You should read the following discussion and analysis of our financial condition, results of operations and cash flows in conjunction with "Summary Special Purpose Combined Financial Statements " and "Special Purpose Combined Financial Statements " on pages 46 and 245, respectively. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in "Risk Factors" on page 18. Actual results could differ materially from those contained in any forward-looking statements and for further details regarding forward-looking statements, please refer to "Forward Looking Statements and Financial Projections" on page 16. The Special Purpose Combined Financial Statements are prepared in accordance with Ind AS except for Ind AS 33: Earnings per share and adjustment/rectification/reclassification wherever necessary read with the SEBI InvIT Regulations and the circulars issued thereunder and the Guidance Note on Combined and Carve-Out Financial Statements issued by the Institute of Chartered Accountants of India, which differs in certain respects from Indian GAAP, IFRS and U.S. GAAP. Our fiscal year ends on March 31 of each year and references to a particular fiscal are to the twelve months ended March 31 of that year. For the sole purposes of the Special Purpose Combined Financial Statements, references to "we ", "us" and "our" are to the Project SPVs on a combined basis.
Unless otherwise indicated or unless the context requires otherwise, the financial information included herein is based on our Special Purpose Combined Financial Statements included in this Offer Document. For further details, see "Special Purpose Combined Financial Statements" on page 245.
Overview
We are an infrastructure investment trust established to acquire, manage and invest in a portfolio of infrastructure assets in India and to carry on the activities of an infrastructure investment trust, as permissible under the SEBI InvIT Regulations. We were settled by way of the Original Trust Deed, by GRIL ( the Settlor), and registered as an infrastructure investment trust with SEBI on August 3, 2022 pursuant to the SEBI InvIT Regulations.
The Sponsor is engaged in testing services in the field of transportation engineering and has expertise in NSV survey, FWD survey, pavement design of roads and airports, physical and chemical testing of soil, lime, cement, road roughness testing, concrete and bituminous mix design of road projects. The Sponsor has setup a laboratory at its registered address which is accredited with National Accreditation Board for Testing and Calibration Laboratories for the discipline of chemical, mechanical and non-destructive testing. NMHPL, the Associate of the Sponsor is a road engineering, procurement, and construction company, with experience in design and construction of various road/highway projects. NMHPL has over six years of experience in the execution of infrastructure projects since 2017.
The Sponsor has an established track record of physical and chemical testing of soil and other material (cement testing, fly ash, bitumen emulsion, aggregate testing) at its laboratory accredited by NABL, which enables it to determine the appropriate material mix for development of bituminous and concrete road projects. Further, its capability to assess the roughness and balance life of road projects allows it to determine the appropriate maintenance activity to be undertaken oI the road projects.
The Sponsor through itself and its associate, NMHPL, complies with the eligibility requirements under the SEBI InvIT Regulations of ensuring a sound track record in development of infrastructure through NMHPL.
Our initial portfolio assets consist of seven road assets, all operating on HAM basis, in the states of Punjab, Gujarat, Andhra Pradesh, Maharashtra and Uttar Pradesh. These roads are operated and maintained pursuant to concession rights granted by the NHAI and are owned and operated by the Project SPVs, which are currently wholly owned by GRIL. For more information about the InvIT Assets, see " Business - Details of the Project SPVs and the InvIT Assets" on page 149.
In addition, the InvIT has entered into a ROFO Agreement with GRIL, pursuant to which GRIL has granted a right of first offer to the InvIT to acquire certain other assets owned and developed by GRIL. For more details, see "Business - ROFO Assets" and "Formation Transactions in relation to the InvIT- Acquisition of future assets by the InvIT - ROFO Agreement on pages 160 and 104, respectively.
Factors Affecting Results of Operations
The Project SPVs business, prospects, results of operations and financial conditions are affected by a number of factors, including the following:
Inflation and interest rate risk
In some of the Concession Agreements, the interest payable to us on balance completion cost is linked with the RBI Bank Rate and income arising out of O&M payments is linked with the movements of inflation indices in the relevant period. However, there are no specific provisions in the Concession Agreements protecting us against increases in interest rates on our borrowings or cost of raw materials, except to the extent of rates linked to RBI Bank Rate and the inflation index. The loan facilities availed by the Project SPVs typically carry a floating rate of interest specified by the lender (benchmarked to the repo rate, MCLR or T-Bill interest rate). Our lenders may have the right to periodically adjust our interest rates and our applicable interest rates may increase based on their review of our credit profile and perceived risks in our operations. Our operational costs may change if our Project Manager fails to perform its O&M duties and responsibilities under the Project Management Agreement. Many factors causing such adverse changes are beyond our control and we are usually not able to demand matching increases in our annuities to account for the impact of inflation and interest rate adjustments on our costs. Even if we invoke inflation adjustment provisions in the Concession Agreements, the increase may not be adequate to offset the negative impact of increases in interest rates or the O&M costs.
