IRB Infrastructure Developers Ltd

NSE:IRB

Earnings Call Transcript 2024-Q4

[Operator]

Good evening, ladies and gentlemen. Welcome to the IRB Infrastructure Developers Conference Call for discussing the financial results for the quarter and year ended March 31, 2024, along with the recent development.

We have with us on the call today, Mr. Virendra Mhaiskar, Mr. Sudhir Hoshing, Mr. S.S. Rana, Mr. Anil Yadav, Mr. Mehul Patel, Ms. Poonam Nishal and Mr. Tushar Kawedia. [Operator Instructions] Please note that this conference is being recorded.

[Anil Yadav, executive]

Thank you. Good evening, everyone. I welcome all the investors and analysts to our earnings call for Q4 result of the financial year 2023-'24. Hope you all have gone through our detailed numbers as well as the presentation. I will briefly cover key highlights for the quarter.

We have, as always, endeavor to ensure the business stability by strengthening our liquidity position. IRB has successfully completed issuance and allotment of USD 540 million, a 7.1% senior secured note having a final maturity in FY '32. This issue was over subscribed by 4.25x, and proceeds for this issuance was utilized towards the refinancing of the existing indebtedness.

Being that issuer, IRB was rated as BA2 and BB+ by the reputed international rating agency, that is Moody's and Fitch respectively. We have received an encouraging response with the participation seen from marquee investor like PIMCO Capital, Clifford, Wellington, Lombard, BlackRock, Goldman Sachs, [indiscernible] et cetera. The notes are listed on the India International Exchange Limited.

IRB has recently received ISO 9001 for quality management system, ISO 14001 for environment management system, ISO 45001 for the operational health safety management system. And for information security management, we have received ISO 27001 certification from ISOQAR United Kingdom. This is a significant achievement for any infrastructure company.

IRB Trust has raised INR 2,253 crores, contributed by both the partner, that is IRB and GIC, in the ratio of 51-49, respectively. Further, the Meerut Budaun Expressway Limited that is Ganga Expressway Project SPV, associate of the company has issued NCD aggregating to INR 520 crores and was subscribed by the company and GIC in the ratio of 51-49 as part of sponsors contribution.

The project has completed over 50% of construction and is now eligible to transfer to the private InvIT, subject to necessary approval. IRB has made upfront payment aggregating to INR 6,111 crores to -- for TOT 12 and TOT 13 to NHAI. Pursuant to upfront payment, the SPV has received appointed date from April 1, 2024, from the competent authority.

Accordingly, SPV has commenced that toll collection with effects from April 1, 2024, and collections are in line with our estimate. We have received an Yedeshi arbitration award on Yedeshi Aurangabad. We have initiated the claim to NHAI for delay in the completion of the project, which was disputed by NHAI and has led to arbitration. The honorable arbitration tribunal has announced the order in favor of YATPL and upheld the claim of YATPL by directing NHAI to pay cash compensation of INR 1,681 crores.

Further, the commercial benefit of the extension to the concession agreement of 651 days would also accrue to IRB. The award also clarifies that further interest will be payable from the date of award till the final realization of the claim amount by YATPL.

YATPL is pursuing enforcement of the award by NHAI. Once claim is received, same will be appropriated towards the compensation that is INR 1,681 crores payable to IRB. Further, IRB has also received arbitration award for Ahmedabad Vadodara Project on April 9, 2024.

As you are all aware that IRB has raised the claim of loss of revenue due to construction of competing road by the state government of Gujarat, running parallel to the project highway. The honorable tribunal in its award declared that competing road come into existence in January 2019, when 75% of the length of the competing road was completed and not in the year of 2015 and '16 as contended by IRBAV.

However, due to technical reasons, no compensation was awarded on account of competing road. IRB is in process of taking legal opinion on the arbitration award and will further move to the high court and seek legal remedy against the order of honorable tribunal. Company does not expect to have any significant impact on its financial statement due to this outcome.

Now on toll income side. Mumbai, Pune and Ahmedabad Vadodara per day toll collection has gone up to INR 6.89 crores for the quarter ended March 2024 as compared to INR 5.9 crores per day for the same quarter last year, a growth of 17%.

