00:00 Hello and welcome to NDTV Profit. I am Vikas Shrivastava. Today we have with us Mr. Harsh
00:05 Shah. He is the CEO of Indigrid, India's first and only listed power invite for the Infrastructure
00:14 Investment Trust. Today he will be talking to us about the latest acquisition of a solar
00:18 asset in Jaisalmer, their assets under management and the business outlook. Welcome to NDTV
00:24 Profit, Harsh. Thank you.
00:27 So Harsh, can you for our viewers give more details on this acquisition that you have
00:33 done from Renu of this solar asset. What role it is going to play in terms of complementing
00:38 your business and like you know such details if you can provide to our viewers.
00:44 Sure. So first of all thank you NDTV to have us here today. We have a sizable presence
00:51 in Rajasthan both for transmission business and solar business of Indigrid. This asset
00:56 is approximately 300 megawatt of single site asset and therefore it adds very well in our
01:03 portfolio in Rajasthan. The overall size of this asset is approximately 1550 crores in
01:09 rupee terms at which we are purchasing it and therefore it will add approximately similar
01:16 amount in our AUM. Our AUM today is around 27,000 crores. So this asset adding to that
01:22 will bring the AUM up by around 3 to 4% on addition of this asset. In terms of our solar
01:31 portfolio, solar consisted of approximately 17% of our AUM. We acquired 4000 crores of
01:38 renewable energy assets last year and adding to this additional 1600 crores of asset we
01:44 have acquired around 5600, 5700 crores of assets of operating solar projects and that
01:49 has taken percentage of solar assets in our AUM to just over 20% and the total AUM to
01:56 just over 28,000 crores.
01:59 Right. So for an inventor that started for transmission projects, how are these generating
02:06 assets especially into solar going to kind of complement your business going ahead? What
02:11 role would solar play? And also if you can give a break up of your power projects portfolio.
02:16 Sure. So we are an infrastructure investment trust as you described. So we are in power
02:23 transmission power space and our role is to ensure that our unit holders achieve a superior
02:29 risk adjusted returns. And what that means is that we provide them a predictable yield
02:35 which grows over a period of time. By that logic, what we need to do is to acquire assets
02:41 which gives a long term predictability of the cash flow that those assets can generate
02:47 and then continue to acquire more assets so that we can grow that cash flow to our unit
02:51 holders.
02:53 Both transmission and solar projects provide predictable cash flow to unit holders. When
02:58 we started the transmission business, we were only focused on transmission. However, we
03:03 realized that solar business as well, if we can acquire projects with strong counterparties
03:09 like Seki, like NTPC, Gujarat, in that scenario, they are also equally safe and they provide
03:17 superior adjusted long returns to our unit holders. And therefore, we expanded to that
03:22 area and operating in both transmission and generation space, solar generation space to
03:28 be honest specifically, we are able to leverage our current manpower and skill set. So we
03:34 have an operating synergy, plus, we have a financial synergy with our overall cost of
03:39 capital being relatively better than the market. And therefore, we are able to acquire assets
03:43 at better price and provide our unit holders an additional yield. And therefore, adding
03:48 solar to our portfolio and specifically solar assets with central counterparties or good
03:53 counterparties allows us to provide a higher return without really increasing the risk
03:59 material on our business. And that's why adding 20-25% of solar makes tremendous sense
04:05 on integrated business model. And that is why we expanded into solar. First time we
04:09 expanded in 2020 with just 100 megawatts. We've proven this hypothesis over two years.
04:15 And then last year, we grew from 100 megawatt to a gigawatt portfolio.
04:20 So this 300 megawatt will increase it beyond gigawatt or it makes up for one gigawatt?
04:26 It makes just over a gigawatt. Okay, so given there is a lot of focus on
04:32 wind power also now going ahead, you know, so would you be looking at wind portfolio
04:37 also in your total assets? At this point in time, we are not looking
04:41 at wind portfolio, because you know, solar projects are relatively easier to manage at
04:46 a lesser scale. So even a 100 megawatt solar project, we can operate it with efficiency.
04:52 But 100 megawatt wind project does not provide operating synergies. So then we need to really
04:59 do big in wind, a 500 megawatt or gigawatt. And that adds a lot of variability to our
05:04 portfolio and something as I said earlier, our unit holders desire stable, predictable
05:09 AAA returns. And that becomes difficult when the wind generation varies materially on quarter
05:15 on quarter. And many of the cash flows are wind PPAs are state counterparties, which
05:22 are probably a notch lower than SECI and NTPC. So both for operating reasons, and credit
05:28 reasons and variability reasons, we have stayed away from wind and even at this point in time,
05:32 we are not looking to buy any wind assets at this point.
05:37 Okay, so going ahead, you need a lot of funding requirements also you will be having for this
05:42 kind of expansion that you are taking up. So what will be the fund requirement and how
05:47 you are planning to fund it?
