India Grid Trust (INDIGRID) Q4 FY23 Earnings Concall Transcript

India Grid Trust (NSE:INDIGRID) Q4 FY23 Earnings Concall dated May. 15, 2023.

Corporate Participants:

Harsh Shah — Chief Executive Officer and Whole-time Director

Satish Talmale — Chief Operating Officer

Navin Sharma — Chief Financial Officer

Meghana Pandit — Chief Investment Officer

Analysts:

Subhadip Mitra — Nuvama Wealth Management — Analyst

Mohit Kumar — ICICI Securities — Analyst

Kunal Nikam — DSP Mutual Fund — Analyst

Sagar Sanghvi — ADD Capital — Analyst

K.P. Kabra — Individual Investor — Analyst

Pratik Kothari — Unique Portfolio Managers — Analyst

Kayur Asher — PNB Metlife — Analyst

Pradyumna Dalmia — Lansdowne Investments — Analyst

Tanveer Sure — Individual Investor — Analyst

Sunil Shah — Turtle Star — Analyst

Rajan Kapadia — Individual Investor — Analyst

Chandra Mauli — Individual Investor — Analyst

Malav Sharedalal — Pravin Ratilal Share and Stock Brokers. — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the India Grid Trust Limited Q4 FY ’23 Earnings Conference Call. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Subhadip Mitra from Nuvama Wealth Management. Thank you and over to you, sir.

Subhadip Mitra — Nuvama Wealth Management — Analyst

Good afternoon, friends. On behalf of Nuvama Wealth Management, welcome you all to the IndiGrid InvIT fourth quarter FY ’23 conference call. We are joined today by the senior management of IndiGrid represented by Mr. Harsh Shah, CEO and Whole-Time Director; Mr. Naveen Sharma, Chief Financial Officer; Ms. Meghana Pandit, Chief Investment Officer; Mr. Satish Talmale, Chief Operating Officer.

We will start with opening remarks by the management followed by a Q&A session. I would now like to hand over the call to Harsh for his opening remarks. Over to you, Harsh.

Harsh Shah — Chief Executive Officer and Whole-time Director

Thank you, Subhadip, and thank you, everyone for joining the call. And a very warm welcome to our annual investor presentation as well as the quarter-four results. As we have done in the earlier presentation, I will take you through the part of the presentation and I’ll invite my colleagues to discuss some of the — rest of the segment and eventually, we’ll do question and answer.

To start with, I’m on slide number three, which talks about, what is our vision? Our vision is to become the most admired yield vehicle in Asia, which is going to be based on our focused business model, value-accretive growth, predictable distribution and an optimal capital structure. While focusing on these four pillars and division on Slide 4, what we stand today is with a AUM of about INR23,000 odd crores, INR22,800 crores to be specific spread across 20 states in UP, 61 different revenue-generating elements between transmission lines and substations, 100 megawatt solar generation as on date, about 27 years of residual contract life and the sizable amount of residual value in terms of amount of metal that we carry with us.

On Slide 5, considering this is an annual presentation, just taking through the evolution over the years, since inception, first couple of years, middle ages I would say 2019 to ’20 and 2022 to ’23 over the last couple of years. I just — portfolio is just to showcase how our portfolio is grown in terms of starting from 10 revenue-generating elements now 61. And it’s going to grow further to 75 or 77 next year.

Our unit holder base diversification from our developer owned InvIT to financial sponsor-owned and financially sponsor-owned managed — professionally managed InvIT, to variety of investors getting introduced, starting from insurance company NPS, pension funds, over the last six years. And in general proliferation of market and liquidity increase with reducing lot size and diversified ownership.

Along with that, our revenue asset-base EBITDA and NDCF has also grown multifold. That’s been the evolution of us over the last six years. Coming to exactly the quarter four quarterly update on slide number 7, there has been significant activity in quarter four in the Board meeting in portfolio growth. We have signed definitive agreements to sign, acquire Virescent Renewable Energy Trust, which is a AAA-rated InvIT, with an operational renewable assets of about INR4,000 crores in size, subject to closing adjustments and customary approvals. IndiGrid AUM will increase by 18%, almost to INR27,000 crores after acquiring this and the renewable energy portfolio will stand at 674 megawatt peak.

In the quarter, we also completed acquisition of Khargone Transmission Limited from Sterlite Power and ISTS TBCB project is approximately 626 kilometers of line and 765 kV substations for about INR1,500 crores. Financial performance augmented by KTL and the other acquisition which were done earlier in the year in last year, our quarter four FY ’23 revenue and EBITDA witnessed 9% and 6% growth respectively. Quarter four collections were healthy at 114%, the trend which you have seen in the past.

DPU was bumped up, I would say, ahead of the schedule in quarter four ’23 itself, INR3.45 versus INR3.19, which was in quarter one of FY ’22, quarter four of FY ’21. This year, we have increased it a quarter early and we have increased it by a significant amount for this year and the next year. So next year, the DPU guidance is at INR13.8 a unit, which is approximately again a 4.5% growth over the last year of guidance of INR13.2. During the quarter, we also raised one of the long — I would say one of the longest infrastructure bonds with 18 years of tenure with IFC, with a very competitive terms and a stringent ESG and governance norm. And we are pretty excited about having IFC on board and also you will see it as a testament of ESG work IndiGrid is pursuing.

Our AUM is INR2,800 crores, net-debt to AUM at 59.5%, which left substantial headroom for growth considering the cap of 70%. Our operating performance remain to be robust. We are at 99.6% availability at the end of quarter four FY ’23, 2.5 million safe man hours achieved till now. And we commissioned our first battery energy storage system, coupled with solar installation is one of our substations, which allowed us to offset substation’s auxiliary power consumption with green power, as well as it allows us to experiment with DESS at our working level to get our hands dirty and to be — to provide us more insights and understanding to go for larger projects. All-in all, this is kind of tallying up well with our strategy of delivering superior returns, sustainable increase in DPU and stable operations.

Turning to Slide 8 and quarter four FY ’23 update. While there is a lot of details, the top three point capture of the summary is, we do see accelerated addition of generation capacity to meet rising demand. And that’s something I’m sure many of us have read it in the newspaper, in general, the demand has been growing consistently, and this is linked to the fact that government focused a lot on rural electrification over last five years, which is resulting into increased demand and therefore, a lot of latent demand which earlier was not served, to get them on the grid. And we think this is just a beginning and overall consumption growth on electricity side will continue to grow sustainably.

What this would require is additional transmission networks, which will facilitate evacuation both for renewable as well as stability products and we do see having a lot of opportunities on that account on our business. In addition to that, the heightened focus on renewable generation and energy storage infra is also going to yield to both investments in renewable energy storage as well as in transmission sector. So we believe we are playing in a sweet-spot of electricity growth that’s going to pan-out over the next 10 years.

On slide number 9, quarter four FY ’23 operational performance, I’ll invite my colleagues, Satish Talmale to join and take you through the quarterly highlights.

Satish Talmale — Chief Operating Officer

Yes. Thanks, Harsh. Good afternoon, everyone. So starting with safety. We achieved our zero-harm milestone for the quarter as well. 2.5 million safe man hours have been achieved. We had zero fatalities, zero recordable lost time incident and zero first aid cases. Overall on asset performance, we achieved 99.60% quarterly average of availability for the portfolio, whereas from annual performance point-of-view, we are standing at 99.7%.

Solar generation with 100 megawatt plant, we achieved 61.20 million units, which has generated at 28.38% CUF. On the reliability, typically quarter four has lot of scheduled outages for the correction of any plant identified issues, defects in the system. So which we’ll take to cleanup those defects. Our trip performance is one of the best compared to our peers and we achieved quite zero trip months in substation in a year.

