IRB Infrastructure Developers Ltd
NSE:IRB
IRB Infrastructure Developers Ltd
IRB Infrastructure Developers Ltd. stands as a significant pillar in India's infrastructure landscape, epitomizing the swift evolution of the nation's road development sector. Founded in 1998 by Virendra D. Mhaiskar, the company has carved a niche by focusing primarily on the development of roads and highways, an endeavor critical to India's economic progress. The genesis of IRB's business model revolves around the Build-Operate-Transfer (BOT) model, a cornerstone in modern infrastructure projects. This model not only allows IRB to undertake construction projects but also enables them to manage long-term operations, collecting toll revenues that serve as the lifeblood of their income stream. By engaging in BOT projects, IRB mitigates initial financial risks while creating a steady cash flow, further leveraging government policies that support public-private partnerships in infrastructure.
As one navigates the success trajectory of IRB Infrastructure, the company’s strategic acumen becomes evident in its diverse portfolio, which extends beyond highway development to include airport construction and real estate. This diversification not only spreads out the risk profile but also taps into new revenue streams, thus sustaining growth amidst the cyclic challenges of the construction industry. The company’s prowess in securing project finance, coupled with its execution capabilities, ensures the timely delivery of projects, often ahead of schedule. By continually adapting to technological advancements and adopting innovative engineering solutions, IRB maintains its competitive edge in an industry that is vital to the cohesion and growth of India's economy.
Earnings Calls
In Q3 FY '25, IRB Infrastructure Developers reported a modest total income increase to INR 2,090 crores, up 1% from the previous year. Notably, income from the InvIT and related assets surged by 267% to INR 245 crores. EBITDA grew 7% to INR 1,049 crores, with profits before tax rising 10% to INR 323 crores. The company declared a 10% dividend totaling INR 60 crores and expects an executable order book of INR 6,000 crores over the next two years. IRB is positioned to explore new bids amid a recovering bidding environment, leveraging increasing toll revenues and government support for PPP projects.
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Good morning, ladies and gentlemen. Welcome to the IRB Infrastructure Developers conference call for discussing the financial results for the quarter ended December 31, 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. Mehul Patel, Ms. Poonam Nishal and Mr. Tushar Kawedia.
[Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Yadav to give you an overview of the significant developments during the quarter. Thank you, and over to you, sir.
Thank you. Good morning, everyone. I welcome all the investors and analysts to our earnings call for Q3 results financial year 2024-'25. I trust you have reviewed our detailed numbers and presentation. I will briefly highlight the key points for the quarter.
Private InvIT, IRB Infrastructure Trust has issued preliminary and nonbinding offer of its matured asset to the public InvIT that is IRB Infrastructure Fund.
As of September '24, the enterprise value of high offered asset is INR 15,000 crores as outlined in the independent valuer report of the private InvIT. The consideration so received will be used for the funding upcoming opportunity in the sector. The proposed transfer is key step to our BEST that is bid, execute, stabilize and transfer strategy, under which the projects are initially developed under our private InvIT platform. Upon completion and stabilization, these assets are then offered to the public InvIT platform. This process not only maximizes the value for the stakeholder of IRB Group, but also ensures a sustained long-term benefit.
The BEST growth strategy focuses on sourcing the capital for growth through asset monetization. This transfer of the asset from the private InvIT to the public InvIT will ensure that there is no need to dilute the equity or alternatively raise the debt at IRB.
For the public InvIT, this is a win-win situation as not only their portfolio expands, but also the residual life of the asset under the management will get enhanced. During the quarter, Private InvIT has acquired 80.4% equity of share capital and 84.4% of the debenture of the Ganga Expressway project in line with the concession agreement.
The project has already received 3 tranches of grant that is INR 8.7 billion out of INR 17.46 billion from UPEIDA. We are happy to inform that the project is progressing as per the scheduled timeline.
Investment manager of the Private InvIT on behalf of the trust has issued and allotted 5.84 crores unit of the trust aggregating to INR 1,714 crores and the company being a sponsor of the trust has been allocated 2.98 crores unit.
We have witnessed a robust growth in the toll revenue, 21% across in Private InvIT and Mumbai, Pune and Ahmedabad Vadodara put together on a year-on-year basis for Q3 FY '25. The Private InvIT has been generating positive cash flow since last financial year and has declared a distribution of INR 54 crores in Q3 of FY '25, which will reflect IRB's cash flow to the extent of its holding 51%. Cumulative distribution declared by the Private InvIT for 9 months FY '25 aggregates to INR 190 crores.