Strategic expansions through acquisitions including under the Right of First Offer
The Investment Manager intends to develop and expand the portfolio of InvIT Assets by capitalizing on opportunities provided by GRIL to undertake strategic acquisitions of infrastructure assets, including the ROFO Assets. The Investment Manager may also consider potential acquisitions of infrastructure assets from third parties, other than through the Right of First Offer. Any acquisition will have a direct impact on our revenue growth as well as a corresponding increase in any operating and financial expenses that we will incur. Future acquisitions are expected to be financed by incurring additional debt and/or through the issuance of fresh Units, which could impact our cash flows in case of any adverse developments or could lead to dilution of holdings of existing unit holders that do not maintain their percentage interests upon the issuance of fresh Units. Key factors that affect our ability to acquire additional assets include the limited availability of, and competition for, suitable projects, our financial resources, including our available cash and borrowing capacity, and other factors that may be beyond our control. For more details, please see Risk Factors on page 18.
General economic conditions in India, economic conditions in the areas in which the Project SPVs operate and the level of investment and activity in the road infrastructure sector
Demand for roads in India and consequently, the performance and growth of road projects are impacted by economic conditions in India and government policies relating to infrastructure development to support long-term growth plans of the Indian economy.
The Indian economy has been affected by the recent global economic uncertainties, volatility in interest rates, currency exchange rates, commodity and electricity prices, adverse conditions affecting agriculture and various other macroeconomic factors. Since the Project SPVs focus on the road and highways sectors, any slowdown or perceived slowdown in the Indian economy, or in those sectors of the Indian economy, could materially and adversely impact the business, financial performance and results of operation of the Project SPVs. Similarly, the health and sustained economic development in the regions in which the Project SPVs operate could have a significant impact on the revenues and growth prospects of the Project SPVs. Additionally, an increase in trade deficit or a decline in Indias foreign exchange reserves could negatively impact interest rates and liquidity, which could adversely impact the Indian economy and our business. Any downturn in the macroeconomic environment in India could materially and adversely affect our business.
Due to increased budgetary allocations by the Government and its road development initiatives as well as investments by the private sector in the infrastructure projects, the road and highways sectors have developed significantly in the last decade. While recent Indian governments have been focused on encouraging private participation in the industrial sector, any adverse change in policy could result in a further slowdown of the Indian economy. The rate of economic liberalisation could decrease, and specific laws and policies affecting foreign investment, currency exchange rates and other matters affecting investment in India could change as well. In the road sector, there can be no assurance that the Gols engagement with and outreach to private sector ope rators, including InvIT, will continue in the future. A significant change in Indias economic liberalisation and deregulation policies, in particular, those relating to the road sector, could disrupt business and economic conditions in India generally and our business in particular.
Dependence on support from governmental entities
Any significant changes in a particular governments policy for the road infrastructure sector could have a significant effect on the InvITs revenues, expenditure and growth prospects as they relate to future projects. The results of operations of future projects are likely to be affected by budgetary allocations made by the various central and state government agencies for the infrastructure sector as well as funding provided by international and multilateral development finance institutions for road infrastructure projects. Any adverse change in focus or policy framework regarding infrastructure development or the surface transportation industry, or the InvITs relationship with the government or various governmental entities in India could adversely affect the InvITs business, financial condition and results of operations. Changing political or social imperatives can also affect the InvITs and the Project SPVs businesses.
Competition
The InvIT faces competition from other road operators, financial investors and other infrastructure investment trusts in acquiring profitable concessions for future projects. The competition for road projects varies depending on the size, nature and complexity of the project and on the geographical region in which the project is to be executed. Some competitors may have, greater financial resources, economies of scale and operating efficiencies than the InvIT. In respect of new and eligible acquisition opportunities, the InvIT may rely on the experience and qualifications of GRIL (which proposes to grant a right of first offer to the InvIT in respect of the ROFO SPVs), which faces competition from both domestic and international entities in the roads and highways infrastructure sector, as most of the contracts awarded by the Government of India and State Governments are awarded on a competitive bidding basis and subject to satisfaction of other prescribed pre-qualification criteria. There can be no assurance that GRIL can effectively compete with its competitors in relation to the acquisition of future projects, and any failure to compete effectively may have a material adverse effect on the InvITs financial condition and results of operations.