On digital asset management platform, I think all our assets are operational on the platform since last eight to 10 months. Now we are heading towards advanced business intelligence platform, which will help us to take analytical decisions and enable faster decision making to improve reliability and safety of the assets.

As Harsh also already mentioned, the battery energy storage system is already commissioned and this will help us to scale-up for any large battery energy storage projects.

On the right-hand side, the availability performance, we achieved over normal Q availability and as a portfolio, we are at 99.7% at average level for the financial year performance.

Again on the key indicators point of view, quarterly comparison, the number of trips per-line has slightly increased because of weather related events but otherwise, we are on track as per as our annual targets are concerned. There is a increased focus again on training manpowers, reporting culture on EHS, which is helping us to achieve over safety goals.

Yes, that’s it. Will handover next to Navin.

Navin Sharma — Chief Financial Officer

Yes. Thanks, Satish. So, that brings us to financial performance for the — on the slide number 10, on quarter four. As you can see on earnings table, our revenue and EBITDA stands at 9% and 6% year-on-year growth, our NDCF generated a substantially higher at 18% at INR347 crores for the quarter versus INR293 crores to last quarter year-on-year. On collections, as I mentioned earlier, it’s been a good quarter with about 114% collection and that’s been a trend that we’ve seen quarter four typically plays out in our higher collection. However, this is even higher than what we experienced last year.

DSO days stands at 54 as on March ’23, which is while it’s four days higher than March ’22, but it’s pretty much similar in-line that we see of our usual days of 60 days.

On the next slide, I’ll just take you through the DPU growth journey that we’ve gone through and our management objective is to ensure superior returns sustainable DPU and stable operations. FY ’23, we did three acquisitions, which enable us to grow DPU. First of that was Raichur Sholapur, which is about INR240 crores. Second was Khargone Transmission is around INR1,500 crores. Third was we signed a framework agreement with G R Infra with still not kicked-in in terms of our acquisition, but as and when it kicks-in, it will add to the FY ’24 DPU.

Also FY ’22 acquisitions, which were the first solar projects yielded the first full year cash flows in FY ’23, which in the FY ’22 were only for part [Phonetic]. In addition to that, we do see a pipeline of strong pipeline with respect to very soon coming to closure H1 FY ’24 G R Infra assets Rajgarh Transmission coming to acquisitions and a strong pipeline on greenfield transmission on GFS. So we are pretty confident of further pipeline that’s converting — that might converting to the overall asset base.

With that in mind, we increase the DPU by 4.5% to 3.45% this quarter. And we believe that they can be an additional DPU increase by 2% to 3% one some of the pipeline acquisitions fructify in FY ’24 and stabilized. On the right hand side, you can clearly see our overall chart of growth of DPU that’s taken place over the period of years.

The next Slide is with respect to the details on DPU. The INR3.45 consist of INR2.53 of interest, INR0.03 of dividend taxable, INR0.26, which is non-taxable again I would urge all of you to check the respective Income Tax section and your individual tax treatments, including capital repayment. Other income at INR0.5, net-net we have distributed INR241.5 crores for this quarter. The record date stands at May 18, 2023 and tentative distribution date would be around 27 May, 2023.

NAV has remained pretty much stable at INR131.62 versus last year, while there have been asset conditions, there has also been rescue rate increase and therefore that is something which is balancing out.

Going on the next slide is, in consolidated EBITDA to NDCF Waterfall for the quarter, we have generated INR525.8 crores of EBITDA at the SPV. There were total working capital capex moment and tax at SPV, which made the NDCF at the SPV at INR607 crores, considering all the finance cost is at IGT, the INR251 crore is a IGT, which is the finance cost getting reduced and effective NDCF generated was INR347 crores, the third blue bar. We distributed INR241.5 crores. And we added to the reserve about INR105 crores. And as on the year end, we would have reserve of approximately INR322 crores, which is nothing but the 10% NDCF over the period of years, we try to save and create balance for a stable performance.

On the slide number 13, we — Meghana, I would invite Meghana to take care of the balance sheet on that. Meghana, can you please?

Meghana Pandit — Chief Investment Officer

Yes. Hi, good evening, everyone. I’m on slide number 14, on the balance sheet of IndiGrid. We continue to be AAA-rated by all the three rating agencies and we ended the year with an average cost of debt of about 7.53%, with a cash balance of about INR1,160 odd crores, which includes about INR400 odd crores of DSRA and about INR240 odd crores of distribution for quarter four.

The mix between the floating and the fixed-rate borrowings, continues to be skewed on the fixed rate borrowings, more than three-fourths of our borrowing book is fixed rate borrowings. We ended the year — fiscal year with a net-debt to AUM of about 59.5% and again a very robust interest coverage ratio of about 2.16 times.

The gross borrowing ended being about INR14,600 odd crores, which is spread between bank loans and NCDs, which is also diversified amongst various classes of investors, on NCDs, we have mutual funds, corporates retail, insurance companies, domestic pension funds and on the loans as well subscribed by private banks as well as public sector banks.

The average cost of incremental borrowings for the quarter in-line with the way the markets — debt markets have moved was slightly higher at around 7.86%, which — wherein we borrowed foreclosed the Khargone transaction. Harsh has already mentioned about we raising about INR1,140 odd crores of NCDs from World Bank funded IFC, International Finance Corporation with the tenure of 18 odd years.

The chart at the bottom of the slide provides the repayment or refinancing schedule. So we are looking at the refinancing plan of about INR930 odd crores for FY ’24, 50% of which is coming up in the next quarter, for which we already have the funding and balance 50% is coming at the end of the fiscal. So we will be raising funds to refinance the facility as well. Rest of the years, as you can see, we have tried to ensure that our refinancing amount don’t cross more than 12% to 13% of the gross borrowing.

Moving on to slide number 15, this talks about the total return — risk-adjusted total returns to investors, both on the annualized part as well as the total returns part, since the time we got listed. As you can see, we are again outperforming compared to all the pure-play debt indices, which is the G-Sec — 10-year G-Sec bond and the 30-year G-Sec bond, as well as on the right-hand side, you can see, we’ve compared ourselves to the indices — equity indices, both on the infra utilities, as well as the pure plays transmission entities. And as you can see, we are providing superior risk-adjusted returns. Risk being monitored through beta, which remains at the lower-end of about 0.08 times.

Moving ahead on the business outlook part, Harsh, do you want to come in?

Harsh Shah — Chief Executive Officer and Whole-time Director

Sure. So, on the business outlook, again following the same principle, on the portfolio strategy, we will continue to look and identify and acquire value-accretive assets, making sure consistent DPU and stable DPU growth. We will work towards consummating the pipeline deals at our existing, which is the recent acquisition framework with GR, and some of the other bids that we are seeing.

We will also actively looking to explore some of the specific greenfield bidding opportunities in power transmission and utility-scale. And I think the focus is to deliver on the increased DPU guidance that we’ve provided and we are confident in that.

On the balance sheet front, as we have continued to maintain, we will continue to maintain liquidity and optimize our interest cost, longer tenures, which is allowing us to keep a robust balance sheet and not impacted by change in interest rates scenario. And we do plan to raise equity capital up to INR1,500 crores to ensure that we use that to fund partly the recent acquisition, we’re also keep adequate headroom for growth.

On the asset management side, we will continue to work towards the resiliency and which will mean that we are able to ensure that our operations remain stable and predictable and maintain more than 99.5% availability across portfolio. You also migrated to Central and [Phonetic] earning practices across the portfolio. So, sizable part of our portfolio is managed by IndiGrids own teams and not by contractors, which allows us to ensure our cost are in the check are control on the asset remains better. I’m — we’ve able to do that by utilizing the right set of digital tools that we have invested over last two years.

