IRR of over 16% and about the -- and apart from that, return in the construction margin. Having run this model and established 2 InvITs to cater to investors with varied risk profiles, IRB's business model today has reached a stable position.
Going forward, our endeavor is to execute BOT, TOT projects in a 51-49 equity ratio with GIC affiliates through the private InvIT platform. Further, considering the redeployment of construction profit, net equity requirements from IRB falls below 10% of the BOT project cost. Post the recent preferential allotment, we have surplus funds available with us for meeting the equity requirement of projects on hand and more. Thus, our corporate debt will keep reducing and any additional debt will be self-liquidating taken at the SPV level for new projects in the private InvIT, which will not reflect in the consolidated debt of the parent company.
With regard to HAM projects, though the debt will reflect in the consolidated balance sheet of the parent company, it will get liquidated when these projects complete construction and are monetized by sales to the public InvIT. Listed company business will generate cash on an ongoing basis and will gain in regular dividend paid. With this in mind, the Board has approved an interim dividend of INR 1.25 per share for the quarter totaling to an outflow of approximately INR 75 crores. Pandemic impact on traffic growth is fading away, and we are witnessing a strong traction coming back across our portfolio.
Mumbai-Pune project reported a 52% growth over -- for Q1 of FY '23 year-on-year and Ahmedabad-Baroda project grew at approximately 44% year-on-year. Taking into account the private InvIT assets, we have seen a robust growth of approximately 75% year-on-year as some projects completed construction during the year as well. Notably, Mumbai-Pune has grown at approximately 8% quarter-on-quarter on account of traffic growth alone, while for Ahmedabad-Baroda, we have implemented a 10% tariff revision on 1st April '22, reflecting a similar growth in collections quarter-on-quarter.
Effectively, even during the monsoon period, we have seen a robust toll collection of about INR 57 million per day for these 2 projects, which are well positioned to meet our estimate of over INR 2,100 crores in collections for the whole year. We are pleased to share some interesting data points which we recently came across. Gross store collection collected across India for FY '22 was approximately INR 40,000 crores. The toll revenue that IRB Group has collected across the listed company and the 2 InvIT was close to INR 5,000 crores, which translates to a 12.5% market share of the total revenue collected across India. We presently operate 43 Toll Plaza, service 572 lanes and cater to more than 1 million vehicles on a daily basis. This number will strengthen as we complete construction for more projects. We are pleased to inform you that we have successfully achieved completion for all the 9 projects, which were transferred to the private InvIT in the initial phase.
Post completion of Kishangarh Guplabpura project and Hapur Moradabad project, the toll rates for these SPVs has seen an increase of 78% and 65%, respectively. Post construction completion of a few of our other assets, the ratings of the private InvIT SPVs have also improved. This has led to lower interest costs for these SPVs. So even in this inflationary environment, where the Central Bank has been hiking interest rates, we are seeing a decline in the interest cost for our project as they enter the stabilization phase with improved credit rating.
At the parent company level, prepayment of debt to the tune of INR 3,250 crores has resulted in an interest saving of almost INR 90 crores this quarter in the Construction segment. The total order book of the company now stands at INR 15,700 crores, which provides good revenue visibility over the next 3 years. We -- I had touched upon like key arbitration award wins, which can be expected, almost annually over the next 4 to 5 years basis ongoing dispute NHI. In the last quarter of the previous financial year, we received an arbitration award for the [ Panji-Goa ] project and this quarter, in continuation of the favorable order for the Amritsar-Pathankot project from the Honorable Delhi High Court, an award amount of INR 308 crores was received for being the EPC contractor for the SPV.
Further, we wish to inform you that the Board of Directors of the company at the meeting held on August 5 has approved, subject to necessary permissions from concerned authorities, the transfer of the VK1 HAM project, which happens to be the first project to complete on the prestigious Delhi-Mumbai Expressway at an enterprise value of INR 1,297 crores to the IRB InvIT fund. Post the transfer of VK1, INR 955 crores worth of debt will further reduce from the consolidated debt and we will also receive INR 342 crores, which will further the cash flow uses. A strong balance sheet has aided us in achieving financial closure for all our new projects at a faster pace. We today stand all blazing for a timely execution of these projects and have an intense focus on tapping new victories in collaboration with our global partners. This partnership has led to IRB adopting the best of global practices and policies. We have also initiated concerted efforts towards being ESG compliant and have committed to the UNGC principles as well.