Critical Accounting Policies
The preparation of the Special Purpose Combined Financial Statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
While all aspects of the Special Purpose Combined Financial Statements should be read and understood in assessing their current and expected financial condition and results, we believe that the following critical accounting policies warrant particular attention:
Basis of preparation
The Special Purpose Combined Financial Statements comprise the special purpose combined balance sheet as at September 30, 2023, March 31, 2023, March 31, 2022 and March 31, 2021, and the special purpose combined statement of profit and loss (including other comprehensive income), combined statement of changes in equity, special purpose combined cash flow statement for the six month period ended September 30, 2023 and for the Fiscal Years ended March 31, 2023, March 31, 2022 and March 31, 2021, the combined statement of net assets at fair value as at September 30, 2023, the combined statement of total returns at fair value for the six month period ended September 30, 2023 and the Fiscal Year ended March 31, 2023 and notes to the special purpose combined financial statements including a summary of significant accounting policies and other explanatory information.
The Special Purpose Combined Financial Statements have been prepared by Investment Manager, acting on behalf of the InvIT to meet the requirements of InvIT Regulations and for inclusion in the Draft Offer Document / Offer Document / Final Offer Documents prepared by the Investment Manager in connection with the proposed Issue of Units of the InvIT. As a result, the Special Purpose Combined Financial Statements may not be suitable for another purpose. Further, the requirements of Schedule III (as amended) notified under the Companies Act 2013 are not applicable to these Special Purpose Combined Financial Statements and hence these financial statements are not prepared in accordance with those requirements.
The Special Purpose Combined Financial Statements have been prepared on basis of the general purpose audited financial statements of the SPVs as at and for the six month period ended September 30, 2023 and the Fiscal Years
ended March 31, 2023, March 31, 2022 and March 31, 2021 which were prepared in accordance with Indian Accounting Standards as defined in Rule 2(1)(a) of the Companies (Indian Accounting Standards) Rules, 2015 prescribed under Section 133 of the Companies Act, 2013 ("Ind AS"). The following adjustments have been made to those general purpose audited financial statement for the purpose of preparation of the Special Purpose Combined Financial Statements of the SPV Group prepared as per requirement of InvIT Regulations and Guidance Note on Combined and Carve-Out Financial Statements issued by the Institute of Chartered Accountants of India:
a) Necessary adjustments, rectifications, reclassifications wherever necessary in accordance with SEBI Circular CiR/IMD/DF/114/2016 dated October 20, 2016 as mentioned in the Special Purpose Combined Financial Statements.
b) Non-disclosure of earning per unit as required under Ind AS 33: Earning per share which has been explained in the Special Purpose Combined Financial Statements.
In accordance with the requirements of the SEBI InvIT Regulation, since the InvIT was registered as an InvIT on August 3, 2022 and hence it has been in existence for a period lesser than three completed financial years before the filing of offer documents, the Special Purpose Combined Financial Statements have been prepared considering financial information of the SPV Group for the six month period ended September 30, 2023 and the Fiscal Years ended March 31, 2023, March 31, 2022 and March 31, 2021, when such historical financial statements of the InvIT were not available. The general purpose audited financial statements of the Project SPVs as at and for the six month period ended September 30, 2023 and the Fiscal Years ended March 31, 2023, March 31, 2022 and March 31, 2021 were audited by firms of chartered accountants other than S R B C & Co LLP. Further, as required by the SEBI InvIT Regulations, the Special Purpose Combined Financial Statements are prepared, based on an assumption that the InvIT holds 100% stake from April 1, 2020 in all SPVs. The Special Purpose Combined Financial Statements may not be representative of the position which may prevail after the SPV group is transferred to the InvIT.
Basis of combination
The Special Purpose Combined Financial Statements have been prepared using uniform accounting policies for like transactions and other events in similar circumstances. The special purpose combined financial statements of the SPV Group used for the purpose of combination are drawn up to the same reporting date i.e. year ended on March 31 each year/ six month period ended September 30.
