IRB Infrastructure Developers Ltd

Jubilee Year - IRB Group with 3 listed entities and market capitalisation in excess of Rs 36,000 Crores

The toll revenue that IRB group has collected across the listed company and the two InvITs was close to Rs 5,000 Crores, which is around eleven percent market share of the total toll revenue collected across India.

Dear Stakeholders,

Following a humble beginning in the year 1998, IRB went on to list in the year 2008. 25 years later, with immense support from all stakeholders, IRB Group today has 3 listed entities, an Asset base of around Rs 70,000 Crores, 13,739 lane kms under management, 20% share of India's Golden Quadrilateral, 37% market share of TOT projects across the country and enjoys the backing of marquee Investors (Cintra and GIC) to help it realise its growth potential.

Presently, we operate 64 toll plazas, service 736 FASTag lanes and cater to more than 1.3 million vehicles on a daily basis.

We are pleased to share an interesting data point that we recently came across. Gross toll collection across India for the Financial Year 2023 was approximately Rs 48,000 Crores. The toll revenue that IRB group has collected across the listed company and the two InvITs was close to Rs 5,000 Crores, which is around eleven percent market share of the total toll revenue collected across India. This number is growing at robust pace with increasing traffic, tariffs and the addition of new assets.

Global developments including geopolitical escalation and recalibration of supply chains have led to a significant increase in inflation across the globe including India. This has been a threat to all businesses across the world. Fortunately, for IRB, Inflation-linked tariff revision acts as a natural hedge against interest rate hikes. For example, the Ahmedabad-Vadodara BOT project and nine assets of the Private InvIT received a tariff revision of -10% in line with inflation from April 1, 2022. During the current financial year, we have also witnessed good traffic growth across the portfolio. The combination of tariff revisions and traffic growth has enabled us to deliver an improved performance in the financial year under review.

We are pleased to inform you that we have successfully achieved completion for all the nine projects that were transferred to the Private InvIT in the initial phase. Following the completion of the Kishangarh-Gulabpura and Hapur-Moradabad projects the toll rates for these SPVs have seen an increase of 78% and 65% respectively. As most of the assets of Private InvIT have achieved completion, we expect to receive regular payout from Private InvIT to IRB from the financial year.

Successful award of two projects enhancing visibility of growth

Taking forward the growth momentum, we bagged two projects during the financial year, i.e. the upgradation project for 6 laning of NH27 from Samakhiyali to Santalpur having a project cost ofRs 2,132 Crores and concession life of 20 years on BOT basis from NHAI in the state of Gujarat. The project will be funded by debt of approximately Rs 1,450 Crores and balance through equity and internal accruals (IRB's share of equity is less than Rs 300 Crores).

The second award is for a prestigious project in the state of Telangana. The scope encompasses TOT for the Hyderabad Outer Ring Road (ORR) project comprising an 8-lane highway, starting at kilometre 0 at Narsingi junction and ending at kilometre 158 at Gachibowli in Hyderabad, in the state of Telangana on upfront payment ofRs 7,380 Crores for a concession period of 30 years. The total Capex will be Rs 8,362 crores which will be funded by debt of Rs 5,500 Crores and balance through equity

We are pleased to inform you that we have successfully achieved completion for all the nine projects which were transferred to the Private InvIT in the initial phase. ofRs 2,862 Crores. Since the project is to be executed through the Private InvIT, IRB's share will be close to Rs 1,500 Crores and the remainder will be contributed by our financial partner (GIC).

The total order book of the Company as on June 30, 2023 is Rs 33,708 Crores including the Hyderabad ORR project. EPC order book is close to Rs 8,423 Crores providing good revenue visibility for the next 2-3 years for the construction segment and further bolstered by a 3 years' executable O&M order which is close to Rs 2,500 Crores to Rs 3,000 Crores. This marquee Hyderabad TOT project not only provides visibility for toll revenue but also adds a significant long-duration O&M order book which provides visibility for the construction segment as well.

Return optimisation strategy with optimal debt equity mix

Following the raising of growth capital in the prior financial year, we have repaid debt and significantly reduced leverage. On a consolidated basis, the debt-equity ratio is less than 0.8:1 which is one of the best for asset developers in the sector. Further, CRISIL has upgraded the rating of the Company by a couple of notches. This has led to a change in the Long term rating from A to AA-.