For private InvIT, per day toll collection has gone up to INR 8.61 crores for the quarter ended March 2024 as compared to INR 6.28 crores per day for quarter ended March 2023, a record growth of 37%.

Increase in toll collection is on account of increase in traffic, tariff and addition of the new project.

IRB Trust has declared aggregated maiden distribution of INR 470 crores for FY '24 and 50% -- 51% of the same will accrue to the IRB. IRB has declared an interim dividend of 10%, face value INR 1, amounting to INR 60.3 crores for Q4 of FY '24, thus taking cumulative dividend to INR 181 crores for the year.

The total order book for the company stands now almost INR 35,000 crores. Within this, the EPC order book is INR 5,700 crores. Next 2 years executable order book, including, EPC and O&M, is close to INR 8,000 crores, thus providing a good construction visibility for next 2 years.

We have cash on books close to INR 2,700 crores and our future equity requirement is very minimal for the project, which we have on hand. This provides us enough scope to bid for the upcoming projects, which, according to NHAI estimate, amounts to more than INR 2 trillion, that is 53 BOT projects. Further, there is a pipeline of 33 TOT projects as well.

Now with respect to the recent guidelines of RBI and its impact. Reserve Bank of India has recently purposed to the lenders that they set aside higher provision for under construction infrastructure project. Banks are already charging 8% to 10% higher interest cost for the under-construction project -- for construction.

Typically, the rate charged by banks is 60 to 100 basis points higher as compared to fully operational projects. RBI proposed guidelines has also mentioned only 5% provisioning under the -- for under-construction project. Therefore, we don't expect any further additional impact that will accrue to us on this count.

Now I will request Tushar to cover the financial highlights for Q4 FY '24. Over to you, Tushar.

[Tushar Kawedia, executive]

Yes. Thank you, sir. Good evening, all. I'll just take you through the financial analysis for Q4 FY '24 versus Q4 FY '23.

The total consolidated income for Q4 FY '24 has increased to INR 2,504 crores from INR 1,699 crores, an increase of 47%. The consolidated toll revenues for Q4 FY '24 has increased to INR 640 crores from INR 547 crores, increase of 17%. The consolidated construction revenue for Q4 FY '24 have increased to INR 1,864 crores from INR 1,151 crores, an increase of 62%. EBITDA for Q4 FY '24 increased to INR 1,333 crores from INR 838 crores, an increase of 59%.

Interest cost has increased to INR 615 crores for -- in Q4 FY '24 from INR 373 crores, an increase of 65%. The depreciation has increased to INR 274 crores in Q4 FY '24 from INR 222 crores, up by 23%. PBT has increased to INR 444 crores in Q4 FY '24 from INR 242 crores, an increase of 83%. PAT after share of JV of loss INR 135 crores has increased to INR 189 crores from INR 130 crores, an increase of 45%. Cash profit has increased to INR 598 crores from INR 389 crores, an increase of 54%.

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

[Operator]

[Operator Instructions] The first question is from the line of Alok Deora from Motilal Oswal.

[Alok Deora, analyst]

So just a couple of questions. First, on the ordering pipeline. Because now we have started the new financial year. So is there any indications of any bids being opened now? Or practically, we'll see it in -- from November, December onwards only? That's the first one.

[Virendra Mhaiskar, executive]

So as you know, the pipeline of BOT projects totaling to almost INR 2 lakh crores and almost 35 TOT projects are now already displayed on NHAI website, which, to my understanding, are presently being on held -- hold because of the positive code of conduct.

So my sense is that somewhere by middle of June, the bidding process should start in full earnest. And if we look at our market share that has been in the sector, particularly pertaining to BOT and TOT, we have had a 30%-plus market share in the past. And even if I moderate that, given the larger size of bidding on these particular 2 platforms. Even if I make it half of what it was earlier, we should have a considerable orders in possibilities coming our way in the upcoming year, which can easily go up to anywhere around INR 20,000 crores, INR 25,000 crores.

So that's the visibility we are very excited and looking forward to, to start in full earnest. And I think we are well capitalized to undertake these projects as well given the financial positions and the ratios where we stand.

