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Edited Transcript of IRBI.NS earnings conference call or presentation 24-Aug-20 10:45am GMT

Q1 2021 IRB Infrastructure Developers Ltd Earnings Call

Mumbai Sep 30, 2020 (Thomson StreetEvents) -- Edited Transcript of IRB Infrastructure Developers Ltd earnings conference call or presentation Monday, August 24, 2020 at 10:45:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Anil D. Yadav

IRB Infrastructure Developers Limited - Group CFO

* Virendra D. Mhaiskar

IRB Infrastructure Developers Limited - Chairman & MD

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Conference Call Participants

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* Aditya Mongia

Kotak Securities (Institutional Equities) - VP

* Alok Deora

Yes Securities (India) Limited, Research Division - Research Analyst

* Bharanidhar Vijayakumar

Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP

* Mohit Kumar

IDFC Securities Limited, Research Division - Analyst

* Prem Khurana

Anand Rathi Financial Services Limited, Research Division - Research Analyst

* Rohit Natarajan

Antique Stockbroking Ltd., Research Division - Associate VP

* Teena Virmani

Kotak Securities (Institutional Equities) - VP

* Vibhor Singhal

PhillipCapital (India) Pvt. Ltd., Research Division - VP & Lead Analyst of Infrastructure and IT Services

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Presentation

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Operator [1]

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Ladies and gentlemen, good evening, and welcome to the IRB Infrastructure Developers conference call hosted by the company for discussing the unaudited financial results for Q1 FY '21. We have with us on the call today, Mr. Virendra Mhaiskar, Mr. Sudhir Hoshing, Mr. Anil Yadav, Mr. Mehul Patel, Ms. Poonam Nishal; and Mr. Rushabh Gandhi. After the opening remarks by the management, there will be a question-and-answer session.

I would now request Mr. Mhaiskar to give you an overview of the significant development during the quarter. Thank you, and over to you, sir.

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Virendra D. Mhaiskar, IRB Infrastructure Developers Limited - Chairman & MD [2]

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Good evening to all of you. I would like to welcome all the investors and analysts on this conference call. Hope you got a bit of time to look at the detailed numbers as well as the presentation that was released.

Q1 of FY '21 was a challenging quarter marked by the national lockdown as well as smaller localized lockdowns, affecting our business through constrained toll collections as well as lack of construction.

As the intensity of lockdown and associated restrictions are being relaxed across the country now, we are witnessing an equally strong recovery and expect to achieve normalcy in coming months.

We have achieved above 80% recovery levels year-on-year in the month of July for our toll collections across projects, and our construction sites are gradually moving towards the desired momentum.

Closure of the private InvIT deal with GIC affiliates as well as the Mumbai-Pune TOT win has provided us with a strong balance sheet and financial footing, well in time to take on the lockdown impact without much pressure given the challenges our business strategy today needs to calibrate both the long-term and short term strategy. Considering the same broad strategy, we have chartered it as follows.

For the long term, as regards protecting the long-term value of assets, the same will be achieved with extension in concession period granted by NHAI. The moratorium granted by banks will also push down the repayment to a later date, thus helping the NPV. Cumulatively, the NPV is likely to remain unaffected due to these measures. So looking at current quarter post adjusting for the compensation as per concession agreement, we would be at a net profit of INR 54 crores versus a loss of INR 30 crores as reported for now as we have excluded compensation income following prudent policy of revenue recognition.

A better and more relevant variable to track our performance would be the cash profit, which even with current pressure has remained positive at INR 206 crores. And as we move towards regaining the pre-COVID levels of business activity in coming months, the revenues are likely to get stronger and result in side becoming positive at the earliest.

Well, we talk for short-term now. By keeping in mind the long-term objectives, we cannot ignore the short-term compulsion. To cater to the same, liquidity was a critical factor. In the past 3 months, we have worked closely with our bankers to ensure that we raise sufficient cash considering the fact that significant amount of cash on hand was to get deployed for Mumbai-Pune, and we have remained fairly successful in the same.

Following the strategy, IRB today is sitting on a strong cash balance of over INR 2,000 crores fairly comfortable to compete and take up new BOT projects coming up for bidding.

NHAI has lined up a INR 9,300 crore worth of BOT pipeline. And INR 1,30,000 crores worth of HAM projects for the balance of FY '21. This opens up a large opportunity for us, and we would target to be in anywhere between INR 7,000 crore to INR 10,000 crore worth of orders from this particular pipeline.

We have recently been awarded HAM projects totaling up to INR 1,755 crores in the state of Gujarat along the proposed Vadodara-Mumbai Expressway. Thus, taking the order book to approximately INR 12,900 crores, 2.6x of previous year's revenues.

