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India Grid Trust.

BSE: 540565 Sector: Infrastructure
NSE: INDIGRID ISIN Code: INE219X23014
BSE 00:00 | 30 Nov 142.19 1.56
(1.11%)
OPEN

141.80

HIGH

142.40

LOW

141.00

NSE 00:00 | 30 Nov 141.75 1.13
(0.80%)
OPEN

142.10

HIGH

142.10

LOW

140.55

OPEN 141.80
PREVIOUS CLOSE 140.63
VOLUME 7887
52-Week high 144.99
52-Week low 106.53
P/E 8.88
Mkt Cap.(Rs cr) 9,956
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 141.80
CLOSE 140.63
VOLUME 7887
52-Week high 144.99
52-Week low 106.53
P/E 8.88
Mkt Cap.(Rs cr) 9,956
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

India Grid Trust. (INDIGRID) - Chairman Speech

Company chairman speech

Dear Unitholders

FY 2020-21 was an extraordinary year by any measure - a year of global pandemic a yearof tremendous volatility and a year in which every one of us faced difficult personalchallenges. As I begin this address reflecting on FY 2020-21 and marking the onset of FY2021-22 I am overwhelmed with a feeling of pride and gratitude for your unflinchingsupport and dedication.

I feel extremely proud of what IndiGrid team has achieved - collectively andindividually in the year gone by putting us at the cusp of a sustainable growth journey.

Despite the impact of COVID-19 we at IndiGrid have taken this year with positiveenergy and kept growing and learning undeterred. We have overcome these unprecedentedtimes through a focus on growth and resilience. Our growth over the past year has been acumulative outcome of the efforts of every person associated with us - our employees andstakeholders including sponsors investors regulators and the government. As we battlethrough the more destructive second wave of COVID-19 we continue to look at responsibleand constructive ways of responding to the situation by taking care of all our employeesand stakeholders while working tirelessly to maintain crucial parts of the national gridwithout disruption.

I thank you for your continued support as a unitholder and am happy to share with youthat despite external vagaries FY 2020-21 marked a phase of accelerated growth forIndiGrid. IndiGrid maintained its growth momentum in FY 2020-21 and reported a 35% growthin revenue and 27% growth in cash flows during the period on the back of accretiveacquisitions and operational resilience. Today our asset portfolio consists of 40transmission lines with a total network length of 7570 circuit kilometres 11 substationswith 13550 MVA transformation capacity and 100 MW of solar power plants across 18 statesand one Union Territory. Our total assets under management have leapfrogged to over INR210 Billion on the back of five acquisitions worth INR 75 Billion during the last year.

FY 2020-21: A Transformational Year

FY 2020-21 has been marked by many key transformations creating a launchpad toleapfrog our growth story. I am especially proud of how we stepped up collectively as anorganisation to make the most of the opportunities presented to us during this period. Inbrief FY2021 has indeed been a watershed year in our journey with some landmark eventslike the largest transmission asset deal in India KKR getting onboarded as a Sponsor andthe inception of our digital transformation journey with IBM. FY 2020-21 will also beremembered for several "Firsts" such as the acquisition of our first solarproject first cost plus inter-state transmission project first intra-state transmissionproject among others. We shall discuss these in detail as we move along.

During the year under review our focus remained on maintaining the highest levels ofavailability and safety growing our asset portfolio enhancing the financial performanceand ensuring highest standard of corporate governance. In terms of the financialperformance of the year revenue and EBITDA grew by 35% YoY and 26% YoY respectively onthe back of accretive acquisitions and robust annual availability of over 99.5%. For theyear we reported a jump of 27% YoY in Net Distributable Cashflow to INR 9179 Millionsupported by robust collections during the year.

Resilient Operations amidst COVID-19

The COVID-19 situation in the country has been worsening with the emergence of thesecond wave. However I am confident that this is different from 2020. The situation of2020 had several unknowns as against 2021 with substantially better understanding aboutthe virus better-equipped medical community and ongoing vaccination.

As I say this I would also request all of you to continue taking utmost care andfollow the precaution guidelines both at home and outdoors to ensure the safety ofyourself as well as your loved ones. As far as the Indian economy is concerned theoutbreak of the pandemic offered a grave challenge. It upended the Indian economysuspended business activities and brought about unprecedented slowdown across industries.The lockdown announced by the Central and State Governments impacted the demandtemporarily on account of limited commercial operations. However we witnessed a sharprecovery once the lockdown conditions eased. Though IndiGrid's revenue is linked to theavailability of grid and not actual electricity consumption resumption of the industrialactivity is a strong positive for the power sector and the entire economy.