I would now request our CFO, Tushar Kawedia, to provide synopsis for the Q1 FY '23 results. Over to you, Tushar.
Thank you, sir. Now I'll present the financial analysis for Q1 FY '23 versus Q1 FY '22. The total consolidated income for Q1 FY '23 has increased to INR 1,995 crores from INR 1,620 crores, registering a growth of 19%. The consolidated construction revenue for Q1 FY '23 have increased to INR 1,468 crores from INR 1,268 crores, registering a growth of 16%. The total consolidated total revenues for Q1 FY '23 have increased to INR 527 crores from INR 403 crores, registering a growth of 31%. EBITDA for Q1 FY '23 increased to INR 1,131 crores from INR 745 crores, registering a growth of 52%. Interest cost has decreased to INR 385 crores in Q1 FY '23 from INR 468 crores in Q1 FY '22, declined by 18%.
Depreciation has increased to INR 203 crores in Q1 FY '23 from INR 136 crores in Q1 FY '22, up by 49%. EBIT has increased to INR 543 crores in Q1 FY '23 from INR 141 crores, registering a growth of 286%. PAT after share of JV has increased to INR 363 crores in Q1 FY '23 from profit of INR 72 crores in Q1 FY '22, registering a growth of 400%. Cash profit has increased to INR 600 crores in Q1 FY '23 from INR 242 crores in Q1 FY '22, registering a growth of 148%.
Now I request moderator to open the session for question-and-answers.
[Operator Instructions] The first question comes from the line of Mohit Kumar from DAM Capital.
Congratulations on good set of numbers. Like, sir, in the Construction segment, the number seems to be looking slightly on the higher side with EBITDA margin at 44%. Is it -- have you booked something of IRB Pathankot in this quarter? Is that a fair assumption?
Yes, Mohit, you are absolutely correct. We have booked roughly INR 418 crores of income in Amritsar-Pathankot. And there was a close INR 50 crores expenses, INR 50 crores expenses on that account. And on EBITDA, it has an impact of roughly INR 368 crores and roughly INR 100 crores of construction. On PAT side, it's close to INR 270 crores of impact on the PAT. If I remove the impact of this Amritsar-Pathankot, then the revenue will be close to INR 1,050 and EBITDA will be roughly INR 254 crores, which translates roughly 25%, 26% of EBITDA margin.
Understood, sir. Secondly on Meerut Budaun Expressway Limited, have we given the subcontracted project and has the work started? And is it a fair assumption that you'll take around 30 months from here?
Which projects are we discussing?
Meerut Budaun.
Meetut-Budaun. so Meerut-Budaun project, we have achieved the financial closure. The environment clearance for the project has also been just received a couple of days back by UP. And we are in the process of completing the balance formality post which we should be able to start the construction before end of this quarter.
Understood, sir. Lastly, sir, can you touch upon the BOT opportunity for -- have you seen any BOT tender being floated by NHAI? And if not, do we expect some tenders to float with this financial year?
There are 3, 4 opportunities, which we have been able to sight and increasingly, our view is that more opportunities will come over. There was a statement by the government where they talked about INR 30,000 crores of projects to be awarded on PPP. So we do look forward for both projects in the list to get added.
Next question comes from the line of Vibhor Singhal from PhillipCapital.
Sir, my question was basically, as you mentioned in your opening remarks about the state that we are in the mature state in which we can turn assets and transfer them to the different InvITs. So just wanted to understand, so the strategy going forward will be that any of the HAM projects that we do, we will offer them to be public InvIT and see if they like it and of course, that would be subject to their Board approval and try to monetize it that way. And the BOT projects, we will try to basically either bid along with them or transfer them to private InvIT. Is that the correct understanding of our strategy going forward?
I think you're right. The BOT and TOT projects, which are CapEx-heavy projects will certainly be bid in the development platform that is the private InvIT that we have with GIC Associates. And as far as HAM are concerned, that will continue to get bid at the IRB list 4 level itself. And in terms of monetization, IRB upon completion of the HAM assets will monetize them by offering them to the public InvIT and the development platform will continue to churn assets as they complete as well.