In line with our dividend policy, the company has declared an interim dividend of 10% amounting to approximately INR 60 crores. Total dividend for 9 months FY '25 aggregates to INR 181 crores.
Our total order book now stands at INR 31,500 crores with an EPC order book at approximately INR 3,200 crores. Next 2 years executable order book, including O&M and EPC is close to INR 6,000 crores. With respect to new bidding, the government push for the PPP project is gaining momentum with bidding for BOT and TOT project is now underway. We are well positioned to capitalize on these opportunities and intend to actively participate in upcoming projects. India Rating has affirmed the rating of IRB. Now I will request Sri Tushar to present the financial highlights for Q3 FY '25. Over to you, Tushar.
Thank you, sir, and good morning to all. I will first take you on the new accounting segment reported by the company for this quarter, followed by the financial highlights for the quarter. To align the accounting treatment in line with the regulatory changes relating to InvIT operations, shifting business environment and emerging business opportunities, the company has engaged experts to advise on the accounting approach to be adopted by IRB.
Following an extensive study of IRB's business model and Indian and global accounting guidelines, the experts have recommended the accounting treatment. This treatment was considered and approved by the Audit Committee and Board after detailed deliberations. Accordingly, the company has introduced a new segment, InvIT and related assets and reported the segment results in accordance with Ind AS 108.
As you are aware of that more than 85% of enterprise value is attributable to its asset business for IRB. Notably, the Private InvIT has an enterprise value of approximately INR 60,000 crores in which IRB holds 51% stake. Now with adoption of new measurement approach, the investments in Private InvIT will reflect the inherent value of these investments on an ongoing basis.
I will now take you through the financial analysis of Q3 FY '25 versus Q3 FY '24. The total consolidated income for Q3 FY '25 has increased to INR 2,090 crores from INR 2,077 crores, registering a growth of 1%.
The income from BOT segment for Q3 FY '25 have increased to INR 648 crores from INR 616 crores, registering a growth of 5%. The income from InvIT and related asset segment for Q3 FY '25 have increased to INR 245 crores from INR 67 crores, registering a growth of 267%. The income from Construction segment for Q3 FY '25 have decreased to INR 1,133 crores from INR 1,353 crores, down by 16%. The other income for Q3 FY '25 have increased to INR 64 crores from INR 42 crores, an increase of 52%.
EBITDA for Q3 FY '25 increased to INR 1,049 crores from INR 978 crores, registering a growth of 7%. Interest cost has increased to INR 461 crores as against INR 433 crores, an increase of 7%. Depreciation cost increased to INR 265 crores in Q3 FY '25 from INR 251 crores, an increase of 5%.
PBT has increased to INR 323 crores in Q3 FY '25 from INR 294 crores, an increase of 10%. PAT before exceptional gain and post JV losses has increased to INR 222 crores in Q3 FY '25 from profit of INR 187 crores considering the JV loss for Q3 FY '24 of INR 51 crores in Q3 FY '24, an increase of 18%.
Now I request the moderator to open the session for question and answers.
[Operator Instructions] The question is from the line of Alok Deora from Motilal Oswal Financial Services.
Just had a couple of questions. First is on the order inflow. So if you could just highlight what is happening on the NHAI side because the order inflow has been pretty poor YTD. It's although it's picked up in the third quarter, but still on the overall basis, it seems pretty weak. And now we are just left with 2 months. So if you could just highlight on the total order inflow as well as what kind of projects are expected because even toll projects have not really come by.
Mhaiskar on this side. As you know, the year opened for us with the 2 TOTs that we had back starting from 1st of April. And as all of us are aware, due to the elections getting conducted, the ordering and the overall activity has slackened. But we see positive momentum coming back. A few of the TOT and BOT bids have already happened. And we see a good traction over the next 2 months as far as TOT and BOT space is concerned. We are fully geared up to participate in these upcoming opportunities. And we will be working very, very closely on these opportunities to see what best we can get in for the company prospects.
Sure. So based on what has happened, I'm sure it has been below our expectation also that last time when we spoke in the earnings call, post that also 2 months, nothing has really materialized in a concrete way. So have we trended down our expectations for the remaining 2 months because this is when the most of the ordering was expected in the last 4 months, which is -- and 2 months have already gone by.
So Alok, on a lighter version, India has won many matches on the last over. We have not give our target as yet. Stay tuned with the same target number even now.
Absolutely. And after this the reclassification exercise, which we have done, so now the recurring number will be the -- I mean, the gain from InvIT and everything will be counted in the revenue part. So the classification would look like this only, right, how it's given in the P&L. And just that the INR 58 billion of one-time -- this thing will go away from next quarter onwards?
