Release Date: October 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- India Grid Trust (BOM:540565, Financial) reported a 16% year-on-year growth in revenue and a 31% increase in EBITDA for Q2 FY25.
- The company achieved a net distributable cash flow of INR320 Crore, with a distribution of INR3.75 per unit, marking a 5.6% YoY increase.
- India Grid Trust maintains a strong balance sheet with a AAA rating from CRISIL, ICRA, and India Rating.
- The company has a significant pipeline of battery storage projects, totaling 900 megawatt hours, positioning it as a leader in this sector.
- India Grid Trust continues to deliver superior risk-adjusted total returns, with an annualized return of about 13% since listing.
Negative Points
- The company is facing challenges with increased trips per line, attributed to unusual monsoon patterns, impacting availability.
- There is uncertainty regarding the future battery pricing, which could affect the cost structure of ongoing projects.
- The company's net debt to AUM ratio stands at 58.7%, which, while leaving headroom for growth, indicates a significant level of leverage.
- India Grid Trust's solar capacity utilization factor is relatively low at 20.4%, which may impact overall efficiency.
- The company is undergoing a name change due to regulatory advisories, which may involve administrative and branding challenges.
Q & A Highlights
Q: Can you discuss your capacity to invest in large equity projects and your capability to handle new technologies like HVDC?
A: Harsh Shah, CEO, explained that while the project is still under bidding, India Grid Trust has the capacity to invest, especially by partnering with financial institutions. They have a capable team for transmission projects and plan to collaborate with vendors experienced in HVDC technology to fill any technical gaps.
Q: With the increase in battery energy storage projects, how do you view the risks and opportunities, especially with potential battery price fluctuations?
A: Harsh Shah, CEO, noted that India Grid Trust has been involved in battery projects for three years and has benefited from price reductions. While future price trends are uncertain, they focus on executing current projects, which represent a significant pipeline. The business model is similar to transmission, providing comfort with the associated risks and cash flows.
Q: What is the expected growth in AUM, considering the headroom for expansion?
A: Harsh Shah, CEO, stated that while they don't provide specific AUM growth forecasts, they focus on value-accretive growth. Current projects will add around INR 3,000 Crore, with an estimated headroom of INR 8,000 to INR 9,000 Crore for future growth.
Q: How would a potential change in interest rates affect your liability profile, given the fixed-rate nature of most of your debt?
A: Harsh Shah, CEO, mentioned that 77% of their debt is fixed-rate, so immediate impacts from rate changes would be limited. A 0.5% rate increase would affect about 23% of their debt, but the full impact would take 2-3 years to materialize due to refinancing and repricing opportunities.
Q: What is your strategy for maintaining a healthy balance sheet and optimizing interest costs?
A: Meghana Pandit, CIO, highlighted their focus on optimizing interest costs by elongating debt tenures to match long-term concession agreements. They aim to maintain a healthy leverage ratio, ensuring sufficient headroom for growth while managing refinancing schedules to avoid maturity bunching.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