I think [Phonetic] it will continue to ensure our world-class VHS and ESG practices across our portfolio. On the industry stewardship, I think, two points which we continue to work in presently. First being maximizing private sector participation, the electricity sector, both in greenfield where big job, which should come for tariff-based company in the bidding as well as national monetization pipeline where we do believe that the right way of monetizing public aspect to call for an auction. And these two are strategic objectives, which we pursue on the industry. And in the InvIT in side, I think we continue to work towards increasing awareness. On the other side segment as well as stakeholders about which are and maybe, buyback [Indecipherable] business. That’s been the business outlook that we see for next year and key priorities.

On the next slide, while our EGM notice is not yet issued, but many of the activities that we have described above requires approval of our unitholders. And therefore, we plan to call for an Extraordinary General Meeting scheme. And that could be in the first week of June which will be our physical plus e-voting. And the first item on that which requires approval of pinnacle, this is acquisition of Virescent renewable energy the trust in units of Virescent’s, along with that acquisition of shares of Virescent’s Investment Manager and Product Manager. These two items are linked to acquisition of Virescent. There have been many slides that we published on Virescent besides that along with this presentation, we will be publishing valuation reports as well, which will provide a great amount of detail for unitholders to evaluate before voting.

On item number three, we have proposed to consider and approve amendment in investment manager agreement to add for provision of success fee linked to enterprise value, which again, the details and the description and rationale is provided for in the presentation, we would be addressing any question on relating to that also in the call today.

Item number four is linked to the capital raising approval of up to INR1,500 crore by institutional placement which I have mentioned above in the presentation.

And the point number five is to consider and approve reclassification of status of Sterlite Power as a sponsor of IndiGrid, considering that the own zero or nil shares that IndiGrid or the managers of IndiGrid.

So these are the decision that EGM at IndiGrid in first week of June, we should soon be issuing the EGM notice, which will carry the requisite detail for unitholders to consider. However, the purpose of considering in today’s call was to address any prima facie questions or clarifications investors might have.

With that, I will take a pause and would open for question-and-answers. So there is adequate time for question answer this time. Thank you.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions]. First question is from the line of Mohit Kumar from ICICI Securities. Please go ahead.

Mohit Kumar — ICICI Securities — Analyst

Good afternoon, sir, and congratulations on the good year, and it’s heartening to see the consistent increase in DPU over last few years. Sir, first question is, can you just clarify the leverage now and leverage post price issue, and the leverage post-acquisition of Virescent? Can you give me these three numbers, it will be helpful. Yes.

Harsh Shah — Chief Executive Officer and Whole-time Director

Sure. So the leverage now is approximately 59.5% as of year end, which is FY ’23. After acquisition of Virescent, it will be — and again, valuation report will get published, the closing adjustment might happen, but effectively, it will be approximately 65% on closure of the Virescent transaction, subsequent to depending on how much capital we raise, right INR1,000 crore or INR1,500 crores, it will come back to probably about 60%. So it will be in the same range, but the exact numbers are difficult to project in future, but it is 59.5% now. It will grow to approximately 65% and it will come back to 60% to 62% depending on the size of the capital raise we do.

Mohit Kumar — ICICI Securities — Analyst

Sir, the broader question is there within that what is the future of the Trust? Are you looking to — because this is only 60%. We don’t have enough headroom. So are you looking — should be expect more future raise in the coming year?

Navin Sharma — Chief Financial Officer

I think that’s — I mean we keep debating the question. We need to strike a balance, because when we raise capital we need to be able to see that we are still able to meet our DPU growth, right? So there is an optimal debt-to-equity that is needed in infra to be able to, I would say, juice-up the projects and really provide the right yield. On the other hand, if we over-lever, we run the risk of being susceptible to impact on the balance sheet. So we try to strike a balance between the two, even at let’s say 60%, today, we had about INR6,000 crores, INR7,000 crores of headroom from a purely regulatory perspective to acquire assets. But we are showing our inclination to raise capital preemptively, after closing Virescent, which will take us to 65%. And the reason why we are raising capital is to be able to keep enough dry powder to close further acquisition.

So, I think we have enough headroom to grow after Virescent and capital raise, we’ll have INR7,000 crores, INR8,000 crores of headroom to grow without raising capital. That is sufficient and that allows us to balance the DPU growth and the right DPU yield versus the growth potential. So I think it’s a balance that we are looking to strike and I think it’s the right balance between INR1,000 crore to INR1,500 crore capital.

Mohit Kumar — ICICI Securities — Analyst

Understood, sir. Sir, my second question is that you’ve introduced the fees which we you’re looking to get the approval from the unitholders. This was — can you explain how does it work? This is look for, because the unit if you acquire that, let’s say, INR100 crore. I mean with the guidance for this fiscal. And they get paid or is it based on the two, three years DPU guidance?

Harsh Shah — Chief Executive Officer and Whole-time Director

Yeah. So, I think further details will be there in the EGM, but the we went about this is to really benchmark IndiGrid with I would say a wide variety of stakeholders in terms of asset managers. And today, IndiGrid fees are about 0.25% of AUM and subject to a cap of 1.75% of EBITDA. If you look at it, it’s one of the lowest, if not the lowest [Phonetic] that in any asset managers would be charging and I’m not comparing with InvIT leverage mutual funds or AIF or other platforms, right?

We also compared with other Yield Cos in Singapore, Hong-Kong, Australia elsewhere and we are still amongst the lowest in terms of fees. Now, what that does is to really hampers the — I would say managers’ capability to incentivize and attract the right talent. But so what we wanted to do is to create a fee structure, which is globally accepted and incentivized employees and manager for growth. And the way we have structured it is to have and introduce success fee or an incentive fee on acquisitions, but payable after the financial year-ends and when the financial year guidance have been met. Now, many of the times we acquired assets in quarter four, sometimes we acquire assets in quarter one. So instead of every asset, you pay a fee, which becomes difficult to judge, as well as doesn’t allow opportunity for full year of operation.

So we have put a simplistic structure saying let’s say, for example, in FY ’23, the company has acquired X crore of assets. We will pay 0.5% of fee as one-time fee on that subject to FY ’23 guidance being met, right? So it will be a decision the manager board will be able to exercise at the end-of-the financial year looking back for the last financial. That is how it is designed at the moment. And I think it is still one of the lowest success fee if you compare it to Global Fund. So we are again trying to strike the balance between that and Investment Manager as a company has also committed that majority of this one-time fee will be going towards employee incentives, towards good. So I think it kind of directly links to the employees.

Mohit Kumar — ICICI Securities — Analyst

Understood, sir. Thank you and all the best. Thank you.

Harsh Shah — Chief Executive Officer and Whole-time Director

Thank you.

Operator

Thank you. The next question is from the line of Shalini Vasanta from DSP Mutual Fund. Please go ahead.

Kunal Nikam — DSP Mutual Fund — Analyst

Hi sir, this is Kunal from DSP Mutual Fund. So my question is in terms of leverage, again. So as you mentioned, occasionally for this VRET acquisition, where you would reach to 65% mark and post the capital raise, you will be again back to sub 60%. So what kind of peak level of leverage you’re comfortable with and also in order to maintain a AAA rating? So that was the only question.

