IRB Infrastructure Developers Ltd (IRB) Q3 FY23 Earnings Concall Transcript

IRB Infrastructure Developers Ltd (NSE:IRB) Q3 FY23 Earnings Concall dated Feb. 08, 2023.

Corporate Participants:

Vinod K. Menon — Sr. Vice President

Rushabh Gandhi — Chief Financial Officer

Anil Yadav — Director, Investor Relations

Analysts:

Dhiraj Dhage — — Analyst

Satinder Singh — EON Infotech — Analyst

Mohit Kumar — DAM Capital — Analyst

Krishna Prasad — GoFrugal — Analyst

Rahul Marathe — ICICI Pru — Analyst

Ketan Shah — Individual Investor — Analyst

Analyst — — Analyst

Rajan Kataria — Individual Investor — Analyst

Sherman Gosh — Individual Investor — Analyst

Saurabh Chitre — Individual Investor — Analyst

Presentation:

Operator

Good morning, ladies and gentlemen, and welcome to the IRB InvIT call hosted by the company for discussing the financial results for Q3 FY ’23. We have with us on the call today, Mr. Vinod K. Menon, Mr. Anil Yadav, Mr. Rushabh Gandhi and Ms. Swapna Vengurlekar from IRB InvIT team. As a reminder, all participant lines will be in a listen-only mode and after the opening remarks by the management, there will be a question-and-answer session. Please note that the duration of the call will 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 request Mr. Menon to give you an overview of the significant development during the quarter. Thank you and over to you sir.

Vinod K. Menon — Sr. Vice President

Thank you. So good morning, everyone. I would like to welcome all the investors and analysts on this call. Hope you have reviewed our detailed numbers as well as the presentation. During the quarter ended December ’22, we have observed robust traffic growth across all our projects. As compared to the corresponding quarter of the previous year, we have observed 21% growth in the toll revenue on a like-to-like basis, that is excluding Bharuch Surat, Surat Dahisar and Pathankot Amritsar project. Toll collection on Amritsar Pathankot project was temporarily suspended on account of farmers protest in the state of Punjab from mid December. The project recommenced the tolling on 15th January 2023. NHAI has also filed a writ petition before the Punjab and Haryana High Court against the said protest. The project SPV, of course, has filed claims under the force majeure provisions of the construction equipment. During the quarter, Vadodara Kim HAM has been successfully added to our portfolio. The project has received its first annuity from NHAI, along with the O&M payment.

Recently, the project SPV has been assigned AAA-rated by the India Ratings. Considering the current bank rate of 6.5%, the project will be eligible for interest on annuity at the rate of bank rate plus 3%, that is 9.5%. During the quarter, the trust is also in the talk [Phonetic]. AAA issuer rating from two of the credit rating agencies that is India Rating and Care Ratings. Now, distribution in the form of return of capital was not considered as taxable since the same could be considered as reduction in the cost of acquisition. Based on the recent finance bill, we understand that the distribution in the form of return of capital would be taxable in the hands of the unit holders. However as per the said distribution, resulting into redemption of unit will be considered as reduction of cost of acquisition. This is an industry-wide issue, for which we expect that the industry bodies will make suitable representation to the government.

From our InvIT perspective, we have made substantial distribution in the form of return of capital to the unit holders in the past few years. We have projects which are having long concessions. We will device our new strategy to maximize the distribution in the form of interest and we do not foresee any material distribution in the form of return of capital in the next couple of years.

I would now request Mr. Rushabh Gandhi to take you through the financial performance of the quarter and the year. Over to you, Rushabh.

Rushabh Gandhi — Chief Financial Officer

Thank you sir. I would like to present the financial analysis for the quarter ended December ’22 aside with the trailing quarter. The total consolidated income for the quarter ended December ’22 has improved to rupees INR285 crores from INR203 crores in the trailing quarters. The consolidated total revenues for the quarter ended December ’22 has improved to INR209 crores as compared to INR199 crores for the trailing quarter September ’22. EBITDA for the quarter ended December ’22 has improved to INR208 crores from INR177 crores in the trailing quarter September ’22. Interest cost which includes interest on premium deferment and in the current quarter, interest on VK1 HAM asset also stood at INR58 crores from INR36 crores in the trailing quarter.