Given the financial and operational capabilities, we plan to participate in all viable upcoming BOT bids and also in select TOT and HAM projects going forward to shore up the order book further. We continue to excel on quality of projects and 9 of our projects have received excellent ratings by NHAI as a part of their trial started recently to monitor and improve quality of highways.

Projects are assigned weighted score under 3 categories: highway efficiency, highway safety and user services. Resulting combined score is used to provide overall rating, where as of now, 9 of our projects have received an excellent rating and evaluation of a few others is still underway.

With this, I would now request Anil to take you through the financial analysis before the Q&A session. Over to you, Anil.

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Anil D. Yadav, IRB Infrastructure Developers Limited - Group CFO [3]

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Thank you, sir. I will present the financial analysis of Q1 of FY '21 versus Q1 of FY '20. Total consolidated income for Q1 of FY '21 has decreased to INR 1,073 crores from INR 1,821 crores, a decline of 41%.

Total consolidated toll revenue for Q1 of FY '21 has also decreased to INR 291 crores from INR 627 crores for Q1 of FY '20 decreased by 54%.

Consolidated construction revenue for Q1 of FY '21 has decreased to INR 782 crores from INR 1,194 crores over Q1 of FY '20 declined by 34%.

Both construction revenue and the tolling revenue has been declined due to the COVID-related lockdown, and there was almost 20 days complete closure of the toll. EBITDA for Q1 of FY '21 has decreased to INR 529 crores from INR 904 crores, a decline by 41% in Q1 of FY '20.

Interest cost almost remained the same from -- at INR 366 crores. Depreciation in line with the revenue has also reduced from INR 154 crores to INR 84 crore. And PBT has also decreased to INR 79 crores from INR 387 crores. Post tax post share of the loss from the JV. Loss for Q1 FY '21 is INR 30 crores.

Now I will provide the key financial numbers. Debt -- gross debt is roughly INR 14,350 crores. Cash is at approximately INR 2,100 crores. Net rate is at approximately INR 12,000 crores. Net worth is around INR 6,800 crores, and net debt-to-equity is approximately 1.75:1.

Now I will request the moderator to open the session for question-and-answer. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of Teena Virmani from Kotak Securities.

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Teena Virmani, Kotak Securities (Institutional Equities) - VP [2]

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I have 1 or 2 questions. One is actually related to the MRM and stand-alone business. Because after going through the annual report, the debt at MRM and stand-alone level has moved up in FY '20. And there was a sharp movement from the levels of FY '19. So what were the reasons for that? Was there any incremental loans and advances given to any SPVs because of which the debt had moved up and correspondingly there's a movement in the net working capital also at MRM plus stand-alone level. And how do you see the debt reduction for the stand-alone business going forward?

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Anil D. Yadav, IRB Infrastructure Developers Limited - Group CFO [3]

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With respect to increase in the debt at MRM level and IRB level, there was debt extended by the Mumbai-Pune SPV to IRB and the same SPV also at the time of -- when GIC has extended INR 700 crores, INR 700 crores NCD was subscribed by Modern Road Makers also.

So to that extent, the loan was extended by Mumbai-Pune, old Mumbai-Pune SPV to the MRM.

Accordingly, we have seen an increase in the debt profile of the IRB and MRM, both put together. But if you look at the external data of IRB or MRM as on March 31, 2020, that was at similar level what it was last year.

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Teena Virmani, Kotak Securities (Institutional Equities) - VP [4]

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No, sir, for FY '20, it has witnessed an increase? If you take into account...

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Anil D. Yadav, IRB Infrastructure Developers Limited - Group CFO [5]

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Basically, if you'll remove the borrowing -- internal -- if you will remove the internal borrowing, there has been an increase. The increase was not that sharp.

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Virendra D. Mhaiskar, IRB Infrastructure Developers Limited - Chairman & MD [6]

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I think effectively, it was a surplus point moving from 1 SPV to another, that is from the old Mumbai-Pune SPV to MRM.

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Teena Virmani, Kotak Securities (Institutional Equities) - VP [7]

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Okay. Okay. So that was borrowing given from Mumbai-Pune to IRB -- to stand-alone or to MRM?

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Virendra D. Mhaiskar, IRB Infrastructure Developers Limited - Chairman & MD [8]

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Yes, that's correct. So it was not a third-party debt increase within the group.

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Teena Virmani, Kotak Securities (Institutional Equities) - VP [9]

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Okay. Okay. And going ahead, do you expect a level similar to FY '19 level for stand-alone?

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Virendra D. Mhaiskar, IRB Infrastructure Developers Limited - Chairman & MD [10]

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Yes. So that particular NCD was subsumed after the GIC transaction went through, and accordingly, this particular debt has also been reversed after that.

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Teena Virmani, Kotak Securities (Institutional Equities) - VP [11]

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Okay. Okay. So for FY '21, it will come down?

