Enhancing capabilities for the future
Dear Stakeholders,
It gives me great pleasure to share my views on the performance of your
Company for FY 2024 and share the forward path set for growth in years to come.
Your Company has built an illustrious track record of over 25 years, by
following the best practices, consistently demonstrating expertise in efficiently
delivering projects, optimising its resources to scale its operations, and striving to
achieve excellence in operations and overall functioning. Today, IRB Infra stands as a
pinnacle in the industry, comprising an exquisite blend of robust in-house project design,
flawless execution, and impeccable maintenance capabilities.
From modest beginnings, IRB Infra has emerged as a behemoth in the
roads and highways sector in India, now comprising 3 listed entities, one of the largest
BOT and TOT portfolios in the country of a total length of 15,444 lane km and a combined
asset size of ~ I 80,000 Crores.
This is amplified by its 38% market share of TOT projects across the
country, marquee portfolio projects, and several pioneering initiatives to its credit such
as delivering India's first BOT Project, operating and maintaining India's first
expressway project, establishing the first Infrastructure Investment Trust (InvIT) in the
country and successfully conducting the largest offshore bond issue for a company in this
sector.
The support of marquee global investors (Cintra and GIC) who have
chosen to participate in the growth journey, further validates the immense growth
potential.
Presently, your Company operates 72 toll plazas, services 820 FASTag
lanes, and caters to more than 1.3 Million vehicles daily. The toll revenue collected by
IRB Infra in FY 2024 across the listed company and the two InvITs reflects a ~10% share of
the total toll revenue collected across India. The tolling revenue is growing at a robust
pace with the increasing traffic, rise in tariffs, and the addition of new assets.
The toll business of your Company is dependent on the economic activity
in the country and more specifically in the state where the asset is located. Thus, it is
largely dependent on State GDP and National GDP. Further, tariff is influenced b inflation
which also acts as a natural hedge against interest rate hikes. The Ahmedabad-Vadodara BOT
project and nine assets of the Private InvIT received a tariff revision of ~5% in line
with inflation from April 1,2023. The Mumbai-Pune TOT Project received a tariff revision
of ~18% for YCEW and ~16% for NH48. During FY 2024, we have also witnessed good traffic
growth across the portfolio. These factors have contributed to the strong performance in
the financial year under review.
As I had indicated in this communication last year, with the successful
completion of all 9 projects in the Private InvIT at the end of FY 2023, we anticipated
regular payouts from the Trust from FY 2024. I am pleased to share that IRB Infrastructure
Trust declared its maiden distribution of I 470 Crores during FY 2024, out of which I 398
Crores was in the form of return of capital and I 72 Crores towards interest. In keeping
with its share in the InvIT, 51% of the distribution ~ I 240 Crores accrued to IRB Infra.
Project awards and commencement
I am pleased to inform you that IRB Golconda Expressway Private
Limited, the SPV incorporated to operate the prestigious Hyderabad Outer Ring Road TOT
Project, received an appointed date and commenced toll collection in August ‘23. The
Samakhiyali Tollway Private Limited achieved financial closure and commenced toll
collection and construction in December ‘23.
IRB Infrastructure Trust was awarded two TOT projects of NHAI in FY
2024, i.e. TOT-12 comprising Tolling, Operation, Maintenance and Transfer of the four-lane
Lalitpur-Sagar- Lakhnadon section in the states of Uttar Pradesh and Madhya Pradesh and
TOT-13 comprising Gwalior-Jhansi section on NH44 and Kota Bypass on NH76 in Madhya Pradesh
& Rajasthan. These projects have received an appointed date on April 1, 2024, upon
upfront payment to the authority and commenced toll collection.
Continually optimising returns by leveraging improved financial
position
Leveraging the strengthened financial position and improved rating, in
line with the return optimisation strategy, IRB Infrastructure Trust successfully
refinanced 5 BOT project SPVs, namely Kaithal Tollway Limited, IRB Westcoast Tollway
Limited, Kishangarh-Gulabpura Tollway Limited, AE Tollway Limited and IRB Hapur-Moradabad
Tollway Limited. This will significantly improve the cashflows for unitholders - given the
back-ended amortisation, optimised tax treatment (owing to InvIT structure), and lower
interest rate due to the pooling of cashflows from completed projects at the Trust level.
These initiatives will result in savings in interest cost by 110 basis points and savings
in amortisation of debt by 15% over a period of 5 years. The benefit will eventually
accrue to your Company, holding 51% of the trust.
Overseas bond issuance
Your Company has, as always, endeavoured to ensure business stability
by strengthening its liquidity position.
We have successfully completed the issuance and allotment of US$ 540
Million, 7.11% Senior Secured Notes having final maturity in the FY 2032. Proceeds from
the issuance of notes were utilised towards repayment of existing indebtedness. Being the
issuer, your Company was rated as Ba2' and BB+ by reputed international rating firms -
Moody's and Fitch, respectively. The Notes are listed on the India International Exchange
(IFSC) Limited ('India INX').
