IRB Infrastructure Developers Ltd (NSE: IRB) Q3 2025 Earnings Call dated Feb. 01, 2025
Corporate Participants:
Anil Yadav — Director, Investor Relations
Tushar Kawedia — Group Chief Finance Officer
Virendra D. Mhaiskar — Chairman & Managing Director
Analysts:
Alok Deora — Analyst
Vishal Periwal — Analyst
Parikshit Kandpal — Analyst
Presentation:
Operator
Good morning, ladies and gentlemen. Welcome to the IRB Infrastructure Developers Conference Call for discussing the Financial Results for the quarter ended, 31 December 2024, along with the recent developments.
We have with us on the call today, Mr Virendra; Mr SS Rana, Mr Anil Yadar; Mr Mehul Patel; Ms Punam Nashal and Mr Tushal Cavea. As a reminder, all participant lines will be in listen-only mode. And after the opening remark by the management, there will be a question-and-answer session. Please note that the duration of the call would be 45 minutes and any queries left unanswered after the call can be subsequently mailed to the management for adequate response and resolution. Please note that this conference is being recorded. I now hand the conference over to Mr Yagar to give you an overview of the significant developments during the quarter. Thank you, and over to you, sir.
Anil Yadav — Director, Investor Relations
Thank you. Good morning, everyone. I welcome all the investor analysts to our earning call for Q3 results financial year 2024-’25. I trust you have reviewed our detailed number and presentation. I will briefly highlight the key point for the quarter.
Private InvIT, IRB Infrastructure Trust has issued preliminary and non-binding offer high of its matured asset to the public InvIT, that is IRB Infrastructure Fund. As of September ’24, the enterprise value of offered asset is INR15,000 crores as outlined in the independent valuers Report of the private. The considerations so received will be used for the funding upcoming opportunity in this sector. The proposed transfer is key step to our BES team that is built, execute, stabilize and transfer strategy under which the projects are initially developed under our private platform.
Upon completion and stabilization, these assets are then offered to the public platform. This process not only maximizes the value for the stakeholder of IRB Group, but also ensures a sustained long-term benefit. The base growth strategy focuses on sourcing the capital for growth through asset monetization. This transfer of the asset from the private to the public InvIT will ensure that there is no need to dilute the equity or alternatively raise the debt at IRB level.
For the public, this is a win-win situation as not only their portfolio expands, but also the residual life of the asset under the management will get enhanced. During the quarter, Private InvIT has acquired 80.4% equity of share capital and 84.4% of the debenture of the Ganga Expressway project in-line with the concession agreement. The project has already received three tranches of grant that is INR8.7 billion. Out of INR17.46 billion from UPIDA. We are happy to inform that the project is progressing as per the scheduled timeline.
Investment manager of the Private InvIT on behalf of the Trust has issued an allotted INR5.84 crores unit of the trust aggregating to INR1,714 crores and the company being a sponsor of the trust has been allocated 2.98 crores units. We have witnessed a robust growth in the toll revenue, 21% across in private InvIT and Mumbai, Pune and Ahmedabad Vadra put together on year-on-year basis for Q3 FY ’25. The private InvIT has been generating positive cash-flow since last financial year and has declared a distribution of INR54 crores in Q3 of FY ’25, which will reflect IRB’s cash-flow to the extent of its holding 51%.
Cumulative distribution declared by the private for nine months FY ’25 aggregates to INR190 crores. In-line with our dividend policy, the company has declared an interim dividend of 10%, amounting to approximately INR60 crores. Total dividend for nine months FY ’25 aggregates to INR181 crores. Our total order book now stands at INR31,500 crores with the EPC order book at approximately INR3,200 crores. Next two years executable order book, including O&M and EPC is close to INR6,000 crores.
With respect to new bidding, the government push for the PPP projects is gaining momentum with bidding for BOT and TOT project is now underway. We are well-positioned to capitalize on these opportunities and intend to actively participate in upcoming projects. India Rating has affirmed the rating of IRB.
Now I will request Sri Tushar to present the financial highlight for Q3 FY ’25. Over to you, Tushar.
Tushar Kawedia — Group Chief Finance Officer
Yeah. Thank you, sir, and good morning to all. I will first take you on the new accounting segment reported by the company for this quarter, followed by the financial highlights for the quarter. So to align the accounting treatment in-line with the regulatory changes relating to operations, shifting business environments and emerging business opportunities, the company has engaged experts to advise on the accounting approach to be adopted by IRB.
