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Powergrid Infrastructure Investment Trust (PGINVIT) Q3 FY23 Earnings Concall Transcript

PGINVIT Earnings Concall - Final Transcript

Powergrid Infrastructure Investment Trust (NSE:PGINVIT) Q3 FY23 Earnings Concall dated Jan. 25, 2023.

Corporate Participants:

Anshuman Ashit — Associate

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

Amit Garg — Chief Financial Officer

Purshottam Agarwal — Chief Executive Officer

Analysts:

Mohit Kumar — PAM Capital — Analyst

Sunil M. Kothari — Unique PMS — Analyst

Niraj Kamtekar — ProsperoTree — Analyst

Dhruv Muchhal — HDFC Mutual Fund — Analyst

Pratik Kothari — Unique Portfolio Managers — Analyst

Sarvesh Gupta — Maximal Capital — Analyst

Ravi Chandra — Individual Investor — Analyst

Kayur Ashar — PNB MetLife — Analyst

Sanjeev Zarbade — Dream Ladder Investment Advisors — Analyst

Ketan Shah — Individual Investor — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Powergrid Infrastructure Investment Trust Q3 FY23 post-results conference call, hosted by ICICI Securities. [Operator Instructions]

I now hand the conference over to Mr. Anshuman Ashit from ICICI Securities. Thank you and over to you.

Anshuman Ashit — Associate

Thank you, Yashashwi [Phonetic].

Good evening, everyone. On behalf of Mr. Rahul Modi and myself from ICICI Securities, I welcome you all to PGInvIT’s Q3 FY23 post-results conference call. Today, we are pleased to host the Senior Management of the Trust, represented by Mr. Abhay Chaudhary, Non-Executive Chairman; Mr. A.K. Singhal, Non-Executive Director; Mr. Purshottam Agarwal, Chief Executive Officer; Mr. Amit Garg, Chief Financial Officer, and other senior officials from the management.

The call will start with brief remarks from the management, after which we’ll open the floor for the question-and-answer session.

Thank you and over to you, sir, for your initial remarks.

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

Good afternoon, everyone. On behalf of Powergrid Unchahar Transmission Limited, Investment Manager to PGInvIT, I would first take this opportunity to wish PGInvIT unitholders, a very Happy New Year 2023. I would also like to thank all the participants for sparing time and joining this call.

I have with me Mr. A.K. Singhal, Director PUTL; Mr. Purshottam Agarwal, CEO, PUTL; and Mr. Amit Garg, CFO, PUTL, and other senior officials.

On January 24, 2023, PGInvIT announced its unaudited financial results for the quarter and nine months period ended December 31, 2022, and distribution for the quarter ended December 31, 2022, which have been disclosed on both the stock exchanges.

Our presentation on Q3 FY2023 results of PGInvIT has been uploaded on the website and presuming that you have gone through it, I do not propose to go through the same, I instead would be providing a summary of the results.

Most of you would be aware that PGInvIT currently owns five SPVs with 100% equity shareholding in one SPV, and 74% in each of the other four SPVs. The SPVs are operational projects comprising 11 transmission lines with a network of approximately 3,699 circuit kilometers and three substations with 6,630 MVA of transformation capacity. The average remaining life of the TSAs is more than 30 years.

PGInvIT with a value proposition of AAA that is Assets, Assurance, and Advantage, aims to provide consistent, stable, and visible returns to its unitholders. Now, I would like to start from the distribution for the quarter ended December 31, 2022.

We have announced a distribution of INR3 per unit, which would be paid to the unitholders before 8 February, 2023. And this is the third distribution by the Trust for fiscal ’23, and the sixth consecutive distribution since our listing in May ’21.

Including the recently announced distribution, we aggregate distribution by PGInvIT since its listing is more than INR17.74 billion. For fiscal ’22, an aggregate distribution of INR10.5 per unit was debt [Phonetic] to the unitholders for the working period of the Trust with effect from May 13, ’21 to March 31, ’22.

Our distributions including the latest INR3 per unit are in line with our distribution policy and SEBI regulations which stipulate not less than 90% of NDCF to be distributed to unitholders. I would like to reiterate that as per our distribution policy, the distribution shall be declared and made not less than once every quarter.

At last, coming to the highlights for the quarter and nine months period ended December 31, ’22, and on the operations part first, I would like to say that our Project Manager ensured that the operation and maintenance of the assets were carried out efficiently and the monthly availability of each of the SPV during the period April to December ’22 was in excess of the target availability.

SPV whole, [Phonetic] the average availability has been in excess of 99.75% for nine months period ended December 31 ’22. The data for quarter three financial year ’23 is on provisional basis as the monthly availability certificates for most of the SPVs for the period October ’22 December ’22 are awaited from the respective RPCs.

No accidents were reported during the quarter. Keeping in mind are first on sustainable operations various activities like wire and safety drills and training programs were held for the teams. You’d be aware that one of the SPVs, PKATL, has allotted a project implementation of [Indecipherable] after that Kala Amb substation by PKATL under regulated tariff mechanism. I would like to inform that civil works are currently under progress.

And now coming to financial highlights. During the current financial year, total income on a consolidated basis for the quarter ended December 31, 2022, was about INR3,310.67 million, which included INR3,243.23 million of revenue from operations, and INR67.44 million of other income. The [Technical Issues] is mainly on account of interest earned on the deposits and surcharge income.