Yes, Alok, you are correct. This will be a recurring nature.
Sure. Just one last question. Why is this gain included in revenue? I mean, isn't it part of the -- I mean, non-operating or the non-core revenue because then it actually does not give a true picture of the core revenue, right, because this is coming from the InvIT operations. So...
Alok, as you are aware that InvIT investment, typically, InvIT works on the NDCF and where the cash flow generated from InvIT gets distributed to the unitholders. And the present accounting system where whatever the distribution we were getting were not reflecting in the P&L account. That was not reflecting in P&L account.
Secondly, as these assets has a long life, as basically, we will go closer to the cash flow as the revenue increases and the cash flow increases, the value of these assets will increase. So in fact, if you look at your own analyst model, which do the DCF, as basically you roll forward by 1 year, there is an appreciation in the value and accordingly, the target price also increases.
So I think with respect to -- in terms of monetization, we have already offered assets to the public InvIT. We are monetizing also that will be on a timely basis, there will be a realization of the numbers also. So I think considering that this should be treated recurring in nature and this should be treated form of regular income. And this is in line with the accounting standard and accounting norms in India or globally.
Yes. So Alok, just to add here, if you see for IRB now as such, strategically now the bidding is happening at the trust level. And for IRB, it's like a regular investment and it will be a regular phenomenon where IRB will deploy its capital against its stake. So for IRB, it's a major operation -- operational segment because now all the biddings which we are looking for is to come at the private InvIT level. So that leads to us for treating it as an operational segment going forward.
One thing more to reflect upon because your question was why FVTPL and why not OCI. So I think the point here is that the toll revenues reflect at the Private InvIT end and that keeps giving the investors the visibility about how the portfolio is actually performing. But the reflection of that of gaining cash flows doesn't get reflected into IRB balance sheet in spite of owning 51% because of a joint control mechanism that we -- that exists in the private InvIT.
And that reflection not getting captured in IRB, it gives a little truncated picture of the scheme of things for the investors. So it was thought appropriate to move it through P&L and not as an OCI treatment.
The next question is from the line of Vishal Periwal from Antique Stock Broking.
Two questions from me. First, in the P&L, in the revenue, when we have booked the dividend interest income from InvIT of INR 167 crores, how does this differ from the PPT where we have mentioned distribution of INR 540-odd million? I mean are the same thing or are they different?
No. So it's INR 167 million is the distribution, which includes the distribution from private InvIT and public InvIT.
Okay. No, but then quarter 3 in the PPT mentioned INR 540-odd million. So roughly like 51% of it will be like almost like INR 27 crores, INR 28-odd crores vis-a-vis the INR 16 crores, INR 17 crores that we have booked.
Vishal, I think based on the revised accounting standard, whether dividend or distribution from the InvIT are accounted only on received basis. So whatever dividend is declared in Q3 will get accounted in next quarter. This was the distribution, what is reflecting is distribution of the last quarter.
Okay. Got it. And second is on this -- the treatment of the investment that we have done for the InvIT, according to you, how this will have an impact on ROEs? And I think margins may be largely same, EBITDA margin, but ROEs, will this have a positive impact? Is that fair to understand?
Yes. To begin with, it will have a positive impact on the ROE. But however, for our business, typically, people don't look at ROE or return on capital employed. Our businesses largely have 80%, 85% value coming from the asset where people do the DCF. And for EPC business, give the multiple. So our business is not evaluated or valued on the basis of ROE. But you are absolutely correct, there will be improvement in ROE.
The next question is from the line of Parikshit Kandpal from HDFC Securities.
My question is on the monetization part, which we are taking from private to public. So are we now in a position where this will become a more regular phenomena because first these 5 assets in whatever time it takes, I think you have given a timeline of first half of FY '26. So do you think that on a periodic basis, each financial year from here on, we can see more assets coming in getting monetized to this route?
So Parikshit, this is a more strategic thought process that we have gotten into. And you are right that this will be an ongoing phenomenon because the way we have built the business and the way we have created the structure of private InvIT acting as a development platform and also owning the Public InvIT, which is majorly housing all the matured assets, I think this becomes a perfect fit where based on the risk allocation of the project, the value unlocking keeps happening.
So while at the IRB end, we are capturing the executional risk and reaping the benefits on the construction and O&M margins and ending up owning investments in both these platforms, which will now reflect basis the treatment that we talked about earlier, the unlocking of value will continue to happen where matured assets, we can always offer to the public InvIT where this platform also gets fresh air to start growing rapidly.