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Virendra D. Mhaiskar, IRB Infrastructure Developers Limited - Chairman & MD [12]

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Yes.

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Teena Virmani, Kotak Securities (Institutional Equities) - VP [13]

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Okay. And my next question is related to, although Mr. Anil had clarified on this, but a little bit more clarification would be really helpful. There is one amount of INR 31 billion as part of other noncurrent financial assets, which is basically the deferred consideration towards sale of subsidiaries. So can you elaborate a bit more as to who is going to pay this amount to IRB and by when it is expected to come?

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Virendra D. Mhaiskar, IRB Infrastructure Developers Limited - Chairman & MD [14]

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Which subsidiary?

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Anil D. Yadav, IRB Infrastructure Developers Limited - Group CFO [15]

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Basically, it's -- with respect to the receivable from the trust. So basically, earlier, whatever the unsecured loan or sub-debt was infused by IRB that used to be recoverable from the SPV. On transfer of the SPV to the Trust as per the InvIT regulation, all the rights and all the liability of the sponsor needs to be transferred to the trust. Accordingly, whatever the sub-debt and unsecured loan was extended to the extent units were not issued, those are shown as receivable from the trust. Once the SPV receives funds from the NHAI, the trust will pay it to the -- back to the IRB.

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Teena Virmani, Kotak Securities (Institutional Equities) - VP [16]

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So effectively, that means that when the GIC transaction took place, by that time, IRB had infused more than the required amount into the SPVs. Now after GIC deal, the stake of IRB got reduced to 51%. So that incremental amount is going to come back from the trust to IRB. Is that what is the understanding?

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Virendra D. Mhaiskar, IRB Infrastructure Developers Limited - Chairman & MD [17]

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Yes. So effectively, what happens is there are several receivables like there are claim date, there are change of scope dates -- change of scope payment, which has to come. So as Anil explained originally when the SPV was 100% belonging to IRB, this was in the form of sub-debt extended by IRB to the SPV.

Now the same stand receivable from the transition.

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Operator [18]

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(Operator Instructions) The next question is from the line of Mohit Kumar from IDFC Securities.

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Mohit Kumar, IDFC Securities Limited, Research Division - Analyst [19]

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Congratulations on a good quarter given the challenging environment. Sir, my first question is, what is the kind of extension expected in Mumbai-Pune concession agreement? And is there any upper limit to the extension here? Do you think this will be NPV neutral for us?

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Virendra D. Mhaiskar, IRB Infrastructure Developers Limited - Chairman & MD [20]

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Mohit, for the period prior to the financial closure, whatever was the compensation element, it was around INR 70 crore. So there was an element of interest that was supposed to be paid to MSRDC. So they have reduced the amount by INR 70 crores to begin with. So that part of compensation has already been received and adjusted against the amounts that we are supposed to be paid to them.

As regards to the extension is concerned for the period beyond the financial closure, the contract has the same clause as NHAI, which says that till the time we achieved 90% of the previous collections, to that extent, there will be a concession period extension.

It's a very similar NHAI kind of a clause. And to that effect, the MSRDC have already issued a letter confirming this arrangement that they will be extending the concession period, depending on when we are finally able to achieve the final levels of up to 90% revenue that we were collecting earlier. So yes, there is an affirmative confirmation from MSRDC. This was something which was very much critical for us to give comfort to the bankers when we paid the upfront money. And this has been confirmed by MSRDC in writing.

So depending on when we reach back the pre-COVID normal revenue level, depending on that, the extension will finally be worked out. So part of the consideration, as I said, to the extent of INR 70 crores has been cash settled. So balance exact compensation number of days will be worked out. And then MSRDC will confirm the same as well.

So once we reach that level, I think that would be the right time to calculate how much days have gone back. And to that extent, we can get it. But I expect that it should be minimum 90 days.

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Mohit Kumar, IDFC Securities Limited, Research Division - Analyst [21]

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Understood, sir. And sir, secondly, on the construction activity level across our toll projects. How far we are -- are you facing any challenges and compared to normal activity level, where we are right now? And when do you expect the 100% ramp up to happen?

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Virendra D. Mhaiskar, IRB Infrastructure Developers Limited - Chairman & MD [22]

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So the activities, sir, definitely remains under some kind of a challenge, project to project. But a good amount of labor has come back, things have started to stabilize quite well and construction is gathering momentum. So maybe in another month or 2 once the monsoons are behind us, it should further gather pace.

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Mohit Kumar, IDFC Securities Limited, Research Division - Analyst [23]

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So what kind of run rate one can look forward? Your monthly run rate once the normal level is achieved?