[Alok Deora, analyst]

Sure. And just some color on this interest expenses or the financial expenses, which has increased the component of the kind of a onetime expense also in that. So how do we see this expense moving now, the interest expense?

[Anil Yadav, executive]

I think, Alok, this time, the finance expenses on the construction side include close to INR 239 crores to INR 240 crores of onetime expense. If you net out that, that should be the normal kind of run rate which we should look for future quarters.

[Alok Deora, analyst]

Got it. And similarly for this share of profit loss in JV and associates there, again, it's been a pretty volatile number quarter-by-quarter. So if you could just elaborate how things have shaped up here? And what could be expected going forward?

[Anil Yadav, executive]

I think fair valuation gain or loss is last quarter, we received the arbitration award on Yedeshi Aurangabad. Accordingly, the fair valuation amount needs to be adjusted based on that particular order. But on going forward, also the fair valuation gain or loss should remain in the range of INR 42 crores, INR 45 crores per quarter.

Typically, why there is fair valuation gain or loss because as we are moving closer to receive date of the claim, automatically, there will be a fair valuation gain in IRB and fair valuation loss in the private InvIT.

[Alok Deora, analyst]

Got it. So this number would look like how much in FY '25?

[Anil Yadav, executive]

I think close to INR 150 crores to INR 160 crores.

[Alok Deora, analyst]

Got it. But just one last question. So now what is the pipeline as far as the BOT projects are concerned?

[Anil Yadav, executive]

I think as boss explained, I think almost 35 TOT projects are in pipeline. I think that also should take close to INR 1 trillion worth of opportunity. And in fact, in our presentation, Slide #25 or 26, we have already updated the list of pipeline which is available on the website of the NHAI.

[Operator]

[Operator Instructions] The next question is from the line of Prem Khurana from Anand Rathi.

[Prem Khurana, analyst]

So just to begin with somewhat bookkeeping sort of question. So I think you said this quarter, there is almost a INR 240-odd crores of additional finance cost in our numbers. I'm not sure, if I heard the nature of this additional number that you have a one-off number. Is it because we made repayment of that earlier debentures? Is the entire amount because of that or is there any other component as well?

[Anil Yadav, executive]

Yes, yes. You are at correct frame. It's relating to the early redemption of earlier debenture.

[Prem Khurana, analyst]

Okay. And even with this sort of INR 240-odd crores of additional number, the new money that you've raised, I mean you would still be somewhat better off, right? I mean the kind of coupon rate that you've been able to manage, right? Or is it only because, I mean, you want to improve your maturity profile that you've done this?

[Anil Yadav, executive]

I think both -- on the coupon side also and the maturity profile also. So if you are -- now the average maturity is close to 7.25 years.

[Prem Khurana, analyst]

Okay. And sir, on this Ahmedabad arbitration ruling that we've had, we were supposed to make some premium payments there earlier, but then these are put on hold because we're waiting for this outcome. So now with this outcome in place, does it mean the SPV would have to start making those payments? Or you would still be able to kind of defer it and tell that I'm there, is final -- because I'm sure, you would want to challenge this in the court of law again. So how does it work? Would you be required them to start making those payments now or you would still be able to pay for it?

[Virendra Mhaiskar, executive]

Yes. Prem, if we -- I mean our understanding of reading the arbitration award, it's very -- made very clear that the same is to be paid as per the premium deferment scheme. And as you know, the premium deferment scheme practically talks about balancing the cash flow mismatches.

So it will clearly be dependent on the availability of the cash from the project resources itself. So we were looking forward for reversal of the expense provision that we had, that probably would not happen at this juncture because of the arbitration tribunal not quantify the claim amount that should accrue to us, assuming that the competing road came into existence in 2019 as against our view of it being in place since 2015. But other than that, we don't see any other negative outcome from this.

[Prem Khurana, analyst]

Sure. And sir, on this opportunity pipeline that you spoke about, I mean, INR 2 trillion worth of BOT toll and then TOTs worth around INR 1 trillion odd. What sort of competition do you envisage for these sort of projects?