Depreciation, which includes amortization for the quarter ended December ’22 stood at INR46 crores as compared to INR48 crores in the trailing quarter. Profit-after-tax for the quarter ended December ’22 has improved to INR100 crores from INR91 crores in the trailing quarter September ’22.

I would now request the moderator to open the session for Q&A.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of the Dhiraj Dhage from Samvat [Phonetic] Financial. Please go ahead.

Dhiraj Dhage — — Analyst

Good afternoon, good morning sir, and thanks for giving me the opportunity to ask the question. My first question is basically the Jan toll collection, which we seen and which has been given on NSE. We see basically, there has been decline, most of the assets we see a decline. Can you draw some light on what is the reason for drop in the toll collection here.

Anil Yadav — Director, Investor Relations

So. I think if you are comparing with the – if we compare with the corresponding month of the large year–

Dhiraj Dhage — — Analyst

Considering December sequentially, YoY growth but generally what result into, any specific sector or–

Anil Yadav — Director, Investor Relations

There is no specific factor. Typically because of the December where the passenger car vehicle increased because of the holiday season and during first week of Jan, school starts and other activity slows down and that is the routine phenomena and one has to compare with the corresponding month of the last year.

Dhiraj Dhage — — Analyst

So there is nothing unusual. So the second perspective is basically what could would be kind of distribution henceforth. So basically, we have almost reached in fourth quarter. So any guidance on FY ’24 for distribution.

Anil Yadav — Director, Investor Relations

So I think sir, our endeavor is to continue 2 rupees distribution per quarter. Unless and until we acquire more assets and by that we increase our distribution. As of now, we can only guide for 2 rupees distribution per quarter basis.

Dhiraj Dhage — — Analyst

Fair enough. I’ll come back in queue. Thanks a lot. Wish you all the best.

Operator

Thank you. The next question is from the line of Satinder Singh from EON Infotech. Please go ahead.

Satinder Singh — EON Infotech — Analyst

Good morning, team. IRB InvIT. Congratulations for this–

Operator

Satinder sir, your voice is not very clear. May I request you to use the handset please?

Satinder Singh — EON Infotech — Analyst

Okay, so congratulations for the stable set of numbers. So my question is regarding some of the assets. One, Talegaon Amravati, can you throw some light because Talegaon-Amravati in the quarter that we are discussing the revenue growth is about 14% but 10.2% out of that comes out of the tariff increase only. So effective traffic increase is only about 3%. In fact in January, the revenue increase is only 5%, which means we are talking of a traffic de-growth of almost 5%, 6%. So some light on Talegaon-Amravati, seems to be clearly struggling on the traffic side. We understand it because of the tariff increase.

Anil Yadav — Director, Investor Relations

I think Talegaon-Amravati we have discussed in the previous few quarters as well because of some construction work going on. Traffic on that particular project was soft. In fact, we in December quarter, we have seen some improvement that is close to 3.5% to 4% tariff improvement and I think going forward once the construction work for adjacent corridor and the metro work gets completed, probably we’ll see further uptick in the traffic, but last quarter was quite encouraging and we have seen some improvement, if we compare with the trailing quarters for the same year.

Satinder Singh — EON Infotech — Analyst

So the industry has worked according to target to get over the bridge or whatever activities is impeding our traffic. So we were under the impression that probably the worst is already over as of last quarter, so–

Anil Yadav — Director, Investor Relations

No. I think there last time we have told that by December, the work should get over and that’s why we have seen some improvement in December quarter. Probably we have to see one or two quarters more for further improvement for the traffic in the Talegaon. Anyway this project contributes hardly 10% to 12% of the overall revenue of the trust. So that way it’s not a very sizable project but because of the size of the construction activity going on this, there was laggard in the traffic but because of the tariff improvement, we have got double-digit kind of growth in this project also.