Got it, sir. So in case of, let's say, BOT and TOT projects, I mean we are at this point of time bidding, obviously private InvIT platform along with intra and -- around the [ TIC ], so I'm sorry. So let's say if there is -- I mean hypothetically speaking, let's say there is a BOT project that IRB finds attractive, what let's GIC doesn't want to go along with it? Will we be open to bid for them on an independent basis take then in the IRB platform and then later think about mortizing it to some other platforms or maybe offering to -- later on maybe when they would have more viability in the traffic itself?
So I think the consensus would be to go along with GIC being there as a partner, because we would like to grow this book cautiously with having all our partners together with us rather than venturing alone. And I think that is a very clear thought process on which we are working at this point.
Got it. So the [indiscernible] goes into the GIP units?
Yes, yes.
Okay. So all the BOT and TOT. Mumbai-Pune is still not there. Mumbai-Pune is still with the listed company?
Yes. Mumbai-Pune will continue to be a part of the listed company for the entire life of its construction.
So that is not going to get covered at any point of time to the GIC?
That's correct.
Got it. Got it, sir. Sir just a few booking questions, if I may get an answer to. So sir, in terms of the order book that we mentioned is around INR 15,700 crores, would it be possible to give a broad breakup. In fact, sir, I would want to request that now that we have [indiscernible] this very detailed presentation in which we are giving so much information. It would be really helpful, I mean we don't have like -- we are not working on like 20, 25 projects. It would be really helpful if you could quarterly -- on a quarterly basis give the breakup of the order book as to project wise, if it is possible?
So you want the order book breakup right, Vibhor?
Yes, sir. Yes... So if we divide our current order book, which is INR 15,700 crores, the EPC is INR 9,500 crores and O&M is INR 6,200 crores. The EPC further if you divide in BOT and HAM, then BOT is INR 7,100 crores and HAM is INR 2,400 crores..
I'm sorry how much?
HAM is INR 2,400 crore balance order book and BOT is INR 7,100 crores.
Okay and out of the INR 7,100 Crores, Ganga Expressway would be around INR 6,500 crores?
That's right.
Got it, sir. Great. Also, sir, if I could get the breakup of other income in this quarter?
Vibhor INR 6,500 crores what you have mentioned that is the total cost for the Ganga. Out of that, as you remember, last quarter, we have removed GST out of order book, Ganga roughly INR 5,500 crores, close to INR 5,500 crores and balance will be the [indiscernible].
Perfect. Yes. Okay. Got it, sir. So INR 5,500 crores is the EPC order value of the Ganga Expressway excluding GST?
Excluding GST, yes.
Got it. Got it, sir. If I could get the breakup of other income in EPC and BOT?
Yes. So in this quarter, our construction income includes INR 56 crores of other income. And roughly in toll business, we have around INR 15 crores to INR 16 crores of other income.
Got it, sir. And over that they would also be at INR 412 crores -- okay that's in the topline sorry. So that's not in other income. Got it, got it. Sure, sir. And sir, just one last question in terms of the outlook that we're looking at. Are we comfortable -- are we looking comfortable to do almost 5,000 -- I mean, if I'm looking at, let's say, the revenue for the EPC segment, do you think we can kind of achieve INR 5,000 crores kind of revenue for this year?
I think we are definitely comfortable for more. But yes, depending on the opportunities as they come, we will certainly keep bidding on them.
Got it. Sir just one last question. I think I missed out on that. If I could get just the details of the financial closure for net phase, what is the net equity in grants, what is the debt and equity component of that?
Can you -- I'm not able to hear you. Can you speak little slowly?
So looking for the financial closure details of Ganga Expressway, the debt and the equity component.
Sure, sure. So INR 1,750 crores is the [ UPDA ] grant. Around INR 2,650 crores is the debt and approximately INR 2,100 crores is the equity, which will be between GIC and IRB on a 51%-49% basis.
Got it. And sir, what is the interest that we have closely did that, at this point of time?
I think we'll share that at an appropriate time, but it is a very competitive basis, I can confirm.
Next question comes from the line of Abhineet Anand from Emkay Global.
In terms of Mumbai-Pune and Ahmedabad-Baroda, you said that the growth has been 52% and 44%, respectively. What is the volume growth for these?
