IRB Infrastructure Developers Ltd

NSE:IRB

Earnings Call Analysis

Significant Financial Growth and Strategic Developments in Q1 FY '25

In Q1 FY '25, IRB Infrastructure reported a 13% rise in total income to INR 1,972 crores, driven by a robust 18% increase in construction revenue to INR 1,335 crores. Toll revenues grew 4%, while EBITDA rose by 10% to reach INR 976 crores. Private InvIT also declared a distribution of INR 72 crores. The company's order book stands strong at INR 33,600 crores, with a promising pipeline of BOT and TOT projects worth INR 2 trillion. Key milestones include toll collections exceeding expectations and significant project advancements, such as a 50% completion of the Ganga Expressway.

Quarterly Performance Overview

In the Q1 of fiscal year 2024-25, IRB Infrastructure Developers recorded a total consolidated income of INR 1,972 crores, up 13% from the previous year's Q1. The company's toll revenues increased by 4% to INR 636 crores and construction revenues saw an 18% hike to INR 1,335 crores. EBITDA rose by 10% to INR 976 crores, reflecting robust operational performance. However, interest costs and depreciation also saw increases of 15% and 8%, affecting the overall profit margins.

Toll Collection and New Projects

IRB's toll collection has been strong, with a 4.4% growth seen from INR 6.55 crores per day in the previous year to INR 6.84 crores per day in Q1 FY25. Significant progress was made in new projects, including the commencement of tolling for TOT-12 and TOT-13 starting April 1, 2024, and the Meerut Budaun Expressway surpassing 50% completion. The project’s toll collections have surpassed initial estimates, highlighting strong traffic growth and effective project execution.

Strategic Partnerships and Investments

Cintra, a subsidiary of Ferrovial, has acquired a 24% stake from GIC in the IRB Infrastructure Trust and its investment manager, MMK Toll Road Private Limited. IRB continues to hold a 51% stake in both entities, maintaining significant control and strategic direction. This transaction signifies strong investor confidence and is expected to bolster project execution and financial outcomes moving forward.

Financial Adjustments and Guidance

Despite the robust income growth, IRB encountered fair valuation losses amounting to INR 40 crores for the quarter. However, these are non-cash book entries, and operational cash flow remains positive. Looking ahead, higher toll collections in Q3 and Q4 are anticipated, potentially mitigating reported losses and contributing to stronger financial health.

Operational Highlights and Future Outlook

IRB's order book stands at INR 33,600 crores, with an executable order book worth INR 7,000 crores for the next two years. The company sees a significant opportunity in BOT projects valued over INR 2 trillion and plans to participate actively in upcoming bids. With a consolidated net debt to equity ratio of less than 1:1, IRB is financially well-positioned to capitalize on these opportunities along with its partners, GIC affiliates, and Cintra.

Dividend and Cash Flow

The Private InvIT has been generating positive cash flow since the last fiscal year and declared a distribution of INR 72 crores for Q1 FY25. This will enhance IRB's cash flow proportionately to its 51% holding. In accordance with its dividend policy, IRB declared an interim dividend of 10%, totalling INR 60 crores, underscoring its commitment to rewarding shareholders.

Earnings Call Transcript 2025-Q1

[Operator]

Good evening, ladies and gentlemen. Welcome to the IRB Infrastructure Developers conference call for discussing the financial results for the quarter ended June 30, 2024, along with the recent developments. We have with us on the call today, Mr. Virendra Mhaiskar, Mr. S. S. Rana, Mr. Anil Yadav, Mr. Tushar Kawedia and Mr. Mehul Patel.

[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 after adequate response and resolution. Please note that this conference is being recorded.

I now request Mr. Yadav to give you an overview of the significant developments during the quarter. Thank you, and over to you, sir.

[Anil Yadav, executive]

Thank you. Good evening, everyone. I welcome all the investors and analysts to our earnings call for the Q1 of financial year 2024-'25. I trust you have reviewed our detailed numbers in the presentation. I will briefly highlight the key points for the quarter. Starting with the project update, we have received appointed date from NHAI for TOT-12 and TOT-13, and commenced the tolling on 1st April 2024.

