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    Indus Inf. Trust Q2 FY25 earnings call

    INDUSINVITGood
    Services·8 Nov 2024
    Management Summary

    Bharat Highways InvIT reported a strong Q2 FY25, marked by the successful acquisition of the GR Aligarh Kanpur project, expanding its asset base to 8 HAM roads with an AUM of INR6,628 crores. The InvIT declared a DPU of INR2.20 for the quarter, contributing to a cumulative DPU of INR9.20. Management expressed confidence in achieving its IPO DPU guidance of INR11.5 and pursuing further yield-accretive acquisitions, despite a muted H1 in road sector awarding activities, which are expected to pick up from December.

    Highlights

    8

    • AUM stood at INR6,628 crores as of September 30, 2024, comprising 8 HAM road assets.

    • Acquisition of GR Aligarh Kanpur project completed in Q2 FY25 for INR339.5 crores.

    • Board approved a DPU of INR2.20 per unit for Q2 FY25, bringing cumulative DPU to INR9.20 per unit.

    • Standalone EBITDA for the quarter was INR575.84 crores.

    • Consolidated revenue from operations was INR156 crores, with consolidated EBITDA at INR134.74 crores.

    • External debt of INR682 crores was availed at the trust level, bringing total external borrowing to INR1179.5 crores.

    • Management reiterated its IPO DPU guidance of INR11.5 per unit and targets 2-3 incremental asset acquisitions this fiscal year.

    • Project IRRs for acquired assets are expected to be 11.5% or more.

    What Changed2

    vs Q1 FY26

    Guidance items9 → 5 (-4)Risks discussed4 → 3 (-1)

    Key financials

    Single quarter

    19 metrics
    1. 01AUM₹6,628 Cr
    2. 02Outstanding Annuities₹6,835 Cr
    3. 03Interest Income (Standalone)₹147.8 Cr
    4. 04Dividend Received from SPV (Standalone)₹434.22 Cr
    5. 05EBITDA (Standalone)₹575.84 Cr

    Guidance & targets

    5
    CategoryTargetPriority
    Dividend
    DPU (Distribution Per Unit)
    INR11.5
    		High
    Asset Acquisition
    Incremental Asset Acquisitions
    2-3
    		High
    Asset Acquisition
    Project IRR for acquired assets
    11.5% or more
    		High
    Debt
    Leverage level
    70%
    		Medium
    Sector Outlook
    BOT and HAM awarding activity
    Pick up
    		Medium

    Risks & concerns

    3
    RiskSeverity

    NHAI approval for asset acquisitions

    The timing of asset acquisitions is subject to NHAI approval, which introduces uncertainty regarding final deadlines. — Management acknowledged

    medium

    Muted awarding activity in the road sector during H1 FY25

    Awarding activities by MORTH and NHAI were comparatively muted in the first half, partly due to elections, but are expected to pick up from December onwards. — Management acknowledged

    low

    Leverage capacity constraint (initially 49%, then 70% after 6 AAA distributions)

    The InvIT's ability to increase leverage to 70% is conditional on achieving six successful AAA-rated distributions, which is projected for after the next financial year, but management believes they can raise capital if good opportunities arise. — Management acknowledged

    low

    Q&A highlights

    3

    “But what I understand is that, look, you can give interest anyway, SPVs has to pay interest to InvIT, right, at whatever rate it's been entered in the loan agreement. So, that anyway will remain as a, you can say, one of the substantial way of income of DPU, you can say. But of course, the composition is going to be a little bit changed because company law allows you to make a dividend only till the time your net worth is positive, right.”

    Clarifies the sustainability and changing composition of DPU, indicating a potential shift towards return of capital, which is tax-free, as net worth might become negative.

    asked by Sarvesh Gupta

    2 min read6 chapters

    Detailed Narrative

    01

    Q2 FY25 Financial Performance Overview

    Bharat Highways InvIT reported an AUM of INR6,628 crores as of September 30, 2024, with outstanding annuities of INR6,835 crores. Standalone EBITDA for the quarter stood at INR575.84 crores. On a consolidated basis, revenue from operations was INR156 crores, contributing to a total income of INR171.25 crores and a consolidated EBITDA of INR134.74 crores. The net distributable cash flow (NDCF) for the trust level was INR97.50 crores.

    02

    GR Aligarh Kanpur Project Acquisition

    The InvIT successfully completed the acquisition of the GR Aligarh Kanpur project in the September quarter. This acquisition involved an equity consideration of INR339.5 crores, broken down into INR98.6 crores for equity and INR240.9 crores for the assignment of a loan to Bharat Highways InvIT. This transaction was finalized on September 17, 2024, adding to the InvIT's portfolio and expanding its asset base.

    03

    Distribution Per Unit (DPU) & Composition

    The Board approved a DPU of INR2.20 per unit for Q2 FY25, bringing the cumulative DPU to INR9.20 per unit. The Q2 DPU composition included INR1.66 from interest, INR0.19 from return of capital, INR0.30 from dividend, and INR0.05 from other sources. Management reiterated its IPO guidance of INR11.5 DPU, noting that the composition might shift towards return of capital as per company law once net worth becomes negative.

    04

    Asset Acquisition Pipeline & IRR Targets

    Management confirmed being on track to acquire 2-3 incremental assets this fiscal year, having already completed one. They anticipate completing two more acquisitions within the next five months, subject to NHAI approval. The target project IRRs for these acquired assets are expected to be 'north of 11.5%', ensuring yield-accretive additions to the portfolio. The InvIT is actively exploring third-party assets in addition to ROFO assets.

    05

    Road Sector Outlook and NHAI Awarding

    The road sector witnessed a comparatively muted awarding activity in the first half of FY25, with 1,152 kilometres of projects awarded and 2,961 kilometres constructed up to August '24-25. Management attributed this partly to elections but expects awarding activities for BOT and HAM projects to pick up significantly from December onwards, aligning with historical trends of stronger second-half performance.

    06

    Leverage Strategy and Debt Profile

    During the quarter, Bharat Highways InvIT availed external debt of INR682 crores at the trust level, primarily to repay existing debt of the newly acquired GR Aligarh Kanpur project. This brought the total external borrowing at the trust level to INR1179.5 crores. The InvIT aims to increase its leverage to 70% only after achieving six successful AAA-rated distributions, which is projected to be after the end of the next financial year. Current leverage is around 27%.

    This is an AI-generated summary of a publicly available earnings call transcript.