Other updates
Our vision is to become India's largest, most admired, trustworthy,
respected and stakeholder-friendly organisation, committed to developing safe and
comfortable roads and highway infrastructure for the nation. To create a comprehensive
network of world-class roads and highways infrastructure in India that will bring cities
and citizens closer and share and exchange values to ensure socio-economic and cultural
development of the nation.
To strengthen leadership position further by ensuring continual
improvements in operational efficiencies, quality and services.
As per the dividend policy of the Company, the Board has declared a
total dividend of 30% on the face value of equity shares of I 1 each taking the aggregate
dividend payout for the current financial year to I 181 Crores.
Rating agencies India Ratings & Research (Ind-Ra) and CRISIL have
rated your Company an ‘IND AA-' with a Stable outlook and an ‘AA-' with a Stable
outlook, respectively.
The total order book of your Company as of March 31, 2024, is I 34,800
Crores. The EPC order book is close to I 5,700 Crores providing good construction revenue
visibility for the next ~2 years for the construction segment and further bolstered by a
3-year executable O&M order amounting to~ I 2,500 - I 3,000 Crores.
ESG and others
IRB Infra works towards a progressive economy through infrastructure
development that undertakes measures and practices that best preserve the environment such
as minimised tree-cutting and replanting trees. IRB Infra is committed to enhancing
opportunities for the underprivileged sections of society. We have built IRB schools in
Rajasthan and Punjab to provide free education. These schools offer high-quality education
from the pre-primary level to Class VIII. In line with our focus on healthcare initiatives
under CSR, our Company has donated a second mobile van for mammography testing and vision
restoration for the underprivileged people from the rural areas in the Thane district of
Maharashtra. In addition, it continues to add its support for the causes in sports, arts
and culture, and other fields too.
At IRB Infra, an efficient and transparent organisational structure
serves the best interests of our stakeholders.
We attach great importance to carrying out transparent communication
with our investors and to promptly resolving stakeholder grievances. The Independent Board
of Directors at all subsidiaries ensures accountability, closely monitoring both the
financial and governance aspects of our Company. The inclusion of members from Cintra, our
strategic investor on the Board has further strengthened the Board.
We are pleased to inform you that, IRB Infra has recently received ISO
9001 for Quality Management System (QMS), ISO 14001 for Environment Management System
(EMS), ISO 45001 for Occupational Health & Safety Management System (OHS) & ISO
27001 for Information Security Management System (ITMS) Certification from the ISOQAR.
This is a significant achievement for your Company.
We are committed to ensuring resource efficiency, reducing emissions,
and promoting a circular economy through the effective planning and management of input
materials.
Road ahead
We are witnessing a change in terms of the mode of award from NHAI. As
against a 5% to 7% BOT award in the past several years, it is expected that the BOT pie of
the awards will increase meaningfully. The identified opportunity on a BOT basis is more
than I 2 Trillion. We will be bidding for viable opportunities apart from TOT Projects. We
will participate in BOT, TOT, and HAM in the same order of preference and projects when
executed through Private InvIT, equity requirement will be reduced to 51% i.e. close to
15% of the Project cost.
There is a list of 33 TOT projects on the website of NHAI with a total
lane kilometre of more than 2,600 which will come for the bidding in the near future.
Considering our consolidated net debt to equity at less than 1:1 in the last two years, we
are well-capitalised, to tap the upcoming opportunities which will consist of a
significant portion of BOT/TOT along with our partners GIC affiliates and Cintra.
Reiterating our B.E.S.T policy, at IRB Infra, we believe our untiring
efforts and persistent focus on calculated bidding, building robust execution skills,
stabilising projects and transferring these assets to InvIT is the B.E.S.T. way to grow.
By embracing the ‘B.E.S.T.' (Bid. Execute. Stabilise. Transfer) approach, we have
developed a robust, self-sustaining business model. A model that allows for the creation
of income-generating assets, their stabilisation, and subsequent monetisation by offering
them to InvIT. It is relatively non-cyclical, delivers superior returns, mitigates
downside risks, maximises returns to stakeholders, and provides a way to recycle capital
to achieve company growth without additional leveraging or equity dilution.
We are focused on strengthening our project team, and improving
construction quality, and operational efficiency. Through our 'B.E.S.T. (Bid. Execute.
Stabilise. Transfer)' philosophy, we aim to grow as an organisation.
Transferring stabilised assets to the InvIT will unlock capital for new
projects, demonstrating our commitment to creating value for stakeholders.
I would like to thank all the stakeholders for their valuable
contribution and wholehearted support including our staff and vendors. Together, we shall
continue to effectively steer and surge ahead through this voyage on which we have
collectively embarked.
I once again express my sincere gratitude to all the stakeholders for
the continuing faith in your Company, valuable support, and guidance from time to time.
Regards,
Virendra D. Mhaiskar
Chairman and Managing Director