So for Mumbai-Pune, it's purely on the volume growth. Volume growth was 8%, as I mentioned in my narration for Mumbai-Pune, quarter-on-quarter.
Quarter-on-quarter.
There was no tariff revision in Mumbai-Pune.
And even on Y-o-Y, the 52% is purely on the volume.
Okay. Because that is for every 3 years, tariffs increase every 3 years, Okay.
That is right.
And for Ahmedabad-Baroda what is the volume growth?
So if you see the tariff hike is around 10% on a Y-o-Y basis, if you see the 44% growth, the breakup tariff is around 10% and balance is toward the volume growth. Almost 33%.
Okay. And sir, the other thing that I had, is you did mention that there are a few opportunities in the BOT side. And I think the government is looking for TOT as well. In case there is a lower bound of opportunities in the BOT and TOT and that presently, our balance sheet is quite strong. How do we go about looking into the construction business? Because let's assume the EPC, your order book today on the EPC side is around INR 10,000 crores, INR 9,500 to be exact. That could probably get consumed over the next 2, 2.5 years. So I mean, in case the BOTs does not -- we look for more aggressively into HAM, which is a space actually works very crowded part. So if you can just share your thoughts on your strategy?
Sure. So I think the strategy thought is very clear, as I mentioned earlier also, that the waterfall mechanism in terms of our preference would continue to be BOT, TOT and HAM. But we are not averse to undertaking HAM projects either. So while we will scout for good quality BOT projects or even TOT projects, which are CapEx heavy. If there are large size hands that come up with the revised format wherein the prequalification criteria has been mid-stringent and the certain areas where people used to have some advantage of tweaking the bids have been taken away now. So we expect the hand bids also to rationalize going forward. And we will continue to scout for those opportunities as well. So the idea would be that the construction business that we have on hand and the kind of resources and manpower that we have continues to grow at a steady pace is the kind of order flow that we will continue to chase. Hello?
Sorry. So if you could just elaborate on your current order book of the EPC, for '23, '24, '25, what could be a broad breakup of this INR 10,000 crores of EPC, how that span out without any incremental orders I'm talking about?
So with present order book of INR 15,700 crores to be executed in the next 2.5 to 3 years. The current order book breakup is INR 7,100 crores in BOT. So EPC order book is INR 9,500 crores, O&M is INR 6,200 crores. INR 7,100 crores is towards BOT, which includes INR 550 crores for Ganga and INR 1,600 crores towards Palsit and INR 2,400 crores is towards the HAM project.
I think if we go by year-wise breakup, roughly INR 4,000 crores, INR 4,500 crores will get executed in this year and around similar in the next year. And in the last year, there will be close to INR 1,000 crores of execution as far as EPC is concerned. And O&M around INR 600 crores to INR 700 crores on a per annum basis, and that will be on the increasing trend.
Next question comes from the line of Nikhil from HDFC Securities Limited.
Am I audible? Hello?
Yes, go ahead.
Congratulation on the good set of numbers, sir. Sir my first question is, what is the amount of loss funding? And if you could give us the bifurcation into cash and non-cash component?
Not clear. What loss pending.
Sir, loss funding in case of private InvIT and also the bifurcation into cash and non-cash?
So if you -- for private InvIT, I guess, all the projects are now operational. And for this quarter, there was no loss funding because all projects are now self-sustainable in case of private InvIT. And I guess we have also shared on the -- in our presentation one slide where the cash EBITDA is somewhere around INR 250 crores, and the net debt is somewhere around INR 9,000 crores. So roughly, if you see the net debt -- the EBITDA and net debt, there is a surplus rather than any shortfall.
Okay. Okay. Sir, my next question is in case of all the completed projects, what is the quantum of change of scope works?
For this quarter, I guess it's hardly INR 25 crores to INR 30 crores.
Okay, INR 25 or INR 30 crores.
To adjust add additional input on the earlier question as regards private InvIT is concerned, given the low debt of almost INR 9,000-odd crores in the private InvIT, it has never been a situation even in the past where any cash loss funding was ever made by IRB towards the private InvIT. It has been self-sustaining all across in the past as well.
Okay, sir. Understood. And sir, what is the amount of order inflow for the quarter?