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Virendra D. Mhaiskar, IRB Infrastructure Developers Limited - Chairman & MD [24]

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Monthly run rate, in the sense, it's difficult to give you a number right now because we keep facing local lockdowns at times. I mean, last month in the middle of nowhere, we had 15 days lockdown at Bhilwara, which gets us -- which houses 2 of our Rajasthan project. So right now, I wouldn't like to state any number as such. But with labor force back in place, all the raw material available, I think the normal run rate whatever we had been clogging, I think we should be able to go back to that if there are no hindrances.

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Mohit Kumar, IDFC Securities Limited, Research Division - Analyst [25]

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Understood, sir. Last question is any update on IRB Ahmedabad-Vadodara arbitration, which you can share?

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Virendra D. Mhaiskar, IRB Infrastructure Developers Limited - Chairman & MD [26]

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I think the status is largely unchanged. There is no negative cash flow. The stay continues. Arbitration panel likely to get decided very soon. The court has reserved the judgment. We expect the presiding arbitrator to be announced any time, post which the arbitration proceedings will come in. And there is a very clear caveat, which says that till Section 17 under the arbitration is decided, the present relief that has been given will continue and no cohesive action can be taken by NHAI against the project.

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Operator [27]

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The next question is from the line of Vibhor Singhal from PhillipCapital.

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Vibhor Singhal, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Lead Analyst of Infrastructure and IT Services [28]

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So just few from my side. Sir, just a small clarification from your side. You mentioned that on the Mumbai-Pune TOT, we will have an extension up to the period that reduced 90% of traffic levels. So the NHAI formula of minimum 3 to maximum 6 months of extension, that is not applicable to this Mumbai-Pune TOT, right?

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Virendra D. Mhaiskar, IRB Infrastructure Developers Limited - Chairman & MD [29]

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No, I didn't get it.

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Vibhor Singhal, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Lead Analyst of Infrastructure and IT Services [30]

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So the NHAI is basically, again, extending the closing period -- concession period for all the BOT projects by a minimum of 3 months and a maximum of 6 months.

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Virendra D. Mhaiskar, IRB Infrastructure Developers Limited - Chairman & MD [31]

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Got it. Got it. So you're saying minimum 3 months what NHAI has declared industry guideline. So Vibhor what has happened here is during that particular relief from NHAI is for the total impact. In case of MSRDC, for the total lockdown period of 24 days, they have already cash compensated. So that part will have to be deducted when working out the final compensation. Hence, I did not give a minimum number.

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Vibhor Singhal, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Lead Analyst of Infrastructure and IT Services [32]

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So that 24 days was the INR 70 crores will be waived off?

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Virendra D. Mhaiskar, IRB Infrastructure Developers Limited - Chairman & MD [33]

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Yes. That INR 70 crores, whatever is the total compensation, from that, INR 70 crores, will define the number of days extension that will be primitive.

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Vibhor Singhal, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Lead Analyst of Infrastructure and IT Services [34]

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Fair enough, fair enough. That's good to hear, sir. Secondly, sir, in the order book that I see right now. So excluding the O&M project, our order book of the ongoing construction part, ETC part is around INR 5,700 crores. This includes the INR 1,700 crore of the new HAM that we have won?

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Virendra D. Mhaiskar, IRB Infrastructure Developers Limited - Chairman & MD [35]

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Yes, that's correct.

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Vibhor Singhal, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Lead Analyst of Infrastructure and IT Services [36]

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Right. So sir, assuming it takes, let's say, 2 or 3 months to do financial closure, then NHAI takes its own sweet time as usual to give us the AD. The remaining INR 4,000 crores of order book, which is under construction, will it get completed, let's say, in the next 18 to 24 months?

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Virendra D. Mhaiskar, IRB Infrastructure Developers Limited - Chairman & MD [37]

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No, I think much earlier to that. So if I look at the order book, ex the new order, then the balance order book has to be consumed in, say, 5 to 6 quarters. And this particular award, which is part of the Vadodara-Mumbai Expressway, I think don't have any land acquisition issues on this particular alignment. It's a greenfield highway that is to be built, which is a 6 lane highway and the length is only 23 kilometers.

The cost is higher because it's a concrete pavement, 8 lane expressway. Land as such not being an issue and financial closure moving at a good pace, we should be in a position to start construction on this project by November. So we would have around 5 months of construction period available in this financial year, which should give you a good at least 20 -- anywhere between 20% to 30% of progress in this financial year itself on this particular order.

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Vibhor Singhal, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Lead Analyst of Infrastructure and IT Services [38]

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Sure, sir. So sir, putting all this together, any number that you can help us with kind of top line we are looking for the ETC segment for this year?

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Virendra D. Mhaiskar, IRB Infrastructure Developers Limited - Chairman & MD [39]

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That would be a little difficult to give a specific number. But as I said, except for the new orders, the order book is to be consumed in 5 to 6 quarters. And this order, you can expect 25% to 30% progress and everything assumed in the first 5 months starting November.