Total expenses including impairment for the quarter at the consolidated level stood at about INR1,102.76 million. Total income and expenses, excluding impairment, for the nine-month period ended December 301, 2022 stood at INR9,924.31 million, and INR3,247.89 million, respectively.

The NDCF calculated at SPV level have been provided along with the consolidated financial results disclosed on the stock exchanges. The cash flows from SPVs are in the nature of interest income, dividend income, repayment of SPV debt. More than 90% of the NDCF of the SPVs have been upstreamed to PGInvIT by December 31 ’22, in line with InvIT regulations and the Trust’s distribution policy.

The NDCF of PGInvIT for the quarter ended December 31, 2022, works out to be INR2,661.28 million. For the nine-month period ended December 31, ’22, the Trust’s NDCF was INR8,145.67 million. We have announced a distribution of INR3 per unit, which comprises of interest component of INR2.01, taxable dividend component of INR0.43, exempt dividend component of INR0.25, repayment of SPV debt of INR0.3, and treasury income of INR0.01. The total distribution amount works out to be more than 100% of the NDCF at PGInvIT level as against at least that deposit that is stipulated in the regulations and our distribution policy.

For this fiscal, this takes our aggregate distribution to INR9 per unit. And with this distribution, we have an aggregate paid or announced an aggregate of INR19.5 per unit to our unitholders since our listing in May ’21. As on December 31, 2022, PGInvIT had an external borrowing of INR5,734.27 million, which was arranged from HDFC Bank to part finance the acquisitions. The loan, as informed earlier, is a floating rate loan linked to three months’ tangible [Phonetic]. I’d, additionally, like to share that recently, in the new year, the spread of the loan has been reduced by 34 basis points, which would lead to savings on future interest payments.

Net debt as a percentage of AUM as on December 31, 2022, worked out to about 1.2%, which provides significant headroom for funding future acquisitions and target through the debt. The Trust continues to endure the highest credit ratings, AAA, with stable outlook from all the three ratings agencies, namely ICRA Limited, CRISIL ratings, and CARE Ratings.

Bill to trade receivables as on December 31, 2022, stood at INR2,046.97 million, equivalent to 58 days of billing. Now, for the acquisition of the balance 26% equity shareholding in PKATL, we are envisaging completing of acquisitions of Powergrid’s remaining 26% shareholding in Powergrid Kala Amb Transmission Limited during the previous quarter, however, the same could not be concluded during the period. While we are in discussion with the sponsor on the matter, we feel that completing the transaction in the current fiscal can be a bit of a challenge.

On the outlook front, we would like — we would be evaluating acquisition opportunities from our sponsor, Powergrird, as and when, it undertakes monetization as per targets assigned to it under the Government of India’s National Monetization pipeline.

During financial year ’22-’23, Powergrid had a target of INR75 billion monetization, and considering that only about two months are left in the financial year, we are not envisaging any fresh acquisition opportunities from the sponsor in the financial year ’23.

We continue to maintain that by virtue of having significant headroom for acquisition of new assets through debt, competitive strengths, and being a very investment vehicle, with a large pool of institutional and non-institutional investors, PGInvIT stands to benefit from Government of India’s Asset Monetization program. Further, we are not relying solely on sponsor’s monetization plan and are exploring opportunities to acquire other operational power transmission assets as well.

While there may be concerns about the debt funded acquisition strategy and prevailing high-interest rate, we believe that since [Phonetic] InvIT regulations, the acquired assets to be valued by the independent valuers before acquisition, the cost of debt prevailing at that time will be factored in by the independent valuer, while are filing value to the assets.

We would like to reiterate that all assets proposed for acquisition will be evaluated for the suitability to PGInvIT on the basis of the operational history in accordance with InvIT regulations, compliances with InvIT regulations, and statutory requirements, PGInvIT’s Corporate Governance Framework and keeping in mind the overall interest of the unitholders. We are on our way to deliver on our guidance of distribution of INR12 per unit for the financial year ’22-’23.

Thank you. And now. I would like to hand over to the moderator for further proceedings. Thank you very much.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions]

We have our first question from the line of Mohit Kumar from PAM Capital. Please go ahead. Mr. Mohit Kumar, can you please unmute your line? Mr. Mohit Kumar, they are unable to hear you.

Mohit Kumar — PAM Capital — Analyst

Hello. Hello?

Operator

Yes, please go ahead.

Mohit Kumar — PAM Capital — Analyst

Yeah. Thanks a lot for the opportunity, sir. Sir, my first question is about any guidance on the timeline of acquisition of new asset. Basically, you just mentioned that you won’t be acquiring any assets in 2023, but what is the timeline for the acquisition of assets in ’24? [Technical Issues]

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

Yeah. We cannot say a definite timeline, but yes, we hope to have some acquisitions in ’24 because few of the provident assets are procuring in ’24, as well as depending on the NMP, that National Monetization plan [Phonetic] of Government of India, definitely, we expect something on the way in ’24.

Mohit Kumar — PAM Capital — Analyst

Sir, and is it fair to assume that if you don’t acquire any more assets, the distribution for next year will also be around INR12?

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

It is too early. You will expect to be to phrase [Phonetic] that it will — after a quarter when we give the — announce the fourth quarter results.

Mohit Kumar — PAM Capital — Analyst

Sir, just a follow-up on that. If you consider that we don’t add any more assets, apart from buying the remaining stakes in the four assets that we already have, so how long can we sustain the INR12 per unit of distribution?

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

It is very difficult. Although, it was very clear at the beginning at the IPO. We have given you the — a list of all the cash flows. So, from there, you can see, or I would request my CFO to brief you on that.