We are pleased to inform that the toll collection for both the projects has been robust and encouraging exceeding our initial estimates. Meerut Budaun Expressway Limited, that is Ganga Expressway Project SPV entire equity that is sponsor's contribution has been infused. Following this infusion, Ganga Expressway has received first tranche of grant of INR 350 crores from UPEIDA.

The project has achieved a significant milestone surpassing 50% of restructure completion. This accomplishment makes the project eligible for transfer to the private InvIT. During the quarter, Cintra, a subsidiary of Ferrovial, has successfully completed the acquisition of 24% stake from GIC in IRB Infrastructure Trust and 24% stake in MMK Toll Road Private Limited, that is the investment manager of the trust.

Post the transaction, IRB will continue as a sponsor and project manager to the trust, holding approximately 51% of the unit in the trust and 51% equity share of the investment manager. And GIC and Cintra now holds 25% and 24% of the units, respectively. Cintra will have also a representation on the Board of the Private InvIT.

We have received PCOD for Hapur Moradabad project, resulting in tariff revision of approximately 4%. Toll collection and other updates. Our toll collection has seen a growth of almost 4.4%. The toll collection has increased from INR 6.84 crores for the quarter ended June 2024 as compared to INR 6.55 crores per day for quarter ended June 2023.

For Private InvIT per day toll collection has risen to INR 10.25 crores for the quarter ended June 2024, as compared to INR 6.45 crores per day for the quarter ended June 2023, recording a growth of 59%. This increase is attributable to traffic growth, toll tariff revision and addition of the new project. The project has received a tariff revision of approximately 2.5% effective from 3rd June 2024.

Private InvIT has been generating positive cash flow since last financial year and has declared a distribution of INR 72 crores for Q1 of FY '25, which will reflect in the IRB's cash flow to the extent of its holding that is 51%. In line with our dividend policy, the company has declared an interim dividend of 10%, amounting to INR 60 crores.

Order book and future outlook. Our total order book now stands at INR 33,600 with an EPC order book of INR 5,000 crores. Next 2 years executable order book including EPC and O&M is close to INR 7,000 crores. We are witnessing a shift in the mode of award from NHAI with an expected increase in BOT award.

The identified opportunity on a BOT basis is over INR 2 trillion. We will build for the viable opportunity apart from the TOT and participate in BOT, TOT and HAM in the same order of the preference. For the project executed through Private InvIT, equity requirement will get reduced to 51%, approximately 15% of the project cost. NHAI has also come out of 33 TOT projects on their website with a total lane kilometer over 2,600, which will be up for bidding in the near future.

As our consolidated net debt to equity is less than 1:1, we are well capitalized to tap this upcoming opportunity, which will consist of significant portion of BOT and TOT along with our partner, GIC affiliates and Cintra.

Now I will request Tushar to cover the financial highlights for Q1 of FY '25. Over to you, Tushar.

[Tushar Kawedia, executive]

Thank you, sir. Now I'll take you through the financial analysis of Q1 FY '25 versus Q1 FY '24. The total consolidated income for Q1 FY '25 has increased to INR 1,972 crores from INR 1,745 crores, registering a growth of 13%. The total consolidated toll revenues for Q1 FY '25 have increased to INR 636 crores from INR 613 crores, registering a growth of 4%.

The total consolidated construction revenue for Q1 FY '25 have increased to INR 1,335 crores from INR 1,133 crores, registering a growth of 18%. EBITDA for Q1 FY '25 increased to INR 976 crores from INR 889 crores, registering a growth of 10%.

Interest cost has increased to increase INR 439 crores for Q1 FY '25 from INR 381 crores, up by 15%. The depreciation has increased to INR 255 crores in Q1 FY '25 from INR 237 crores in Q1 FY '24, up by 8%. PBT has increased to INR 282 crores in Q1 FY '25 from INR 271 crores in Q1 FY '24, increased by 4%.