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Vibhor Singhal, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Lead Analyst of Infrastructure and IT Services [40]

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Sure, sir. So that's great. Anil, sir, if I can just have one bookkeeping question. At the end of this quarter, Q1, what was the debt at the MRM plus stand-alone level?

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Anil D. Yadav, IRB Infrastructure Developers Limited - Group CFO [41]

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So basically, MRM at -- MRM in the stand-alone level, including the overdraft, basically, the debt was -- it was close to INR 4,000 crores and cash was roughly INR 2,100 crores.

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Vibhor Singhal, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Lead Analyst of Infrastructure and IT Services [42]

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So sir, INR 4,000 crores is pretty much the same as it was in March also?

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Anil D. Yadav, IRB Infrastructure Developers Limited - Group CFO [43]

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No. I think March, it was -- the number would have been lower, including OD, the debt would have been INR 4,000 crores. So basically, if I include the OD also, it's a INR 4,600 crores. OD plus...

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Vibhor Singhal, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Lead Analyst of Infrastructure and IT Services [44]

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Right now, including the OD -- okay, so right now the -- including OD, that is INR 4,600 crores?

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Anil D. Yadav, IRB Infrastructure Developers Limited - Group CFO [45]

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INR 4,600 crores and cash balance of INR 2,100 crores.

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Vibhor Singhal, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Lead Analyst of Infrastructure and IT Services [46]

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Sure, sir. And do you expect this INR 4,600 crores to probably come down as Teena asked in the earlier question?

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Anil D. Yadav, IRB Infrastructure Developers Limited - Group CFO [47]

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I don't think so, (foreign language) it will increase significantly going forward.

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Vibhor Singhal, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Lead Analyst of Infrastructure and IT Services [48]

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Okay. Might remain stable at these current levels?

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Anil D. Yadav, IRB Infrastructure Developers Limited - Group CFO [49]

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Yes.

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Operator [50]

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The next question is from the line of Prem Khurana from Anand Rathi.

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Prem Khurana, Anand Rathi Financial Services Limited, Research Division - Research Analyst [51]

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Congratulations on decent set of numbers in this kind of challenging environment. Sir, my first question was with respect to our BOT toll project, which was annulled recently. I mean if you can -- I think in your opening remarks, you said, I mean, there are almost around INR 9,300 crore worth of BOT toll projects in the pipeline. But then -- I mean as you -- so if I look at the project which was annulled, it seems that the government has still not come to the terms that the market is such that there could be a situation wherein the projects would not fetch the kind of price that they were anticipating before COVID.

So I mean though there is pipeline, but then what is the probability that these would come out? Because it seems that -- I mean either they would have to change their expectations or it looks like -- I mean they've don't intend to kind of give out projects at this kind of -- the kind of price that you bid these days?

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Virendra D. Mhaiskar, IRB Infrastructure Developers Limited - Chairman & MD [52]

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I mean we have the same set of information that you have, Prem. So whatever formal comment NHAI has been giving out, we are repeating the same. So the INR 9,300 crore number is NHAI/MRDH number that we have heard of. Whether those projects will meet their expectations or not or how will they decide to navigate that further is something which we will also have to see.

But one thing I feel for sure is that given the financial constraint, considering the fiscal deficit and COVID situation, I think encouraging more private investment will be something that the government will be mindful of. And if that has to be achieved, then to encourage more private investment, BOT will be the way forward.

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Prem Khurana, Anand Rathi Financial Services Limited, Research Division - Research Analyst [53]

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And sir, second was, I think, if you could share your thoughts on toll collection numbers post this quarter. So June, I understand -- I mean you had done almost 80% kind of -- reached almost 80% kind of number in terms of when number compared to last year. How is the traffic in the month of July? And have seen further uptake? Or they are still at the same number that we've seen in the month of June?

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Virendra D. Mhaiskar, IRB Infrastructure Developers Limited - Chairman & MD [54]

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See. It depends project to project. Certain projects have even reached the pre-COVID level. Certain projects, it is 90%. Certain projects, it is lower at 65%, 70% or 75%, 80%. But broadly, if you ask me, it's reached 80% level is on the year-on-year basis. And if I have to compare with, say, February, March of this year, then still be around 70% is how I will put it.

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Prem Khurana, Anand Rathi Financial Services Limited, Research Division - Research Analyst [55]

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Sure. And similar would be the profile for our private InvIT projects that we recently transferred?

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Virendra D. Mhaiskar, IRB Infrastructure Developers Limited - Chairman & MD [56]

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Yes, across the portfolio is how I would put it.

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Prem Khurana, Anand Rathi Financial Services Limited, Research Division - Research Analyst [57]

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Got it. And Anil, sir, just one question if you could help me with. So this quarter, we booked almost around INR 290-odd crore of other -- I mean toll income is what we've shown in our segment reporting, how much would be other income in this?

