IRB Infrastructure Developers Ltd
NSE:IRB
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
PayPal Holdings Inc
NASDAQ:PYPL
|
Technology
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
33.4029
76.85
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
PayPal Holdings Inc
NASDAQ:PYPL
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
IRB Infrastructure Developers Ltd
You don't have any saved screeners yet
Good morning, ladies and gentlemen. Welcome to the IRB Infrastructure Developers conference call for discussing the unaudited financial results for Q3 FY '21. We have with us on the call today Mr. Virendra Mhaiskar, Mr. Sudhir Hoshing, Mr. Anil Yadav, Mr. Mehul Patel, Ms. Poonam Nishal and Mr. Rushabh Gandhi. [Operator Instructions] Please note that the duration of the call would be 45 minutes, and any queries left unanswered after the call can be subsequently mailed to the management for adequate response and resolution. Please note that this conference is being recorded.I now request Mr. Mhaiskar to give an overview of the significant developments during the quarter. Thank you, and over to you, sir.
Good morning, everyone. I would like to welcome all the investors and analysts on this con call. Hope you all have been able to go through the detailed numbers as well as the presentation release. The new year has started on a positive note with vaccination and cure for the deadly virus. For us, the recovery from the loan has started in previous quarter itself, and Q3, we have been able to build on it very strongly.With an exemplary 32% Q-on-Q growth in collections for 13 toll assets housed in IRB and IRB Private InvIT, we surpassed the pre-COVID collections across our assets during Q3 of '21. Mumbai-Pune TOT project led this growth, registering a solid 42% Q-on-Q increase in collections, achieved across vehicle categories seemingly triggered by the unrestricted movement of traffic now between Mumbai and Pune city permitted from September 2020 onwards and subsequent onset of festive season in India.For this asset, we have already crossed per-day collections of over INR 3.8 crores a day, which was penciled for Q3 of FY '22 in our estimates, corresponding to COVID recovery. Given the unexpected nature of this buoyancy, it is obvious question about the sustainability of these numbers. We have provided a monthly movement in collections across our projects in our results presentation from Slide 5 to 18, which reflects the broad-based bounce back across regions and sectors, conforming to the strong underlying recovery being witnessed in the Indian economy and is thus expected to stay.The robust performance seen during the quarter, in effect, reflects the resilience as well as sustainable growth opportunity lying latent in India and validates a strong business case for BOT as well as TOT model. The 4 TOT assets -- toll assets owned by IRB reported a growth of 29% Q-on-Q, resulting in a cash profit increasing from INR 171 crores by 97% Q-on-Q.Coming to private InvIT, we completed Agra-Etawah project during the quarter and have witnessed strong growth in collections of 56% Q-on-Q and 76% year-on-year. With smoothened traffic movement post construction completion as well as over 66% revision in tariffs, we expect to complete 2 to 3 projects more in Q4 of FY '21, which, following the same pattern and logic, would aid significant improvement in collections and cash flows for the private InvIT.Recovery has picked up for construction segment as well, growing at 29% Q-on-Q in Q3 of FY '21, which is expected to improve further in Q4 of FY '21. Balance EPC order book now stands at INR 11,300 crores, of which around INR 4,400-odd crores is construction-based, providing good visibility for next 4 quarters. Aided by this robust performance across toll and construction segment, we have reported a net profit of INR 69 crores for this quarter, wiping off all the accumulated losses incurred during -- due to disruptions caused by the pandemic in H1 of FY '21.Also key to note is the fact that loss for private InvIT portfolio has been coming down consistently with strengthening collections, and continuation of current momentum will likely aid in shift to profits over coming quarters.We are also pleased to report a successful financial closure for the recently won HAM project, VM7. This is the second financial closure achieved by IRB during the pandemic-driven challenges and yet within stipulated time. The first was the single largest financial closure in road space concluded for the Mumbai-Pune in the month of June '20 and now this one. We don't have any other projects pending financial closure in our portfolio.NHAI has been reporting highest award and execution of projects in any financial year for period till date. And another INR 600 billion worth of bids are lined up until March '21, including some select TOT and BOT opportunities. We are keenly evaluating this and are in the thick of bidding calendar, and we'll be targeting to bag anywhere between INR 6,000 crores to INR 8,000 crores worth of projects from this bid pipeline.With this, I would now request Anil to take you through the financial analysis before opening up the Q&A session. Over to you, Anil.