Amit Garg — Chief Financial Officer

Yeah.

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

Yeah.

Amit Garg — Chief Financial Officer

Yeah, yeah. Good evening, Mr. Mohit. I mean this is — have you had gone through our offer document, which is available on the SEBI’s website, wherein you know you can find the cash flows, but rather the financial projections for the next three years. Along with that is also the valuation report which gives the cash position for all my five assets.

So, you can very well make out to a very large extent if you go through that. However, having said that, there are ought to be certain ups and downs, though too a not very large extent. But as far as giving guidance for the next fiscal growth, as the Chairman sir pointed out, I mean you can expect it along with the Q4 results when we’ll be interacting with you guys.

Mohit Kumar — PAM Capital — Analyst

Okay, sir. And just a final question, you also mentioned about you looking at opportunities to add through other assets apart from PUTL, so are we only looking at transmission assets or are we also looking at, say, renewable assets or battery storage systems, all those?

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

At the moment, we are looking after only transmission assets, for the time being.

Mohit Kumar — PAM Capital — Analyst

Okay, sir. Thanks a lot, I’ll join back in the queue.

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

Thank you.

Operator

Thank you. We have our next question from the line of Sunil M. Kothari from Unique PMS. Please go ahead.

Sunil M. Kothari — Unique PMS — Analyst

Thanks for opportunity, sir, and a very detailed [Technical Issues] which was really helpful.

Sir, just one question, I’m not able to [Technical Issues] this Powergrid, have they changed any policy [Technical Issues] or thought process [Phonetic] changed, or why the 7 — I think INR7,500 crore was current year — they wanted to convert this asset to InvIT and then 15 [Technical Issues] crore, and another 15 [Technical Issues] that was the guidance we heard —

Operator

Mr. Kothari?

Sunil M. Kothari — Unique PMS — Analyst

Yeah?

Operator

Your voice is not correctly audible, sir.

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

[Speech Overlap] It is basically for the sponsor, for Powergrid to answer, I mean, it would not be good for the PGInvIT to answer your question. So, I would leave it back to you, you can ask someone in the Powergrid ADM, and not — I should not — it should [Phonetic] not be appropriate for me to answer that question on behalf of Powergrid.

Sunil M. Kothari — Unique PMS — Analyst

Right. So, sir, my question is, is there any [Technical Issues] remaining opportunities [Technical Issues] to sustain this Trust for many more years [Technical Issues] to generate this type of cash flow?

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

See, presently, it is in good shape, you very well understand. Now, how to sustain it for a longer period, definitely, if we acquire a few assets that will be good for us. And depending on the — if you can see the future growth of the transmission sector, the transmission sector is poised for a sustained growth as is visible. There the rolling time of PUTL [Phonetic] is similar transmission trajectory for ’27, ’28 [Phonetic]. And more recently, there is a [Indecipherable] report also which has been released for addition of the idle capacity by 2030.

There is a tremendous — they have spoken about tremendous growth in the transmission sector. They’ll be adding around more than 50,000 circuit kilometers and more than 4 lakh of MVA capacity, at an estimated cost of around INR2,40,000 crores, during the period from now to 2030. And because — you’re fully aware that the Government of India is full there to go for these renewables and 50% of our generation capacity has to be added from the noncost — cost affluent sources.

So, to match with that and for the integration of those resources to the grid, further inter-regional transmission capacity is also going to grow from 1,12,000 megawatts at present to about 1,50,000 megawatts in 2030. So, more transmission bills means larger book of assets that will be available for acquisition.

But as these assets are presently in the construction stage, maybe not in the immediate future, say, one or two years, but definitely after that there’ll be a lot of assets for us to go for acquisition.

Sunil M. Kothari — Unique PMS — Analyst

Okay. Thank you very much, thanks a lot.

Operator

Thank you. We have our next question from the line of Niraj Kamtekar from ProsperoTree. Please go ahead.

Niraj Kamtekar — ProsperoTree — Analyst

Good evening, sir, and thanks for the opportunity. Sir, my — earlier participant had asked the same question but I repeat the question. Sir, in the presentation, it is mentioned that InvIT will acquire the balance stake in the SPV through the debt raise. So, my question is that, how much the distribution will be increased through this acquisition, because now the InvIT will hold a 100% in the whole SPV, so what will be the impact on the distribution in future?

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

I think, I’ll request our CFO to give you a detailed answer on this.

Amit Garg — Chief Financial Officer

Yeah, good evening, Niraj ji. I mean, sir, it all depends at debt — what — what price are you going to acquire the balance 26 percentage stake. Now, you view it from the perspective that this balance 26% — some — acquisition of this balance 26% stake is more from the perspective of gaining the 100% control. From the perspective of increasing the DPU, there will not be much of an impact to begin with, you know. The only thing we can think of — thing we can think of right now is that we’re sitting almost on the peak of the interest rate cycle. And this peak may last for quite some time. So, probably the acquisition that we make basis the — that rate’s prevailing as of now, and when they start tapering off, because you know that cycle turns around every three, four, five years, so maybe, we will be having some leverage to play on the interest rate at that point in time.

But to — but overall, it depends upon at what price we acquire, and it is obviously based upon the valuation done by an independent valuer and further negotiation between the two parties.