The procedure for preparing Special Purpose Combined Financial Statements of the SPV Group are stated below:
i) Combine like items of assets, liabilities, equity, income, expenses and cash flows of the SPV;
ii) Eliminate in full intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between entities of the SPV group (profits or losses resulting from intragroup transactions that are recognised in assets, such as inventory and property, plant and equipment, are eliminated in full). Ind AS 12, Income Taxes applies to temporary differences that arise from the elimination of profits and losses resulting from intragroup transactions.
Dates of commencement of commercial operations
The SEBI InvIT Regulations require disclosure, if there are any assets for which the financial information is considered for a period lesser than three years. The details of incorporation and commencement of operations of such Project SPVs are as given below:
| Name of the SPV | Date of incorporation | Commercial operations date * |
| Varanasi Sangam Expressway Private Limited | April 17, 2017 | November 2, 2020 |
| Porbandar Dwarka Expressway Private Limited | June 09, 2017 | April 18, 2020 |
| GR Phagwara Expressway Limited | Sept 21,2016 | February 25, 2020 |
| GR Gundugolanu Devarapalli Highway Private Limited | March 28, 2013 | July 10, 2021 |
| GR Akkalkot Solapur Highway Private Limited | April 26, 2018 | March 31, 2021 |
| GR Sangli Solapur Highway Private Limited | April 26, 2018 | June 28, 2021 |
| GR Dwarka Devariya Highway Private Limited | March 26, 2019 | August 2, 2022 |
Functional and presentation currency
The Special Purpose Combined Financial Statements are presented in INR, which is the functional currency of the SPV Group. The SPV Group does not have any foreign operation and has assessed the functional currency to be INR. All values are rounded to the nearest million rupees, unless otherwise indicated. Certain amounts that are required to be disclosed and do not appear due to rounding-off are expressed as 0.00.
The Special Purpose Combined Financial Statements correspond to classification provisions contained in Ind AS 1 ‘Presentation of Financial Statements. The Special Purpose Combined Financial Statements have been prepared on a historical cost convention and on an accrual basis except for certain financial assets (refer accounting policy regarding financial instruments).
Current versus non-current classification
The SPV Group presents assets and liabilities in the balance sheet based on current/non-current classification. An asset is current when it is:
• Expected to be realized or intended to be sold or consumed in the normal operating cycle;
• Held primarily for the purpose of trading;
• Expected to be realised within twelve months after the reporting period; or
• Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
Operating Cycle
The operating cycle is the time between the acquisition of assets for processing and their realization in cash and cash equivalents. The SPV Group has ascertained its operating cycle being a period of twelve months for the purpose of classification of assets and liabilities as current and non-current.
Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
i Financial Assets - Initial recognition and measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income (OCI), and fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial assets contractual cash flow characteristics and the SPV Groups business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the SPV Group has applied the practical expedient, the SPV Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the SPV Group has applied the practical expedient are measured at the transaction price determined under Ind AS 115. Refer to the accounting policies of Revenue from contracts with customers.
In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI) on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. Financial assets with cash flows that are not SPPI are classified and measured at fair value through profit or loss, irrespective of the business model.
The SPV Groups business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. Financial assets classified and measured at amortised cost are held within a business model with the objective to hold financial assets in order to collect contractual cash flows while financial assets classified and measured at fair value through OCI are held within a business model with the objective of both holding to collect contractual cash flows and selling.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (regular way trades) are recognised on the trade date, i.e., the date that the SPV Group commits to purchase or sell the asset.
ii Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
• Financial assets at amortised cost (debt instruments)
• Financial assets at fair value through profit or loss Financial assets at amortized cost (debt instruments)
A financial asset is measured at amortised cost if it meets both of the following conditions are met:
a) the asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and
b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the profit or loss. The losses arising from impairment are recognised in the profit or loss. SPV Groups financial assets at amortised cost includes service concession receivable, trade receivables, security deposits.
