Detailed Narrative
Q1 FY25 Financial Performance Overview
Bharat Highways InvIT reported a consolidated revenue from operations of INR 127 crores for Q1 FY25, with total income reaching INR 191.44 crores. The consolidated EBITDA stood at INR 144.1 crores. The Net Distributable Cash Flow (NDCF) from the Trust and SPVs was INR 523.43 crores, out of which INR 390 crores were retained for the upcoming acquisition. A DPU of INR 3 was approved for the quarter, consisting of INR 0.72 in interest and INR 2.28 in dividend, bringing the cumulative DPU to INR 6 per unit.
GR Aligarh Kanpur Acquisition Update
The acquisition of GR Aligarh Kanpur Highway Private Limited has been approved by unitholders and is expected to be completed before the end of the current quarter, pending NHAI approval. This asset has an acquisition IRR of approximately 12%. The acquisition will be funded by INR 390 crores of retained equity and INR 766 crores of debt, totaling an enterprise value of INR 1,156 crores. This acquisition is projected to increase the overall InvIT yield by 0.5% to 1%.
Distribution and Yield Outlook
Management reaffirmed its FY25 DPU guidance of INR 11.5, noting that the InvIT is 'enroute to our guidance, maybe beating our guidance' with INR 6 DPU already distributed. For the next three years, assuming eight assets, the DPU is expected to be approximately INR 12 per annum. The composition of future DPU is anticipated to shift, with interest income comprising 55%-60% and dividend income 10%-15% from next year onwards, with the balance from repayment updates.
Debt and Funding Strategy
The InvIT availed INR 662 crores of external debt in Q1 FY25 to repay existing SPV-level debt, resulting in no external borrowings at the SPV level. Total external borrowing at the Trust stands at INR 1,135 crores. Post the GR Aligarh Kanpur acquisition, the AUM is expected to be INR 7,156 crores, and the InvIT will have an estimated debt headroom of INR 1,700-odd crores, well within the regulatory limit of 49% of EV.
Future Acquisition Pipeline and Strategy
Beyond GR Aligarh Kanpur, Bharat Highways InvIT is exploring the acquisition of one or two more assets this year, including another GR asset and potential third-party assets, primarily HAM projects. The company has a ROFO pipeline of 21 assets from GR Infra. Management indicated that more GR assets with a track record of two or more annuities will become available for acquisition from next year onwards, adhering to InvIT regulations that allow acquisition of under-construction assets up to 10% of EV, which currently translates to INR 700 crores.
Major Maintenance Reserve Policy
Management clarified that under current loan agreements, the InvIT is not required to maintain any major maintenance reserve. This arrangement was factored into the asset valuations. While future lenders might impose such requirements, the current structure provides a positive impact on cash flows and distributions.