Niraj Kamtekar — ProsperoTree — Analyst

But sir, what I understand from your — that the — you are raising the debt and the rate of interest is very high currently, but there should be some arbitrage opportunity because the interest rate is non — today, if we are raising any loan, then the interest rate is loan. And at the same time, though — if you are thinking that the interest cost must be lower than the revenue, the new revenue or new EBITDA, so there must be some gain to the bottom line. If you’re now understanding the —

Amit Garg — Chief Financial Officer

Yeah, yeah, obvious, sir. I mean, theoretically speaking, if I understand you right, there will be some margin over and above the cost of interest at which we’ll be discounting the cash flows and taking over valuing the remaining 26% stake.

But the point I was making is that it will not be too used to make a huge impact on the distributions.

Niraj Kamtekar — ProsperoTree — Analyst

And because — we understand that there should be a — because it’s 26%, I mean, the four SPVs out of the five SPVs, and if the 76% stake in the four SPVs is generating the INR12 distribution per unit from the — at the current distribution level, then it must be increased by at least INR2 to INR2.5, because if the same SPV are operating at the same level, only the interest arbiter’s gain is there.

Amit Garg — Chief Financial Officer

Niraj ji, kindly appreciate the fact that our bulk of the funding has been done in these SPVs as loan given by PGInvIT. And this INR12 of DPU contains two elements which pertains solely to PGInvIT, that is the interest repayment and the capital repayment. Whatever is distributed in the form of dividend by the SPVs are shared in the proportion of equity holding by the sponsor that is Powergrid and PGInvIT.

So, going forward, if you assume that INR12 will become — will be escalated by 26%, so that will not be the case. Only the dividend portion is what will be start accruing to PGInvIT. And if you happen to see the distribution [Technical Issues] only, how much? Only a miniscule form ports — forms parts of the dividend.

I will just tell you the percentage also, just give me one second. [Speech Overlap] First of all, these five SPVs, the dividend was INR0.43. And INR0.25, which is that some dividend which pertains to Vizag, in which we already hold 100%.

So, [Foreign Speech] INR3 [Foreign Speech] 43 [Foreign Speech] is what remains for this. So, you know, which can be increased by this 26% asset acquisition. So, major chunk is already with PGInvIT.

Niraj Kamtekar — ProsperoTree — Analyst

But, sir, [Foreign Speech] benchmark IRR [Foreign Speech] acquisition [Foreign Speech] then what should be the benchmark IRR, which should lead to generic data [Speech Overlap]

Amit Garg — Chief Financial Officer

This is not the right forum to talk about the IRRs. These are the strategic issue, which we will not like to discuss in the open forum, sir.

Niraj Kamtekar — ProsperoTree — Analyst

Okay, okay. Fine, sir, fine. Thanks, thanks, sir Amit [Foreign Speech].

Amit Garg — Chief Financial Officer

[Speech Overlap] Thank you, sir.

Operator

Thank you. We have our next question from the line of Dhruv Muchhal from HDFC Mutual Fund. Please go ahead.

Dhruv Muchhal — HDFC Mutual Fund — Analyst

Yeah, sir, thank you so much. Sir, in the 2Q results, you had given a, in the notes to accounts, you had given a disclosure of statement of net assets at fair value as of the Q2 end. Sir, is it a — I mean, do you disclose it on a quarterly basis or it’s only a half-yearly requirement?

Amit Garg — Chief Financial Officer

The re-computed — you know, as per dilute resolution, I am mandated to get the evaluation done on half yearly basis, that is for the September and March. So, this value for InvIT asset depends upon the valuation done by the independent valuer. So, we do not do it quarterly. And as you’ve found in our Q1 and Q3 results that there is no impairment also provided in the financials, precisely because of the reason that we have not got the valuation done as it is not mandated.

So, in the March results, obviously, you will be finding the valuation report and basis which the NAV and the net effect at fair value also. Yeah.

Dhruv Muchhal — HDFC Mutual Fund — Analyst

Got it. Perfect, sir. And sir, the second thing is, just on the earlier question of acquisition of future asset, now, there was a news report that your sponsor is probably looking at some alternate methods. So, just wanted to understand based on your understanding, is there some change in the strategy or has there some incremental complication come up or anything that you can probably share just to understand what’s changed, or probably if there is some change also?

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

I think it would not be fair enough for me to, again, give my comments on what is change of thought process in my sponsor’s mind. But definitely, they will be looking at the market and — but we still hope that the remaining 26% — not sooner than later, we hope to acquire these assets.

Dhruv Muchhal — HDFC Mutual Fund — Analyst

Sure. So, the remaining is probably not a question, probably that will surely have come, but we were wondering about the future assets, which probably, TBCB assets that —

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

Yeah, yeah, future assets also. Future assets also, I think, if you were read the news, it speaks of dropping the plan definitely for the current fiscal. We do not see it as a surprising new development. As you’d recall that during the last investor conference also, Powergrid had explained issues around the conditions stipulated in the NMP for undertaking next set of monetization and the challenges around it.

But, still again, I would say that Powergrid is probably the best person to answer this question, not us.

Dhruv Muchhal — HDFC Mutual Fund — Analyst

Perfect, sir. Great, sir, thank you so much, and all the best.

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

Thank you.

Operator

Thank you. We have our next question from the line of Pratik Kothari from Unique Portfolio Managers. Please go ahead.

Pratik Kothari — Unique Portfolio Managers — Analyst

Hi, good afternoon. Sir, wanted your comments on what is causing this delay in acquiring the balance stake from PKATL because this got, I mean, we could have gotten this in July, so it has been a while.

