Indigrid InvIT: High yield on stable and predictable revenues

Q1 results are out,came out, post market today

“Declaration of Q1 FY 23 distribution of INR 3.3 per unit comprising INR 3.0556 per unit in the form of Interest and INR 0.2444 per unit in the form of Principal payment.
The record date for this distribution will be August 01, 2022, and payment will be made on or before August 10, 2022”

Here is the media release (Co sec too is leaving ! but a sub has been found)


13.2 was the guidance and 3.3 in the 1st qtr, augurs well, I guess !! but they have to maintain this run rate (unlike last year, where Q1 was higher but it tapered off but within the guidance)
What if someone buys at current price and takes in all the promised 13.2 distribution?..their pre-tax yield at CMP, will work, close to ~ 9.25%

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CEO has resigned. Little surprising given that he took the job just two months back. Had originally joined as CFO in Sept 2020. Don’t think there’s any implications for the INVIT but something to keep an eye on maybe?

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Harsh Shah is back as CEO after a two month stint at Azure Power :sweat_smile: !

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Quarterly results came out on 10th Nov, post market (which means that market has digested the info on Friday, 11th Nov and there was no change on either direction !)
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Key Highlights
• Acquired Raichur Sholapur Transmission Limited (RSTCPL) for ~₹ 2,500 million
• Q2 FY23 Revenue and EBITDA up 6% YoY
• Q2 FY23 Distribution at ₹ 3.30 per unit, up 3.5% YoY
IndiGrid reports robust Q2 performance
On track to deliver FY23 DPU guidance of ₹ 13.20

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https://www.bseindia.com/xml-data/corpfiling/AttachHis/538f1566-1e3e-4b7b-8d40-d273ab477394.pdf
The record date for the distribution is November 16, 2022 and shall be paid as ~₹ 3.11 per unit in the form of interest and ~₹ 0.19 per unit as capital repayment.
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Comment by me :slight_smile:
With current price of 140, if someone has to buy it today, the 13.20 guidance will give a distribution of ‘on-hand’ pretax return of 9.45%

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Will this be part of IndiGrid InvIT t ?

This is Sterlite Power and now that has got nothing to do Indigrid.

Disclosure - I run a SEBI registered PMS. Views are personal.

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https://twitter.com/IndiGrid_In/status/1601154132500713473?s=20&t=-MXjVaSM2A2MvYk25tpQSQ

I would not say that…Indigrid has first right of refusal for Sterlite powers pipeline of assets (Being the original sponsor for INdigrid Invit-now the sponsor is KKR). Most assets from sterlite with 3+ years of operations gets transferred to Indigrid

Execution of binding agreement for acquisition of shares of Khargone Transmission Limited

Announcement of Quarterly results today (25th Jan)

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Q3 results

Declaration of Q3 FY 23 distribution of INR 3.30 per unit comprising INR 2.8042 per unit in the form of Interest and INR 0.4958 per unit in the form of Principal payment.
The record date for this distribution will be January 31, 2023, and payment will be made on or before February 09, 2023.

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I am not clear about the effect of principal repayment on NAV? Will NAV go down after this payment? If all the principal is repaid does the stock become delisted?

You can check the extent of fall by easily comparing the price before and after the record date. In the last quarter, there was some other drama and hence price fell quite a bit for several days post the record date too (but recovered later). If you take the Aug’22 data, the total distribution was 3.3 (including capital or principal repayment, the term used by this invit), the price fell from 144.1 to 139.99 (a little more than the distribution)…
On the return of capital subject, it is a complex subject …not addressing it here…requesting you to go through FAQs available in various Invits. In principle, these are perpetual instruments and should keep getting new project additions and need to keep raising funds, to fund the same

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Harsh Shah — Chief Executive Officer and Whole-time Director

So I think the reason why we showcased that chart before was exactly that what can be done. However, whether the distribution is increase or not we historically taken a decision in the quarter for both we think for the [Indecipherable]. So we will be able to guide on that only in the next quarter, however. If you look at last five years track-record we have consistently done it. We applied two parameters. One parameter is that when we increase distribution, we want to increase it in a way that at least for next five-six years even if we go acquire anything distribution still remains at that level, right. And that is very important for our business model, because we may not acquire assets in some years. We may not acquire assets every quarter and our business should still provide enough headway to provide distribution visibility to investors and us the timing that when the market is right for acquisition, we acquired at the right price. So we keep that flexibility, but we compare and whenever there is an ability to increase distribution consistent and it will remain stable for next five to six years, we look-forward to increase that. That has been our strategy in that. And historically we have done it whether it gets done this quarter or not, it’s a Board decision and we’ll take it up in the next quarter.

The fall after the distribution , and presently IndiGrid at its NAV , makes me wonder if they Bit off more than they can chew… can any boarders shed more light on this

From a pure distribution point, they did bit off more than can chew…that is almost comparable to the last Qtr…can you please elaborate more?

I have been mistaken about the fall , as DPU got timed with the Budget, IndiGrid still has a healthy net-debt to AUM is 58% , so they have some more space to grow.
Unfortunately in the Budget the Capital repayment portion which was tax Free upto now , will be taxed henceforth, although this is very insignificant portion ( perhaps this could be the reason for the Fall)
Are there any MF which invest exclusively in Reits/InVit ?

I have attempted to come out with a calculator that depicts the ravages of the 2023 budget taxation :slight_smile: Target entry price for a target return and current return %
All the assumptions are in the spreadsheet. A very point is that this is historical distribution based and assumes that if this distribution is continued as such, what will happen with the new budget proposal.
I have also included a table for comparison with conventional instruments like FD

The only input cells are tax bracket, surcharge and target return (all in blue accent)

Pl give feedback and I am open to correct the excel
[InVit_REIT_Target Price_Target Return.xlsx|attachment]
InVit_REIT_Target Price_Target Return.xlsx (15.8 KB)

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Hi @KS16 thanks for sharing this. Would it not be better to have DCF analysis for invits and reits and then carry out subsequent steps in terms of taxation effects. Taking current yield does not look right way to calculate medium/long terms returns.

@rpasrija
Rahul…I have based the calculator based on the history of the distribution. Yes. The future can be different but if history has shown, the delta in distribution is marginal in the immediate quarters. If anything, the distribution has fallen in some cases and have marginally increased in some cases from immediate quarters…
The calculator is an attempt to bring in the reality to the mind of the common investor on what they are going to get, post the budget changes and one must know what is coming, especially for their instrument.
Finally, the fine print - the budget said, this is applicable from 1/4/24 but also said from AY24-25 (which is FY23-24) and hence from 1/4/23…I think, there was a typo in the 1/4/24 date and it should have been 1/4/23…considering that and the SPVs can’t be restructured quickly in a couple of months time, it is not easy to change the structure of distribution, in the immediate few quarters. And this calculator is an attempt to show , based on history, what you will get in immediate quarters…

What shocked me was the amount of correction needed in Brookfield, post the budget change…how did it escape? is it held by entities who don’t have tax?

image

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