Release Date: November 06, 2023
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- India Grid Trust (BOM:540565, Financial) reported a 20% year-on-year growth in revenue and a 4% increase in EBITDA.
- The company successfully acquired Virescent, significantly increasing its solar capacity and assets under management.
- Collection rates surpassed expectations, with 114% for transmission and 127% for solar, aiding the net distributable cash flow (NDCF).
- The company raised INR 400 crores through Preferential Allotment, attracting reputed investors and family offices.
- India Grid Trust (BOM:540565) increased its distribution per unit (DPU) guidance for FY '24 to INR 14.10, reflecting a 7.5% year-on-year increase.
Negative Points
- EBITDA growth was limited to 4% due to onetime integration and other expenses related to the Virescent acquisition.
- The net debt to assets under management (AUM) ratio stands at 63.5%, indicating a high level of leverage.
- The company faces challenges in maintaining high availability and reliability, with some issues in insulator flashovers affecting performance.
- There are concerns about the sustainability of high DPU growth rates, given the reliance on accretive acquisitions and market opportunities.
- The company is dealing with increased compliance and transaction costs due to the large number of legal entities it operates.
Q & A Highlights
Q: What is the EBITDA of Virescent in the quarter and in the half year? And what is the price value you bought this portfolio?
A: Harsh Shah, CEO, stated that Virescent's performance has been consolidated from August 25th, contributing for 1 month and 5 days. The enterprise value of Virescent is approximately INR 3,850 crores.
Q: What is the equity requirement and CapEx required for the battery storage project, the expected COD, and EBITDA?
A: Harsh Shah, CEO, mentioned that the project has an annuity basis top line of around INR 11 crores for 10 years, with CapEx over INR 100 crores. The equity required is approximately INR 30 crores, with 70% debt funded by a leading development organization.
Q: What is the purpose of the internal restructuring of various SPVs and HoldCos held by IndiGrid? Does it provide any financial benefit?
A: Harsh Shah, CEO, explained that the restructuring aims to reduce compliance and transaction costs by minimizing the number of legal entities from over 35 to approximately 25-26, simplifying the structure.
Q: Can you explain the disproportionate increase in employee benefit expenses and investment management fees, given the 20% revenue growth but only 4% EBITDA growth?
A: Harsh Shah, CEO, clarified that onetime costs related to the Virescent acquisition, including management incentives and a 0.5% incentive fee for the IM, contributed to the lower EBITDA growth.
Q: Are there any updates regarding the national monetization plan and its impact on IndiGrid?
A: Harsh Shah, CEO, noted that while the government aims to monetize assets in a way that they return to the government after 20-30 years, the implementation details are still under discussion. IndiGrid supports this principle and awaits formal guidelines.
Q: What is the average tenure on the fixed-rate borrowings?
A: Harsh Shah, CEO, stated that the weighted average tenure of the fixed-rate borrowings is about 6.2 years.
Q: Is the battery energy storage system operational?
A: Harsh Shah, CEO, confirmed that the battery energy storage system is not yet operational and is to be installed.
Q: What factors contributed to the drop in NAV on a year-on-year basis?
A: Harsh Shah, CEO, explained that the NAV reduction is due to the fixed life of some assets and an increase in the risk-free rate. Recent acquisitions like Virescent and Khargone have had a positive impact, mitigating the drop.
Q: Can you quantify the factors that resulted in less than proportionate EBITDA growth compared to revenue growth?
A: Navin Sharma, CFO, detailed that onetime costs related to the Virescent acquisition, including an acquisition fee of INR 23 crores and incentives of INR 48 crores, contributed to the lower EBITDA growth.
Q: Is there a change in strategy to procure non-operational assets?
A: Harsh Shah, CEO, mentioned that while they have ventured into development with projects like Kallam Transmission, the focus remains on maintaining a balance with operational assets.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