Satinder Singh — EON Infotech — Analyst

Thank you. On Pathankot-Amritsar we had a claim of about INR80 crores. This is for the previous farmer education. And we’ve received about INR36 crores. So could it be, one, an update on what has happened to that arbitration. And second, what is the rough claim that we are raising for this one month of the — will it break also, one month of construction

Anil Yadav — Director, Investor Relations

Yeah. I think with respect to Pathankot-Amritsar first. I would like to upgrade that what we have received. We have received equivalent number of days extension in terms of concession agreement and plus we have received INR36 crores of cash compensation for large closure and for balance, as you rightly mentioned we have moved in arbitration And typically, as you know that arbitration process takes one to one and half years to get concluded. So, probably after a year or so we can get some resolution on that aspect. Now with regard to the one month compensation amounts around 6.5 to 7 crores rupees and which we claim as Mr. Menon has already explained that we have already launched with the NHAI and it’s a small amount. And there will be a similar one month extension in the concession.

Satinder Singh — EON Infotech — Analyst

Okay, and what will be the Tumkur Chitradurga, is the project second or what is the status on back of the arbitration. We understand that the margin has been lifted on the account on the escrow account. But what is the status of the settlement of them.

Anil Yadav — Director, Investor Relations

Tumkur Chitradurga, the escrow account is now normalized, it is in the normal operation mode. So the arbitration is with respect to whatever claim that NHAI had on the advancement of some deferred premium. So that arbitration is continuing [Phonetic] and the arbitration stage it will reach very soon.

Satinder Singh — EON Infotech — Analyst

Thank you. And what is the contribution of term [Phonetic] to this current this year’s this quarter’s distribution. So how do you think that is — so what could be indicated contribution for this.

Vinod K. Menon — Sr. Vice President

Sir, we missed last part. Can you speak little loudly?

Satinder Singh — EON Infotech — Analyst

Sir, what is the contribution of the projects to this distribution of 2 rupees. So just wanted to understand for a like-to-like comparison that since [Phonetic] is the new entrant this time. How many paisa has it contributed, 10 paisa, 8 paisa, 12 paisa to this distribution of time.

Vinod K. Menon — Sr. Vice President

When we had talked about adding of VK1, VK1 was about to contribute close to 25 to 30 paisa on per annum basis from the FY ’24 onwards because in this financial year though we will receive 2 annuity but there is a requirement of INR50 odd crores of this [Phonetic] creation, which will be created out of the second annuity. There will be hardly INR8 crores, INR10 crores of surplus which will be left, which can be total contribution of VK1 for entire financial year.

Operator

Thank you. The next question is from the line of Mohit Kumar from DAM Capital, please go ahead.

Mohit Kumar — DAM Capital — Analyst

Hi, good morning, sir. Three questions from my side, sir. Can you please let us know the date on the asset as of now and repayment for FY ’24 and FY ’25.

Vinod K. Menon — Sr. Vice President

I think Mohit on VK1 we have roughly INR955 crores of debt and around INR45 to INR50 crores is repayment in FY ’24 and similar amount in FY ’25 as well.

Mohit Kumar — DAM Capital — Analyst

My question was the entire debt on the entire InvIT

Vinod K. Menon — Sr. Vice President

Entire InvIT level, our debt is roughly INR1588 crores rupees. And the cost is little less than 8% and with respect to the repayment, repayment is around INR55 crore, INR60 crore in FY ’24.

Mohit Kumar — DAM Capital — Analyst

And this is over and above the repayment scheduled for VK1, right?

Vinod K. Menon — Sr. Vice President

Yes, correct. Next year we will be paying InvIT and this VK1 put together close to INR105 crores to INR110 crores.

Mohit Kumar — DAM Capital — Analyst

Understood, sir. And any premium repayment for Tumkur Chitradurga in FY ’24 and FY ’25.

Vinod K. Menon — Sr. Vice President

It can be close to INR225 crores for FY ’24 and for FY ’25 it will be INR265 crores.

Mohit Kumar — DAM Capital — Analyst

Understood. And the last question on the taxable distribution, you said that, of course the changes in the Budget. So going to the industry going to make a represenation. So can you please let us know what is the demand of the industry. Is it on the principal amount, they don’t want any reduction, is that the — what you’re talking about here.