Thank you, sir. I will present the financial analysis of Q3 of FY '20 versus Q2 of FY '21 because corresponding quarter of the last year will not be comparable because 9 assets were transferred to the private InvIT.The total consolidated income for Q3 FY '21 has increased to INR 1,595 crores from INR 1,169 crores in Q2 of FY '21, registering growth of 36%. Consolidated toll revenue for the Q3 of FY '21 has increased to INR 468 crores from INR 364 crores for Q2 of FY '21, registering a growth of 29%. Consolidated construction revenue for the Q3 has also increased to INR 1,079 crores from INR 759 crores in Q2 of FY '21, registering growth of 42%.EBITDA for Q3 FY '21 increased to INR 768 crores from INR 601 crores in Q2 of FY '21, registering growth of 28%. Interest cost has also slightly increased to INR 441 crores from INR 435 crores in Q2 of FY '21. Depreciation also on backdrop of increase in the toll collection has increased to INR 191 crores in Q3 of FY '21 from INR 129 crores in Q2 of FY '21.PBT has also increased to INR 135 crores in Q3 of FY '21 from INR 37 crores in Q2 of FY '21, registering growth of 266%. PAT after share of loss from the JV has increased to INR 69 crores in Q3 of FY '21 from loss of INR 20 crores in Q2 of '21, registering growth of 452%.And as basically the -- there is improvement in the private InvIT also, the losses of the private InvIT is now reduced to only INR 17 crores to INR 18 crores in this quarter.Now I will request moderator to open the session for question and answers.
[Operator Instructions] The first question is from the line of Mohit Kumar from DAM Capital.
Two questions, sir. First, congratulations on the good set of toll collections. Sir, my first question is on the private InvIT side. Have -- has the entire money been infused now? Do we expect another INR 2 billion to INR 3 billion, which is pending, I believe, based on the initial commitment? And do we expect all Udaipur-Gujarat and all the 3 Rajasthan projects to get commissioned in this quarter?
Yes. So you're right, another INR 200 billion, INR 300 billion -- INR 2 billion to INR 3 billion of the private InvIT commitment is yet to come in, which will commensurate with the progress of the projects, particularly the Hapur project, and we expect that to come in either first quarter of next financial year or so.As regards Rajasthan projects are concerned, they are pretty much well on track to completion. And at least 2 of the 3 Rajasthan projects we are hopeful to complete before end of this financial year.
Okay. Understood, sir. Secondly, on this -- sir, on the private InvIT, is there any guidance that you can give on the distribution side, which you expect to come in the next FY '22 or FY '23? When do you expect distribution to start?
Private InvIT will continue to be in a CapEx mode for at least another couple of years because we have Hapur and other Rajasthan projects under construction mode. So the surpluses deployed -- surpluses generated will be primarily utilized as internal accruals to meet this CapEx. And once we are done with the entire CapEx, only then will we discuss about taking the money off the table from private InvIT.
And lastly on this, sir, on the NHAI pipeline, have you participated in the bids? Have you submitted the bids? Or you will participate in the upcoming bids right now?
No, no. I think we are -- right through the last couple of months, we have been bidding across projects. And we do have a large number of bids where we have put in bids, and we are awaiting results.
And what kind of order -- what kind of pipeline do you think, in your opinion, can be bid out by March in this quarter?