We don't give any order inflows in the quarter. I think there was no new quarter the order had, because post March hardly any projects have actually been awarded.
Okay, sir. And sir, if I may, I believe that you have given the bifurcation of the arbitration award into the -- like the impact of it on the EBITDA and the PAT level. I missed out on that point. Do you mind repeating the same point?
Yes, sure. Pathankot-Amritsar, as I explained earlier, the construction revenue included INR 418 crores of revenue. On expense side, the INR 50 crores was the expenditure. And on EBITDA side, it was close to INR 368 crores of EBITDA and INR 100 crores was the taxation and net impact on PAT was roughly INR 270 crores.
Next question comes from the line of Prem Khurana from Anand Rathi.
Sir, I think I've been answered to one of the participants spoke about some 3 to 4 odd opportunities that we have identified on BOT toll side. So if possible to have put a number to this, I mean, in terms of value, fees that you expect, I mean, this would if -- we get to have success with these [ little piece ], what will be the total value that we would be able to add? And what is the inflow target that we have for FY '23?
I'm not able to hear you clear at all, but I could sense that you are asking about the new BOT opportunities that is coming up. And I think the bids are still some distance away. But certainly, my sense is that in terms of order book addition as I mentioned earlier, I think it should be INR 5,000 crores to INR 7,000 crores of order additions that one can expect during the entire financial year is what my guess is.
Sure... No, I was asking -- so I mean the 3 to 4 opportunities that we have already identified, what will be the total value of these 3, 4, I mean in terms of [indiscernible] that all you have identified and there will be, obviously, I understand there'll be -- subsequently, we will get to have more opportunities than you will go and between and we are targeting INR 5,000 crore, INR 7,000 crores. But what will be the number for these 3 that you've already identified?
It would be around 440 kilometers of 6 laning and 4 laning projects which are expected, which has been identified. So the cost in all is not done yet. So that we are still expecting.
Okay. Okay. Sure. And on this VK1 that we've decided to transfer public InvIT. So I mean, if I understand we used to give us a sense -- I mean, you used to the sense that I mean we're targeting a 11%, 12% kind of equity IRR. So just want to understand maybe selling it at a premium to our equity infused, right? I mean into public InvIT, which essentially would have meant that the IRR number could be even lower than what we spoke about in our comments. So I mean, adjusted for PIM part, is it still comparable to that 11%, 12% that we were targeting initially? Or how will the math work for public InvIT? I mean why I want to understand is eventually, I mean, this would be taken up by the Board and the unitholders of the public InvIT and if the return is not -- I mean, generally the target that we tend to have, I mean there could be a situation that could take some time for them to confirm us the asset acquisition. So what will be the total PIM that we would have received and which is where the annuities would not be on INR 2,000 crores with a bid project because that we used to give for this project. So what will be the total PIM part in this? How is the bid project cost changed I mean over the years for this?
As you are aware that bid cost project would have changed in the line with inflation. But first, I would like to take this, what kind of equity return to the public unitholders. So roughly, we are transferring this project at 12% cost of equity, that 12% equity IRR for the public unit hold up. But there, the public InvIT in predominantly will be funding 50% to retained internal approvals and 50% through tax. On levered equity IRR, it's a close to 16% to 17%. If I take 50% as an equity and 50% as debt, then that translates 16 to 17 kind of percent return to the public InvIT. And this is based on the actual annuity which can be realized to the public InvIT.
Any possible to share your thoughts on this INR 200-odd crores of money that we're supposed to receive over and above the equity consideration towards the project management. Because when I am looking at my old sheet, I mean, the O&M number that we've kind of bid with is around INR 2.7 crores which would be adjusted to the inflation number. So how did we arrive on this INR 200-odd crore piece of number, I mean, for project management?
With respect to -- this is the O&M for the project for 15 years. And in terms of -- if you look at the O&M at what we have bidded, what NHAI is going to pay, if you are aware that everybody bids for the lower one. But thereafter, the one has to consider the actual O&M of the project. If you remember at the time of when we have bagged this project, that time also, we have shared that INR 12 crores to INR 13 crores will be per annum O&M because you can't maintain the road with the INR 3 crores of O&M. And even the public InvIT has taken a third-party evaluation for the O&M and which is almost 7% to 8% higher than what O&M price IRB is providing. Further public InvIT has a right that at any time, if they find better pricing, they can change the O&M contractor.
