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IRB Infrastructure Developers Ltd
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Good evening, ladies and gentlemen. Welcome to the IRB Infrastructure Developers conference call for discussing the unaudited financial results for the quarter ended September 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 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 request Mr. Anil Yadav to give an overview of the significant development during the quarter. Thank you, and over to you, sir.
Good evening, everyone. Our sincere apology for delaying this call by 15 minutes. I welcome all the investors and analysts on the quarterly conf call. Hope you all have been too able to go through our detailed numbers as well as the presentation released.
We're pleased to inform you all that we have successfully refinanced the debt of INR 2,100 crores for 2 projects, that is Solapur Yedeshi and Yedeshi Aurangabad of private InvIT through INR bond with a bullet repayment after 5 to 7 years at the rate of 8.65% per annum. This is a part of our business strategy of written enhancement through leverage optimization, which we have been successfully doing for our projects through the debt as well.
With a stronger balance sheet and improved credit rating achieved now, we can see even better financing terms and optimize the capital structure of the project to bring down the cost of funding on ongoing basis.
To give you a sense of this lever for every INR 1,000 crores of projects, refinancing or cost reduction by 2% can lead to at least INR 100 crore, that is 10% saving over debt deliver. We have entered the stabilization phase of 9 projects transferred to the private InvIT and this strategy is being implemented there as well.
To start with, we refinanced 2 projects, that is Solapur Yedeshi and Yedeshi Aurangabad whereas the debt restructuring and cost revision amounts to additional cash flow of INR 500 crores over next 5 years. We feel incredibly happy about the fact that these projects are assigned AAA rating by CRISIL, the first of any BOT toll project in India. The same will be taken up for the rest project in the same manner over the coming quarters.
With respect to the VK1, the public InvIT has received an overwhelming response from the unitholder for the acquisition of VK1 at an enterprise value of INR 1,297 crores from IRB. We expect to complete the transaction very soon. IRB will get a cash of INR 342 crores and debt of INR 955 crores will get reduced from the consolidated debt.
Now net debt to equity on a consolidated basis, is 0.81 is to 1 as on September 30, 2022. This also helped change in our rating category of IRB. We have moved to AA category in terms of rating by India Ratings from single A category. For private InvIT 1 asset, Kaithal Rajasthan, we have received close to INR 58 crores, INR 59 crores from NHAI as interim release in connection with the claim loss towards the farmers' agitation on October 10, 2022.
For Ganga Expressway Project SPV we have already included INR 533 crores of equity, out of which INR 261 crores was funded by GIC being a 49% equity partner. Traffic momentum or momentum on Mumbai-Pune reports 10% growth for Q2 FY '23 as compared to Q2 of FY '22. [ AV ] reports 13% growth on Q2 of FY '23 as compared to Q2 of FY '22.
We have also witnessed 56% growth in toll revenue for Q2 of FY '23 as compared to Q2 of FY '22 in 9 assets transferred to private InvIT, excluding the Palshit Dankuni.
EPC revenue is lower on account of monsoon and delaying appointed date in some of the projects. We have received appointed date for Ganga Expressway, and work has started in full swing as initial work like cleaning and grubbing was started much before the appointed date.
As stated earlier, the equity for Ganga Expressway will be funded in the ratio of 51% and 49% by IRB and GIC and GIC will be contributing more than INR 1,000 crores for the project. With execution on Ganga in full swing, we expect EPC revenue to be in the range of INR 4,500 crores for financial year 2022 to '23, which we had guided at the beginning of the year.
With respect to the toll revenue, considering the previous trend, the second half of the fiscal seems to be promising and leading to a strong generation of the toll revenue. Considering the upcoming festive season, we have started witnessing an uptake in the traffic movement already, providing us comfort and traction for the coming quarters. The total order book for the company now stands at INR 20,075 crores, which provides the visibility for next 2 to 3 years.
For -- further, with respect to the new assets, a couple of BOT projects are already identified to be bidded out in future. Further, we expect robust order pipeline in Q3 and Q4 of the financial year. And we will be bidding for the BOT, TOT and HAM project in the same order of the preference.
Now I will request Shri Tushar to continue with the financial overview. Over to you, Tushar.
So thank you, sir. Now I'll take you through the financial analysis for Q2 FY '23 versus Q2 FY '22. The total consolidated income for... [Technical Difficulty].