NHAI has indicated to bid out a total projects of around INR 60,000 crores. And they have a very heavy calendar right now, and we are participating across projects, whether it is TOT, HAM or BOT. And let's see how much of that they are able to bid out. I'm quite hopeful that they'll be able to give out a strong number of projects. And certainly, we're looking forward to win a few of those.
The next question is from the line of Bharani Vijayakumar from Spark Capital.
So my first question is on the impact of the material costs and the prices how they have increased. So for example, steel prices have increased from, say, INR 40,000 per tonne to INR 50,000, INR 60,000 per tonne, et cetera. So in HAM projects, we have a mechanism through the price index where we can pass it on. It's captured through the WPI numbers. But on actual expenditure on steel and cement prices, how -- is it compensating for the actual expenditure? How are margins going to be impacted because of this [ if at all ]?
Construction margin certainly will be a little soft because, as you rightly say, steel and cement prices are hardening up. And in the BOT projects, the escalation has to be borne by us, whereas in HAM projects, it's a pass-through because of NHAI funding the escalation. So some impact on margin certainly is a given, given the hardening steel and cement prices.
Understood. Understood. So could you quantify that, like, say, in percent of terms like how much...
So commenting on that is very, very difficult because there are efforts on from the government side to soften those prices. So we really don't know how fast the graph will come down or how the things will roll out. So putting out a number today will be a little premature.
No problem, sir. I got that. So the second question is on the financial closures that we had achieved recently. Could you tell me the rate at which it has been closed?
I didn't get the...
FC of VM7.
FC of -- so VM7, we have achieved the FC, and we are awaiting appointed date from NHAI. So I think it should come in another month or so.
Okay. So what you are telling is you will be able to tell the rate at which has been closed in a month?
You're not audible. Can you repeat the question?
So what I'm asking is what is the interest rate at which this financial closure has been achieved?
Interest rate will be in the range of around 8.25%.
[Operator Instructions] The next question is from the line of Vibhor Singhal from PhillipCapital.
Congrats on a great set of recovery under the current conditions. Sir, on the toll collection side, we read that in the Amritsar-Pathankot project, there was a little toll collection due to farmer protests. What does -- what happens to these kind of places? Are we seeing that -- before that in these kind of places, NHAI does compensate us for that kind of toll collections? Or is that something which is probably going to be long drawn like all battles with NHAI?
Again, not very audible, but are you asking about the compensation from NHAI towards the COVID thing or the existing agricultural stuff -- farmers agitation?
Yes, sir. So it was regarding the farmers agitation on the Amritsar-Pathankot project. Sir, do we -- I mean, as per the historical trends, do we see these compensations being paid out? Or do you think it could also be long drawn, as most of the time, disputes with NHAI?
No. I think this is very clearly a political force majeure. So as far as the farmer agitation is concerned, we are pretty hopeful that it will be settled by NHAI very quickly once there is a resolution to it.
Okay. Sure, sir. And just a couple of bookkeeping questions. If I could get debt numbers at stand-alone and consol levels?
Yes. On consol level, net debt is INR 12,500 crores, and cash will be roughly INR 2,300 crores. And net debt-to-equity will be 1.9 -- 1.91:1. And in terms of the stand-alone, after adjusting the cash, it will be roughly close to INR 3,000 crores.
INR 3,000 crores. And the cash would be, of course, as you mentioned, INR 2,300 crores?
Cash is roughly INR 2,300 crores.
Right. Sure, sir. And sir, the financial closure that we have done, sir, what is the final project cost and debt that we have done the financial closure for?
INR 1,705-odd crores is the financial closure cost.
INR 1,705 crores.
Yes, around that.
And sir, debt availed is? I'm sorry...
Debt will be around INR 750 crores.
Sure, sir. And sir, basically, given that the order book that we have right now of around INR 4,500 crores, which, as you mentioned, gives us 4 quarters of visibility. Even if, let's say, we win any projects, BOT, HAM or TOT, in this quarter, assuming it takes 6 months' time for financial closure and appointed date and all those things to take place, the [indiscernible] contributes to your EPC top line should probably be in the second half of FY '22. So what is the kind of top line that we are looking for the EPC segment for FY '22? Any color on that would be helpful.