Leveraging the strengthened financial position and improved rating, in line with our return optimisation strategy, we have refinanced 3 BOT project SPVs i.e. Solapur-Yedeshi, Yedeshi-Aurangabad and Udaipur-Shamlaji of the Private InvIT, reducing/fixing the rates for 5 years. We will be saving an additional cash surplus of ?550 Crores over the period of 5 years.

Strategy of monetisation of HAM assets

As part of our strategy to monetise HAM assets upon completion, we have successfully transferred the VK1 HAM project to the Public InvIT in this financial year. We have received a consideration of Rs 342 Crores which is close to 1.2 times of the book value. The Public InvIT received an overwhelming response from its unitholders for the acquisition of the VK1 HAM project. For IRB, the consolidated debt reduced by Rs 955 Crores with debt for this project also getting transferred to the buyer.

Continue to undertake pioneering initiatives in the sector

We are pleased to inform you that our private InvIT has been listed on NSE on April 3, 2023 in line with the SEBI InvIT regulation which requires the listing of all InvITs. On the day of listing, the trust had 10 assets spread across 7 states of India which had a balance average concession life of around 21 years with total enterprise value of more than Rs 28,000 crores and equity value of over Rs 18,000 crores.

With this listing of IRB Infrastructure Trust, all three entities within the IRB Group are now listed. The combined market cap of all three entities is more than Rs 36,000 crores and the gross debt for all three entities is less than Rs 26,000 crores. The implied debt to market capitalisation for the group is very low, i.e. 0.7x on gross debt level. This validates the position of IRB Group that it is well-capitalised and has the requisite muscle to undertake large-scale projects enabling it to deliver superior growth.

As per the dividend policy of the Company, the Board has declared total dividend of 20% on face value of equity shares Rs 1 each taking the aggregate dividend pay-out for the current financial year to Rs 120 crores.

Our business vision is deeply connected to sustainable growth, emphasising environmental preservation, efficient resource utilisation, and reduced ecological impact.

ESG in Action

IRB Infra is driven by a steadfast commitment to the triple bottom-line approach, that encapsulates social commitment (people), environmental responsibility (planet), and financial performance (profit).

We prioritise sustainability through innovative practices, executing large-scale projects while adhering to sustainable principles. Our business vision is deeply connected to sustainable growth, emphasising environmental preservation, efficient resource utilisation, and reduced ecological impact. By adopting ESG principles, we focus on energy conservation, implementing energy-efficient processes, and transitioning to renewable energy sources to contribute to decarbonisation.

With the participation of two marquee strategic/financial investors since FY21, viz. US Headquartered Infrastructure behemoth, Ferrovial group, through its subsidiary Cintra and sovereign wealth fund, Singapore GIC Affiliates. This not only strengthened our financial position but also facilitated the adoption of global best practices and elevated our standards of governance. It is worth noting that IRB Group maintains a robust governance policy, meticulously driven by our esteemed Board.

Our commitment and focus on ESG has yielded significant improvement in our ESG rating in the current financial year by two rating agencies i.e. S&P Global & Sustainalytics and scores are as under:

Outlook

With the continued thrust on infrastructure and asset creation by the Government, we see a steady pipeline of opportunities arising across the landscape. IRB will selectively bid for BOT, TOT and HAM projects in that order of preference. From an execution standpoint, BOT and TOT projects will be housed in the Private InvIT which is the development platform of the Group. Any HAM assets will be housed in IRB during the construction phase and will be monetised post-completion. The Public InvIT will enjoy the right of first refusal for the HAM Assets. The EPC and O&M of all the projects will be undertaken by IRB.

This uniquely designed operating model reduces the capital requirements for IRB Infra to 51% of the Equity Component as 49% of the equity component is contributed by GIC Affiliates, our partner in the Private InvIT. Further, with the monetisation strategy we can continue to unlock capital and churn it into future projects. In addition to our strong financial position, the favourable outlook for both toll revenues and our construction business will provide further resources for growth. Needless to say, your Company is

uniquely positioned in the sector with an unmatched track record, a differentiated business model and an elevated financial position.

On this momentous occasion of our Company's 25^th anniversary, we extend our heartfelt gratitude to our esteemed shareholders. Your unwavering support and trust in our vision have been instrumental in propelling our growth and success over the years. Together, we have overcome challenges, celebrated milestones and embraced opportunities to shape the trajectory of our organisation. Your continued investment and belief in our mission have empowered us to innovate, expand, and create lasting value. We deeply appreciate your commitment and partnership, and we look forward to embarking on the next chapter of our journey, fortified by your unwavering support. Thank you for being an integral part of our remarkable 25-year journey.