PAT after share of JV of -- after share of loss from JV of INR 53 crores has increased to INR 140 crores Q1 FY '25 from profit of INR 134 crores in Q1 FY '24, increased by 5%. Cash profit has increased to INR 448 crores in Q1 FY '25, from INR 424 crores in Q1 FY '24, an increase of 6%.

Now I request moderator to open the session for question and answers.

[Operator]

[Operator Instructions] The first question is from the line of Deepak Krishnan from Kotak Institutional Equities.

[Deepak Krishnan, analyst]

Yes. I just wanted to sort of understand, we've been hoping for this BOT, TOT base to kind of come through, and there were about INR 45,000 crores, I think, worth of projects initially expected to be bid out on BOT basis. Are we close to getting bid finalization or L1 in any projects? And what do you think is the timeline for sort of BOT wins to come true for IRB?

[Anil Yadav, executive]

You're right. The numbers in terms of biddable amount of projects on BOT and TOT remain unchanged. And there has been a slight delay because of some clarifications that have been sought by the prospective bidders. But otherwise, everything looks as it was -- as robust as it was, and we are very much looking forward for the upcoming bids.

[Deepak Krishnan, analyst]

So maybe in Q2, is it a possibility? Or would it be Q3 and 4Q when actual numbers...

[Anil Yadav, executive]

For sure, should see some fireworks and some awards coming through.

[Deepak Krishnan, analyst]

Sure. And similarly on the TOT because you've indicated that...

[Anil Yadav, executive]

TOT as well as BOT, we should see some projects definitely getting awarded if I go by the existing timeline that we can see on the NHAI website. Some projects awards certainly looks doable in Q2.

[Deepak Krishnan, analyst]

Sure. And maybe just a follow-up. So obviously, we've added a lot of assets to the private InvIT, the revenue growth has been pretty strong in terms of toll collection. When does that sort of positively start reflecting in terms of lower losses, adjusting for the accounting adjustments you have to do for the legacy assets? Now for the full year, like what kind of loss number do we think we'll end up with?

[Anil Yadav, executive]

Krishnan, I think the losses has 2 parts. One is the fair valuation loss, which is a book entry. There is no loss -- cash loss as such. And that will be close to INR 40 crores for the quarter, that is INR 20 crores share of IRB. Apart from that, if you look at, it's a INR 34 crores kind of loss.

And as typically we see Q3 and Q4 toll numbers are better. From there, we should start seeing these losses coming down. And probably from next financial year, we will have a positive number from the share of minority.

[Operator]

The next question is from the line of Alok Deora from Motilal Oswal Financial Services.

[Alok Deora, analyst]

So just a couple of questions. One is similar to the previous question. So if you look on an overall basis also, there has been hardly any awarding by NHAI till date in this financial year. And typically, we don't see much projects coming in during the monsoon period as well.

So is it fair to assume that anything material will only come by from November, December onwards. And also, many people are struggling -- many contractors are struggling for orders, so there will be a decent competition also there?

[Unknown Executive]

No, I think you are very right. We have been saying this for a long time now that the EPC and the HAM part of the bidding is likely to see a considerable slowdown and that is now reflected from what you just said. But as regards TOT and BOT pipeline is concerned, there is an active dialogue happening between the prospective bidders and NHAI.

And as I said, whatever deferments or delays in the bid dates has happened, is primarily to do with clarification that the prospective bidders have sought. And I think a better prepared bid will be a good thing for the industry as a whole. And the delays that we are seeing are not anything to do with lack of push from the government.

But a part of the procedural aspects with regard to getting the full information in the right manner before committing a bid given the long-term investment that it involves. So as I said, BOT and TOT side of the bidding remains very, very robust. And we are very much going to be a part of that bidding process.

[Alok Deora, analyst]

Sure. So the consultations to and fro, has that been completed now? Or it could -- it's still in like a dialogue stage?

[Unknown Executive]

So Alok, as I said, we expect a few bids to see the light of the day in the Q2. And for Q3, I think, definitely, there will be a lot more of it. But Q2 also, we definitely feel that there will be some good number of outcomes on BOT plus TOT put together.