One more point to add here, as Anil rightly pointed out earlier and model was always tweaked with a lower O&M that people used to pay. But when we used to take the project for financing to the lenders, we have always factored the realistic O&M that you will be spending on the project. And even there, whatever cash flow we had factored as a O&M, the same was also weighted by public InvIT as a part of this process. And as Anil said, after taking a third-party confirmation, they have gone ahead with the O&M numbers.
Sure, sure. And just one last from my side. And if you could help me with the appointed date for Chittoor-Thachur and on this Amritsar-Pathankot we've realized 75% in reserves now? And do we expect to have the balance 25% come to us?
For Chittoor-Thachur we are expecting in 30, 35 days, the [ appointed ].
Okay. And how about the balance, 25% from Amritsar-Pathankot claims?
I think the -- should come through in this financial year itself. I don't want to give a date on that, but to best of our abilities. And certainly, before end of this financial year is what we expect.
Next question comes from the line of [ Abhiram Iyer from Deutsche Bank ].
Congratulations as a strong set of numbers. My quick question was with respect to the construction revenue and EBITDA. Spreading out the Pathankot revenue and EBITDA, as you mentioned, the INR 418 crores and the INR 50 crores expenses. The other part of the contract revenue has actually sort of been flat and has actually gone down y-o-y and especially compared to, say, 6 months ago or 12 months ago. So is there any particular reason for this? Or -- and what's the sort of view going forward?
If you are comparing with the trailing quarter, there was also Goa arbitration award, which was accounted in the trailing quarter. Secondly, as we are about to get appointed date for various projects, so now this revenue is going to increase. Third aspect, which is very important in the last quarter to align basically with respect to GST. Earlier, revenues were booked along with the GST. Now those revenues are booked excluding the GST. And to that extent, last quarter, we have reduced our order book also. So one -- if want to compare, one has to divide by 88% to arrive the real number on the construction revenue. So I think if we do that, then the construction revenues are comparable with the trailing quarters or trailing year. And in fact, it will be a 5%, 7% higher than the -- compared with the tailing quarter or previous year's quarter.
Next question comes from the line of Alok Deora from Motilal Oswal.
Congratulations on good numbers. Sir, just wanted to understand on the order inflow side. So -- just in HAM also, the NHAI is considering reducing the equity as in their contributions from 40% to 20%. So how do you see that space? And also in BOT toll you mentioned about certain projects coming up. So just if you could elaborate a little more on that? I mean, how many projects we can look to win in this year?
So Alok, I think as you rightly pointed, as the fiscal tightening is setting in, we certainly see an endeavor from NHAI to entice more private participation. And they have already talked about even I have read the article, which you are mentioning where they talk about reducing the annuity to 20% during the construction phase. So if one looks at the way HAM projects have been bid in the past, what the lenders used to do is they used to say that out of the 100%, 40% is getting funded by NHAI. So the balance 60% used to be funded at a debt equity ratio of 80-20 or 75-25. And the effective equity in the project that the developer was required to put in was 12% to 15%.
Now if the NHAI contribution during construction goes down to 20%, automatically, the upfront equity that the developer will have to put in will certainly significantly go up to anywhere between 25% to 30%. And I think that is one big defining moment to my mind, because the moment that happens, it will bring in a big amount of discipline in hand bidding because the irrational exuberance that is being seen presently because there is no yield equity getting into the HAM project because it is a churn of mobilization advance that keeps happening, and there is hardly any skin in the game, that will certainly change big time.
And serious players with good balance sheets will be able to come and pick up projects at a same pricing, which will bring in more discipline in execution and all the [ frac ] will start going away. So my sense, this is a big, big change that we are looking forward to. Apart from BOT where I said that the government had talked about a total of INR 30,000 crores projects to come up on BOT in this fiscal. That was an article which I'm quoting which appeared a few days back in [ PTA ]. So going by that, we expect close to INR 30,000 crores worth of projects to be tendered on BOT.
So sir, this HAM, the reduction of NHAI contribution, is that just limited to the article? Have we had any sort of discussion on any further updates on that? If you could share if you have been in discussion on this part?