Vinod K. Menon — Sr. Vice President

I think so far, we have now the industry, we were not able to discuss with the industry body because everybody was busy with the quarterly numbers, but as a company what principal issue we have. Whatever the principal repayment we are doing, that should we allow adjusted against the cost incurred by the investor. And if we are paying more than whatever the cost of acquisition by the investor then whatever the surplus is there, that should be taxable, not the entire repayment per se. So that should, that will be our plea with whatever forum we represent. But anyway for our InvIT, it’s not an immediate issue, because for next three to five years, it will be largely interest what we will be paying and principal repayment will be very miniscule because we have all the concession, which has a long period, almost a 16 to 18 years life left except one concession, which is the MVR. But whatever the low repayment will happen in MVR similar kind of repayment is happening by the trust also to the third party debt. So considering that aspect, we will not have an immediate issue. But on long-term basis, definitely this is an industry-wide issue. And probably once we will get resolution on the same, post that we can re-devise our strategy, but as of now strategy remains that we will try to distribute maximum amount by way of interest only.

Mohit Kumar — DAM Capital — Analyst

Understood. Can you repeat the number you just said it on the VK1, how much distribution expect it to add in FY ’24.

Vinod K. Menon — Sr. Vice President

FY ’24 it will add around 25 to 30 paisa per unit.

Mohit Kumar — DAM Capital — Analyst

Understood, sir. Thanks. Best of luck.

Operator

Thank you. The next question is from the line of Krishna Prasad from GoFrugal. Please go ahead.

Krishna Prasad — GoFrugal — Analyst

Good morning, sir. I just wanted to understand if there are any updates on the buyback proposal, because this is an industry issue and is there any representation made and any updates on that, sir.

Vinod K. Menon — Sr. Vice President

Sir. I think federation has already met with the SEBI, but only issue with the buyback because the trust from where the trust will do the buyback because whatever that cash trust is generating the trust is mandated to pay minimum 90% of the distribution. So from where SEBI has came back saying that the trustees to formed to make a payment to the unit holder and if buyback is not permitted out of NDCF from where the buyback will be done because if they allow the payment of buyback from NDCF, then there will be only selected unit holder, which will receive the money in buyback because if no trust can buyback the entire unit. So that is the only tricky part over there. Apart from that, I think on regulation side, there should not be any other challenge but only challenge is how we will manage the buyback.

Krishna Prasad — GoFrugal — Analyst

Sir, I understand that there are SEBI regulations. But if the majority of the shareholders approve for such because if I look at the fair value as per your valuation report and the price it trades and also the last two years due to COVID another overhang, the price is very less. From a unit total perspective it would have added a lot more value to it, right? So that is the concern with which I asked this question. Thank you sir.

Vinod K. Menon — Sr. Vice President

Thank you. Moderator, can we move over to the next question.

Operator

Thank you. The next question is from the line of Rahul Marathe from ICICI Pru. Please go ahead.

Rahul Marathe — ICICI Pru — Analyst

Yeah, congratulations sir on a steady set of numbers. So recently we saw that there was a strong impetus on infrastructure spending by the government in budget. So what are the new set of opportunities which we are looking at or the deal pipelines which we are looking at for acquiring assets.

Vinod K. Menon — Sr. Vice President

I think being InvIT and on with object to pay a maximum distribution to the unit holders, we will be looking at the matured assets and probably the HAM asset will be best suited asset for InvIT because HAM asset starts contributing to the payout from year 1 because the payments in the HAM assets are evenly distributed over the life of the asset. Basically, as of now, we are eyeing for the third-party HAM asset and probably we will add HAM asset from the be third party. We are evaluating various projects. And once we reach to a particular level, then definitely, we will be looking in the–

Rahul Marathe — ICICI Pru — Analyst

Okay, thank you.

Operator

Thank you. The next question is from the line of Saurabh Satse as an investor, please go ahead. Sorry sir, Saurabh is not connected anymore. So we’ll move to the next question that is from the line of Ketan Shah as an additional investor. Please go ahead.

Ketan Shah — Individual Investor — Analyst

Good morning. Thank you for giving me an opportunity. In budget as we understand lot of efforts are putting money putting in railways. So do we see any threat on this. If there are some railways coming up. There are already over project, do we see it as a threat, have we studied anything like this or there is no for such threat in immediate future?