So you are right, a lot of things for FY '22 will depend on when the new orders come in, number one, and what is the on-ground reality at the NHAI end in terms of handing over the site. Because I think one thing which we are clearly seeing is, as far as HAM projects are concerned, banks coming forward to fund them is not that big an issue. So if we are able to win projects in this quarter, achieving financial closure should not take long. And if the land acquisition situation at NHAI end is good, then rolling out those projects from October is not that big a stretch to my mind.
[indiscernible]
Sorry to interrupt you, Mr. Singhal, but your voice is breaking and you're not audible. Can you please check?
Am I audible now?
No.
Sir, I will get back in the queue for anything. I will just try to change my line.
The next question is from the line of Viral Shah from Prabhudas Lilladher.
First of all, congratulations on a good set of numbers, sir. Sir, to begin with, what is the status on arbitration claim on Ahmedabad-Baroda project?
Yes. So on Ahmedabad-Baroda, the arbitration panel has now been set up and -- after the Supreme Court intervention. And now the Section 17 application has been filed with the arbitration panel, and we would be requesting the arbitration panel to continue with the existing relief. So we should have a visibility on that before end of March. Right now the High Court relief continues.
Okay. That is great, sir. Sir, in terms of -- it's a bookkeeping question. In terms of contribution -- for construction revenue during the quarter, what is the contribution from key projects during the quarter?
Sure. So instead of giving you key projects, I would give you key groups. So BOT would have contributed around INR 480 crores, HAM has contributed INR 260 crores and the other stuff, which would include Sindhudurg, change of scope, utility shifting and O&M across public and private InvIT, would contribute around INR 340 crores. O&M particularly in this would be almost 50%.
Okay. And sir, if the understanding is correct, the margins in O&M will be much better than what general data margins in EPC are, right?
That is right. That is right.
Sir, lastly, from my end, when you look at -- in terms of new project wins and [ going forward as the participant ] had given in, sir, what is your take? Because there has been -- if the tender pipeline goes correctly, there are 3 BOT projects, which are there in the pipeline. So what is our take on there? Where we are in terms of bidding? And where do we feel that we can have some success there as well?
So I can share with you that, yes, we are bidding on the TOT projects which are coming up, and we look forward for more as well. But at the same time, we are not shying away from bidding on HAM as well because, to keep the team and the equipment busy and to gather some good cash flows, a few HAM projects also we will not be averse to.
Fair enough, sir. Sir, lastly, from my end, if I understand correctly, our equity commitment in the under-construction portfolio is completed and now only the part time -- the GIC payment has been coming in on whatever has been there? Is the understanding correct? Or there is some ambiguity there?
You are asking about the equity commitment, right?
Equity commitment in the under-construction portfolio, which has been transferred to the...
Largely, yes. Some couple hundred crores would be balance, and that would be a commensurate INR 200 crores, INR 300 crores balance from GIC to come in. So it will be equivalent, around INR 300-odd crores.
The next question is from the line of Alok Deora from Yes Securities.
So just a couple of questions. One, I wanted to ask that even in the first half, we have seen NHAI awarding has been pretty robust. And most of the players in the industry have got decent set of order books now. So how do you see the competitive intensity panning out in the next 2, 3 months where we are looking at INR 50,000 crore, INR 60,000 crore worth of orders being rolled out?
So if you are saying that the NHAI order in the H1 was robust, I doubt that because that was not the case. It started towards end of H1 and since then has been picking up. And as I said, we expect a total of INR 60,000 crores plus of ordering to happen before end of March. The competitive intensity is extremely high because what has changed is, today, to bid for an NHAI project, you don't need to give any bid security. So the competitive intensity has gone up pretty well because as a COVID measure, government had done away with the bid security requirement, and that still continues.So for -- at least for HAM projects, there is no bid security required. That's not the case for TOT and BOT. But as a result, the competitive intensity has been very, very strong. But irrespective, I feel that given the number of projects that are being awarded, I believe everybody would be able to pick up a fair share of it.