Following an extensive study of IRB’s business model and Indian and global accounting guidelines, the experts have recommended the accounting treatment. This treatment was considered and approved by the Audit Committee and Board after detailed deliberations. Accordingly, the company has introduced a new segment, Invita and Related Assets and reported the segment results in accordance with IndAS 108. As you are aware of that more than 85% of enterprise value is attributable to its asset business for IRB.
Notably, the private InvIT has an enterprise value of approximately INR60,000 crores in which IRB holds 51% stake. Now with adoption of new measurement approach, the investments in private will reflect the inherent value of these investments on an ongoing basis.
I will now take you through the financial analysis for Q3 FY ’25 versus Q3 FY ’24. The total consolidated income for Q3 FY ’25 has increased to INR2,090 crores from INR2,077 crores, registering a growth of 1%. The income from beauty segment for Q3 FY ’25 have increased to INR648 crores from INR616 crores, registering a growth of 5%. The income from Invit and related asset segment for Q3 FY ’25 have increased to INR245 crores from INR67 crores, registering a growth of 267%. The income from Construction segment for Q3 FY ’25 have decreased to INR1,133 crores from INR1,353 crores, down by 16%.
The other income for Q3 FY ’25 have increased to INR64 crores from INR42 crores, an increase of 52%. EBITDA for Q3 FY ’25 increased to INR1,049 crores from INR978 crores, registering a growth of 7%. Interest cost has increased to INR461 crores as against INR433 crores, an increase of 7%. Depreciation cost increased to INR265 crores in Q3 FY ’25 from INR251 crores, an increase of 5%. PBT has increased to INR323 crores in Q3 FY ’25 from INR294 crores, an increase of 10%. PAT before exceptional gain and post JV losses has increased to INR22 crores in Q3 FY ’25 from profit of INR187 crores of — considering the JV loss for Q3 FY ’24 of INR51 crores in Q3 FY ’24, an increase of 18%.
Now I request the moderator to open the session for question-and-answers.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Alok from Motilal Oswal Financial Services. Please go-ahead.
Alok Deora
Hi, good morning. Just had a couple Of questions. First is on the order inflow. So if you could just highlight what is happening on the NHI side because the order inflow has been pretty poor YTD. It’s although it’s picked-up in the 3rd-quarter, but still on the overall basis, it seems pretty weak and now we are just left with two months. So if you just highlight on the total order inflow as well as what kind of projects are expected because even toll projects have not really come by.
Virendra D. Mhaiskar
So morning,, side. As you know, the year opened for us with the two TOT that we had back starting from 1st of April. And as all of us are aware, due to the elections are getting conducted, the ordering and the overall activity had flattened. But we see positive momentum coming back. Few of the TOT and BOT bids have already happened and we see a good traction over the next two months as far as TOT and BOT space is concerned.
We are fully geared up to participate in this upcoming opportunities and we will be working very, very closely on these opportunities to see what best we can get-in for the company prospects.
Alok Deora
Sure. So based on what has happened, I’m sure it has been below our expectation also that you know, last-time when we spoke in the earning call post that also two months, nothing has really materialized in a concrete way. So have we trimmed down our expectations for the remaining two months because this is when the — most of the ordering was expected in the last four months, which is — and two months have already gone by.
Virendra D. Mhaiskar
So look for the lighter version, India has won many matches on the last over. We have not our target as yet.
Alok Deora
Sure, sure.
Virendra D. Mhaiskar
Stay-tuned for with the same target number even now.
Alok Deora
Absolutely. And after this the reclassification exercise, which we have done. So now the recurring number will be the — I mean, the gain from InvIT and everything will be counted in the revenue part. So the classification would look like this only, right, how it’s given in the P&L. And just at the INR58 billion of one-time this thing will go away from next quarter onwards?
Anil Yadav
Yes, Alok. You are correct. This will be a recurring nature.
Alok Deora
Sure. Just one last question. Why is this gain included in revenue? I mean, isn’t it part of the — I mean, non-operating or the non-core revenue because then it actually does not give a true picture of the core revenue, right, because this is coming from the InvIT operations.
Anil Yadav
So Alok, as you are aware that InvIT investment, typically InvIT works on the NDCF and where the cash-flow generated from is gets distributed to the unit holders. And the present accounting system where whatever the distribution we were getting was not reflecting in the P&L account. So that was not reflecting in P&L account. Secondly, as these assets has a long-life, as basically we will go closer to the cash-flow. As the revenue increases and the cash-flow increases, the value of these assets will increase.