Vinod K. Menon — Sr. Vice President

Sir. I think whatever the budget, I have read, they are talking about expansion of the existing rail network but they have not talked about any new rail network to be setup. So probably that will not impact the traffic and anyway we have a project, which connects basically which is robust on the, depends on the consumption in India. And considering that we don’t foresee that increase in railway budget will have any impact on the current traffic of the road project.

Ketan Shah — Individual Investor — Analyst

Similarly, new roads are, budget is also focusing on infrastructure. So any new road which are alternative to our these road. Is there any news. something like that?

Vinod K. Menon — Sr. Vice President

Sir, so basically as of now there is no parallel facility which can be envisaged but anyway, there is a provision in the concession agreement that if there is any parallel facility constructed, you can claim the compensation for loss of the revenue from the NHAI. That is already be well like scripted in the concession agreement and we can claim for the compensation if there is any loss on that.

Ketan Shah — Individual Investor — Analyst

Thank you sir. Thank you very much.

Operator

Thank you. The next question is from the line of Satinder from Eon Infotech. Please go ahead.

Satinder Singh — EON Infotech — Analyst

Yeah. Thank you for the follow-up. This mining going on full stream, both on the average JD Tumkur Chitradurga and Pathankot Amritsar. Any restrictions on mining currently or are things going full steam.

Vinod K. Menon — Sr. Vice President

I think JD mining has slowly, slowly started basically based on the Supreme Court direction. They have created some kind of category on the basis of the category A and B has already. I think started. And with respect to Tumkur, I don’t think so there is any mining ban and we are seeing a robust collection on Tumkur Chitradurga. Now coming to the Amritsar Pathankot project, I think there was some restriction by the army in terms of overall mining stuff and probably that was with regard to some law and order situation over there and I think that is a temporary phenomena. Once lifted, probably we will see some uptick in the traffic.

Satinder Singh — EON Infotech — Analyst

And this quarterly interest component of the payout is high and the capital is low compared to the previous quarter. So is it a deliberate by NDCL out of the judgment or is it because of Tumkur Chitradurga funds coming in. So just wanted to understand that is it a plan or is it just because of the cash flows which have come in.

Vinod K. Menon — Sr. Vice President

Basically, sir, as you rightly mentioned couple of project Surat Dahisar and Bharuch Surat was handed over last year, in fact, Surat Dahisar in this year. There those projects were towards finance of their concession, so there was largely payment was coming from both project. And probably now we have a project, which has a longer concession line. Based on the current thing itself, it will be mostly it would have been larger portion would have been interest and the repayment portion would have been reduced but considering the current budget now we will try to maximize the interest and we will try to pay almost nil repayment till we will get a clarity on the subject matter.

Satinder Singh — EON Infotech — Analyst

Right, sir. One final question. You mentioned that average 8%. Can you just share in terms of repo. So both for our trust loan and our term [Phonetic] loan, what is the terms like repo plus what kind of a spread are we talking about.

Vinod K. Menon — Sr. Vice President

So that is linked to SBI MCLR rate and even the SBI residual [Phonetic] rate is linked to the MCLR rate. Both are linked to MCLR.

Analyst — — Analyst

Even the term is also linked to MCLR

Vinod K. Menon — Sr. Vice President

Yes.

Analyst — — Analyst

Okay, so what is the spread between our term borrowings and the bank rate plus 300 that we get contractually. So what is the spread available to us there.

Vinod K. Menon — Sr. Vice President

As of now. It’s close to 3% spread available.

Analyst — — Analyst

No sir. That’s on the revenue on the income side, we get a 300 bps on bank rate, that is clear.

Vinod K. Menon — Sr. Vice President

The rate is 7.55% and we get close to 9.5%, so 200 basis, 205 basis point is the spread.

Analyst — — Analyst

And this 7.5 is not due for any increase because of the lag effect. That increase is not there. All the MCLR increases have been baked in into this.

Vinod K. Menon — Sr. Vice President

No. I think today also there MCLR. There is RBI increase rate and then that will have an impact on the MCLR. Then definitely that will have impact both on the bank rate and on the borrowing rate.

Analyst — — Analyst

Yes, that moves like this because bank rate has gone up by 25 bps today and so the MCLR but there is no backlog at MCLR because there’ll be those quarterly resets which should be happening on our borrowings side.