Sir, we are losing the audio, sir.
Yes. Sorry for disturbance. I will just take you through the financial analysis of Q2 FY '23 versus Q2 FY '22. The total consolidated income for Q2 FY '23 has decreased to INR 1,439 crores from INR 1,504 crores, a decline of 4%. The consolidated toll revenues for Q2 FY '23 has increased to INR 494 crores from INR 457 crores, registering a growth of 8%.
The consolidated construction revenues for Q2 FY '23 have decreased to INR 944 crores as against INR 1,047 crores declined by 15%. EBITDA stood at INR 761 crores from INR 757 crores, registering a growth of 1%. Interest has decreased to INR 389 crores from INR 477 crores, a decline by 18%. Depreciation has increased to INR 192 crores from INR 165 crores, up by 16%. EBIT has increased to INR 180 crores from INR 115 crores, registering a growth of 57%. PAT after share of JV loss has increased to INR 85 crores as it is INR 52 crores in Q2 FY '22 -- INR 42 crores in FY '22, registering a growth of 102%. The cash profit has increased to INR 302 crores in Q2 FY '23 from INR 243 crores INR 243 crores in Q2 FY '22, registering a growth of 24%.
Now I request moderator to open the session for question and answer.
[Operator Instructions] We take the first question from the line of Mr. Mohit Kumar from DAM Capital.
Yes. So two questions, sir, from my side.
Mr. Mohit your line is in talk mode, sir. Please go ahead with your question.
Am I audible now? Hello. Am I audible? Hello. Am I audible?
Mr. Mohit, can you hear us.
Yes I can hear you. Can you hear me? Hello?
As there is no response from the line of Mr. Mohit. We move to the next question. [Operator Instructions].
The next question from the line of Teena Virmani from Kotak Securities.
My questions are related to this EPC revenue guidance. Is there any change in the guidance? Because earlier, we believe we were expecting a bit higher because of ramp-up on Ganga Expressway and expectant inflows in future.
So is there any shortfall that you are expecting on the inflow side for the company, which is basically giving us -- which is basically resulting in a guidance of around INR 4,500 crores for the current financial year for the EPC [indiscernible]?
So Teena, what we are guiding is INR 4,500 crores. If you see earlier revenue was gross of GST, now this revenue is being reported as a net of GST. Hence you are seeing that particular difference. Otherwise, our construction revenue targeted INR 4,500 or this year is on track. We will try to catch up for the Ganga Expressway where we have already received the appointed date now.
Okay. And any tentative idea on the pipeline or the BOT [indiscernible] that you are seeing for the current fiscal in the second half? And how much are you expecting to win?
So we expect at least 4 to 5 BOT projects getting bid out before March, and we would be evaluating those bids and participate in the same. Plus we expect a good traction on the HAM projects as well to cater to the ECP requirement, INR 5,000 crores to INR 7,000 crores of incremental project wins is what we would be looking at.
And my next question is related to the equity requirements on a year-wise basis for Ganga, Palshit and even on a newer inflows that you are expecting. So would the internal approvals be sufficient to take care of the same, if you can first quantify the amount and then maybe comment on the other part?
Sure. So for this particular fiscal, for the balance period, the equity requirement is around INR 200 crores, INR 250 crores -- INR 250 crores. And for next year, it is -- the requirement would be for the projects at INR 800 crores and balance around INR 200 crores in the subsequent year for the projects like Ganga, which will continue for [ FY '20 ] as well.
With respect to the cash flow requirement, as we have already -- as we have been discussing that we have the growth capital available and the margins that we are generating from our construction revenue would cater this particular requirement for the coming years as well.
Sure. Sure. Just one last question on the changes that were expected on the HAM model, -- how -- can you expect any clarity on the same from the government side or from NHAI side?
We did have 1 round of deliberation that the NHAI and to discuss these modalities of reducing the upfront payment during construction on HAM project.
And as a sector, most companies have given their views to NHAI and it's now between NHAI and government to finalize what is the revised structure that they want to announce. And we also are fully awaiting that clarity. But the consensus seemed to bring that down to 20% from the conversation with what we had in those interactions.
And by then can it come?
I have really no idea about that because that is something which NHAI and the government would be deliberating. And once we know more about it, we will be more than happy to share that with you.
Sure. So basically, as certain -- both the models would coexist, 40% grant and 20% grant both will provides in the initial or they would completely replace that 40% grant with a 20% grant.