Harsh Shah — Chief Executive Officer and Whole-time Director

Thanks. I think it’s an interesting question. I think we have been saying that consistently from a comfort perspective, we are comfortable with around 65% peak leverage but that’s peak and that’s comfort. So from a covenant perspective, we continue to maintain 70% threshold, which SEBI allows us. So if let’s say Virescent was a little bigger, we might have been 67%, and we would have been fine, right? But anything above 65%, we are — it’s out of our comfort zone and therefore, we will start looking to raise capital. So it’s not like a covenant, but it is a — I would say business strategy to ensure that we remain below 65% for [indecipherable] risk as well as agility in terms of further growth opportunity to materialize.

Kunal Nikam — DSP Mutual Fund — Analyst

Understood. Thanks a lot, sir.

Operator

Thank you. The next question is from the line of Sagar Sanghvi from ADD Capital. Please go ahead.

Sagar Sanghvi — ADD Capital — Analyst

Yeah. Thanks for the opportunity. Harsh, two sets of questions. On the recent acquisition that has been announced, one, intensity in the renewable space if you bought the asset at about 8 times EV/EBITDA, so what is the IRR that you are looking for all these kind of acquisitions? And what is the hurdle rate for IRR? That is one. And two, you mentioned that the DPU will increase by 2% to 3%, once the acquisition fruitifies. Whereas the asset that you are adding is about 18% of the total asset-base right now, and the NDCF that will be generated, that is INR200 crore would be about 20% of the current NDCF. So that should give a bump-up of about INR2.75 on the existing DPU of INR13.8, about 20% odd kind of thing?

Harsh Shah — Chief Executive Officer and Whole-time Director

Yes. So, I’ll address your second question first. And you’re absolutely right. Let’s say if IndiGrid was comfortable managing at a higher leverage, right, let’s say, 65%, 67%, that means the entire INR200 crores of additional NDCF that we would earn can translate into direct accretion to unitholders, and therefore, INR2, INR3 of DPU accretion.

But we think that that is not the right way to run a platform because we do want to grow further and that means you have to raise more capital. So when you raise more capital, we are going to issue more units, and therefore when we issue more units, the INR200 crore depending on what is the size of the capital raised and other things, will get divided on a wider unitholder base, right? And that would leave not INR2.75, but maybe INR0.50 or INR1 of accretion, right. Yes, it is still not 2% to 3%, it can be more. But I would say if we give a guidance, we want to be 100% sure, instead of giving an optimistic guidance and not delivering on it. So, yes, can it be more than 2%, 3%? 2%, 3% is approximately INR0.40, yes, it can be. But would like to see integration, cash-flow, how much dilution at what price, INR1,000 crore or INR1,500 crore depending on that, we will give further guidance right? But INR200 crore definitely adding to the INR70 crores is not appropriate, it’s is not appropriate, because we are going to issue more units. So that is the right way to look at it, because we think that’s the right way to run the business. See if IndiGrid were to say this is the only projects that we’re going to have, it might be comfortable with 65%, 67% and DPU can grow and eventually we can run the business like that but, we have chosen to always keep a headroom on DPU growth both for risk and opportunities. And therefore, the DPU growth immediately that you may see may not be like 10%, it may be 2%, 3%. That’s to answer question number two. Can you repeat your question one, please?

Sagar Sanghvi — ADD Capital — Analyst

So the kind of competitive intensity in the renewable space with you acquiring an asset at 8 times EV/EBITDA, so what is the hurdle IRR for this and what is the IRR that you are paying to acquire this asset?

Harsh Shah — Chief Executive Officer and Whole-time Director

Okay. So, I would — to be honest, you know, refrain from using eurythmics like EV/EBITDA and I’ll give you why. One is 8 times EV/EBITDA maybe higher, maybe lower depending on how much cash we are acquiring the company with, that is one. Second, it is also a function of how much is a residual tenure. This company has around 18 years a PPA left, so accordingly gets valued. Again, all these numbers will be public in valuation reports, so one can actually run the financial model exactly. Third is, the EBITDA number that gets published are kind of accounting EBITDA number, and what is the difference between that number and the practical number is straight-lining.

So under IndAS, many of the EBITDAs which are higher now, later, lower tomorrow gets straight-lined and therefore, reduced. In some cases, it’ll increase. So one needs to tie-up to the actual cash generation and not just the accounting EBITDA in some of the renewable energy projects. So it is not — I mean, you might end-up with a wrong conclusion either on a higher side on a lower side in terms of both EBITDA multiple and profitability. So I would urge you to look at the valuation reports that gets published, which will talk about the exact projections for each asset of Virescent that’s going to be acquired to create a model.

To, answer the second question on that was, what is the return thresholds we acquire at? We do look at acquiring renewable energy projects at least 100 bps to 200 bps higher than what we make on transmission projects. I think the specific return or IRRs, I would refrain from communicating on that because there are a variety of assumptions that goes into that, starting from cost of debt, tax, repayment structure, all of it. So what looks like — let’s say 13.5% IRR to us, might look like 11% to somebody else, right. So it’s a nuanced working. But again, all the information that is required to make the right judgment on that is available in public domain, in the valuation report, in our incremental cost of debt. And so information is made available, but to give a threshold return that we make won’t do a just based on the call, both for inaccuracies as well as our competitive intelligence.

Sagar Sanghvi — ADD Capital — Analyst

Got it. Okay. And the last one is you mentioned you will be reaching about INR27,000 crore of AUM with the recent acquisition. So and with the incremental capital, should ideally reach INR33,000 odd crore of AUM that should suffice a capital need. So, any assets in pipeline that you have identified and looking to add over the next one, one-and-half years?

Harsh Shah — Chief Executive Officer and Whole-time Director

Yes. There are many-many assets in pipeline, but we can’t comment on that till the time we find something, right. We got to wait for that.

Sagar Sanghvi — ADD Capital — Analyst

Okay. Thanks a lot.

Harsh Shah — Chief Executive Officer and Whole-time Director

Thank you, Sagar.

Operator

Thank you. The next question is from the line of K.P. Kabra, an Individual Investor. Please go ahead.

K.P. Kabra — Individual Investor — Analyst

Yes. Good afternoon, sir. Thanks for the good set of numbers. My question is the distribution of the income per unit. There are several parts, interest, dividend taxable, dividend non taxable, as an Indian investor, we are confused that which part is taxable which is not not taxable. So if you can help with the guideline or sale certificate, I know that it would be difficult in early question, in earlier function of growth, it might differ from the individual to individual. For a individual like we, who has 1,000 units, and earning INR12,000 a year. It’s difficult for me to give CACA certificate, paying INR5,000. So with that disclaimer, can you please provide a certificate or any guidelines or any suggestion that this part is taxable, this is not taxable in my hand. Thanks all.

Harsh Shah — Chief Executive Officer and Whole-time Director

No, I think Kabra sir, I completely understand your concern and issue. We do provide that. So if you look at our distribution advice, which is called Form 64B, if I’m not wrong that captures pretty much in exact manner, component which will be — what is the given is what under what tax provision, 115 UA or 194 LBA or other provision. So, we do provide that distribution advice. I would suggest you to look at that. Second, we do provide something called FAQs. Right now, our FAQs are already available on our website. They are yet to be updated for the latest amendment that has taken place in March, we would be updating that. Between these two, I believe it will give you the right amount of guidance to make that judgment yourself. I don’t think you need a CA certificate for that.

However, I think it eventually, the way, as you know, India functions is that the liability of rights, filing of taxation is the individual’s responsibility right, even if the government knows what is the tax accessibility, its responsibility lies with the individual. We as a company cannot take that liability unfortunately, but we are providing every disclosure required for you to file that return. And also FAQ, but the FAQ will come up with the disclosure that please take the advice of the CA right, because we cannot take the liability of guiding people on tax, right, which is a specific subject matter and we won’t know what other incomes you have. So I think there is enough disclosure, if you look at Form 64B, which we are providing annually, now we are going to provide quarterly plus a distribution advice, which is that and our FAQ which will be updated. You will have adequate amount of information to make that judgment.