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

See, I mean, again the same question is being asked by a number of persons. I think we should not comment what prevented Powergrid in transferring these assets to us. Basically, maybe the conditions — maybe Powergrid may not be requiring those money now or — but sooner than later, we are there to — we are confident that probably it will be with us, and coming to us for this transaction.

Pratik Kothari — Unique Portfolio Managers — Analyst

So, the reason I think this question also is getting repeated because, as our CFO also mentioned, if we look at the cash flows which we have said on the offer document on SEBI’s website, it goes down from INR12 now to maybe INR7, INR8 in 2030. And hence, the concern, again and again whether do you have new assets to acquire such as balance [Phonetic] these assets to the debted. [Phonetic]

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

Again, I would say that, see, because they have the income [Phonetic] forum, they have conveyed that this is a very small value of the asset, this PKATL, and maybe — and since all the assets are getting mature in 2024, they would like to take up the transaction in FY24 with other SPVs as well.

Pratik Kothari — Unique Portfolio Managers — Analyst

Sir, in case that doesn’t come to one of the power-generating asset have securitized some 15 years of cash flows with another bank, are we working or do we have assets in pipeline, non-Powergrid, non-sponsor assets or, say, maybe some private or third-party assets, are we working on anything? What kind of pricing do we have now?

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

Yeah, we have kept our mind open, basically, that the — apart from Powergrid asset also, we will look into. But definitely, we’ll see the valuation, we’ll see the quality of the asset, and if need be, we are committed to acquiring those assets as well, other than Powergrid.

Pratik Kothari — Unique Portfolio Managers — Analyst

Okay. Any timeline, any quantum that we can say what are we working on currently?

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

No, it will be too early right now.

Pratik Kothari — Unique Portfolio Managers — Analyst

Okay, fair enough. Sir, one clarification. So, all through the last three-four quarters, there is some debt prepayments which an SPV does, I mean, this quarter about [Indecipherable]. So, in which case of an SPV, we have to repay debt, or this is your normal structure of loan that you would have given to them?

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

I would request my CFO to answer this, please.

Amit Garg — Chief Financial Officer

Good evening, Pratik ji. I mean, as explained in the earlier calls also, I mean, you must be aware that there is a limit to the dividend distribution by any company as per the company’s act, dividends can only be declared out of the profit for the period or out of the retained earnings or reserves, as you call it.

So, what we do principally is that interest is something which needs to be upstreamed as per the facility agreement so that gets the first priority while upstreaming the cash from SPV. After that, whatever profit the SPV earns, out of that, we try to get the dividend upstream, and if there is cash remaining, which is required to be upstreamed to meet my DPU guidance, we give capital repayment the last priority to balance out the DPU.

Now, this makes sense because the interest is our tax-deductible expense so we try to elongate the life of the loan as far as we can.

Pratik Kothari — Unique Portfolio Managers — Analyst

Fair enough, sure. And sir, just one clarification regarding this offer documents, just to make sure that my understanding is correct. This INR12 goes down to about INR8 in 2030, that sounds fair to you?

Amit Garg — Chief Financial Officer

2030?

Pratik Kothari — Unique Portfolio Managers — Analyst

Yes.

Amit Garg — Chief Financial Officer

2030, we’re talking about [Foreign Speech]?

Pratik Kothari — Unique Portfolio Managers — Analyst

Yes, six, seven years on the line.

Amit Garg — Chief Financial Officer

We — I mean, I mean, it can be, I mean, but you can do your number crunching —

Pratik Kothari — Unique Portfolio Managers — Analyst

No, I’ve done my — I just want to make sure that I’m reading it correct, because you know it much better than we do.

Amit Garg — Chief Financial Officer

So, obviously. [Speech Overlap] I mean, it’s too hypothetical, yeah. But you know, obviously it’s going to suddenly going to go down because the revenue profile is like this that after X number of PUs [Phonetic] the topline, it starts to decline. And this is the case in all the five assets that we own. So, it is going to go down, no doubt about it, as reflected in our OD and valuation reports also.

Pratik Kothari — Unique Portfolio Managers — Analyst

Fair enough, point taken. And — but last question, this remaining 20 — 26% [Phonetic] stake that we’ll acquire, I mean, you said the DPU component, I mean, DPU amount doesn’t go up by a large number, but does this ensure that this INR12 can then last for a longer period of time than what it is today?

Amit Garg — Chief Financial Officer

Pratik ji, as I had mentioned earlier also, we are viewing it more from the perspective of gaining 100% control. Does — the DPU is not going to make — take a hit or increase by a large extent due to acquisition — because of acquisition of [Foreign Speech] 26% stake in balance four companies, so whatever [Speech Overlap] the dividend we are paying to the other party for holding this 26%, that will start accruing to PGInvIT, and we will discount basis whatever — my current cost of that, at that point in time, will be basis of few basis points of margin, and offering the acquisition accordingly — offering the acquisition price accordingly to the sponsor.

Pratik Kothari — Unique Portfolio Managers — Analyst

No, fair, sir. My question wasn’t whether your DPU will go up, my question was, if currently we can sustain INR12 for another two, three years by acquiring this remaining asset, can we sustain it for a longer period of time?

Amit Garg — Chief Financial Officer

So, that will not happen, anyway, if the DPU does not increases so does — the status remains the same. There will be status quo sort of a thing. So, we do not see it going down substantially or increasing substantially. So, a few bps here and there, that is it.

Pratik Kothari — Unique Portfolio Managers — Analyst

Fair enough, sure. Thank you, sir, and all the best.