My sense is that given the available purpose with them and their wish to build out a similar number of kilometers on an ongoing basis. They might want to reduce that upfront number and ensure that they have adequate resources to keep funding the project... [Technical Difficulty]
I'm sorry, sir, I'm not able to hear you. Participants, it seems that we have lost the connection for the management. Please stay connected while we reconnect.
[indiscernible]
Yes, sir. We missed last point, sir.
I'm extremely sorry, the light gets [indiscernible] I don't know. But as I said, once the way we understand it is once they actually decide on the revised HAM allocation, I think all of it could cater to that new requirement. It what my understanding, I don't think they will continue both the platforms. Projects which have already been bid out. It will continue with the old platform of 40% construction. And once they bring in the response, then projects that could get bid out after that would cater to the translation of whatever they decide, whether it be 20%, 25%, 15%.
We take the next question from the line of Mr. Mohit Kumar from DAM Capital.
Am I audible?
Mr. Mohit your line is in talk mode, please go ahead with your question.
Am I audible? Hello? Hello? Hello?
Mr. Mohit your line is in talk mode, please go ahead with your question.
Yes, I have two questions. First is, sir, on the macro side, how is the pipeline looking at this point of time? Given that the...
As there is no response from the line of Mr. Mohit's line.
We will move to the next question from the line of Mr. Viral Shah.
Yes. Wishing you all a happy Diwali. Sir, a couple of questions from my end. So when you look at in terms of strategy -- can you hear me? Hello? Can you hear me, sir? Hello. Hello.
Mr. Viral, your line is in talk mode, sir, please go ahead.
Ma'am, can you hear me? So basically, when you look at in terms of strategy, when you look at in terms of when the VGF comes down to 20%. So are we keen on bidding for further [indiscernible] where VGF will come down to 20% and still our thought process and IRR of 14%...
Sir, can you please allow me a moment, I will have to check the line for Mr. Viral, please stay connected.
Mr. Mohit, we have promoted your questions, sir. You may go ahead, please.
There seems to be some problem with Mohit's line. At this time we are asking Mr. Mohit to ask the question, the line is getting dropped. I don't know if there is some a problem at their end. The...
No, sir, actually, I'm just checking because I'm able to hear you. Give me one moment, I am just checking the participant's line. Sir, I checked the line for Mr. Mohit, but there is no response.
We have a follow-up question from the line of Ms. Teena Virmani.
Yes, sir. Can you give me a standalone [ debt ] number.
Yes. So for construction side. So I think the stand-alone debt number is INR 2,868 crores without working capital.
And the working capital?
With working capital, it is INR 3,600 crores.
INR 3,600 crores?
Yes.
Sure, sir. And sir, in this quarter, we have also seen some impact on the toll revenues. So do you think that the traffic is coming back to normal? Or is there any kind of -- is there a general slowdown in the traffic that you are witnessing with a -- within this quarter also in -- starting from October.
So Teena, for the quarter -- on a quarterly basis, we have seen a good growth in the traffic number despite of being a month-end quarter. And also the current trend, what we've always seen is the -- because of the festive season, the trend improves a lot. So that has been recognized in the current numbers as well.
Sure. Sir, no, I was referring to the sequential decline. So 1 impact was because of the [indiscernible].
So if you see a sequential decline, there is a 1 day short for this particular quarter. That is the 1 reason. But otherwise, if you see on a Y-o-Y basis, there is a growth of around 8%. We don't have any tariff hike for Mumbai-Pune. So [indiscernible] revenue has been contributed by traffic, which is almost 13% for the Mumbai-Pune.
And sir, Ahmedabad-Vadodara, it would be around?
Ahmedabad-Vadodara 13% and 10% is for Mumbai-Pune.
Okay. That is only traffic growth.
So for Mumbai-Pune, it's only traffic growth. For Ahmedabad-Vadodara, there was a 10% tariff hike, so balance is towards the traffic growth.
So 2, 2.5 or around 5, 6, 7% could have been the traffic growth and 6%, 7% could have been your tariff hike?
Yes, yes.