Financial assets at fair Value through Profit and Loss (FVTPL)
All financial assets which are not classified as measured at amortized cost or at fair value through other comprehensive income (FVOCI) as described above, are measured at FVTPL. This includes investment in mutual funds and all derivative financial assets. On initial recognition, the SPV Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset.
iii Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the SPV Groups combined balance sheet) when:
• The rights to receive cash flows from the asset have expired, or
• The SPV Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘passthrough arrangement; and either (a) the SPV Group has transferred substantially all the risks and rewards of the asset, or (b) the SPV Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the SPV Group has transferred its rights to receive cash flows from an asset or has entered into a passthrough arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the SPV Group continues to recognise the transferred asset to the extent of the SPV Groups continuing involvement. In that case, the SPV Group also recognises an associated liability. The transferred asset
and the associated liability are measured on a basis that reflects the rights and obligations that the SPV Group has retained. Further, the contractual terms of the existing financial assets are substantially modified, such modification is treated as the derecognition of original financial asset and the recognition of a new financial asset. Such newly recognized financial asset is measured at fair value on initial recognition. The difference in respective carrying amount, if any, is recognized in the statement of profit and loss. If the modification of a financial asset does not result in its derecognition, then the gross carrying amount of the financial asset is recalculated at original effective interest rate and the resulting gain or loss is recognized in the statement of profit and loss.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the SPV Group could be required to repay.
iv Impairment of financial instruments
At each reporting date, the SPV Group assesses whether financial assets carried at amortised cost are credit-impaired. A financial asset is ‘credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.
Evidence that a financial asset is credit-impaired includes the following observable data:
• significant financial difficulty of the borrower or issuer;
• a breach of contract such as a default or being past due for 90 days or more;
• the restructuring of a loan or advance by the SPV Group on terms that the SPV Group would not consider otherwise;
• it is probable that the borrower will enter bankruptcy or other financial reorganization; or
• the disappearance of an active market for a security because of financial difficulties.
Ind AS 109 requires expected credit losses to be measured through a loss allowance. The SPV Group applies the expected credit loss (ECL) model for measurement and recognition of impairment losses. The SPV Group follows the simplified approach for recognition of impairment allowance on all trade receivable, receivable under service concession and/or contract assets. The application of the simplified approach does not require the SPV Group to track changes in credit risk. Rather, it recognizes impairment allowance based on lifetime. For all other financial assets, expected credit losses are measured at an amount equal to the 12 month expected credit losses or at an amount equal to the life time expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition.
Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets and recognized in the statement of profit and losses under the head of "Other Expenses".
v Financial liabilities - Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
vi Subsequent measurement
For purposes of subsequent measurement, financial liabilities are classified in two categories:
• Financial liabilities at fair value through profit or loss
• Financial liabilities at amortised cost (loans and borrowings)
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term.
Gains or losses on liabilities held for trading are recognised in the profit or loss.
Financial liabilities designated upon initial recognition at fair value through profit or loss are designated as such at the initial date of recognition, and only if the criteria in Ind AS 109 are satisfied. For liabilities designated as FVTPL, fair value gains/ losses attributable to changes in own credit risk are recognized in OCI. These gains/ losses are not subsequently transferred to P&L. However, the SPV Group may transfer the cumulative gain or loss within equity. All other changes in fair value of such liability are recognised in the statement of profit and loss. The SPV Group has not designated any financial liability as at fair value through profit or loss.
Financial liabilities at amortised cost (Loans and borrowings)
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit and loss.
vii Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit and loss.
viii Reclassification of financial assets
The SPV Group determines classification of financial assets and liabilities on initial recognition. After initial recognition, no reclassification is made for financial assets, such as equity instruments designated at FVTPL or FVOCI and financial liabilities. For financial assets which are debt instruments, a reclassification is made only if there is a change in the business model for managing those assets.
ix Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the balance sheet when, and only when, the SPV Group currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.
a. Fair values measurement
The SPV Group measures financial instrument, such as derivative, investment in mutual fund at fair values at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
• In the principal market for the asset or liability, or
• In the absence of a principal market, in the most advantageous market for the asset or liability The principal or the most advantageous market must be accessible by the SPV Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participants ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The SPV Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs
All assets and liabilities for which fair value is measured or disclosed in the special purpose combined financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.
Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the special purpose combined financial statements on a recurring basis, the SPV Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
The SPV Group has an established control framework with respect of fair values. This includes a financial reporting team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to the chief financial officer.
The financial reporting team regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as pricing services, is used to measure fair values, then the financial reporting team assesses the evidence obtained from the third parties to support the conclusion that these valuations meet the requirements of Ind AS, including the level in the fair value hierarchy in which the valuations should be classified.
For the purpose of fair value disclosures, the SPV Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
b. Leases
At inception of a contract, the SPV Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
i. Company as a lessee
The SPV Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets.