So in fact, if you look at your own — the analyst model, which do the DCF, as basically you roll-forward by one year, there is appreciation in the value and accordingly, the target price also increases. So I think with respect to in terms of monetization, we have already offered assets to the public invent so we are monetizing also that will be on a timely basis, there will be a realization of the numbers also. So I think considering that this should be treated — recurring in nature and this should be treated form of a form of regular income. And this is in-line with the accounting standard and accounting norms in India or globally.
Tushar Kawedia
Yeah. So Alok, just to add here, if you see for IRB, now as such, strategically now the bidding is happening at the trust level. And for IRB, it’s like a regular investment and it will be a regular phenomenon where IRB will deploy its capital against its stake. So for IRB, it’s a major operation segment — operational segment because now all the biddings which we are looking for is to come at the private level. So that leads to us for treating it as an operational segment going-forward.
Virendra D. Mhaiskar
But one thing more to reflect upon because your question was why and why not OCI. So I think the point here is that the total revenues reflect at the private InvIT end and that keeps giving the investors the visibility about how the portfolio is actually performing. But the reflection of that of gaining cash flows doesn’t get reflected into IRB balance sheet in-spite of owning 51% because of a joint control mechanism that we — that exists in the private. And that reflection not getting captured in IRB, it gives a little truncated picture of the scheme of things for the investors. So it was thought appropriate to move it through P&L and not as an OCI treatment.
Alok Deora
Got it. Got it. I think that’s very helpful and all the best for future. Thank you.
Operator
Thank you. Before we take the next question, a reminder to all the participants that you may press star and one to ask a question. The next question is from the line of Vishal Periwal from Antique Stock Broking. Please go-ahead.
Vishal Periwal
Yeah. Yes, sir. Thanks for the opportunity. Two questions from me. First, in the P&L, in the revenue, when we have booked a dividend interest income from InvIT of INR167 crore, how does this differ from the PPT where we have mentioned distribution of INR540 odd million like the same thing or are they different?
Tushar Kawedia
No, so it’s — 167 is the distribution, which includes the distribution from private and public.
Vishal Periwal
Okay. No, but then quarter three in the PPT mentioned 540 odd million. So roughly like 51% of it will be like almost like INR27 crore INR28 odd crore vis-a-vis the INR16 crore INR17 crores that we have booked.
Anil Yadav
Vishal, I think the — based on the revised accounting standard, whether dividend or distribution from the are accounted only on received basis. So the — whatever is declared in Q3 will be get accounted in next quarter. This was the distribution what is reflecting is of distribution of the last quarter.
Vishal Periwal
Okay, okay. Got it, got it. And then the second is on this the treatment of the investment that we have done for the InvIT, according to you, how this will have an impact on ROEs and I think margins may be largely same, EBITDA margin, but ROEs, will this have a positive impact? Is that fair to understand?
Anil Yadav
Yes, to begin with, it will have positive impact on the ROE. But however, for our business, typically people don’t look at ROE or return on capital employed. Our businesses largely have 80%, 85% value coming from the asset where people do the DCF. And for EPC business, they give the multiple. So our business is not value evaluated or valued on the basis of ROE. But you are absolutely correct, there will be improvement in ROE.
Vishal Periwal
Okay. Okay. Sure, sir. Yeah, that’s all from my side, sir. Thank you very much, sir.
Operator
Thank you ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Parikshit from HDFC Securities. Please go-ahead.
Parikshit Kandpal
Hi. My question is on the monetization part which we are taking from private to public. So are we now in a position where this will become a more negative phenomenon because first these five assets and whatever time it takes, I think you’ve given a timeline of first-half of FY ’26. So you think that on a periodic basis, each financial year from here on, we can see more assets coming in and getting monetized to this route.
Virendra D. Mhaiskar
So, Parikshit, good morning. This is a more strategic thought process that we have gotten into. And you are right that this will be an ongoing phenomenon because the way we have built the business and the way we have created the structure of private InvIT acting as a development platforms and also owning the public InvIT, which is majorly housing or the matured asset, I think this becomes the perfect fit where based on the risk allocation of the project, the value unlocking keeps happening.
So while at the IRB end, we are capturing the executional risk and reaping the benefits On the construction and O&M margins and ending up owning investments in both these platforms, which will now reflect basis the treatment that we talked about earlier, the unlocking of value will continue to happen where matured assets we can always offer to the public where this platform also gets fresher to start growing rapidly. And this will unlock the capital for private Invent, which then can go in faster deployment for upcoming new assets. And I think the focus going-forward even from the Government of India is likely to be on asset monetization and that will be a huge opportunity opening up for the sector where we intend to keep our leadership situation and to undertake large number of assets, this unlocking will help us to catapult into a much faster growth of asset-base without adding up or piling up too much of debt and efficiently using the unlocked capital and distributing the risk across the portfolio.