During FY 2020-21 we focussed on improving the reliability of our network throughvarious initiatives and maintained a consistent average availability of more than 99.5%across our asset portfolio. Even as the drop in revenue collections in Q1 of FY 2020-21increased the working capital requirement temporarily our overall collections for theentire financial year stood at 101% signalling a normalcy in collection cycle. We endedthe financial year with the average Days Sales Outstanding (DSO) days of ~41 lowest inpast few years.

We at IndiGrid have also built strong internal protocols and business continuitymeasures to ensure minimal disruption to our operations and the community. We steered thetough environment by further fortifying our strengths and leveraging new opportunities.Besides protecting our current business base we geared up to make the organisation moreefficient to take on short-term challenges. As a responsible organisation we continued tolook for ways to support our employees and stakeholders through several vaccinationdrives extended medical cover and COVID-19 support groups as per the Governmentguidelines.

Strong execution on asset acquisitions

FY2021 has also been a special year with over INR 69 Billion of acquisitions acrossdifferent types of transmission assets from a diversified set of developers. During thefirst half of the financial year we completed two acquisitions with assets aggregatingnearly INR 14 Billion. We completed the acquisition of a Framework Asset Gurgaon PalwalTransmission Limited ("GPTL") for ~INR 10.80 Billion from Sterlite Power and ofJhajjar KT Transco Private Limited ("JKTPL") for ~INR 3.10 Billion fromKalpataru Power and Techno Electric. While GPTL is a strategic asset for ensuring reliablepower supply in the NCR areas JKTPL marks the acquisition of IndiGrid's first intra-statetransmission project. During the second half of the financial year we completed theacquisition of our first cost-plus transmission project i.e. Parbati Koldam TransmissionCompany Limited ("PrKTCL") from Reliance Infrastructure for a total enterprisevalue of ~INR 9 Billion. We closed the year with consummation of the largest single assetdeal in the Indian transmission sector with the acquisition of NER- II transmissionproject from Sterlite Power for ~INR 46.25 Billion as a part of the Framework Agreement.With these acquisitions our total Assets Under Management witnessed a 71% growth - fromINR 120 Billion at the end of FY 2019-20 to ~INR 205.46 Billion at the end of FY 2020-21.

In July 2021 we completed the acquisition of 100% stake in two solar assets withcumulative capacity of 100 MW (AC) from Fotowatio Renewable Ventures at an enterprisevalue of ~INR 6.60 Billion taking the total AUM to over INR 210 Billion. The acquisitionof our first solar asset is an important milestone as this marks the first renewableenergy acquisition by any InvIT in the country. Our plan continues to be to focus on theaccretive acquisition of stable solar projects with long-term stable cash flows goodquality plants long contracts strong PPA frameworks and financially strong and highlycreditworthy counterparties.

Consistent Growth in Distribution

IndiGrid's track record of accretive acquisitions resilient operations and a strongbalance sheet have allowed us to underpin our goal of sustainably and responsibly growingreturns for our investors despite volatility in the capital markets. This is alsoevidenced by the increased annual distribution per unit (DPU) in FY 2020-21 to INR 12.20from INR 12.00 a year ago. With several accretive acquisitions in the last year we haveincreased the distribution guidance further to INR 12.75 per unit in FY 2021-22. This isthe fourth instance of DPU increase by IndiGrid since its listing. This is also in linewith our strategy of providing superior risk- adjusted returns by delivering predictableDPU and growing it by 3-4% year-on-year.

We have distributed a total of INR 45.77 per unit to our unitholders over the last fouryears or 83% absolute return since the IPO (total return includes price change anddistributions from listing to June 30 2021). This makes IndiGrid one of the mostattractive yield platforms in India with an annualised delivered total return tounitholders of ~16%.

Improving Balance Sheet Strength

IndiGrid's strong balance sheet prudent asset management and operational excellenceare underscored during a global crisis like the COVID-19 pandemic. These strengthscombined with AAA-rated cash flows have allowed us to sustainably maintain operationswithout any impact on distribution. During the year we successfully managed COVID-19related uncertainties by maintaining adequate liquidity to mitigate any working capitalimpact of delay in collections.

Another focus area during FY 2020-21 was to substantially diversify our sources ofdebt reduce the incremental cost of borrowing and elongate tenures in incrementalfacilities. This is evidenced by a reduction of ~67 basis points in our average cost ofborrowing which stood at 7.93% at the end of FY 2020-21 as compared to 8.6% at the endof FY 2019-20. The weighted average cost of incremental borrowing stood lower at 7.36%.The Net Debt/AUM as of March 31 2021 stood at ~59% giving ample headroom to fuel thenext leg of growth journey.