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Anil D. Yadav, IRB Infrastructure Developers Limited - Group CFO [58]

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Approximately, other income will be basically INR 30 crores, INR 30 crores will be the other income.

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Prem Khurana, Anand Rathi Financial Services Limited, Research Division - Research Analyst [59]

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Sure. So INR 260-odd crore is essentially implying, I mean is your toll collection. When I look at the...

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Anil D. Yadav, IRB Infrastructure Developers Limited - Group CFO [60]

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There will be other operating income also to the set of INR 68 crores. Basically, other income is INR 30 crores. Other operating income which is INR 68 crores. Balance is the toll revenue.

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Prem Khurana, Anand Rathi Financial Services Limited, Research Division - Research Analyst [61]

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Okay. Okay. INR 68 crores. I mean would you be able to share the nature of this other operating income, what exactly is this?

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Anil D. Yadav, IRB Infrastructure Developers Limited - Group CFO [62]

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Yes. Similar to what we have explained in the public trust that there is a remission of the liability because we have kept -- we have created a amount payable to the NHAI with respect to the premium for entire concession period. And as per circular, NHAI has basically the liabilities extinguish to the extent of INR 68 crores. That is predominantly for the project Ahmedabad-Vadodara. So whatever the liabilities is extinguished that is shown as other operating income. The same treatment what we have followed during the demonetization.

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Prem Khurana, Anand Rathi Financial Services Limited, Research Division - Research Analyst [63]

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And this would persist till then you reached that old number in terms of -- I mean return to normalcy because there's revenue loss, which you are adjusting is essentially what I understand, right?

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Anil D. Yadav, IRB Infrastructure Developers Limited - Group CFO [64]

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Yes.

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Prem Khurana, Anand Rathi Financial Services Limited, Research Division - Research Analyst [65]

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Okay. Okay. Sure. And just one more eventually in terms of -- so this 24, 25 -- I mean the sub-debt that we had extended to the asset that we have transferred to InvIT now, which now reflects as a part of receivables. Are we planning to have this back by this year? And it will go -- I mean the recovery would go to the next year, how does that work?

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Anil D. Yadav, IRB Infrastructure Developers Limited - Group CFO [66]

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Some part is expected in this year, but major trends will be basically over the period of 2 to 3 years. This is what we believe.

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Operator [67]

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(Operator Instructions) The next question is from the line of Mohit Kumar from IDFC Securities.

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Mohit Kumar, IDFC Securities Limited, Research Division - Analyst [68]

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Sir, 2 questions. Sir, first, the number you said on the other operating income, which is for extinguishment of liabilities, because of lower traffic costs, what was that number?

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Anil D. Yadav, IRB Infrastructure Developers Limited - Group CFO [69]

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INR 68 crore.

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Mohit Kumar, IDFC Securities Limited, Research Division - Analyst [70]

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Okay. Okay. Understood, sir. Secondly, sir, have we taken moratorium any -- for all our projects? And have you deferred our interest payment during the quarter? Or have you met all the interest payment obligations?

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Anil D. Yadav, IRB Infrastructure Developers Limited - Group CFO [71]

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We have taken a moratorium during the quarter.

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Mohit Kumar, IDFC Securities Limited, Research Division - Analyst [72]

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For the interest also -- interest payment?

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Anil D. Yadav, IRB Infrastructure Developers Limited - Group CFO [73]

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For interest also. Yes.

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Mohit Kumar, IDFC Securities Limited, Research Division - Analyst [74]

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Okay. Okay. Understood, sir. And sir, lastly, on the -- have you seen the BOT -- any other BOT awards? Any other BOT in the pipeline, which can get awarded in this particular financial year?

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Virendra D. Mhaiskar, IRB Infrastructure Developers Limited - Chairman & MD [75]

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At the moment, there is no BOT right now in the advertisement stage, but they had given a list of 15 projects. So those projects are expected.

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Mohit Kumar, IDFC Securities Limited, Research Division - Analyst [76]

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In the meanwhile, you will keep the -- you will keep bidding for HAM project? Am I rightly understand?

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Virendra D. Mhaiskar, IRB Infrastructure Developers Limited - Chairman & MD [77]

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Yes, that is right. See one more advantage the HAM project will throw is now that we are at the lower end of the interest cycle, the annuity payment, which are linked to bank rate plus 3%. I think this becomes a more advantageous time to go out and pick up a HAM project, which we were not so much comfortable earlier.

So till the time we get some visibility on the BOT side, we would be very much mindful and will bid on HAM projects and try to interrupt that order book and resources, manpower that we have remain adequately deployed.

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Operator [78]

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(Operator Instructions) The next question is from the line of Rohit Natarajan from Antique Stock Broking.