Parikshit Kandpal
So what kind of annual inflows or monetization potential do you think on a near to mid-term can it generate for you and which can come in as a growth capital for and other assets?
Virendra D. Mhaiskar
So let’s look at it this way that the first tranche of assets that has already been offered to public InvIT is having an enterprise value of around INR15 odd crores. If I net out the debt of around INR7,000 crore INR7,500 crores, we are talking here of a significant equity unlocking that will come way to the private InvIT. Now let’s make a simple math here that INR8,000 crores plus of equity unlocking, say, happens at private InvIT end where IRB owns 51%, then that equity capital can be deployed for another INR25,000 crores worth of projects which the private Invent can build for. And this will be a significant capacity that we will be creating for IRB to participate in the upcoming opportunities.
I’m just talking about the first tranche here. Let’s remember that the total enterprise value of the private today stands at INR60,000 crores plus.
Parikshit Kandpal
You are saying the debt on this INR15,000 crores is about INR11,500. So you have —
Virendra D. Mhaiskar
So I said the debt is around INR7,000. INR3,000 crore EV, the debt is around INR7,000 and balance is equity unblocking that will happen.
Parikshit Kandpal
So 8,000 is biggest. So — but looking at the current market cap of public Invent, so do you think there is appetite and that kind of resources. So how do you intend to do this?
Virendra D. Mhaiskar
So naturally, public is right now in the grip of things. And certainly if that fund has to grow, it will — it has certain amount of legroom on the debt side and the balanced capital also can be looked upon by the public invent to acquire assets because for any such platform to grow, if we look across any other invent, they have significantly grown by adding a mix of capital and debt. And I think that is the way forward that even public will involve itself or.
Parikshit Kandpal
Okay. And will the sponsor get diluted here on the public InvIT side because he was a sponsor, I mean, will you be?
Virendra D. Mhaiskar
No, I think we stand committed to support the public platform in which we very much believe and we will continue with our present exposure that we have as a.
Parikshit Kandpal
And the intent on right current IRRs, which public Invent is giving and when you bring in assets, it has to be at a positive IRR. So how is your thought there? I mean, what could be the numbers look like?
Virendra D. Mhaiskar
I think it will — I think it will not be very fair on my part to talk on behalf of the public, but the simple math suggests that with long-dated assets getting added to the public platform, the IRRs are ought to improve from what they exist today.
Parikshit Kandpal
Okay. And sir, on the beauty side, we have been hearing the bid getting postponed. I mean I think multiple times that has happened like and other bids. So when do you think — I mean what is — why is it happening? And do you really think that this year we will see the daylight at the end-of-the tunnel in terms of bids happening? As I hear that these are really large bids like INR4,000 crores INR7,000 crores in that ballpark size. So do you think that they’ll see the light of this? Okay.
Virendra D. Mhaiskar
So I think you have answered the question yourself that these are large-size bids and they are serious numbers. So you will appreciate that the sector here has consolidated and serious players who are looking at bidding on these large ventures. And I think I would like to appreciate NHI here that rather than rushing through on bidding half-cooked projects, they are keen to answer all the queries that are being put across to them in a very, very scientific manner.
Yes, that’s taking time, but I think that will avoid a lot of accidents in future with all these bids getting properly evaluated and bid upon. So while the anxiety level can be understood and it’s getting delayed, I am actually more happy that a more thought through approach is being adopted, all right reasons are being provided to the bidding community. And post that the bid is taking place. So any freak bid or any accident happening, ending up in the project getting stuck at a later-stage can be avoided by this kind of a studied approach. And I would like to appreciate the effort of NHI.
Parikshit Kandpal
Okay. Sure, sir. Those were my questions. Thank you.
Operator
Thank you. A reminder to all the participants that you may press star and one to ask a question. Ladies and gentlemen you may press star and one to ask a reminder to all the participants that you may press star and one to ask a question. As there are no further questions from the participants, I would now like to hand the conference over to the management for closing comments.
Virendra D. Mhaiskar
Yeah. I think everybody is equally keen to go back to the TV screens and watch what the budget has to offer. So I would not like to take the time of all the community that we have here and thank you everyone for taking time-out and coming for this call on a Saturday morning and look-forward to engage with you again soon over the next quarter. Thank you, everyone, and have a great weekend.
Operator
Thank you, sir. Ladies and gentlemen, this concludes your conference for today. We thank you for your participation. You may please disconnect your lines now. Thank you and have a great day-ahead