The vote of confidence accorded by the investors through the recent success of Rightsand Public NCD issue (first by any InvIT in the country) further increases our confidencein our ability to maintain a robust balance sheet. In April 2021 IndiGrid pre-emptivelyraised ~INR 12.84 Billion of equity capital by way of a Rights Issue which was subscribedby over 1.25 times for funding acquisitions and creating leverage headroom for growth.Separately we launched the Public NCD Issue in May 2021 to diversify our sources of debtand increase the debt tenure. The Public NCD Issue was subscribed ~25 times by adiversified pool of investors resulting in triggering of the option to retainoversubscription of full tranche I issue size of up to INR 10 Billion. The averageduration of the issue stood at ~8.6 years with current holders including insurancecompanies within days of IRDAI enablement signifying strong demand from long-termcapital.

Strengthening the Capabilities

The year was also marked by several strategic initiatives that we undertook tostrengthen the internal capabilities and create a robust infrastructure to becomeself-reliant. As a part of this effort IndiGrid signed a multi-year collaborationagreement with IBM to build an artificial intelligence (AI)- enabled asset managementplatform - DigiGrid. The digital transformation will allow us to deploy a hybrid cloudsolution with IBM Maximo Application Suite to optimise the quality and utilisation of ourtransmission and solar assets throughout their lifecycle increase productive uptimethrough preventative and predictive maintenance drive efficiency and reduce operatingcosts - ultimately delivering better value to its investors. This ties in well with ourstrategy to transition the project management operations in-house leading to operationalsynergies.

During the period under review we also made significant strides in promoting inclusivesafety and health awareness amongst our stakeholders and support adjoining communities.IndiGrid through its comprehensive ESG and ESMS Framework is fully committed to ensuringresponsible growth and making a difference to all its stakeholders and the environment andsociety at large. This is a step forward in realising our vision of being the most admiredyield vehicle in Asia.

Policy Advocacy

We have been actively engaging with the regulatory bodies and the government since ourlisting to streamline regulations for deepening markets for InvITs. I must thank all theregulators including SEBI RBI IRDAI PFRDA and also the Ministry of Finance for acommendable approach to proactively engage with participants and enable timely regulationsto allow InvITs to succeed.

The recent move for approving reduction in trading lot size to 1 unit is a landmarkstep by SEBI to deepen the market for InvITs in India. This will not only lead to betterliquidity and efficient price discovery but will also provide an attractive opportunityfor retail investors to earn stable yields with growth potential. The move also paves theway for increased institutional participation with greater confidence on liquidity.

The key to InvITs success is to ensure that InvITs have access to diverse and low-costsources of capital. IRDAI and PFRDA have recently enabled insurance companies and pensionfunds to invest in debt securities issued by InvITs and REITs. This move could be anothergame-changer for the Indian InvIT landscape. Allowing pension funds and insurancecompanies to invest in units and debt securities of InvITs is a win-win for all as on onehand such long-term public capital managers get an opportunity to invest in long-termsteady cash flow generating high quality infrastructure assets and on the other hand theInvITs can tap into another source of long-term capital.

Positive Outlook

Given India's huge need for investment in infrastructure and the need to keep fiscaldeficit under control InvITs can truly become a viable form of investment platform wherelarge amount of foreign and domestic capital can be harnessed in near future. IndiGridbeing the first power InvIT is well positioned to seize this massive potentialopportunity.

We remain well capitalised and with KKR's investment expertise we intend toaccelerate our momentum of growing the underlying portfolio to enhance unitholder returns.

The planned acquisition pipeline accretive acquisitions and deepening investor base onequity and debt side place IndiGrid in a steadfast position despite the externalchallenges.

As we embark on this journey I would like to highlight some key focus areas for theupcoming year. We remain committed to the four key tenets of our growth strategy - afocussed business model value accretion predictable distribution and optimal capitalstructure. We see sizable growth opportunities for IndiGrid and expect to further ramp-upour AUM to INR 300 Billion given the attractive pipeline - both in the transmission andrenewable sectors.

We have focused on ensuring predictable and sustainable distribution over last 16quarters and grown it consistently. While we continue to focus on providing superior risk-adjusted returns to our stakeholders we are mindful of the need to maintain transparencyand the highest standards of governance and build IndiGrid as a platform to targetsignificant future growth opportunities. The past year has been pivotal in our journeyand going forward we look forward to ensuring responsible growth making a difference toall our stakeholders and the environment and society at large. It gives me immense pridethat we continue to evolve and follow our own Environmental Social & Governance (ESG)framework and positively impact the society at large around us.

In the end I would like to extend a note of gratitude to our unitholders for theirunwavering commitment and association with IndiGrid. We have been able to effectivelynavigate through the ups and downs of our journey with your endearing support. We do lookforward to deepening these relations as we embark on the next leg of our growth journey.

I wish you the best of health and hope that you and your family stay safe.

Warm Regards

Harsh Shah

Chief Executive Officer.

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