Vinod K. Menon — Sr. Vice President

Basically there I can’t say that there is no lag. Probably most of the rate is impacted but sometime what bank does if RBI increases the rate today, some increase with a lag of a month or so. There may be a 5, 0 basis-point here and there, but apart from that, there is no major lag.

Analyst — — Analyst

Thank you very much and congratulations again for a very fine set of numbers, sir. Thank you.

Operator

Thank you. The next question is from the line of Dhiraj Dhage from Samvat [Phonetic] Financial. Please go ahead.

Dhiraj Dhage — — Analyst

Yeah, thanks a lot for giving me the opportunity, sir. Not so much of question, but some kind of disclosure. And if you can make it more investor-friendly. For instance, the presentation of the company is not uploaded on BSE site. We need to download from your side and also like concall detail we are not getting loaded on BSE, we have to specifically come to companies site. And so just one question is if you can upload, because almost all companies basically they put this details. So it becomes one source for us as an investor to take that part. One is that. Secondly, in the presentation, we get 9-month traffic for all the project. Now it would make sense basically giving annual traffic that is fine, but nine months we actually I need to see last quarter presentation then to see what is the last quarter. So in the first-quarter, it would make sense because there is no other quarter, but in Q3, I’m getting nine months. I don’t even know what was basically growth in this Q3 kind of it. So one request is if you can modify the disclosure of information on presentation on that. And last, basically the results which we declare particularly financial while in December quarter is for quarter but September and March quarter, you give 6 months. Now I have looked into other peer group also. They exactly give the quarterly results. So rather than making 6-month, why don’t you give a quarterly, even if it is required by regulation please have a particular specific quarter because we need to otherwise recalculate saying that okay, June was so much and September is so much so September minus June is the September quarter result. So these are certain things which I would appreciate if you can look into it and try to adhere because it will make things simpler for most of the analysts and I think all other InvIT and REIT are doing that information. So this is just humble submission. I wish you all the best for your future.

Vinod K. Menon — Sr. Vice President

Thank you, sir. Thanks for your your suggestion. We will try to incorporate all those solutions with respect to the disclosure as far as result is concerned, we were complying with the SEBI norms, but as you rightly mentioned, we will try to include the additional information so that it will be handy for you. Anyway we give the concall on both the exchanges and our website also but with respect to the presentation, we will try that if it can be uploaded on the exchanges also or there is a link created on the exchanges, so that you can directly access from there.

Dhiraj Dhage — — Analyst

Yeah, and. I would just request if you can look into some other listed InvIT say India Grid or say Embassy REIT or Mindspace, the information is not basic minimum. See it is like this, the interest of confidence investor get is also based on the disclosure of information. So if you see that in fact it takes almost two hours to read that. I’m not saying we should disclose everything and probably you are the best person to disclose what you should disclose, but at least it should provide, basically, you don’t get NCDF, if even if it is not required by regulation, why cannot you provide project wise NCDF. Means regulation may not be telling but you get an aggregate NCDF but what is happening on individual project, because that comes in March quarter and September quarter. But in this quarter, it doesn’t come. That is a humble request. The more you disclose more it’s going to benefit all of us, all stakeholders including management. That’s my humble submission. I may be kind of expecting probably it might mean some effort on your end, but will appreciate if you can do that. Because last one two years your disclosure on tolling actually you can see the to a great extent reflection in your unit price and similar kind of clear disclosure will make things simpler and will get us better in future and this is my humble submission.

Vinod K. Menon — Sr. Vice President

Thanks, sir, thanks for your suggestion. As I have mentioned earlier also that we will try to incorporate details whether it’s mandatory required or not, we will try to incorporate those information to the extent but practically possible. Thank you.

Operator

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

Rajan Kataria — Individual Investor — Analyst

How much borrowing capacity you still have for us.

Vinod K. Menon — Sr. Vice President

We have close to 3,000 additional borrowing capacity with the trust.

Rajan Kataria — Individual Investor — Analyst

Okay. And just hypothetical question. If it is materializing, what will be the total impact on yearly distribution.

Vinod K. Menon — Sr. Vice President

Sir, it will be too hypothetical to basically any kind of number, but I think with the one project addition. I think 5% to 6% kind of increase in the distribution happens with the addition of one project.