K.P. Kabra — Individual Investor — Analyst

All right. That fair. I provided these FAQ and all the details to my chartered accountant. But they are not clear, they said about the individual investment you have to take care. Say for example, capital repayment. Everybody is confused whether is capital repayment taxable or not? Because it is not covered under this 115 UA or 194 LBA. Can you please suggest that this particular component is flexible or not in my hand?

Harsh Shah — Chief Executive Officer and Whole-time Director

So if you look at this budget, the announcement has come, it is part of the Income Tax Act now since 31th of March, April 1 onwards, we are not supposed to deduct TDS on capital repayment. As long as capital repayment is issued to the level of issue price of units, for our case, it is INR100. We are not deducting TDS, but cost of acquisition for you will be reduced and therefore when you actually sell the unit, if you sell the unit, your cost of acquisition will stands reduced to the extent of capital repayment you have received, right.

Now that is what I’m exactly replicating what is said in the Income Tax Act, but beyond that I think you will have interpret your financials in terms of how the tax was computed.

Navin Sharma — Chief Financial Officer

My financials is okay. My financials so far concerns, so far, related to these units. For that only, because I have talked to many individual players also who are invested in IndiGrid and everyone is confused, every chartered accountant is also confused, almost. Because see, for particular — for the particular units, they are not going to schedule so many sections. But anyway [Multiple Speakers] It’s okay. Thank you.

Harsh Shah — Chief Executive Officer and Whole-time Director

Thank you. Thank you. Thanks a lot.

Operator

Thank you. The next question is from the line of Pratik Kothari from Unique Portfolio Managers. Please go ahead.

Pratik Kothari — Unique Portfolio Managers — Analyst

Hi, good afternoon and congratulations. Harsh, my first question is on the transmission assets. One, if you can just throw some light about the availability which is out there in the market, the kind of pipeline that we are witnessing. And also in the context of your MNP, the power grid was supposed to sell some assets, is there any movement on that side? We are tied-up with GR Infra grod for certain project, so just some color comment on how things are operating there?

Harsh Shah — Chief Executive Officer and Whole-time Director

Sure. No, so we have a good pipeline, as I mentioned earlier. First on GR Infra, I believe the project is moving on well, and as and when it is ready, we would look to acquire that project. On other INR5,000 crores of bids that we tied-up, we bid for two projects, we could not win, because as I said earlier, for us, profitability and returns are utmost important. We don’t need to acquire projects if they don’t yield accretion to us and therefore we stayed out of those bids, but there are still some many of the bids which are left on transmission greenfield. We are looking at that, including battery energy storage and we’ll see how many of those bids will convert into pipeline. May be subject to it meeting our risk-return thresholds, and — but the pipeline looks to be healthy, and we will see what — which part of the pipeline eventually gets converted into. The next question was on power grid, see, we cannot comment on behalf of Power Grid, but I believe that I think the sale has not taken place. And as I’ve said earlier, we seriously hope that such sale as and when takes place, goes through a public auction process because it is a public asset, built with taxpayers’ money and therefore any monetization should go through a proper auction process, and I would, I can only hope that Government of India will follow that, as and when it gets done.

Pratik Kothari — Unique Portfolio Managers — Analyst

So even the process to bid or auction has not started?

Harsh Shah — Chief Executive Officer and Whole-time Director

Yes, a public process has not started, it’s I don’t know if there’s but yeah. I not aware of any such process.

Pratik Kothari — Unique Portfolio Managers — Analyst

Yes. Fair enough. And my second question is on the new acquisition, the VRET. One with INR200 crores of NDCF which you mentioned this is for the VRET plus oe this will be [Multiple speakers].

Operator

Mr. Kothari, the audio is unclear from your line, request you to please use the handset mode.

Pratik Kothari — Unique Portfolio Managers — Analyst

So, I hope this is better. Yes, so my second question is on VRET. The iNR200 crores of NDCF which we have mentioned one is that what VRET Trust used to generate or this is what we expect to accrue to IndiGrid? And second I think you had mentioned somewhere that it went through a bidding process. And so if you can just highlight what the other bidders were at? And the reason I come to this, I ask you this is in context of one, it seems a bit expensive just prima facie, I’m sure you did mentioned that will come out at valuation report. So and now so, it’s a related-party and hence are questions.

Harsh Shah — Chief Executive Officer and Whole-time Director

Sure. I think extremely valid question. I will address that question first. We — I mean, we don’t know who the second or third bidder were, because it’s not that we have access to it. The process was run by one of the bulge bracket top banks. And we were asked to participate, we participated in that, it went through a professional diligence process and all the bids were compared by the bank and shared with TERA[Phonetic], which is the seller over here. So it has been an independently run auction process, where we’ve participated from IndiGrid side. In our Board meetings or Investment Committee meetings or in EGM, KKR, who is an affiliate of Terra as well as IndiGrid, would be refraining from voting. They did not participate in any of the Board meetings or Investment Committee meeting or an EGM did not have access to any of the diligence or terms that was share at IndiGrid. So that is kept us complete absent from participations who can be potentially conflicted. And therefore, we have completely kept away from them.

In addition to that, as I said, they would not be voting either on IndiGrid side, where they are the shareholders or on Virescent side, where there are shareholder. So this will be voted on both IndiGrid and Virescent side completely by minority shareholders other than KKR. So that’s to kind of give you a perspective on not they had zero participation at Board, they will have zero participation in voting and therefore, it is kind of [Indecipherable] but by that logic, it also means that I don’t know who are the second or third bidder, right because the banker does not have obligation to tell us who the second bidder were. So we are not aware of the exact name. So that’s on question number two.

On question number one, I think you referred to on — can you repeat that — can you rephrase that? Because it’s regarding the expense, whether we will disclose valuation reports so that if you can clarify?

Pratik Kothari — Unique Portfolio Managers — Analyst

With this from the context of EV/EBITDA or your — the amount you’re paying on per megawatt basis. It’s different from what we paid last year to FRV, depends on what happens in the market?

Harsh Shah — Chief Executive Officer and Whole-time Director

Got it. Perfect. So, I’ll differentiate again. I would urge you to do little bit of more work, because we don’t pay based on per megawatt, we pay based on what tariff we earn. The last acquisition we did had a much lower tariff than the tariff that was over here and therefore price per megawatt may not be the right comparison.

Second, I just answered in detail about the EV/EBITDA multiple, I would urge again not to look at the EV/EBITDA, pick-up the model and probably do discounting, you will get better answers on that after the valuation reports are public soon.

And third question was INR200 crore NDCF, I think that is for us, that is not what Virescent was generating, that is for us, because we are going to finance it differently, run it differently. So this INR200 crore estimation is based on IndiGrid’s estimates not on Virescent’s history.

Pratik Kothari — Unique Portfolio Managers — Analyst

Okay. And what’s the tariff here?

Harsh Shah — Chief Executive Officer and Whole-time Director

16 projects, but I believe the weighted-average tariff is approximately INR5, but again let the numbers gets published, approximately INR5.

Pratik Kothari — Unique Portfolio Managers — Analyst

Fair enough. And just last clarification. I mean, earlier we had stated that we have non transmission assets be it battery, solar anything else. We’ll cap it at 25%, 30% for a year, that’s still holds?