And this will unlock the capital for private InvIT, which then can go in faster deployment for upcoming new assets. And I think the focus going forward even from the government of India is likely to be on asset monetization. And that will be a huge opportunity opening up for the sector where we intend to keep our leadership situation and to undertake a large number of assets, this unlocking will help us to catapult into a much faster growth of asset base without adding up or piling up too much of debt and efficiently using the unlocked capital and distributing the risk across the portfolio.
What kind of annual inflows or monetization potential do you think near to midterm can generate for you, which can come in as a growth capital for UP and other assets?
So let's look at it this way that the first tranche of assets that has already been offered to Public InvIT is having an enterprise value of around INR [indiscernible] crores. If I take out the debt of around INR 7,000 crores, INR 7,500 crores, we are talking here of a significant equity unlocking that will come way to the Private InvIT.
Now let's make a simple math here that INR 8,000 crores plus of equity unlocking, say, happens at Private InvIT end where IRB owns 51%, then that equity capital can be deployed for another INR 25,000 crores worth of projects which the private InvIT can bid for. And this will be a significant capacity that we will be creating for IRB to participate in the upcoming opportunity. I'm just talking about the first tranche here. Let's remember that the total enterprise value of the private InvIT today stands at INR 60,000 crores plus.
Okay. So you're saying the debt on this INR 15,000 crores is about INR 11,500 crores. So you have...
No, I said the debt is around INR 7,000 crores.
INR 7,000 crores. Okay.
Out of those INR 15,000 crores EV, the debt is around INR 7,000 crores and balance is equity unlocking that will happen.
INR 8,000 crores. but looking at the current market cap of public InvIT, so do you think there is appetite and the -- I mean, that kind of resources. So how do you intend to do this?
So naturally, Public InvIT is right now in the grip of things. And certainly, if that fund has to grow, it will -- it has a certain amount of legroom on the debt side. And the balance capital also can be looked upon by the Public InvIT to acquire assets because for any such platform to grow, if we look across any other InvIT, they have significantly grown by adding a mix of capital and debt. And I think that is the way forward that even Public InvIT will involve itself on.
Okay. And will the sponsor get diluted here on the Public InvIT side because you as a sponsor and you...
No, I think we stand committed to support the Public InvIT platform in which we very much believe, and we will continue with our present exposure that we have as a sponsor.
And the intent on right current IRRs, which Public InvIT is giving and when you bring in assets, it has to be at a positive IRR. So how is your thought there? I mean, what could be the numbers look like?
I think it will not be very fair on my part to talk on behalf of the Public InvIT. But the simple math suggests that with long-dated assets getting added to the Public InvIT platform, the IRRs are ought to improve from what they exist today.
Okay. And sir, on the BOT side, we have been hearing the bid getting postponed, I mean, multiple times that has happened like Gwalior and other bids. So -- when do you think -- I mean, what is -- why is it happening? And do you really think that this year, we will see the light at the end of the tunnel in terms of bids happening? I hear that these are really large bids like INR 4,000 crores, INR 7,000 crores in that ballpark size. So do you think that they will see the light of this?
So I think you have answered the question yourself that these are large-sized bids and they are serious numbers. So you will appreciate that the sector here has consolidated and serious players who are looking at bidding on these large ventures. And I think I would like to appreciate NHAI here that rather than rushing through on bidding half good projects, they are keen to answer all the queries that are being put across to them in a very, very scientific manner. Yes, that's taking time, but I think that will avoid a lot of accidents in future with all these bids getting properly evaluated and bid upon.
So while the anxiety level can be understood that it's getting delayed, I'm actually more happy that a more thought-through approach is being adopted. All right reasons are being provided to the bidding community. And post that, the bid is taking place. So any [indiscernible] bid or any accident happening, ending up in the project getting stuck at a later stage can be avoided by this kind of a steadied approach. And I would like to appreciate the effort of NHAI.
[Operator Instructions] As there are no further questions from the participants, I would now like to hand the conference over to the management for closing comments.
Yes. I think everybody is equally keen to go back to the TV screens and watch what the budget has to offer. So I would not like to take the time of all the community that we have here. And thank you, everyone, for taking time out and coming for this call on a Saturday morning and look forward to engage with you again soon over the next quarter. Thank you, everyone, and have a great weekend.
Thank you, sir. Ladies and gentlemen, this concludes your conference for today. We thank you for your participation. You may please disconnect your lines now. Thank you, and have a great day ahead.