Because -- why I asked is, because eventually, especially on BOT side, for the last couple of years now, we've not had much from NHAI. So does it mean some of these people who initially were interested in hybrid and with lease could also come and look at this opportunity, and you could have more than 5, 6, 7 players come and compete for these projects, and especially on BOT tolls. TOTs, I understand, I mean, since the EPC part is on a lower side except for the O&M. You could still manage it well, but then how about in the BOT tolls?

[Virendra Mhaiskar, executive]

So you're right. We definitely want more players to come into this. But while I'm hoping for that, I'm not sure how many of them would have the kind of the balance sheet where we will to get into this particular aspect.

But yes, at least 3 to 4 domestic players and 2 to 3 international players is what we expect. And given the size of the opportunity, I think this is the bare minimum number of players that one would want to be there so that even government schemes reassured that private sector is there to do the heavy lifting this time around.

So I certainly feel that the number is just enough adequate to do the heavy lifting that the government is looking forward to. I don't see any aggressive competition or any -- what we can say, very difficult competition coming our way in this particular area because like what we see in EPC or HAM.

And I think all sensible players who understand the risks involved with such long-term projects, will only make beeline for these projects. And I think that is very good from the sectoral perspective because you would not have any adventurous players making up the space and creating problems for the government in future.

[Prem Khurana, analyst]

Sure. And sir, on the EPC revenue side, I mean our existing order backlog would be able to give us INR 4,000 crores on an annual basis, INR 8,000 over the next 2 years. But then -- I mean this would mean there's hardly any. So I'm assuming, you would get to have some numbers come to you from the new projects that you win over the next 2 years, given the fact that these would again come to contribute. Given this situation, what sort of growth should we work within our estimates on the EPC side?

[Virendra Mhaiskar, executive]

I'll quickly reiterate what I said in the beginning. And then on the future growth prospects, Anil and Tushar can add. So as I said, if you look at our past track record on a somewhat lower uptick on BOT project, that was the trend earlier. We had a market share of almost 35% odd.

Now with the increased pipeline, we don't foresee or we don't want to say that we'll be able to retain that same kind of a share. But even if one goes by even 50% of that, I think INR 20,000 crores, INR 25,000 crores worth of projects coming up in IRB way, I don't think is a very difficult target to achieve in the coming years.

And as you yourself said, there will be more of these projects that the HAM and EPC. Certainly, the bidding is likely to commence in right earnest by say, somewhere by middle of June or end of June. And I think that will provide more than good enough visibility for the order book. that will get built up by end of second quarter.

[Prem Khurana, analyst]

And any revenue growth target in mind on the EPC side? This year, we did almost around INR 5,000-odd crores plus. What sort of number would you be happy with? I mean, let's say, in FY '25 and '26 in terms of growth?

[Anil Yadav, executive]

I think FY '25 -- probably 15% kind of growth for FY '25, and a similar kind of growth one can assume for FY '26. But as sir has explained that we are eyeing for approximately 20,000 worth of projects. So probably, depending upon when we back the project, probably FY '26 growth will be much higher. But as of now, on the conservative side, we are guiding close to 15% growth on the EPC side.

[Prem Khurana, analyst]

And sir, just one last question from my side. Would you be able to share the gross debt number please?

[Anil Yadav, executive]

And before Tushar shares the broad number, I will -- just would like to highlight you the onetime impact because you have asked in your first question, what is the onetime impact.

So the fair valuation gain is close to 326. That is forming part of other income of IRB. And finance expense is around INR 239 crores. The net impact of onetime on the P&L side, that is the income side, net impact is around INR 87 crores. Out of that, INR 22 crores is tax. So the net impact comes to INR 65 crores.

And because of the fair valuation gain is in the IRB, that fair valuation gain is in the -- loss in the private InvIT also. Post-tax, that impact is close to INR 120 crores. So I think if you take the -- INR 65 crores was the income and INR 120 crores is the expense because of the fair valuation losses increasing in the private InvIT, that is the 51%.

So then the profit is lower by INR 55 crores. If the onetime income or expenditure would not have been there, the profit would have been increased by INR 55 crores, from INR 188 crores to INR 244-odd crores would have been the profit.

[Tushar Kawedia, executive]

Yes. And your question on gross debt. So gross debt on a consol basis is close to INR 14,700 crores, out of which for the asset side, SPE side it is close to INR 8,600 crores.