05:49 I would say historically, our unit holders and the market is really supported us very
05:54 well in terms of fundraising, we have raised preference issue, rights issue, institutional
06:00 placement, variety of capital raises that we have done in the past. Just last year,
06:06 just end of last year, 2023, we raised two issues. One was a preference issue, where
06:11 large family offices got allocated in degree units with a year of locking. And the other
06:18 was institutional placement, where around most of the large Indian domestic institutions
06:24 participated, largely corporates, domestic pension funds, insurance companies, etc. So
06:31 in all, we raised around 1050 crores in the last half of 2023, which reduced our debt
06:39 to AUM ratio and therefore increase our ability to grow by 6-7000 crores. At this moment,
06:46 our leverage is 60% net debt to AUM. Prescribed guideline of CIDI allows a maximum leverage
06:54 of 70% net debt to AUM, which means we can add another 6-7000 crores of projects. Out
07:00 of that, the 1600 crore project that we just acquired is already figuring it out in that.
07:06 So if we acquire, renew by quarter 4 of FY24, our leverage will be around 62.5% by FY24.
07:15 That leaves still some headroom for us to grow without raising capital.
07:20 So 64% is what you are saying will be the leverage ratio for FY24?
07:25 No, 62.5%.
07:27 62.5%. Okay. And going ahead, which are the sectors where you see most of your orders
07:34 to come up from and what will be your AUM at the end of FY24?
07:39 So see, we are pretty positive about the entire electricity value chain in India currently,
07:48 both for energy transition and energy security purpose. But we don't play all part of the
07:54 value chain. We play on limited parts of the entire value chain. We play on transmission,
07:59 development. We won about 1000 crore orders in December recently, where we are going to
08:05 build out those transmission lines and substations over the next two years. The second area where
08:10 we play is on solar projects, we acquired, renewed recently. And the third part of the
08:15 project we play on battery storage, and we are pretty bullish on the battery storage
08:19 as well. We recently won about 100 crore-odd battery energy storage project with BSES Rajdhani
08:28 in Delhi for the energy shift application. And that's something which we think is going
08:33 to come up online very soon. So we play on these three segments, which are core of energy
08:38 transition today to enable India's journey from coal-focused to a renewable-focused economy.
08:45 And therefore, we are very bullish on all these three segments. All three segments are
08:50 looking at tailwinds and we are in transmission, for example, there are over a lakh per order
08:54 of transmission project coming for auction and bidding. On solar, we already know the
08:59 500 gigawatt of target and that's keep coming and increasing. So we would look to play on
09:03 that in our own small little way. And on battery energy storage, also, we will participate actively.
09:09 At this point in time, we have just got our first project. So it's a new technology we
09:13 are implementing and seeing and learning, but we are liking it and therefore, we would
09:18 be looking to grow that. So these are the three focus areas for us to grow.
09:22 So this battery storage project that you spoke about, this battery storage, you are doing
09:26 the EPC or you will be generating from a battery storage project?
09:31 No, we are owning the battery storage. We will be in the premise of the customer, which
09:37 is BSR and BSCS Rajdhani. But asset will be owned by us for the concession period and
09:42 subsequently it will be transferred to the customer. So it's not like an EPC.
09:46 And what kind of target you see for a battery storage kind of projects in coming years,
09:51 like in terms of revenue generation for Invert?
09:54 See, I think it's an upcoming technology. At this point in time, standalone battery
10:01 storage is not viable at a large scale for every use. And therefore, specific customers
10:07 are putting in specific use cases and putting in. But like it happened with solar, I mean,
10:11 battery storage is where solar was in 2009-10, the cost seemed high. But as the manufacturing
10:18 costs reduced and the scale increased, there is an inflection point after which the battery
10:22 storage will become very much viable. So we'll have to wait for that viability for large
10:27 scale projects. At this point in time, we are not looking to grow overall battery storage
10:32 more than 1000-2000 crore AUM in our portfolio, which will be in the range of 5-6% of our
10:38 overall AUM.
10:39 Okay. And one final question on overall outlook for say transmission and generation business,
10:45 how do you see it and how it's going to benefit an Invert like yours?
10:51 So as I said, we are extremely, I mean, there is a trinity that's playing out in India and
10:55 the world. The renewable energy cost has become, I would say almost at great parity, and the
11:02 technology is supporting us to generate power. The regulations and policy is favoring the
11:09 same. So starting from the top where we are setting up a vision for energy transition
11:13 to almost every bureaucratic organization and eventually the grassroot, there is a clear
11:20 momentum towards moving towards renewable energy, which is causing new transmission
11:25 lines, new battery storage and new renewable energy projects. So we are seeing the demand
11:29 drivers also pushing it in that direction. And the third one is just the capital mobilization.
11:36 There are more and more investors globally and domestically are looking to deploy capital
11:42 in all this. So this trio is working together to make this sector extremely vibrant. And
11:47 we are seeing the green shoots over the last couple of years, as we see. So we are pretty
11:50 bullish on this sector, which 10 years ago was a old sector to now it's become a tech
11:56 sector, financial sector and very, very interesting for players to deploy capital. So we are extremely
12:02 bullish on all these things.
12:05 Thank you. Thank you very much, Harsh, for talking to NDTV Profit, taking out time and
12:09 talk to us. It was a pleasure talking to you.
12:11 Thank you.
12:13 [Music]
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