Rajan Kataria — Individual Investor — Analyst

And on this quarter basis, how much NDCF we have distributed as a percentage.

Vinod K. Menon — Sr. Vice President

So I think on 9-month basis, we have distributed close to 93% to 94%.

Rajan Kataria — Individual Investor — Analyst

Thank you. Thank you sir.

Operator

Thank you. The next question is from the line of Sherman [Phonetic] Gosh as an Individual Investor. Please go ahead.

Sherman Gosh — Individual Investor — Analyst

Sir. I just wanted to ask like the last time concall for this VK1 project that you have guided for the entire year. You can go ahead with the distribution of around 50 to 60 paisa for FY ’24. Now that you are guiding around 25 to 30, like what is the reason of this downgrade of distribution.

Vinod K. Menon — Sr. Vice President

Well. I think last time we had talked about around 20 odd crores of additional distribution, coming from the VK1 and plus there is increase in the interest cost. on the borrowing front, and probably now with this increase, though we will get 25 basis points higher on annuity income, but there will be additional payout on that. So basically ranging from 30 paisa to 40 paisa that is what we can add in the net distribution for VK1.

Sherman Gosh — Individual Investor — Analyst

Okay sir, thank you so much. One more question. You also guided like probably by the year end, one or two HAM asset probably you are in the process of adding. So any update on that.

Vinod K. Menon — Sr. Vice President

Sir, we are in the process of evaluation and once we will reach to a particular level, then definitely we will inform to the unit holders.

Sherman Gosh — Individual Investor — Analyst

Okay, thank you so much sir. That’s all from my side.

Operator

Thank you. The next question is from the line of Mohit Kumar from DAM Capital. Please go ahead.

Mohit Kumar — DAM Capital — Analyst

Sir, one clarification. What is the expected tariff hike up to FY ’23 for our road assets.

Vinod K. Menon — Sr. Vice President

I think, so far there is only provisional WPI number declared and which is close to 5%. If I consider that that to be very precise, it was 4.95%. If I consider that to be actual final number, then it will be a close to 5% kind of tariff improvement from 1st of April

Mohit Kumar — DAM Capital — Analyst

Understood, sir. Thank you sir. All the best.

Operator

Thank you. The next question is from the line of Saurabh Chitre as an Individual Investor. Please go ahead.

Saurabh Chitre — Individual Investor — Analyst

Hi, thank you for giving the opportunity for asking question. I had two questions. So I’m on slide number 20 and 21 on the presentation. I can see that number of cars are going up, but other types of vehicles like SUV [Technical Issues] are going slow. And that is not only like year-on year phenomenon. You can see across four to five years. So is it because of reclassification of vehicles or are there any other insights that management has.

Vinod K. Menon — Sr. Vice President

I think this was asked in the previous quarters as well. And it is predominantly to do with some kind of commercial vehicle. Earlier. I think Tata has a vehicle called Chota Hathi. That particular vehicle was earlier classified as LCV but post the FASTag collection that got reclassified as LNV that is kind of under car category. So that is kind of classification or reclassification issue, nothing more on that side.

Saurabh Chitre — Individual Investor — Analyst

Okay, and my second question is obviously our toll has [Technical Issues] and right now we are seeing like even this year, it might be that you mentioned for answer of this question for 4.95 [Phonetic]. But what happens in case that it becomes negative, potentially for ’24, ’25. Is it then we have to revise it downwards, the toll numbers or toll that we collect

Vinod K. Menon — Sr. Vice President

Tariff policy is 3% fixed plus 40% of WPI. We get only 40% of the WPI. So till that time, WPI is high the resultant number comes high. If WPI is lower or higher than the resultant number will be lower or higher.

Saurabh Chitre — Individual Investor — Analyst

Okay, thank you very much and all the best for your future.

Operator

Thank you. Ladies and gentlemen, that would be our last question for today. I now hand the conference over to Mr. Menon for closing comments. Thank you and over to you, sir.

Vinod K. Menon — Sr. Vice President

Yeah, thanks to all the participants on today’s call. Hope to get in touch again soon.

Operator

[Operator Closing Remarks]