Harsh Shah — Chief Executive Officer and Whole-time Director

That’s still holds, but I would not put utility, energy storage into solar. It will be transmission, even Government of India classifies it as transmission but anyway have we don’t have anything in [Indecipherable]. So that’s a secondary question but to your primary question, yes we would cap it at 25%, 30%.

Pratik Kothari — Unique Portfolio Managers — Analyst

Great. Thank you so much and all the best.

Harsh Shah — Chief Executive Officer and Whole-time Director

Thank you.

Operator

Thank you. The next question is from the line of Kayur Asher from PNB Metlife. Please go ahead.

Kayur Asher — PNB Metlife — Analyst

Yes. Firstly, congratulations for our stable set of numbers. So this most of my questions have been answered but just one thing. If you could provide some more color on the underlying assets that are being acquired in terms of quality of those assets, how does it fit into the criteria that we had earlier guided for in terms of PPAs, counterparties, operational track-record?

Harsh Shah — Chief Executive Officer and Whole-time Director

Yes. So I think — Yes so what we like about the assets that they have got a, on an average, approximately seven years of operating history. Now what that provides us is that, it provides us exactly how the generation track-record of assets were, right and therefore, we don’t need to necessarily depend on future guesses on power generation will pan-out, so, we have a fairly good estimate of how generation will take place, right, because seven year operating history is fairly sizable.

Second, majority of them are still with extremely good counterparties like NTPC, SECI, NVVN. Even beyond that, overall receivable cycles over last year have improved increased so much in all states assets also have under 90 days receivables. So we look at the receivables in a pretty healthy shape that we have seen. So good operating history, good quality of assets, good access to track-record of generation and lesser receivable days. So pretty much it ticks almost all boxes for us.

Kayur Asher — PNB Metlife — Analyst

Sure. Just one follow-up on the counterparties. So I think you mentioned about central counterparties. So if you could quantify as to what could be the share of central counterparties in the portfolio?

Harsh Shah — Chief Executive Officer and Whole-time Director

In our overall portfolio — or let me do the other way round. Total solar portfolio will be approximately 17% to 18% of our AUM of IndiGrid and out of that, approximately 12% will be SECI, NTPC, NVVN and approximately 6% to 7% will be state, which includes UP, Punjab and [Phonetic].

Kayur Asher — PNB Metlife — Analyst

Right. Understood. And sorry, just one thing, I think you partly answered this question earlier, but just want to understand that till now we have been very conservative and let’s say gradual in addition of solar assets. But now we have this rather large acquisition that is being planned. So, could you also talk about the thought process, I mean, whether the share of solar will go up from here, will it reduce? What looks like an optimum level for us?

Harsh Shah — Chief Executive Officer and Whole-time Director

Sure. So, I mean we are still conservative and we will remain conservative. But conservative doesn’t mean we don’t do large transactions. Conservative means we wait for the right opportunity where we find good quality assets and at the right price. So I don’t think there is any change in our strategy. We do not follow a particular optimum mix of solar we want to reach. There is a cap that we’ll follow. But we do not have a particular percentage we want to reach. We would remain neutral between transmission, solar, battery energy storage, in terms of which particular segment offers the best risk-reward, right? And while transmission assets are good, but if the bidding and the price for it is so high, that it results into lesser returns than what we think is reasonable, we will not acquire those assets. And same exists for our solar as well. So whether we acquire solar, transmission or battery energy storage is not a function of what sector we like, we like all three. But what sector or subsector offers the right risk-return for — at that particular point in time. I think that is what our focus is on, to really do micro-level analysis, not a macro decision. So, I think it might happen that we remain at 18% and it might happen that we reached 30%, but none of it is going to be by design, it is going to be decided by opportunities that come to us.

Kayur Asher — PNB Metlife — Analyst

Understood. But subject to a cap, let’s say, about 30% or so within that range?

Harsh Shah — Chief Executive Officer and Whole-time Director

Yes.

Kayur Asher — PNB Metlife — Analyst

Understood. Understood. Yes. Thanks. This is useful.

Operator

Thank you. The next question is from the line of that Pradyumna Dalmia from Lansdowne Investments. Please go ahead.

Pradyumna Dalmia — Lansdowne Investments — Analyst

Hi, am I audible?

Harsh Shah — Chief Executive Officer and Whole-time Director

Yes.

Pradyumna Dalmia — Lansdowne Investments — Analyst

Okay. Hi, Harsh, try to keep it brief. Couple of questions, one on the capital raise and one on the management fee. On the capital raise front, if you could give us some idea as to what is the timeline of the capital raise and how are you intending to raise the capital. I mean you’ve mentioned all various instruments, including rights issue, preferential issue etc and issue of debt securities. So if you could give us some more clarity on that and also the timeline?

And two, on management fee bit, the 0.5% additional that you are proposing to charge every time we acquire an asset, and so, just wanted to understand, the cash-flow impact of that and where is that going to come from, is that going to come from the EBITDA and how are we going to account for that and the cash flow of that?

Harsh Shah — Chief Executive Officer and Whole-time Director

Got it. Perfect. So, answering your first question. See, we are going to fund by debt to start with and then subsequently, raise equity, which is — these are institutional placement preference issue or rights issue. At the moment, I can tell you that we or the Board of IndiGrid do not have a specific answer to what method we are going to raise that INR1,500 crores, or up to INR1,500 crores, we might do INR1,000 crore as well. But I can tell you the criteria that or other considerations that are there on our mind.

Consideration on institutional placement is that it requires EGM approval and therefore we are taking it right now. So it can be subsequently issued in next 12 months. Rights issue does not require EGM approval, but on the other hand, it requires filing of the prospectus, so when we do a rights issue — and last-time, we do rights issue at a discount, we subscribed — 98% of our unitholders subscribed, which was a great sign for us. But also there is a slight downside to that is, because the liquidity does not increase, because new investors do not get introduced right, in a rights issue format.

On the other hand, if you do an institutional placement, it allows us an opportunity for getting good-quality investors added to the register, which adds to liquidity, positioning, all of it and which also helps current investors. But the balance between the two is dependent on at what price we do with the rights or preference, or institutional and we do not have those answers at this point in time.

But the reason why we published it today is to give guidance that we will do it. We will do in outer timeline, 12 months, we might do it in three or six months as well, depending on the market conditions. But is to give a guidance that we are not planning to run the platform at a peak leverage. We would raise capital and keep growth appetite. That’s the guidance. At this point in time, I do not have more specific answers on exact pricing or the method that we will use. As an when we do it, certainly investors will kind of announce that.

On the second question on fee, consider it as a kind of — and again, as you rightly asked it’s not an accounting treatment with the cash-flow impact, it will be considered as part of the acquisition cost and therefore funded like that. So, it will be like if we are acquiring something for INR4,000 crores let’s say give or take, there will be a INR20 crore provision that will be made, payable next year after seeing the performance, but the provisioning will be done for INR20 crores now, but the cash-flow will happen a year after. So that is how we look at impact.

Pradyumna Dalmia — Lansdowne Investments — Analyst

Got it. Okay. Thank you. Thanks Harsh for the clarification.

Operator

Thank you. The next question is from the line of Tanveer Sure, an Individual Investor. Please go ahead.

Tanveer Sure — Individual Investor — Analyst

Yeah. Hi, Harsh. Thanks for taking the question. The question was, you’ve already addressed this question right now regarding the taxation part, but for Individual Investors, it’s really difficult because if I’m buying shares from the open-market, I’m buying at any at random times when I see the opportunity I buy. So, I may not have bought all the share that INR100, I might have bought it at INR120, INR110. It’s not that simple for us to keep a track. So what is your advise and how do we keep track of how much tax we should be paying because even other guy also said that you know even the CAs are confused. And honestly, we cannot keep track of because some shares come at a particular price, some come at a particular price, the other come at a particular. So it’s almost next to impossible daily and just keep a track. I don’t know-how that’s going to work?