Lease term which is a non-cancellable period together with periods covered by an option to extend the lease if the SPV Group is reasonably certain to exercise that option; and periods covered by an option to terminate the lease if the SPV Group is reasonably certain not to exercise that option. The SPV Group uses judgement in assessing the lease term (including anticipated renewals/termination options).
The SPV Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
Short-term leases and leases of low-value assets
The SPV Group has elected not to recognise right of use assets and lease liabilities for short term leases of all the assets that have a lease term of twelve months or less with no purchase option and leases for which the underlying asset is of low value. The lease payments associated with these leases are recognized as an expense on a straightline basis over the lease term.
c. Revenue from contracts with customer
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the SPV Group expects to be entitled in exchange for those goods or services. SPV Group has generally concluded that it is the principal in its revenue arrangements because it typically controls the goods or services before transferring them to the customer.
The accounting policies for the specific revenue streams of the SPV Group as summarized below:
i Construction Income
Revenue, where the performance obligation is satisfied over time since the SPV Group creates assets that the customer controls, is recognised in proportion to the stage of completion of the contract. The stage of completion is assessed by reference to surveys of work performed. Contract costs are recognised as an expense in the Statement of Profit and Loss in the accounting periods in which the work to which they relate is performed.
ii Operational and maintenance Income
The SPV Group is required to carry out operations and maintenance on the road annually with an obligation to carry out periodic maintenance in terms of the concession at regular intervals. Revenue is recognized when services are performed and contractually billable.
iii Income from Service Concession Arrangement (Finance Income)
The SPV Group recognizes the considerations given by the grantor, i.e., NHAI in accordance with the Appendix D to Ind AS 115 - Service Concession Arrangements under financial assets mode. Under financial assets mode, the SPV Group has an unconditional contractual right to receive cash i.e. fixed annuity after concession period including interest thereon. The finance income calculated on the basis of the effective interest rate in accordance with the Ind AS 109. The finance income is recognized under other operating income.
iv Variable consideration
The SPV Groups claim for bonus, incentives and other claims in rates relating to execution of contracts are recognized as revenue in the year in which said claims are finally accepted by the clients. Claims under arbitration/disputes are accounted as income based on final award. Expenses on arbitration are accounted as incurred.
v Contract balances Contract assets
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the SPV Group performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional.
Trade receivables
A receivable is recognised if an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due). Refer to accounting policies of financial assets in section (b) Financial instruments - initial recognition and subsequent measurement.
Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the SPV Group has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before SPV Group transfers goods or services to the customer, a contract liability is recognised when the payment is made, or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the SPV Group performs under the contract.
vi Recognition of interest income and insurance claim Interest income is recognised using the effective interest method.
The ‘effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to:
- the gross carrying amount of the financial asset; or
- the amortised cost of the financial liability.
Insurance claims are accounted for on the basis of claims admitted/expected to be admitted and to the extent that there is no uncertainty in receiving the claims.
d. Service concession arrangement
The SPV Group constructs or upgrades infrastructure (construction or upgrade service) used to provide to public service and operates and maintains that infrastructure (operation service) for a specified period of time. These arrangement may include infrastructure used in a public-to-private service concession arrangement for its entire useful life.
The SPV Group recognizes the considerations given by the grantor, i.e., NHAI in accordance with Appendix D to Ind AS 115 - ‘Revenue from Contracts with Customers. The SPV Group recognizes a financial asset to the extent that it has an unconditional contractual right to receive cash. As per Service Concession Arrangement the financial assets need to be recognized in accordance with Ind AS 109. Ind AS 109 requires a financial asset to be measured at its fair value on first recognition and any difference between the initial measurement of the financial assets in accordance with Ind AS 109 and the contract assets recognized under Ind AS 115 to be presented as an expense. Subsequently, financial assets recognized at amortised cost. Any subsequent modifications to the contractual cash flows are accounted through the statement of profit and loss account in accordance with the Ind- As 109.
e. Income tax
Income tax comprises current and deferred tax. It is recognised in the special purpose combined statement of profit and loss except to the extent that it relates to an item recognised directly in equity or in OCI.
i Current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax reflects the best estimate of the tax amount expected to be paid or received after considering the uncertainty, if any, related to income taxes. It is measured using tax rates (and tax laws) enacted or substantively enacted by the reporting date.