[Operator]

The next question is from the line of Parikshit K from HDFC Securities.

[Parikshit Kandpal, analyst]

My first question is on the bid pipeline for the INR 3 trillion. So how much of this [indiscernible] get awarded in FY '25?

[Anil Yadav, executive]

So I think Parikshit to what NHAI is talking about whatever the list they have already come out, they're talking about to be awarded over the period of 12 to 15 months. Even if you assume that this gets awarded over the period of 18 months, there is enough pipeline what they have already come out and which is there on their website.

So that is INR 2 trillion worth of BOT project and 33 TOT projects. Even if you assume INR 3,000 crores for a TOT, that will also transfer to almost INR 1 trillion of TOT opportunity.

[Parikshit Kandpal, analyst]

So -- and in this, we are looking for a 15% share, sir pointed out around INR 20,000 TO INR 25,000 of share for us, right?

[Anil Yadav, executive]

For BOT. Yes.

[Parikshit Kandpal, analyst]

And beyond this, are we going to bid for any HAM project. Because the HAM pipeline, what will be the HAM pipeline here in this...

[Virendra Mhaiskar, executive]

I think we will clearly like to stay clear of the HAM story given the abundant number of BOT and TOTs are coming up in the near future.

[Parikshit Kandpal, analyst]

Second question is on -- so what do you think would be the reform which can happen in the [indiscernible] any sense you are getting, because what we are hearing that the WPI [indiscernible] there are plans. So any sense on how [indiscernible] for this month? Explain some sort of those revenues. So how do you see -- any sense or thoughts on what potentially reforms can happen?

[Anil Yadav, executive]

Parikshit, can you come closer to the phone. We were not able to get your question. Can you repeat?

[Parikshit Kandpal, analyst]

Sir, I was saying there is a talk of that. And the ministry moving to producer price index, methodology of calculating inflation versus WPI. So I was just referring to what kind of reforms are you hearing can happen in the NHAI program in the coming years? Any sense on that would be helpful.

[Anil Yadav, executive]

So I think if you refer our presentation, we have given a slide on whatever new changes the NCA is likely to see, which are in public domain. We have listed them in Slide #25. Other than that, on this particular WPI thing, we have not heard from them anything. So in case if -- so as far as the existing projects are concerned, they will continue to be covered by the existing tariff policy, which is 3% plus 40% of the WPI.

And in case if there are any changes, we will definitely let you know. But whatever new modifications, they are discussing about the new concession agreement. We have enlisted them on the Slide #25 for you already referenced.

[Parikshit Kandpal, analyst]

But I mean you are seeing -- you have the largest portfolio of BOT toll assets. So do you think these changes -- be 1 or 2 top things that you would like to highlight these changes would have done to make these projects more bankable from both financing side and from the developer side, but according to you are the major, major changes in these -- meaningful changes, not immaterial changes?

[Anil Yadav, executive]

So from a bankability perspective, one of the key changes they have been discussing is in case of a concessionary event of default, still 90% of the debt due will be guaranteed by NHAI.

I think this was one of the contentious issue between the lenders and NHAI because NHAI has been holding a position that if the concessioner fails during construction, why should they compensate, whereas the lenders are saying that because you guys prequalified the guy and gave him the work, if you fail, you should compensate the debt that is outstanding at that point in time.

And probably NHAI is keen to accommodate the lender request here. That is one' of the key things came to my mind. And in terms of selling down the project post completion, now they have reduced the period to 1 year. So asset rotation becomes faster from a developer's perspective, and I think these are 1 of the 2 key changes. And paying for the next concession period related clarity also they have gotten. So I think if you look at the Slide 25, you will see a host of things what they have topped out, which we have enlisted in that particular slide.

I think if there are no more questions, we can conclude the call.

[Operator]

Okay, sir. As there are no further questions, I now hand the conference over to Mr. Anil Yadav for closing comments.

[Anil Yadav, executive]

I would like to thank all investors for participating on this call. We look forward to you to participate for the next conference call as well. 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 conferencing service. You may disconnect your lines. Thank you, and have a great evening ahead.