Teena, we have also faced very severe monsoon in Gujarat and some section of Gujarat also seen some flooding situation in the month of August and end of July. So that was also 1 of the reasons for a little lower number on Ahmedabad-Vadodara. And with respect to your previous question, what Tushar has said, I want to just add basically if on a INR 4,500 crores revenue, which earlier, if I would have reported including the that would have been a revenue of more than INR 5,000 crores. And with the netting of the revenue, my EBITDA does not change. My PBT also does not change even the profitability also does not change. Only thing which improves is the percentage EBITDA margin. -- So revenue is not reducing. In fact, the revenue if you divide by 88%, the revenue INR 4,500 crores divided by 88%, it's a INR 5,100 plus crores of revenue.
Got it. Got it. I was under the impression that this is -- I mean, the GST component was causing the confusion actually.
No, it's a net revenue, net of GST.
[Operator Instructions]
Ma'am, I have got some feedback that from some of the analysts who are attending this call. They are saying the line is very bad, and they are not able to ask their questions. So if you can check if there is some issue with your end because some of analysts have already messaged me stating that.
Right, sir, I'll get that checked. Sir the only issue we faced, I think with Mr. Mohit Kumar, I'm unable to hear him, sir. I will get that checked, sir. I'm just promoting the next question in the queue.
Anil, if you can hear me, if you can gather those questions, we may just reply those. So if those -- I mean I understand the line looks to be bad today. But if those analysts have reached out to you and shared their questions, then maybe you can just reply on this forum, whatever the question was and our answer.
Okay, sir. Noted, sir.
Sir, should we move ahead to the next question?
Yes. Yes, please.
Okay. We take the next question from the line of Mr. Alok Deora from Motilal Oswal.
Am I audible?
Yes. Yes, very much.
So sir, just had a couple of questions. One was on the tender pipeline. So just wanted to understand how are we seeing the BOT projects now? Because that has been slightly on the lower side. I mean, even if they are going ahead with the warning then it's saving time to get the closure done. So just wanted your thoughts on that. Because that is also 1 area which we were targeting quite aggressively.
Yes, it seems to be on a lower side but we may be working to assets to market well. And you're right, there has been some slowdown on the BOT side. And we are also [indiscernible] awaiting the revenue of [indiscernible].
Sure. So when we are talking about this year order inflow, we are not factoring anything on that.
No. So the INR 5,000 to INR 7,000 crores incremental organization that [ can be consuming ] would be primarily on BOP and have put together.
Sure. Sure. And also, sir, like if you look at year-to-date till almost October, will NHAI's awarded nearly 800-kilometer or so of projects where the target is nearly 6,000 kilometers.
So do you think, again, the aggression could be quite high in the last 3, 4 months where these other players also have not bagged any significant number of projects. So again, the competitive intensity would continue to remain high and just your thoughts on that, sir.
So our sense is that unlike last year, and this is a phenomena which we have been observing last now almost [indiscernible] on the earlier where majority of the order activity gets put to the second half of the financial year. Similar trend seems to be unfolding this year as well.
But 1 change that has taken place is unlike last year, the prequalification now [indiscernible] bond security requirement has been leased up by NHAI. And our sense is that, that should bring in some discipline compared to what the theme was last year. And we will be very safely evaluating the bidding pattern because we are very sure that with the order visibility that we have for 3 years, we are definitely not in a hurry to somehow bring a project by compromising for the margin. So we can be very carefully evaluating this aspect and we are [indiscernible] bidding for releasing the project for the sake of bidding it and we would like to see how the scenario as pools and then we'll calibrate our response.
Sure. Just one last question. I'm not sure if this has been answered because the line has been slightly volatile. Just wanted to know this how many toll projects tenders we are looking at to be floated in this year because still now there has been no significant tenders from the toll project side?
So presently, as I said, Ganga, we are now -- we are in the closure, that part is done. Recently, if I look at, we are evaluating 2 BOT projects. One is the state BOT, one is NHAI BOT and we expect at least 6 to 8 more projects to get announced for bidding in the near future.
Sir, there are a couple of questions from Viral. So He wants to know. Hello?
Go ahead, Anil.
Yes. In terms of strategy, are we comfortable for the bidding for the project where VGF comes down to 20%?
Second question is update on pending arbitration award.
And third question is why BOT revenue growth is only 7%.
So I think first question, I will answer the last question first. The BOT total revenue is [indiscernible] the answer is 8% overall number growth is inclusive of Mumbai-Pune where there has been no tariff increase. And as you articulated before [indiscernible] revenue growth, Mumbai-Pune has [indiscernible] revenue growth. So then there was no tariff hike. So that is majorly contributing for the [indiscernible] anything on the traffic numbers, in fact, we look to be really robust.