Sure, sir. And sir, just also wanted to understand, with the price of commodities increasing significantly, do we see some sort of impact on execution in Q4 because we might look to go a little slow till the prices stabilize because even though in projects where there is a pass-through, the pass-through is not really in sync with what the input cost increase might be. So are we -- would the Q4 be slightly different in terms of what a normal Q4 would be like?
It's a difficult decision to make because if we look at our Rajasthan projects, which are nearing completion, they would see a significant revenue ramp-up because almost 50% to 60% of tariff improvement would happen on completion of the same. So slowing down such projects because of higher steel and bitumen prices, whether that will be a prudent idea, I don't think so. So we will have to balance the cash flows, and the project completion interests also have to be kept in mind. And accordingly, we'll have to proceed further. But there would not be any deliberate attempt to slow down projects, to my mind.
Sure. Even for the projects, which are just 25%, 30% sort of complete, and there -- some slowdown we can probably do to sort of wait till the prices stabilize? And that's a question actually at the industry level I'm asking.
Yes. So early-stage projects, where you have multiple activities ongoing, you can reschedule few of the activities to do nonsteel, cement activities; more like you can put up earth work more or you can do the GSB, WMM kind of items ahead of your original planning and shift the structure work a bit backward. Some fine-tuning is possible, but see, this road bidding is a very linear business. So you really cannot change that cycle too much.
The next question is from the line of Prem Khurana from Anand Rathi.
Congratulations for good recovery in toll collections. Sir, my first question was with respect to our BOT toll asset, including our private InvIT asset. I mean we declared IRB InvIT numbers a couple of days back, and what I realized there is, I mean, your -- cars were the key growth driver for these public InvIT assets. I mean would that be the case for us as well, I mean, for the 2 assets that are there with us, I mean, Ahmedabad-Baroda, Mumbai-Pune as well as the private InvIT assets?
To a large extent, yes, the cars recovery has been very, very strong. MAV and HMVs are still catching up, and that gives us a lot of comfort that as they catch up, they yield actually much higher revenue. So going forward, once that growth catches up, we will be able to witness much more stronger growth is my guess as well.
And what will explain the surge in car numbers? Because, I mean, if I understand this correctly, a part of this would essentially be because of the fact that people still are hesitant to take public transport, which is where they would have taken to their own vehicles, which is why this number. So is there a chance wherein, I mean, a part of this would go down and you'll get to have that come to you in the form of, let's say, buses, public buses in which is where you'll get to have toll collection come to you?
So whichever way I slice it, I think that, as you very correctly said, there are 2 possibilities or rather 3 possibilities. Possibility one, people have fundamentally changed their mode of transport and would like to stay with cars because they are not comfortable traveling in public transport because of the pandemic situation. In that case, the car percentage on the roads will continue to remain high. And that, coupled with the MAV and the truck growth coming back due to increase in the consumption story will give a significant bump up in traffic. That is one way.Second way is that people again go back to public transport, car numbers come down and get compensated from the growth in MAV and HMV, [ diesel ] trucks, and you get a structured growth going forward. So whichever of the 2 ways we see, we don't see the growth slowing down.
But then I mean, personally, what would you prefer? I mean would you want to have more of cars or buses? Because, essentially, I mean, the roads tend to have capacity, right, in terms of number of PCUs that these assets would be able to carry, given the fact that you would have capacity as well. So which one would you prefer? Would you prefer buses or cars more?
