IRB InvIT Fund — Q2 FY26 earnings call

Call held 13 Nov 2025

Management summary

IRB InvIT Fund's Q2 FY26 was defined by a transformative acquisition that doubled its asset base and extended its portfolio life to 17 years, setting a new course for long-term growth. This strategic move, however, resulted in a reset of the quarterly distribution to ₹1.50 per unit. The fund reported modest 6% YoY toll revenue growth, citing headwinds from a heavy monsoon and temporary GST-related slowdowns. Management provided a clear and confident outlook, guiding for a stable ₹6/unit payout for FY26, followed by a structured growth trajectory of 5-10% in subsequent years, positioning the InvIT as a growth-oriented vehicle rather than a pure high-yield play.

Highlights

  • Successfully acquired three road assets for a combined Enterprise Value of ₹8,436 crore, more than doubling the portfolio EV to over ₹16,000 crore.

  • Funded the acquisition via a large institutional placement of approximately ₹4,250 crore.

  • Consolidated toll revenue for Q2 FY26 grew 6% YoY to ₹242 crores.

  • Declared a distribution of ₹1.50 per unit for the quarter, resetting the annualized payout to ₹6.00 per unit for FY26.

  • Weighted average concession life of the portfolio increased from ~14 years to ~17 years.

  • Average cost of debt was successfully reduced from 8.50% to 8.00%.

  • Profit After Tax stood at ₹83 crores, a slight decline from ₹85 crores in the corresponding quarter of the previous year.

  • Management guided for 5% DPU growth in FY27 to ₹6.30, followed by 5% annual growth for five years and 10% thereafter.

Concerns

  • DPU reset impacting yield-focused investors

Key financials

  1. Consolidated Toll Revenue ₹242 Cr +6.1%YoY
  2. Total Consolidated Income ₹278 Cr +3%YoY
  3. EBITDA ₹233 Cr +4%YoY
  4. Profit After Tax ₹83 Cr -2.4%YoY
  5. Interest Cost ₹73 Cr +1.4%YoY
  6. Distribution Per Unit (Quarter) ₹1.5

What they filed

Q1 FY27: revenue up 69.1%, net profit down 21.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue270 275 282 291 277 +3%450 +64%528 +87%492 +69%
EBITDA224 224 232 245 232 +4%372 +66%388 +67%396 +62%
Net profit85 91 94 100 83 −2%60 −34%97 +3%79 −21%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Guidance & targets

Other

  • Assets Under Management (AUM) Other · next three years · Medium confidence approximately ₹40,000 crore
    Having more than doubled our portfolio size through the recent acquisitions, we are now firmly on track to achieve an AUM of approximately ₹40,000 crore over the next three years, supported by a healthy pipeline of opportunities and a robust sector outlook.

    — Rushabh Gandhi

Dividend

  • Annual Distribution Per Unit (DPU) Dividend · FY26 · High confidence ₹6 per unit
    With the current acquisition, we expect to maintain a payout of ₹6 per unit for this financial year.

    — Management

  • Annual DPU Growth Dividend · FY27 · High confidence around 5% to Rs.6.30 per unit p.a.
    For next year, we expect the payout to increase by around 5% to Rs.6.30 per unit p.a.

    — Management

  • DPU Growth from HAM Asset Addition Dividend · Post-acquisition · Medium confidence 3-4%
    With this addition, distributions are expected to further increase by 3-4%, again without any dilution.

    — Management

  • Annual DPU Growth (Medium-Term) Dividend · next five years · High confidence 5% annually
    Even without factoring in any additional asset acquisitions, this payout is expected to grow by 5% annually for the next five years...

    — Management

  • Annual DPU Growth (Long-Term) Dividend · thereafter (post 5 years) · Medium confidence 10%
    ...and by 10% thereafter.

    — Management

  • DPU Step-up Dividend · from FY 2030 onwards · Medium confidence meaningful step-up
    Even then, from FY 2030 onwards, there will definitely be a meaningful step-up in distributions.

    — Management

Risks & concerns

  • DPU reset impacting yield-focused investors

    high

    The acquisition led to a lower annual DPU of ₹6, which may not meet the expectations of investors who bought in for a higher yield, potentially causing churn.

    Analyst acknowledged

  • Slower than expected toll revenue growth

    medium

    Management attributed the modest 6% YoY growth to a heavy monsoon and temporary GST-related slowdowns, which could be recurring or new factors impacting future growth.