Amit Garg — Chief Financial Officer

Thank you.

Operator

Thank you. We have our next question from the line of Sarvesh Gupta from Maximal Capital. Please go ahead.

Sarvesh Gupta — Maximal Capital — Analyst

Good afternoon, sir. Sir, first question is alluding to a previous participant question also, that it’s been more than almost two years you’ll be completing soon since listing, and you have been unable to get anything from Powergrid. And of course, while you can say that Powergrid is the right entity, but you must be also having discussions with them because you are essentially an offspring of Powergrid and it was — and it was — the company was setup with the view of monetization of Powergrid. But still after two years, you have been unable to even get one asset from them additionally. So, what is — that discussion is a very pertinent one, and I think unitholders of Powergrid in which should be made privy to such developments that what is happening and why it is not coming — anything is coming to you.

And secondly, you have been saying about non-Powergrid assets also for a long time, but nothing is happening on that front also. So, is it because of lack of the manpower at your end or is it because of some other reason why you have been unable to acquire anything despite having almost zero debt, so there is so much of headroom. [Technical Issues] you guys are with the Maharatna, you have that debt benefit also on the debt rate. Despite all of that, because this is a very cost-of-fund sensitive sort of a business, and you have that advantage and still no acquisitions have been done outside of Powergrid also, despite having almost zero debt.

So that also says that something is lacking. So, if you can throw some light — why you have not been able to acquire outside of Powergrid also —

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

See, we understand your worries, I mean, on that account. Basically, Powergrid will go for monetization as per Government of India target, number one. Number two, how much money is required by Powergrid for making new assets, so keeping the — both the government plan for — the government NMP plan, foundation plan, and the target, while we will be seeing that and then we’ll be interested for the future sale of the assets of TBCB assets.

So, I mean, it is not a very simple thing that we go and acquire the Powergrid or Powergrid [Phonetic] will come to us. So, it will be on the overall economic scenario, overall assets which Powergrid would like to take in this year, and it presents how many assets on other — as well as other private sectors, how many assets they make and then go for InvIT. We will — we are examining both the Powergrid assets as well as other private assets also. And we hope that next year we’ll come with some news. And — but [Technical Issues] also, not many assets are available as of now.

So, as we told you, as I had responded to a previous question that because of this RE [Phonetic], lot of construction work will be going on in the next two, three years, and because this 500 gigawatt of integration has to come. So, maybe not immediate future, but after a year or two, you will definitely be seeing a lot of acquisitions.

Sarvesh Gupta — Maximal Capital — Analyst

But as of now, you don’t see any challenges at your organization front which has led to this sort of scenario —

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

No, no, no, there is no challenges in the organizational front, definitely not.

Sarvesh Gupta — Maximal Capital — Analyst

Okay. And secondly, this thing also I could not understand, the July ’22 acquisition, so what led to a delay of this — almost more than a year delay to — for the balance acquisition, so what is the reason why Powergrid has not gone ahead with the sale of these remaining —

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

As far, we may not be interested because Powergrid may not be having that much of construction at present, so — to go for monetization. That may be the reason, but I’m not sure.

Sarvesh Gupta — Maximal Capital — Analyst

Okay. And you also mentioned that the main aim is to get complete control and you also mentioned that it is not going to have any meaningful change in the DPU by acquisition, then what is the main benefit to Powergrid unitholders to acquire this remaining 26% stake? What exactly do you gain by having 100% control on these assets as opposed to 74% economic interest?

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

I would request the CFO — [Speech Overlap] I would request the CEO to answer this.

Purshottam Agarwal — Chief Executive Officer

You know that when we first acquired the 74% as equity stake, under the sale-purchase agreement, Powergrid is committed to transfer this 26% shareholding to PGInvIT. As for that TSA conditions, own [Phonetic] fulfillment of the TSA conditions when that time matures. So, it is a sale-purchase agreement under which Powergrid has to transfer the 26% shareholding.

Second, the DPU, what our CFO already explained, that this is then not deemed the much DPU increase, or reasons beyond that CFO also explained by structure of this PGInvIT, [Phonetic] most of the profit, which is we are upstream in the form of the interest. So, there is a very few limited profit remain with the SPV, which give you a significant boost to the DPU. As you know, the — our DS — our revenue stream, as you go through, there may be a dip in some revenue stream also, and a dip in net profit will compensate this by increasing this 26%.

So, this INR12 whatever we have given the guidance, that will remain — it will not make much significant change.

Sarvesh Gupta — Maximal Capital — Analyst

Understood. But the question was, sir, so there is a sale-purchase agreement, so is it at their option to sellers and we are obligated to buy when they want to sell, or is it like there is a definitive timeframe because they have not sort of sold it at the time in July ’22? So, what is the timeline by which they have to mandatorily sell and we have to mandatorily —

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

So, I’ll state, for the agreement, there is no definite timeline.

Purshottam Agarwal — Chief Executive Officer

But it is certainly been transferred by the — is sponsored to the PGInvIT.

Sarvesh Gupta — Maximal Capital — Analyst

So, it’s a open-ended thing? At any point of time, they feel like selling, they can sell, basically. So basically, it is an optionality at their end?

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

No, no, no.

Purshottam Agarwal — Chief Executive Officer

It is not optionality, deal has to be concluded within a reasonable time.

Operator

Thank you. We have our next question from the line of Anshuman Ashit from ICICI Securities. Please go ahead.

