Analyst corner: IRB InvIT Fund eyes 10% annual rise in toll revenues

Published: December 12, 2018 2:19:06 AM

The management has indicated that 3 HAM projects of IRB Infra costing Rs 5,400 crore would be given preference for InvIT inclusion in the year 2021.

The AAA rated trust by India Ratings has availed debt at 8.5% to finance the acquisition of the seventh toll road asset completed in September 2017. (Representational photo)

By Yes Securities

The toll collection, since the launch of the Trust, has been largely in line with expectations, despite the ripples of interventions like the GST. On the strength of the decent toll collections, the Trust has paid out Rs 12 per unit on an annualised basis translating to a 12% yield on the issue price. The AAA rated trust by India Ratings has availed debt at 8.5% to finance the acquisition of the seventh toll road asset completed in September 2017. Though the trust plans to take on further debt to acquire more assets, no new assets are likely to be added till FY21.

Given the expected surge in GDP growth, which in turn would up the traffic growth, the management is projecting a 10% annual growth in toll revenues over the life of the assets. Even assuming a tapering toll revenue growth, the IRR works out to 16% post the sharp price correction to Rs 69. Besides, the addition of new projects would further improve IRR. The toll revenues, excluding the recently added Amritsar Pathankot project, grew in double digits y-o-y for most projects. This was despite the all-India transport strike from July 20 to July 27, 2018. Notably, a mining ban in the Jaipur-Deoli stretch impacted traffic growth, causing a 27% y-o-y decline in toll collections. The trust has filed a claim with NHAI and is expecting a resolution on this front.

Going ahead, the company is targeting a 10% growth in toll revenues over the life of the assets.

The sponsor to the InvIT-IRB Infrastructure commands a healthy mix of available projects in terms of size, geography, residual life and operational visibility. The trust would look to add projects which are value accretive from unit holder’s perspective. The management has indicated that 3 HAM projects of IRB Infra costing Rs 5,400 crore would be given preference for InvIT inclusion in the year 2021. As per the relevant concession agreement, the Surat-Dahisar project comprises the NH8 section from km 263 to km 502. NH8 connects India’s two major cities, New Delhi and Mumbai, along with key enroute cities. There are no alternative short-distance or long-distance routes with comparable ride quality, cost efficiency and service. Also, given that project has been operational for more than six years, the traffic pattern along with any diversion to competing roads is well established in the base.

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