Harsh Shah — Chief Executive Officer and Whole-time Director

So, I’ll suggest, again, as I said, it is my advice. Okay? And this issue has been dealt by and we have discussed this with Ministry and CBDT and there was right amount of data available. So let me put it like that, you know 64B, it’ll completely communicate the history of all capital repayment that is made and what date it is made, right. Now, let’s say you acquire 100 units at INR130, 100 units at INR135, 100 units at INR140, 100 units at INR100, correct, at different times you’ve acquired.

Now what happens is, the dates of those units are anyway important to calculate your capital gains, right. When did we acquire that unit? Now, what will be available to you from us, from IndiGrid, an obligation of assets to describe on what date how much of capital repayment is done right? You have four tranches, 100 each bought on different dates. You will know after that date, how much capital repayment is done per unit from IndiGrid side, right? So when you sell it, you will know-how much to reduce your cost of acquisition for which tranche of purchase that you did, right. So that’s one, that information will be available to you from the company side on 64B.

Second is, as and when IndiGrid is keeping track that it has issued at INR100, as and when IndiGrid has already paid out its INR100 rupees of capital repayment, it’ll start deducting TDS, right. So you will know that upsale, it is going to be to get the maximum rate, right. So you will know that, but at least I can tell you for IndiGrid it is at least a decade away, right. Meanwhile, the computation is only if you sell the unit, you need to compute when did you purchase those many units. After that, how much of capital gain has happened, reduce that from your cost of acquisition.

Tanveer Sure — Individual Investor — Analyst

Correct. So your price of acquisition probably becomes slightly lower.

Harsh Shah — Chief Executive Officer and Whole-time Director

Yes. Exactly.

Tanveer Sure — Individual Investor — Analyst

Okay. And just a second question I had is that, I know that now that is [Indecipherable] index, which has — which the NSE has already brought out. Any timeline as to when our [Indecipherable] investment will actually be included in like the topline indexes like Nifty? Because right now, also if you see, the liquidity is not as much when you go to buy it from the open-market. I mean sometimes the spreads are slightly larger. I guess that might be resolved by itself once they are included in indexes and large institutions are then buying them. So any idea about that?

Harsh Shah — Chief Executive Officer and Whole-time Director

To be honest, I’m also waiting for that. So, what I would urge you to do is to write to SEBI, write to NSE, write to Ministry, because we have been at every door that we should be included, we meet the criteria, for whatever reason, it’s been getting held up. So I would, at the end of the day, we are considered interested parties, if it comes from unit holders like yourself, it’ll carry more weight and I would urge all the people to write letters to SEBI and ministry on this and that’s only way going to make it happen I think.

Tanveer Sure — Individual Investor — Analyst

Okay. Great. All right. Thanks, thanks a lot.

Harsh Shah — Chief Executive Officer and Whole-time Director

Thank you.

Operator

Thank you. The next question is from the line of Sunil Shah from Turtle Star. Please go ahead.

Sunil Shah — Turtle Star — Analyst

Yes. Thank you. Congratulations, Harsh and entire team for this wonderful performance. Thank you, very much on behalf of all the unitholders. Harsh, my question is in context with the IFC fund raise, the NCD issue which is there which was mentioned the presentation on Slide 14, which is INR11.4 billion. So my question is —

Operator

Sorry to interrupt Mr. Shah. The audio is slightly muffled from your line. Please use the headset.

Sunil Shah — Turtle Star — Analyst

Yes Is this better? I hope so. Yeah. Okay. So my question is with the IFC NCD issue, A, the cost, the rate, the interest-rate at which we are that thing for 18 years, that is one. Second, are we exposing ourselves to any kind of currency risk, because it’s an international offering, is that the case? And the third point is whether the refinancing schedule, which is just mentioned on the Slide 14, is IFC, the NCD issue which is there are we connecting the two, that in future also whenever this refinancing thing comes in, we will have some kind of support from IFC on the fund raise that would be required? Could you please give us some clarity on that, please?

Harsh Shah — Chief Executive Officer and Whole-time Director

Sure. So, point one, it is 7.7%, which is available on the listed NCD on the BSE it will be available at 7.7%. Two, on the — is it FX? No, this is an INR denominated bond. So, FX risk lies with IFC, not with the company, right, even though it’s an international investor, it’s a rupee denominated issue instrument. So we are not taking FX over here. And three, IFC did not provide further commitment. IFC is an 18 year facility. So what will happen is, what you see on that slide is without IFC maturity schedule. As we publish in quarter one, you will see a revised schedule, which will be including IFC, which will be a little more elongated, but IFC is just INR1,100 crore out of INR14,000 crores of [Indecipherable] right. So we do not see that getting materially changed. Rather, if you look at that slide, there is a part of refinancing that is already planned in this year, right. If you look at slide, first charge that you see in that table, right, which is for repayment of loan, which is FY ’24 INR930 crores refinancing. This is getting addressed by the IFC, rather it is already addressed, right. So, that is what is getting refinanced for an 18 year facility.

Sunil Shah — Turtle Star — Analyst

Fine. Fair enough. Thank you so much. Thanks for the clarification. Bye..

Harsh Shah — Chief Executive Officer and Whole-time Director

Thank you.

Operator

Thank you. The next question is from the line of Rajan Kapadia, an Individual Investor. Please go ahead.

Rajan Kapadia — Individual Investor — Analyst

Hello?

Operator

Your audio is not clear. Please use the handset mode.

Rajan Kapadia — Individual Investor — Analyst

Hello?

Operator

Yes sir, please go ahead.

Rajan Kapadia — Individual Investor — Analyst

Can you hear me now?

Operator

Yes, sir.

Rajan Kapadia — Individual Investor — Analyst

Okay. So actually, the question is regarding that.

Operator

Mr. Kapadia, your audio is breaking. Please repeat your question.

Rajan Kapadia — Individual Investor — Analyst

Just one minute. Board itself gives a distribution guidance and then that also will be having impact on you know additional acquisitions. So will not that we conflict of interest? That’s the first question.

Harsh Shah — Chief Executive Officer and Whole-time Director

Yes. It is, see, it is conflict of interest. And therefore, there are two things which are done, the Board has communicated clearly that whatever income that is generated, a majority of that as an incentive, will be paid to employees, the manager. Second, board is not the final authority, right. That is why it has come to unitholder vote.

Rajan Kapadia — Individual Investor — Analyst

Yeah, definitely.

Harsh Shah — Chief Executive Officer and Whole-time Director

It is for voting for unitholders where Board will not — I mean, KKR is not voting who is owner of the management, so.

Rajan Kapadia — Individual Investor — Analyst

Okay. Now on the second thing is, is it — I mean, this is the alternate path, I mean, when we reach 65% and all. And maybe we go with that equity issue also. So after that, why should we acquire more because of I’m a unitholder since maybe I think five, four years. So the prime motive when we did acquisitions was that it would directly make sure that our DPU is increasing. That was the main issue. At that time we were having very less, I mean not loan-to-value leverage, we were having very less leverage. Now, when we actually reach at 65%, should it not be like that, we just stay there and let it run like that?

Harsh Shah — Chief Executive Officer and Whole-time Director

No, you’re absolutely right. As in, see, if there is one-way to run the business with pace that we keep the debt-equity at let’s say, 65%, 70% and not acquiring more cargo, right. What happens is when we see an opportunity to acquire which will grow DPU further, right? What we have to do at that time is raise capital. Raising capital takes time, right, whether it’s preference issue or rights issue and is subject to market conditions.