Anshuman Ashit — Associate

Thank you, sir, for the opportunity. Sir, a few bookkeeping questions. So, there has been an increase in insurance expense during the quarter, sir, any particular reason behind this?

Amit Garg — Chief Financial Officer

So, this is the actually — this premium was paid in, I think, Q3. That was the reason, bookings in Q3, you saw increase in the insurance expenditure.

Anshuman Ashit — Associate

And this will be the run rate going forward or if there is a one-off payment that we did?

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

Yeah, the — CEO will answer this. Just a minute.

Purshottam Agarwal — Chief Executive Officer

Our insurance period is prepared — the insurance period starts from 1 November to 31 October. So, in this current fiscal year, there is some increase in insurance premium, since 1 November, 2022. So, you are getting a increasing in expenditure of insurance.

Amit Garg — Chief Financial Officer

Yeah, basically, sir, it depends upon the reinstatement value. I mean, as you are aware that you know the — of late, the metal prices were up quite a big. And a major chunk of our assets is steel and aluminum. So, due to which the replacement cost increased substantially. And when we went to the market for insurance, so the premium, which we got for our assets this fiscal, that is from 1 November ’22 till October ’23 was higher than what we paid for the last corresponding period.

Anshuman Ashit — Associate

Okay, understood, sir. And sir, so trying to understand this, so going forward, say, the monetization — so, if it ever — whenever it happens, so has that discussion, so the rights of the whole assets transferring to you versus the rights of only revenues transferring to you? So, has that discussion had some clarification from the ministry front? And so, what is the status on that?

And is that the reason why this — these acquisitions are getting delayed? Is that one of the reasons as well?

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

No, we are not aware — fully aware of that. I mean, that wouldn’t be going on between Powergrid and the ministry. So, maybe, I’m not sure.

Anshuman Ashit — Associate

Okay. Sir, so, one final question. So, sir, what has been the incentives and the surcharge income during the quarter?

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

Yeah, that is — just a minute. Yeah, for the incentive, for the quarter ended 31 December, incentive is INR105.14 million, rebate is INR12.94 million, and the surcharge is INR23.26 million for the quarter and 31 December. And for nine months –and for nine months ending 31 December, it is, incentive is INR314.57 million, rebate is INR45.58 million, and the surcharge is INR69.51 million.

Anshuman Ashit — Associate

INR69.51 million, okay. And sir, what is the cash balance at the end of December?

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

Yeah, cash balance will be — it is INR4,687.07 million, and which has been kept for the distribution of INR3 per unit, which is amounting to INR2,730 million.

Anshuman Ashit — Associate

Okay, understood. Thank you so much.

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

Thank you.

Operator

Thank you. We have our next question from the line of Ravi Chandra, [Phonetic] an Individual Investor. Please go ahead.

Ravi Chandra — Individual Investor — Analyst

Yeah, thank you. Good evening. So, congratulations for maintaining the consistency till now. My question is, till this NMP or alternate acquisition happens, our cost should remain same, it should not vary much other than — because we don’t have much debt, hardly 1.2% [Phonetic] debt. So, till we go for acquisition, that expense cost has to remain, more or less, same, according to the revenue, so the INR12 guidance, it should be possible, I think. Correct me if I’m —

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

INR12 guidance for the next year?

Ravi Chandra — Individual Investor — Analyst

Next year, tentative financial year ’22-’24.

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

I won’t like to divulge it now. Wait for three more months, we’ll be coming to you when we come with the Q4 results.

Ravi Chandra — Individual Investor — Analyst

Okay, because we had lot of confidence with the PGInvIT [Phonetic] till December that PKATL acquisition meeting got deferred. That is the turning point for all the investors to get into the — [Speech Overlap]

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

Maintain — please, maintain that level of confidence. We are with you.

Ravi Chandra — Individual Investor — Analyst

And second question, sir, this acquisition, if NMP happens or not, we are not sure. Let’s hope for the best in the — in that because in one of the article this [Indecipherable] maybe even government cannot talk, cost of selling is more for Powergrid, that’s the reason they are looking for some alternate channel, whatever. But I think intra-state — intra-state have huge transmission lines. At least we can look for [Speech Overlap] that lines.

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

But — yeah, that definitely the Government has given the policy, but it is yet to percolate within the state. The moment any of the states wants to do it, we’ll be there for.

Ravi Chandra — Individual Investor — Analyst

Sure, sure. Sir, there we can — we have 70% — upto 70% debt, since we have the band, maybe the management team also have enough to acquire over 100%, if it’s not?

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

No, we have sufficient headroom, we are fully aware. So wherever it is required, even in the intrastate or the interstate, we’ll be there and going for acquisition.

Operator

Thank you. We have our next question from the line of Kayur Ashar [Phonetic] from PNB MetLife. Please go ahead.

Kayur Ashar — PNB MetLife — Analyst

Yes, sir. Thank you for this opportunity. I just wanted to confirm as you mentioned in your opening remarks that there has been some reduction in our overall cost of funding. So, can you please share the specific details regarding this?

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

Pardon, overall cost of?

Kayur Ashar — PNB MetLife — Analyst

Yeah, so, sir, you mentioned our overall cost of funding has gone down. So, could you just share the specific detail that what was the cost earlier and what is the cost now?

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

Yeah. I would request my CFO to enlighten you on this.

Amit Garg — Chief Financial Officer

Sir, actually, the loan that we have with HDFC Bank is bring to three months’ steel bill [Phonetic]. So, earlier, when we negotiated the loan, that credit was 194 bps over and above the steel bill. So, we could negotiate a reduction of 34 bps in the spread. So now as per the new condition, the loan stands at three months’ steel bill plus 160 bps. So accordingly, there is a saving of 34 bps on the lowering cost here.