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Rohit Natarajan, Antique Stockbroking Ltd., Research Division - Associate VP [79]

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Sir, I just have one sector-specific question. And this has more to do with -- there were some press news about relaxation of making BOT toll concession agreement much more friendly to developers. This includes even getting away with the COD plus 2 clause -- 2 years clause of -- you can straight away bring in an investor at the very completion of project and many other measures. Is there any sanctity to that news that we keep reading? Is there any such policy development that is happening around?

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Virendra D. Mhaiskar, IRB Infrastructure Developers Limited - Chairman & MD [80]

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Yes. That is -- you have -- what you have heard is right. So there has been definitely a move on this line. Though the final model concession agreement has still not seen the light of the day. But what we also hear is there is a significant progress that has been made. And in light of that, I think going forward, we can expect that particular revised model concession agreement to come out sooner than later.

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Rohit Natarajan, Antique Stockbroking Ltd., Research Division - Associate VP [81]

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Okay. No such time lines that you would have in mind, right?

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Virendra D. Mhaiskar, IRB Infrastructure Developers Limited - Chairman & MD [82]

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I mean, I think we both have been hearing this particular news for more than a year now.

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Operator [83]

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The next question is from the line of Alok Deora from Yes Securities.

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Alok Deora, Yes Securities (India) Limited, Research Division - Research Analyst [84]

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Just a couple of questions. One was, what kind of order inflows we are looking at for this year as in combined with the BOT or some of the HAM projects we may look to bag?

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Virendra D. Mhaiskar, IRB Infrastructure Developers Limited - Chairman & MD [85]

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See, if we look at the backlog, which has now come down to -- I mean, although the overall order book is in the range of INR 12,000 crores, but a few of -- the construction order book is now half of that. And given that fact, we have been mindful and have bid for HAM projects also alongside BOT and TOT.

So the endeavor would be to ensure that we get the order book on construction side, further ramped up to the extent of INR 7,000 to INR 10,000 in FY '21.

So with keeping that ballpark number in mind, we will keep evaluating and bidding on opportunities as they come forward.

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Alok Deora, Yes Securities (India) Limited, Research Division - Research Analyst [86]

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Sure, sir. And sir, one more thing you mentioned about the HAM projects, it's the best time to bid because the bank rates are also at the lowest levels but what we have been hearing is for the past HAM projects that the representations have been made to NHAI to compensate the negative carry to some extent.

So just for my understanding, like when it would eventually turn into a positive carry? So would they let the concessioner have that benefit?

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Virendra D. Mhaiskar, IRB Infrastructure Developers Limited - Chairman & MD [87]

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I mean, whether such kind of a goalpost shifting can practically be done, I have my doubts because it's a competitively bid out project and the sheet that NHAI provides is a transparent sheet. Everybody has to plug-in his number and play by that sheet.

So today, can you really change that? I don't know -- I mean, actually speaking, the developer or the contractor who is executing the project is supposed to renegotiate the lending rate which is on lender, because if NHAI decides to relook at such kind of variation the bidding sanctity will be lost is my own understanding.

So I'm not -- I mean, it's a welcome move if NHAI does it, but whether they will do it and whether it is a prudent idea, I have my doubts.

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Operator [88]

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The next question is from the line of Aditya Mongia from Kotak Securities.

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Aditya Mongia, Kotak Securities (Institutional Equities) - VP [89]

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My question relates to the kind of income that you expect the Trust to generate for yourself, let's say, a normal year is FY '22 in terms of dividend?

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Virendra D. Mhaiskar, IRB Infrastructure Developers Limited - Chairman & MD [90]

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Yes. I would say, as you know, there are 9 projects which are housed in the private InvIT, which is co-owned by us and GIC affiliate in the range of 51-49. Out of these 9 projects, there are 5 projects, which are under construction.

So what is happening now is post completion of the transaction, the debt on this particular project has now been delevered to the extent of INR 3,000 crores.

So the Trust as a whole is generating a good positive cash flow. But there are 5 projects which will continue to be under construction for next 6 quarters. And hence, till the time those projects get fully completed and stabilized, the cash flow generated will be used as an internal approval by the Trust to keep funding the -- those under construction projects as a part of their internal approval.

And once all the project construction gets over only after that, the distribution will start happening. So to that extent, what is going to happen is our equity commitment will be net of that internal accrual, which will get redeployed to the individual respective shares that both of us have in the Trust. So that becomes the more tax-efficient structure than distributing and again, redeploying.

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Aditya Mongia, Kotak Securities (Institutional Equities) - VP [91]

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Okay. Sir, you also put a number of about INR 1,000 crores of pending equity commitments for the projects inside the InvIT. Am I to assume that this can be largely taken up by the internal approvals of -- for the InvIT? Or do you expect to be investing sometime over the next 6 months inside the InvIT part of the equity commitment?