Rajan Kapadia — Individual Investor — Analyst

No, my question is not that — let’s say we assume that we will not move beyond 65%. The question is every unitholder knows that beyond a certain point, there cannot be possible DPU increase, that’s the thing because at the end, we are not business like thing, it’s just a annuity kind thing. So that’s what I was referring okay, because.

Harsh Shah — Chief Executive Officer and Whole-time Director

That is where I think you need to look at it as like a business rather than just the annuity. We are not a set of 10 projects alone. We are a YieldCo or a InvIT, which is growing. That is part of our theme. Yes, 80% to 90% of our returns will come as an annuity alone, but 10% to 15% which will come as growth. So for example, we started with a INR11 DPU, now we are at INR13.8, that’s a INR2.8 jump, which is about 20% odd. This happened because we have acquired projects, right. So we are a business. We are in a business of annuity, if I can tell you, we are not an annuity, we are not a fixed-term bond that you have bought. And there’ll be nothing after that will happen. We are a business and we are in a business of annuity, that is the right way to look at us or any other InvIT or REIT, that is the structure.

Rajan Kapadia — Individual Investor — Analyst

That I understand, but most of that increase in DPU or increase in NAV was mainly because of — we were having low leverage and now, it’s very high leverage, that’s the thing. This is my concern.

Harsh Shah — Chief Executive Officer and Whole-time Director

Let’s say, now we want to grow from AR, right. Let’s say, we had 65% you cannot grow any more.

Rajan Kapadia — Individual Investor — Analyst

. No, what I’m saying is, if we grow from here on, we need to dilute. That’s what the thing.

Harsh Shah — Chief Executive Officer and Whole-time Director

Correct. And we need to dilute in a way the [Multiple speakers]

Rajan Kapadia — Individual Investor — Analyst

Yeah, we are trading above NAV, so it’s not a big issue here. Okay. Thank you.

Operator

The next question is from the line of Chandra Mauli, an Individual Investor. Please go ahead.

Chandra Mauli — Individual Investor — Analyst

Hello, sir. My question is also pertaining to the same. See, now we are planning to raise of equity of about INR1,000 crore to INR1,500 crore through whatever way, but do you fairly think that is it the right time — its trading at INR139, INR140, the yield is close to 10% at current DPU approximately whatever anything. Now because is it fair to raise equity at this level? Again my question again going to the previous participant, is it — maybe if it is a right time, it is okay, when it’s INR161, INR170 or whatever. Hope I’ll be able to.

Harsh Shah — Chief Executive Officer and Whole-time Director

Sir, I will come with a preference issue capital with you put in INR1,000 crore at INR160. I can tell you we will go ahead with it. So, I think the whether it’s the right time or not is a very important question. I think it is the right time because we do see other pipeline assets for growth and therefore, we do look to acquire. Whether it’s fair or not, I think is subject to pricing and if we are doing a rights issue at whatever price, right. I mean I think it’s fair, because every investor will get a chance to participate. If we are doing preference issue, I understand that we need to do it in a way that it adds value to unitholders, who are not subscribing, so it’s a balance between the two. But I would say, quoting numbers like INR165, INR170 becomes fair is unfair and unreasonable but I mean if you are happy to put money at that price, we will definitely make sure that we can raise capital at that price.

Chandra Mauli — Individual Investor — Analyst

Why I meant to say INR160, INR170, it is not that you have to fix it at that price. What I meant to say is that the yield value will be in the range of around INR8. So that could be the fair assumption I said. I’m not saying that you have to.

Harsh Shah — Chief Executive Officer and Whole-time Director

I understand. I was just trying to and I get it what you are saying. I think as I said, if we are able to raise capital that INR160, we would certainly do it right. But at the end of the day, there is a difference between, I mean the price of any issue, whether it is an asset, whether it’s a security, whether there are adequate buyers at that price, right. And if there are no adequate buyers at INR160, INR170, should IndiGrid stop growing? My answer would be no to that, right. As long as we are doing acquisitions which are accretive to that particular unit price at which capital is raised, we do feel that IndiGrid to raise capital and acquire. If it is rights issue, it can be a discount because everyone is getting to participate. So it’s a balance between the two. As I said, I do not have any specific number both on capital raise, price or methods today. We take note of the suggestion for sure, but we do not have that guidance as of now. It’s a guidance that we are going to raise capital, how, method, pricing, we’ll come back to you when we actually do it.

Chandra Mauli — Individual Investor — Analyst

Thanks. Fair enough. Thank you.

Harsh Shah — Chief Executive Officer and Whole-time Director

Thank you.

Operator

Thank you. The next question is from the line of Malav Sharedalal from Pravin Ratilal Share and Stock Brokers. Please go ahead.

Malav Sharedalal — Pravin Ratilal Share and Stock Brokers. — Analyst

Hello, sir, congratulations for good set of numbers. My question is related to as a unitholder, we are not eligible to place the securities to the bank or any NBFCs, whereas promoter KKR is able to place and take the loan on it because we want to place it for some days for the requirement. We don’t want to sell the unit. So what’s your view on that? Have you communicated to SEBI or RBI?

Harsh Shah — Chief Executive Officer and Whole-time Director

So, point one. As of now, to clarify, actually, KKR is not pledged the units of IndiGrid. Just a correction of factual stats. Second, the treatment of securities is not different between unitorders in any regulation, whether it’s SEBI or RBI regulations. So if KKR or any promoter can pledge units, legally speaking, you can also pledge unit. Technically, I understand that banks in NBFC are not accepting from retail shareholders because of classification, but they are waiving that off for corporate sponsors.

I understand the anomaly. But as I said, this question has come up earlier, I would urge you to write to SEBI and RBI directly. We as a company or as an InvIT, going to SEBI saying allow our units to be pledged will receive a tremendous push-back because I don’t think that is a purpose which regulators would encourage in which to go and propose.

So I would urge as an individual unitholder, you have right to do so, you have powers to do so. Please write to SEBI if you require which department, we can help you on that. But please write to them. Coming from unitholders themselves, it carries a lot of weight for regulators. Coming from InvIT or the company, it becomes extremely biased.

So while we have spoken about it, we have always been given who has raised this issue, ask them to write to us, right. So I would suggest you to write to them because it is not that IndiGrid can do something different right. At the end of the day it is in the regulatory process between SEBI and RBI, largely RBI and SEBI. So, I would ask you to write to them, we can help you in our compliance and help you who to write, but what to write is up to you. But we cannot write this to regulators as an InvIT.

Malav Sharedalal — Pravin Ratilal Share and Stock Brokers. — Analyst

Yes. I will get-in touch with Compliance Officer.

Harsh Shah — Chief Executive Officer and Whole-time Director

Thank you.

Malav Sharedalal — Pravin Ratilal Share and Stock Brokers. — Analyst

Thanks.

Operator

Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Subhadip Mitra for closing comments.

Subhadip Mitra — Nuvama Wealth Management — Analyst

Yes. Hi. I would like to thank the management for giving us this opportunity to host the call. Harsh, would you have any closing comments?

Harsh Shah — Chief Executive Officer and Whole-time Director

Yes. Thank you. And I would say, thank you. Thank you everyone for being present on the call. Really appreciate your questions. We tried to address them to the best of our abilities and I would hope that we have been able to do it. Our EGM for the key decisions will be issued soon. EGM notice will be issued soon, look-forward to your support and the resolutions that are there. Thank you very much.

Operator

[Operator Closing Remarks].