    Management acknowledged

  • Future acquisitions and potential dilutions

    low

    While the next HAM asset is planned to be non-dilutive, the ambitious AUM target of ₹40,000 crore implies further capital raises which carry execution and dilution risk.

    Management acknowledged

Q&A highlights

3 direct
DPU reduction post-acquisition and future IRR expectations. Direct
If you look at the IRR on the current unit price, it works out in the range of 15%-16%, depending on the growth assumptions one applies. However, based on the valuation report available in the public domain, it should be upwards of 15.5%-16%.

This Q&A clarified the core investment thesis post-acquisition, quantifying the expected long-term IRR for investors to weigh against the immediate DPU reduction.

Asked by Sarvesh Gupta

Lack of DPU and unit price growth despite growing toll revenues. Direct
Since you are a unitholder, you would appreciate that InvITs which add assets and grow their portfolios generally demonstrate better price performance compared to InvITs that distribute high DPU but do not grow, where prices tend to decline.

It addressed a fundamental investor concern by framing the recent acquisition as a strategic pivot towards sustainable growth, managing expectations for future unit price performance.

Asked by Saurabh

Reason for DPU decline compared to other InvITs. Direct
Because revenue continues to grow consistently over the years, whenever you add a longer-tenure asset, the payout gets adjusted accordingly. It is not simply because the unit capital is increasing that the DPU changes—it's fundamentally linked to the life of the asset.

This provided a clear, technical explanation for why IRB InvIT's DPU behaves differently from other infrastructure InvITs, educating investors on the specific cash flow dynamics of long-life toll road assets.

Asked by Sunil Kumar

2 min read 6 chapters

Detailed narrative

Transformative Acquisition Reshapes Portfolio

IRB InvIT completed a landmark acquisition of three road assets (Hapur-Moradabad, Kaithal-Rajasthan Border, Kishangarh-Gulabpura) for a combined Enterprise Value of ₹8,436 crore. Funded by a ₹4,250 crore institutional placement, this move more than doubled the portfolio's EV to over ₹16,000 crore. Critically, it extended the weighted average concession life from approximately 14 years to 17 years, significantly bolstering the long-term visibility and sustainability of cash flows.

Toll Revenue Growth and Near-Term Headwinds

The InvIT reported a 6% year-on-year growth in consolidated toll revenue, which reached ₹242 crores for the quarter. Management noted this growth was tempered by external factors, including an 'excessive rainfall and an extended monsoon' and a 'temporary slowdown in activity' following the government's GST reform announcements. The growth was primarily driven by strong performance in the Tumkur–Chitradurga project (11% increase) and the Jaipur-Deoli project (6% growth).

Distribution Reset with a Clear Path for Future Growth

A key outcome of the acquisition was a reset in distributions. The Trust declared a payout of ₹1.50 per unit for Q2, establishing a new annualized run-rate of ₹6.00 per unit for FY26. Management provided a clear forward-looking path, guiding for a ~5% increase to ₹6.30 in FY27. The long-term guidance projects 5% annual DPU growth for the next five years, accelerating to 10% growth thereafter, signaling a strategic shift towards sustainable growth over immediate high yield.

Proactive Capital Management and Cost Optimization

The Trust demonstrated disciplined capital management by reducing its average cost of debt from 8.50% to 8.00%. On a total debt base of approximately ₹8,000 crores, this 100 bps reduction translates to annual interest savings of nearly ₹80 crores. To fund the acquisition and optimize its capital structure, the Trust also raised ₹1,150 crore via Non-Convertible Debentures (NCDs) with tenures up to 15 years at competitive coupon rates between 7.35% and 7.40%.

Valuation and Investor Return Expectations

In response to analyst questions, management framed the investment proposition post-acquisition. The post-dilution Net Asset Value (NAV) is estimated to be in the ₹75-₹80 range. Based on the new annualized payout of ₹6, the current market price implies a yield of around 10%. More importantly for growth investors, management stated the expected Internal Rate of Return (IRR) is upwards of 15.5%-16%, based on public valuation reports and growth assumptions.

Rationale for DPU Adjustment vs. Other InvITs

Management directly addressed investor concerns about the falling DPU by explaining the unique nature of their toll road assets. Unlike annuity or transmission assets with front-loaded, non-growing revenues, toll assets feature compounding revenue growth. Acquiring a long-life (21-year) asset and blending it with a shorter-life (14-year) portfolio necessitates an initial downward DPU adjustment to align the different cash flow profiles. This strategy ensures a smoother, growing payout over the long term and preemptively mitigates the income drop from the MVR project's upcoming concession expiry.

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