ii Deferred tax
Deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on the laws that have been enacted or substantively enacted by the reporting date. The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the SPV Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the corresponding amounts used for taxation purposes. Deferred tax is also recognised in respect of carried forward tax losses and tax credits.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which they can be used. Deferred tax liabilities are recognised for all taxable temporary differences. The existence of unused tax losses is strong evidence that future taxable profit may not be available. Therefore, in case of a history of recent losses, the SPV Group recognises a deferred tax asset only to the extent that it has sufficient taxable temporary differences or there is convincing other evidence that sufficient taxable profit will be available against which such deferred tax asset can be realised. Deferred tax assets -unrecognised or recognised, are reviewed at each reporting date and are recognised/ reduced to the extent that it is probable/ no longer probable respectively that the related tax benefit will be realised.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
f. Borrowing cost
Borrowing costs are interest and other costs incurred in connection with the borrowing of funds. Borrowing costs directly attributable to acquisition or construction of an asset which necessarily take a substantial period of time to get ready for their intended use are capitalised as part of the cost of that asset. Other borrowing costs are recognised as an expense in the special purpose combined statement of profit and loss in the period in which they are incurred.
Capitalization of borrowing costs ceases when substantially all the activities necessary to prepare the qualifying assets for their intended uses are complete.
g. Provisions and contingencies
A provision is recognised if, as a result of a past event, the SPV Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are measure based on managements estimate required to settle the obligation at the balance sheet date and are discounted the expected future cash flows (representing the best estimate of the expenditure required to settle the present obligation at the balance sheet date) at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.
Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that the outflow of resources would be required to settle the obligation, the provision is reversed.
Contingencies
Disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not require an outflow of resources embodying economic benefits or the amount of such obligation cannot be measured reliably. When there is a possible obligation or a present obligation in respect of which likelihood of outflow of resources embodying economic benefits is remote, no provision or disclosure is made.
h. Earnings per unit
Basic earnings per unit is calculated by dividing the net profit or loss for the period attributable to unit holders by the weighted average number of units outstanding during the year.
For the purpose of calculating diluted earnings per unit, the net profit or loss for the period attributable to unit holders and the weighted average number of units outstanding during the period are adjusted for the effects of all dilutive potential equity units.
i. Operating segments
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (CODM) of the SPV Group. The CODM is responsible for allocating resources and assessing performance of the operating segments of the SPV Group.
j. Cash and cash equivalents
Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, that are readily convertible to a known amount of cash and subject to an insignificant risk of changes in value.
For the purpose of the combined statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the SPV Groups cash management.
Principal Components of Combined Statement of Profit and Loss Income
Our total income consists of (i) revenue from operations, (ii) interest on deposits with banks, (iii) interest from vendor advance and income tax refund and (iv) other income.
Revenue from operations
Revenue from operations primarily comprises:
(i) Revenue from contracts with customers: Revenue from contracts with customers primarily consists of construction income and operation and maintenance income.
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Project SPV expects to be entitled in exchange for those goods or services. The Project SPVs have generally concluded that they are the principal their revenue arrangements because they typically controls the goods or services before transferring them to the customer. The accounting policies for the specific revenue streams of the Project SPVs are as summarized below:
Construction Income
Revenue, where the performance obligation is satisfied over time since the Project SPV creates assets that the customer controls, is recognised in proportion to the stage of completion of the contract. The stage of completion is assessed by reference to surveys of work performed. Contract costs are recognised as an expense in the statement of profit and loss in the accounting periods in which the work to which they relate is performed.
Operational and maintenance Income
The Project SPVs are required to carry out operations and maintenance on the road annually with an obligation to carry out periodic maintenance in terms of the concession at regular intervals. Revenue is recognized when services are performed and contractually billable.
(ii) Other operating revenue: Other operating income includes finance income consisting of interest income on financial assets which is created in accordance with Ind AS by adopting financial asset model for future annuity receivables from the NHAI. The Project SPV recognizes the considerations given by the grantor, i.e., NHAI in accordance with the Appendix C to Ind AS 115 - Service Concession Arrangements under financial assets mode. Under financial assets mode, the Project SPV has an unconditional contractual right to receive cash i.e. fixed annuity after concession period including interest thereon. The finance income calculated on the basis of the effective interest rate in accordance with the Ind AS 109. The finance income is recognized under other operating income.
Interest on deposits with banks
Interest on deposits with banks primarily consists of interest income arising from deposits with banks.
Interest from vendor advance and income tax refund
Interest from vendor advance and income tax refund primarily consists of interest income from advances made to vendors and income tax refunds.
Other income
Other income primarily consists of other non-operating income.