Yes. So I'll give you a quick one on this, that today, the tariff is all linked to PCUs. So if one car goes, I get, say, INR 1. If one multi-axle vehicle goes, I get INR 4.5 because it is 4.5 PCUs. So I am actually neutral to what kind of vehicle uses our road because the tariff is linked to PCU, and this overloading things have now been of the past. So whichever category uses your road more, you will be compensated accordingly.
Sure. And my second question was this recently financially closed hybrid annuity asset. So we already have one, which is already under construction. So was there any difference in terms of the way the banks are approaching these financial closures now in terms of, I mean, whether they're making you commit more in terms of upfront equity?
Yes. So we have tried to fine-tune the model, learning from our peers. We have tried to keep some part of the construction in the SPV itself and tried to optimize the taxation structure. So as I said, against INR 1,755 crores of BPC to NHAI, my EPC is around 1,705.
Okay. Sure. And upfront equity is still the same, I mean, which is what was the case with...
Upfront equity will be around 50% of the total equity requirement, will be around INR 100-odd crores.
[Operator Instructions] The next question is from the line of Ashish Shah from Centrum Broking.
I just wanted to check a little bit on the interest and the -- sorry, the depreciation and the employee cost for the quarter. There was a big increase in the depreciation charges. So anything besides the increase in toll revenue? Anything else is the reason?
Not to my mind. Only because of increase in the toll revenue, the amortization on the Mumbai-Pune particularly has gone up.
Okay. So one can probably expect this level of quarterly depreciation to be there with the toll revenues being at these levels?
Yes. As we have seen the models in the past also that it is linked to the economic value. So as the revenues keep going up in the ballooning fashion, the amortization also will keep going up.
Sure. Sure. And we've seen a significant reduction in the employee cost when I look at it on a quarter-on-quarter basis. So is this the level of -- I mean is it the saving on account of FASTag implementation we've been able to save on the employee cost? Or how one should look at it going forward?
COVID has made everybody sit up and look at their own cycles of optimizing costs. And certainly, we have not been away from that. So we have also rationalized our workforce and structure. Certainly, FASTag has helped to an extent. So some employee rationalization has been done to save costs, and that is what is reflected in the reductions.
Right. Got it. Lastly, we have been carrying a slightly elevated level of cash balances than what we historically did. So are we planning to pay down some of the debt using these cash balances or these kind of cash levels will remain?
No. See, there are commitments which have to be met. And as you know, we have INR 850 crores of payment coming up for Mumbai-Pune. So we have to keep cash handy, and that's probably what we are trying to do.
Right. Sorry, just I'll squeeze in one more. What is the kind of toll hike that we'd expect for the Rajasthan assets? I know we have given a range of probably 50% plus. So I mean for Agra-Etawah, we had some 66%. Is that the kind of number we'll be looking at when the 3 Rajasthan projects get commissioned?
Yes, somewhere between 50% and 60%. Agra-Etawah was more because it was delayed by a year. So the growth -- the tariff increase was almost close to 70%, but here, my sense is that it should be anywhere between 50% and 60%.
The next question is from the line of Rohit Natarajan from Antique Stockbroking.
Sir, my question is more to do with the TOT package. What is the situation over there now that NHAI is aggressively talking about InvIT? Is the scope of TOT bundles reduced in the future?
We haven't heard of anything as such. In fact, they have bid out 2 TOTs as early as yesterday. So in fact, to attract more bidders, they have been vocal to say that they want to reduce the size of TOT packages. Even the tenor from 30 years has been now brought down to 20 years. And my sense is that they have received a good amount of response in the TOTs that happened yesterday. So TOT is certainly here to stay. BOT also, there are 2, 3 projects right now up for bidding and so is the HAM pipeline. So across verticals, I think they are trying to push out as many projects as they can.
So in the order -- if you estimate that you have made for this year, [indiscernible] year, is there an assumption of TOT being win? Or is that not being...