Kayur Ashar — PNB MetLife — Analyst

Understood, understood, sir. And this would be applicable with effect from January ’23?

Amit Garg — Chief Financial Officer

Yeah, 9 of January ’23.

Kayur Ashar — PNB MetLife — Analyst

Understood. Yeah, thank you.

Operator

Thank you. We have our next question from the line of Mohit Kumar from PAM Capital. Please go ahead. Mr. Mohit Kumar?

Mohit Kumar — PAM Capital — Analyst

Yeah, I had the same question. It is already answered. Thank you.

Operator

Thank you. We have our next question from the line of Sanjeev Zarbade from Dream Ladder Investment Advisors. Please go ahead.

Sanjeev Zarbade — Dream Ladder Investment Advisors — Analyst

Yeah, thanks. Sir, I wanted to know like our — the revenues of our five assets, if they are going to decline over the medium term, what kind of countermeasures we have at our disposal to kind of increase the longevity of this INR12 per share distribution that we have?

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

Countermeasures are acquisition of new assets to counter this fall in the revenues and — but let us not look at a very short term, we should look in the long term after two to three years as the transmission business growth, as the lot of transmission sector comes for integration of RE. So, let us not be very shortsighed, let us look after two or three years. We’ll be definitely acquiring more assets and counter the fall in the revenue.

Operator

Thank you. We have our next question from the line of Sunil M. Kothari from Unique Portfolio Managers. Please go ahead.

Sunil M. Kothari — Unique PMS — Analyst

Thanks for giving me the opportunity, sir. So, my just request is, I mean, we have next quarter’s call, please try to clarify all the things which concerns investors are expressing, mainly related to Powergrid’s asset monetization, and if any further assets, which is maybe in a private scale. So, what is our — because you have created a very good confidence in the investor community and [Technical Isses] just one [Technical Issues] public sector, Government owned entity, private entity I mean to say. So, those confidence and those — the — I think there [Technical Issues] created, it will require a little bit more caring confidence. I just request that please clarify those things on next con. call.

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

Sure, sir, sure, sir. Definitely.

Sunil M. Kothari — Unique PMS — Analyst

[Technical Issues] very much.

Operator

We have our next question from the line of Ketan Shah, [Phonetic] an Individual Investor. Please go ahead.

Ketan Shah — Individual Investor — Analyst

Yeah, good evening, sir.

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

Good evening.

Ketan Shah — Individual Investor — Analyst

I have a question based on —

Operator

Mr. Shah, can you speak louder, please?

Ketan Shah — Individual Investor — Analyst

Can you hear me now?

Operator

Yes.

Ketan Shah — Individual Investor — Analyst

Yes, good evening, sir. Thank you very much for giving me opportunity. I’m an individual investor. I was just interested in knowing that if we don’t acquire any further asset, this means a finite life of, say, 30 years. Now, whatever return you give, at the end of 30-year, if I understand correctly, the capital is written off. So, whatever return you give, can you give us something as a return of capital because we have to pay tax when you pay interest or a taxable dividend? Because, anyway it will be — our capital will be written off at the end of 30 years.

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

Yeah, CEO will answer that.

Purshottam Agarwal — Chief Executive Officer

Thank you, Mr. Ketan. Just to explain you, this is the structure of PGInvIT. We have already shared with you all the revenue stream of 30 years. Going forward, as you say, when there will be no happening of this acquisition, then certainly you will get the capital return in the form of capital return.

Ketan Shah — Individual Investor — Analyst

Okay, sir. But my understanding is correct that if there is no acquisition at the end of 30 years, it will be written off, everything, whatever return you’ve got, say, INR12, if I assume [Speech Overlap]

Purshottam Agarwal — Chief Executive Officer

Within the 30 years, there will no acquisition, but certainly, as you mentioned that principally, if it is like that, say, 30 years there is no acquisition, then we will — you will get the return in the form of your return of the capital.

Amit Garg — Chief Financial Officer

And sir, be mindful of the fact also that there is — there have been instances in Indian power sector, transmission sector, wherein the useful life has been increased and agreed upon by the regulator. So, if the scenario so happens that whatever assets we are holding, and after 30 years or whatever the remaining life is, those are configured still to be useful as a transmission asset in the Indian power sector. Then probable — there are all the chances that the life of these assets may be increased after incurring whatever capex is required for. And then, the revenue life can accordingly be further enhanced.

So, any which ways, your capital is secure, either, since we are the owner, since you are the owner, one of the option is to sell it off and then give the capital back, other one is to enhance the life, take revenues for longer tenure, and just payback.

Operator

Thank you. I would now like to hand the conference over to the management team for closing comments. Over to you, sir.

Abhay Chaudhary — Powergrid Infrastructure Investment Trust

Thank you very much, Mr. Anshuman, and your team. And thanks again to all the participants for attending this call. Good participation in PGInvIT’s earning calls keeps us motivated, and we always look forward to engaging with our investor community through our analyst calls.

We have envisioned PGInvIT to achieve a focused business model with operational efficiency to enhance returns, value accretive growth through acquisitions, and an efficient capital structure in order to provide consistent, stable, and visible returns to our unitholders.

Once again, thank you very much, and we look forward to your continued support and confidence in PGInvIT. Thank you.

Operator

[Operator Closing Remarks]

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