In terms of the other point where you were asking about the VGF for HAM projects going up to 20%. I think it will be a welcome move because our sense is very simple on this whole phase. Higher price participation is [indiscernible] format, the dominance will bring in more disciplined bidding and sensible pricing as against higher government funding and lower private participation.
Because the moment the private participation was -- it becomes a very turnover churning exercise, we have no [ VGF bidding ] from any of the bidder and then the aggregation picked up excessively. So any format, whether it is a reduced upfront in hand or any other format of BOT that is offering devices, higher book value participation better will be the result is my understanding.
Sir, update on arbitration award.
So on the arbitration award, all of the disputes that we have across various projects, a, each of them now have an arbitration panel in place and the respective processes are going on in a time-out manner.
So as we had said earlier, I think every year, we can expect to have some meaningful revision contributed to the bottom line going forward. And so far, the progress on both sides has been very, very encouraging.
So Anil, sir, any further questions from Viral.
No, no, I think we can ask moderator to move to the next question.
Next question.
We take the next question from the line of Mr. Meet Parikh from Anand Rathi.
So my first question is regarding the guidance given on the EPC toll -- for EPC revenue for the year of around INR 4,500 crores. Does it include the arbitration which we received in the last quarter?
Anil, do you want to take it?
Yes, sir. So that is including the arbitration award we have received the last year. because while factoring for the business flow for entire year, since this arbitration was already there, and once it got converted in the judicial award when it was confirmed by the High Court then we have recognized the revenue. And it was part of the entire INR 5,000-plus crores of revenues what we have projected, including GST for this financial year.
Okay, sir. And secondly, my question is on the order book. Can you give a project-wise breakup for the order book, order backlog?
Yes. Sure. So on an EPC order book, the balance order book remains at INR 8,800 crores and out of which for BOT projects, the outstanding order book is at INR 6,600 crores and around INR 2,200 crores is towards the HAM projects.
I think if you are reconciling the previous order book and this order book, I think we have added the order book of Ganga O&M also because Ganga is going to be executed in the -- on the basis of 51% and 49%, and the O&M revenue will not get eliminated -- and since EPC and O&M is already in place, we have added back O&M order book in our overall order book. .
Okay, sir. And sir, in the BOT projects of around INR 6,600 crores which you just said. Can you give the breakup on which all projects have at there in order book?
So INR 1,500 crores is -- sorry, INR 5,000 crores is towards Ganga, INR 1,500 crores is towards Palshit. And balance remaining for the private InvIT that is the smaller amount.
Okay. And on the HAM project, sir? INR 2,200 crores?
So for HAM projects, those are the 3 HAM projects that is VM7, Chittoor–Thatchur and Pathankot–Mandi. The breakup for the VM7 is some around INR 950-odd crores for the 2 projects because it's just commenced. So around INR 700 crores and for Pathankot-Mandi it's around INR 550 crores.
[Operator Instructions] Ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over.
So would like to wish...
I'm sorry, sir, I'm sorry to interrupt. We just got a participant in the queue. Shall we promote the questions?
Yes, sure.
We have a question. This is a follow-up question from the line of Mr. Alok Deora.
Yes. Sir, just wanted to understand any other projects which we are looking to transfer to the InvIT in the near-to-medium term? Just your thoughts on that?
Presently no, because we will be looking more from the HAM projects getting transferred to public InvIT. I feel that the private InvIT portfolio that is more of a stabilization phase and none of these HAM projects are likely to reach a quick transferable situation. Although as a sponsor of the public InvIT, I think, public InvIT management has also made it clear that they have been evaluating stand-alone third-party opportunity, and that exercise would continue in my understanding.
So any more questions?
There are no more questions. So you can go ahead with your closing comments, sir.
Okay. So I would just like to wish all of you a very happy and prosperous New Year and Happy Diwali. And thank you for being with us on this call and for your patience. And I apologize for the bad line, which might have caused some irritation at your end. And thank you so much. Have a great weekend ahead.
Thank you, sir. Ladies and gentlemen, this concludes your conference call for today. We thank you for your participation and for using Researchbytes conferencing services. You may disconnect your lines now. Thank you. Have a great day.