Certainly, our preference we have always said that would be BOT, TOT and HAM. So in that sequence, we will certainly focus on BOT wins. A large TOT win has already happened, which was Bombay-Pune. And one HAM also has happened. So logically, one more BOT is a welcome idea. But at the same time, we have been bidding on HAM projects across. So from an order book build perspective, we would also look at few HAM projects coming into the kitty.
Sure. Sir, one more question that has more to do with the sectoral-specific event, that we have heard some news around that there is a shifting of priorities towards EPC contracts probably to aim at employee generation and quicker workaround of these road projects. Is that something true? Or is this something that you've heard something on those similar lines?
Your question is not clear. Can you repeat the question?
So I was saying, there is a realignment of priorities of NHAI projects, whether they should not think -- what they are thinking is more to do with EPC projects rather than going for HAM projects and BOT projects because this will kickstart the project faster than conventional HAM or BOT projects, and this will aid employment generation and other such political [indiscernible] priorities that government wants. So is there some thought really being given or addressed in any of the forums that you have attended with NHAI?
It's the other way. I think the EPC project NHAI is looking to bring it down, and they're bringing more of the HAM projects. So my thinking is and the way we get the feedback, the more of HAM projects will be coming instead of EPC.
The next question is from the line of Kaushik Poddar from KB Capital Markets.
What is the typical annual inflation in toll itself?
Annual toll?
Annual toll inflation. I mean suppose you're getting, say, INR 75 for a particular...
Inflation, so most projects today have a 3% fixed increase and 40% correlation to WPI. So effectively, you can say around 4.5% tariff increase is what one can comfortably pencil in on the most conservative manner, to my mind. And certain projects like Bombay-Pune have a fixed tariff, which is around 18% every third year. So if you annualize that, it's around 6% a year.
Okay. And sir, in case of a Bombay-Pune project, what is the kind of IRR that works out -- I mean, that had worked out? And what is the cost of finance?
The debt has been tied up at 8.4%.
And what is the IRR in a normal circumstances?
IRR -- a very healthy IRR is what it will be able to generate, given the comeback of revenues is what we believe.
Will it be around 12% to 15%?
I think it will exceed that.
Okay. Now since this thing -- you have taken up this project quite some time -- I mean I think in this year, you have taken up this Bombay-Pune project. I mean is it showing up in numbers? I mean are you -- I mean in that case, the profitability would have gone up, isn't it?
Of course, it is showing up. And that is what has made good the revenue loss that happened because of transferring 9 projects to private InvIT. So it has been able to make good or rather make better than what contributed by those 9 projects.
Okay. Okay. Okay. And what you said is that the cost -- your cost of capital is around 8% and you expect the IRR to be around 15%, right?
Yes. The debt cost, I said, is around 8.4%.
8.4% and 15% is what is IRR you're expecting?
I said it will exceed that.
The next question is a follow-up question from the line of Bharani Vijayakumar from Spark Capital.
[indiscernible]
I'm sorry, Mr. Vijayakumar, but we cannot hear you. Can you please check?
Hello?
Mr. Vijayakumar, we cannot hear you.
I just have a question. The order pipeline that you are looking into, in which geography that you are expecting the BOT projects to be awarded from?
There is no specific geography in mind. Whichever geography BOT projects come in, if they are viable, we are open to bid on them. We don't have any restrictive covenants on mind that we would not bid a particular state or anything of that nature.
Okay. Okay. No, from an order...
It is spread across 9 states already.
From an expectation perspective, what do you expect [indiscernible]?
No, no. So long as the law and order is good, execution environment is good, economic growth is good, we are good to go for a project.
Thank you. Ladies and gentlemen, this was the last question for today. I now hand the conference over to the management for closing comments.
Thank you, everyone, for being there for this call and look forward to join with all of you again when we give out the audited results in -- after March 31. So have a great day ahead. Thank you so much.
Thank you, sir. Ladies and gentlemen, this concludes your conference for today. We thank you for your participation and for using Researchbyte conferencing services. You may please disconnect your lines now. Thank you, and have a great day.