[Alok Deora, analyst]

Sure. And on the toll projects, so have you taken any toll price increase in 1Q? Typically, there are a lot of projects where toll price gets changed effective April. So just some color on that.

[Unknown Executive]

So yes, the tariff revision, which was delayed due to model code of conduct was finally given a go ahead, and from the first week of June itself the same has been implemented. And that's in place now, for all the NHAI projects.

[Alok Deora, analyst]

Sure. Just one last thing. What kind of order flows we are looking at for this financial year, considering certain delays in bidding and what is the order inflow target for this year?

[Unknown Executive]

So the order inflow targets from NHAI is a very big number of INR 2 lakh crores. Now a significant part of that will be BOT and also TOT is what they have talked about. And if you look at our market share presently on the BOT, which is close to 10%, and TOT, which is at 38%, we will definitely strive hard to maintain our lead in both the verticals.

[Operator]

[Operator Instructions] The next question is from the line of Ketan Jain from Avendus Spark.

[Ketan Jain, analyst]

My question is on the same BOT pipeline. So can you quantify the value of projects in the near term in BOT mode from NHAI?

[Unknown Executive]

No, the list is already out. I think we have given it as a part of the -- there is a part of the presentation if you see. The presentation on the website. 24 odd projects on BOT and Slide 24, 25 if you see we've given an exhaustive list of it.

[Ketan Jain, analyst]

Understood. Okay, sir. I'll refer to that. So my next question is on what are the key changes in the concession agreement which NHAI has proposed and how it will benefit the contractors?

[Unknown Executive]

We can -- there is a whole host of reforms that they have carried out and...

[Ketan Jain, analyst]

Any major ones which helps...

[Unknown Executive]

It's actually a small presentation. We can reach out to you with a separate -- we can send out to you a small presentation on that.

[Anil Yadav, executive]

I think we have listed on Slide #24.

[Tushar Kawedia, executive]

Slide #24 has a few of those already listed actually -- on our presentation Page 24.

[Operator]

The next question is from the line of Tushar Pendharkar from Ventura Securities Limited.

[Tushar Pendharkar, analyst]

Yes. Sir, there are some shares owned by the promoters, which is shown as pledge. Can you throw some light on the same?

[Anil Yadav, executive]

Yes. There is a nondisposal undertaking given by us as promoters of the company. I want to clarify here that there is no promoter loan or any credit availed against any of the NDU that has been given. Primarily, when GIC and Cintra made the large equity investment of INR 5,000-odd crores in December '21, they wanted this NDU to be in place to give them the comfort that the existing sponsor interest remains aligned with them.

And it is an NDU given for next few years that the promoters will continue to remain aligned and continue to lead the company in terms of project wins and take the business forward. So this is more of a nondisposal undertaking. It is not the pledge nor is there any credit availed against any of these shares.

[Tushar Pendharkar, analyst]

Okay. So there won't be any major impact on the shareholding pattern of the company from that?

[Anil Yadav, executive]

No, no. Not at all.

[Operator]

[Operator Instructions]

[Anil Yadav, executive]

In case there are no more questions, we can wind up the session for today.

[Operator]

The next question is from the line of Vaibhav Shah from JM Financial Limited.

[Vaibhav Shah, analyst]

Sir, what would be the breakup of other income within EPC and BOT?

[Anil Yadav, executive]

INR 22 crores is in -- INR 22 crores is BOT and balance is construction segment.

[Vaibhav Shah, analyst]

And this should be similar over the next 2, 3 quarters as well. The trend should remain similar?

[Anil Yadav, executive]

Range was similar only.

[Operator]

[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to Mr. Virendra Mhaiskar for closing comments.

[Virendra Mhaiskar, executive]

I would like to thank all of you for taking time out and attending this analyst call. I look forward to catch up with you on the next quarterly results call. I wish a very happy and good weekend. See you and connect with you soon. Thank you.

[Operator]

Thank you, sir. Ladies and gentlemen, this concludes your conference for today. We thank you for your participation and for using Researchbytes [indiscernible] Services. You may please disconnect your lines now. Thank you, and have a great evening ahead.