I think that is the serious thought process, what we have been able to understand so far. There was even a discussion where they were thinking of giving some kind of a revenue guarantee on the BOT projects and remove the traffic risk on the BOT aspect as well. So a lot of thought process is happening between us as stakeholders and the regulators and the client that is NHAI. And I think there is a definite positive mindset with which everyone is working as to see how these models are made palatable and generate good returns at the same time, deliver a strong asset to the government, which has less problems going forward.
Next question comes from the line of Karan Kapadia from Systematix.
Yes. I have a question on private InvIT. Can you please share more insights about the traffic growth projections and tariff revision expected for the private InvIT projects in the coming quarter?
So private InvIT projects, as you -- as I said earlier, that all the projects are now operational and with the tariff hike somewhere around 10% for most of these projects, the revenue growth, what we have envisaged for this year with a decent traffic growth of 5.5% to 6%. The revenue growth is...
5.5% to 6%.
Yes.
Okay. And any more guidance that you can give for the [indiscernible] in future more than 10%? Or we can assume the exact tense around.
I think the tariff revision is clearly linked to inflation. And going by the present numbers, certainly, they appear to be going more north in terms of more than at least 5% even for the upcoming years, depending on where the inflation is right now. But I think even Bombay-Pune would have a tariff revision in the upcoming year. That would be a significant revenue driver for next year because 18% tariff revision will become due on 1st April 2023.
Next question comes from the line of Nikhil from HDFC Securities.
Sir, I had one question. When is the consideration for VK1 expected?
I think as we have talked about in previous quarters also, this will take another 2 to 3 months to complete that transition. We expect that consideration to be received by October this year.
Next question comes from the line of Vibhor Singhal from PhillipCapital.
Virendra sir just one quick follow-up to what you mentioned about the [indiscernible] in the HAM model. Now definitely, I mean, as you mentioned that if the government decides to decrease grant share during construction period from 40% to 20%. This will bring in more discipline into the bidding and not everybody will be able to bid for that. But I just wanted to ask that, in your opinion, you like have been in the industry before everybody and basically [indiscernible] and the model.
So in your opinion, do you think that -- I mean, given the kind of industry that we are in right now and the state of players that it is, that most players we most of the players who are right now bidding for the HAM projects might actually maybe stop bidding or maybe reduced there, basically reduce their appetite for the HAM projects by a significant amount. So in turn, NHAI might actually lose out on awarding a lot of projects on BOT, -- on HAM sorry. Do you think, do you envisage that happening that right now, like they have at around 40%, 50% of projects on HAM projects, they might not be able to do that. And then that might actually spill over maybe to more EPC and BOT?
I'll get to differ with you. See, I don't think that all the players will stop bidding on HAM. I don't think that is going to happen because ultimately, if the nation building has to happen, there will be many more hands required to undertake this. So what will happen is, today, ultimately, whatever equity one is putting into the project, he is recovering that equity by some means or the other, whether you are taking part of the equity back as some element of the construction margin or you are keeping that everything as a back-ended return on the annuity itself.
But if your equity amount goes up, naturally, all these players will have to be build little more samely where they will have to factor higher equity into their working, which will automatically bring the bidding to a rational level because today, what is happening is there being no real equity into the project, people are bidding with extremely low margins and trying to outbid other than destroy value and creating problems for themselves in the future. But the moment the lender would say we want more money to be seen upfront when you start the project, automatically, your project discipline will set in, and exhibitant pricing will automatically get corrected is my view.
So yes, now there will be certainly a [ epitomy ] that the client as a government will have to look at as to whether they want to -- then on the improved parameters want to give more on HAM or to do a way or not do away but give more on the BOT by paying the same amount of, say, grant during construction and save the balance 80% from being funded from their copper over 15 years and invite more of private money into the asset building. So I think this is a call that government will have to take. But if we look at the fiscal discipline that the government is putting in place, I think it will balance out somewhere in between.
As there are no further questions, we have reached the end of question-and-answer session. I would now like to hand the conference over to Mr. Virendra Mhaiskar for closing comments.
Thank you, everyone, for this interesting discussion. And we look forward to have all of you again when we declare the next quarter results and wish you a great week ahead. Thank you so much.
Thank you. On behalf of Chorus Call, that concludes this conference. Thank you for joining us. You may now disconnect your lines.