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Virendra D. Mhaiskar, IRB Infrastructure Developers Limited - Chairman & MD [92]

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See, the total outstanding equity commitment for the trust is around INR 1,000, INR 1,100-odd crores. So part of that INR 51 crore, around INR 550 crores is to be pumped in by us. It is a lower number than what we had talked about earlier. Because now what will happen is the balance will get refunded because of the deployment, which I explained to you.

So internal accrual will be redeployed directly by the Trust. And net of that, whatever is required, the INR 500 crores will be put in by IRB as the equity to those projects.

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Aditya Mongia, Kotak Securities (Institutional Equities) - VP [93]

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Sure. Sir, it will be useful if you could suggest that once this money has been deployed and that may be FY '23, that you would see the benefit of cash flows being generated from the portfolio. How much would you expect as if it wouldn't kind of coming to you? And I'm just trying to get a sense of your ability to use cash flows over there and redeploy them somewhere else, assuming that InvIT doesn't grow.

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Virendra D. Mhaiskar, IRB Infrastructure Developers Limited - Chairman & MD [94]

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I think the right way to look at it is that, as you rightly said, say, by FY '23, the project construction will be behind us. All the internal accrual plus the fresh equity would have gone into the project. And you can take another year or so for all the projects to stabilize.

So from there on, the cash flow distribution meaningfully will start for both the parties. And when we had done the transaction, I'm expecting things to be back to normal before that. So on a normalized basis, if you look at our press releases, which we had given out when the transaction was consummated. Over the life of the concession, the surplus cash that the portfolio can generate will be in the tune of INR 88,000 crores. So 51% of that is what is likely to get attributed to IRB's share.

And I mean, yes, it will be 3 to 4 years of stabilization that will go into it because of certain projects that continue to be under construction. But after that, there will be a meaningful pickup in the cash that will keep coming back to IRB year-on-year.

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Operator [95]

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The next question is from the line of Bharanidhar Vijayakumar from Spark Capital.

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Bharanidhar Vijayakumar, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [96]

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I just wanted to check what happened with that BOT project we won in West Bengal, which got scrapped by NHAI. I just wanted to find out what was the reason?

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Virendra D. Mhaiskar, IRB Infrastructure Developers Limited - Chairman & MD [97]

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Vijay, good evening, nice speaking to you after a long time. Very good question. Yes, we had bid for the Bengal BOT. It was a 4 to 6 lane project. As you would have surely read that we had emerged as a preferred bidder there. And we had asked for 4.5% grant as against the upper limit of 10% grant that NHAI had fixed but to our anguish after a time of around 8 to 10 days, NHAI wrote us back saying they have decided to handle the process without assigning any reason whatsoever.

So yes, it was a rude shock. And we were not able to see any logical reason why they should have done this because some research that we carried out at our end suggested that the DPR, which they had enclosed along with the bid document, talked about a much larger concession, which afterwards, they had cut it short to 20 years and 17 years.

So whether there was a better price expectation that they had earlier and whether that could not be met and hence they canceled it, we don't know. But if you ask me in a legal terms, I would say that our bid was very much within the guided numbers that they had given because they had guided that if we are quoting for a grant, we have to be below 10%, if not, then we can also quote premium. But as the concession period was only 17 years for this particular project where we had emerged as a preferred bidder, we had sought a 4.5% of grant.

Now I'm happy with the decision taken by NHAI. We have taken this matter to the court. And a writ petition has been filed against this unjust annulment by NHAI. And the court was pleased to issue notice to NHAI seeking reasons for cancellation of the same, and the matter is sub-judice and pending at this point in time.

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Bharanidhar Vijayakumar, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [98]

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Right. So would it be coming back again as a rebidded project? Or would the sub-judice case will be ruled in our favor?

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Virendra D. Mhaiskar, IRB Infrastructure Developers Limited - Chairman & MD [99]

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I think only the honorable justice can decide on the same. But at this point, I can only say that this being a bid matter, I don't think it to get lingered for a longer time. A 1 months’ time has been given for NHAI to file the plan, for us to file counter affidavit, if any. And probably, the court should decide after that is my understanding of the case.

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Operator [100]

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As there are no further questions, I would now like to hand the conference over to Mr. Mhaiskar for closing comments.

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Virendra D. Mhaiskar, IRB Infrastructure Developers Limited - Chairman & MD [101]

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Thank you, everyone, for being there with the call. And we hope that things normalize sooner than later. And hope to catch you all on the next quarterly results when we meet again and hope to have better environment around us at that time. Have a great evening. Thank you so much.

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Operator [102]

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Thank you, sir. Ladies and gentlemen, this concludes your conference for today. We thank you for your participation and for using Researchbytes conferencing services. You may please disconnect your lines now. Thank you, and have a great evening.