Expenses
Our expenses primarily consist of (i) sub-contractor charges, (ii) employee benefits expenses, (iii) finance costs and (iv) other expenses.
Sub-contractor charges
Sub-contractor charges comprise (a) sub-contract charges (EPC contract) and (b) sub-contract charges (O&M contract).
Employee benefits expenses
Employee benefits expenses comprise salaries, wages and bonuses paid to employees. Since the employees work for the Project SPVs on a secondment basis from GRIL, costs in relation to employee benefits (i.e., towards gratuity, leave encashment and post-retirement benefits) are borne by the GRIL at the first instance, which is then reimbursed by the Project SPVs by way of invoices raised on the respective Project SPVs. Upon consummation of the Formation Transactions, the employees of GRIL, who are currently engaged by the Project SPVs on a secondment basis, will be transferred as full time employees of the respective Project SPVs. Accordingly, upon the consummation of the Formation Transactions, all employee benefits expenses (such as a salaries, wages and other statutory employment benefits) in respect to such employees will be borne by the respective Project SPVs.
Finance costs
Finance costs comprise (a) interest payable on borrowings from banks, debentures, customer advances (mobilization) and unsecured loans availed from GRIL; and (b) other borrowing costs.
Other expenses
Other expenses include expenses in relation to (a) short term leases, (b) insurance, (c) legal and professional charges, (d) independent engineers fees, (d) labour charges and labour cess, (e) electricity and (f) miscellaneous expenses.
Results of Operations
The following table sets forth certain information with respect to the results of operations of the SPV Group for the six months period and financial years indicated:
| Particulars | Six month period ended September 30, 2023 | Year Ended March 31, 2023 | Year Ended March 31, 2022 | Year Ended March 31, 2021 | ||||
| (in Rs million) | Percentage of Total Income | (in Rs million) | Percentage of Total Income | (in Rs million) | Percentage of Total Income | (in Rs million) | Percentage of Total Income | |
| (%) | (%) | (%) | (%) | |||||
| Income | ||||||||
| Revenue from operations | 3,680.65 | 94.73 | 15,094.87 | 98.18 | 15,857.02 | 99.10 | 21,539.65 | 99.24 |
| Interest on deposits with banks | 173.91 | 4.48 | 225.80 | 1.47 | 104.76 | 0.65 | 36.59 | 0.17 |
| Interest from vendor advance and income tax refund | 19.94 | 0.51 | 34.79 | 0.23 | 40.02 | 0.25 | 124.67 | 0.58 |
| Other income | 10.90 | 0.28 | 19.24 | 0.12 | - | - | 3.02 | 0.01 |
| Total Income - (I) | 3,885.40 | 100.00 | 15,374.70 | 100.00 | 16,001.80 | 100.00 | 21,703.93 | 100.00 |
| Expenses | ||||||||
| Sub-contractor charges | 372.76 | 9.59 | 4,118.72 | 26.79 | 11,381.55 | 71.13 | 16,365.78 | 75.40 |
| Employee benefits expenses | 2.05 | 0.05 | 3.77 | 0.02 | 3.92 | 0.02 | 4.58 | 0.02 |
| Finance costs | 2,007.86 | 51.69 | 3,758.55 | 24.45 | 3,440.87 | 21.50 | 2,648.58 | 12.20 |
| Other expenses | 147.00 | 3.78 | 283.82 | 1.85 | 332.27 | 2.08 | 341.77 | 1.58 |
| Total Expenses - (II) | 2,529.67 | 65.11 | 8,164.86 | 53.11 | 15,158.61 | 94.73 | 19,360.71 | 89.20 |
| Profit before tax (I-II) - (III) | 1,355.73 | 34.89 | 7,209.84 | 46.89 | 843.19 | 5.27 | 2,343.22 | 10.80 |
| Tax expenses | ||||||||
| Current tax | 304.27 | 7.83 | 208.22 | 1.35 | 1.84 | 0.01 | - |
- |
| Adjustment of tax related to earlier year (net) | - | - | - | - | - | - | (202.75) | (0.93) |
| Deferred tax charges | 37.93 | 0.97 | 1,731.15 | 11.26 | 212.67 | 1.33 | 1,051.51 | 4.84 |
| Total tax expenses (IV) | 342.20 | 8.80 | 1,939.37 | 12.61 | 214.51 | 1.34 | 848.76 | 3.91 |
| Net profit for the period/year (V) + (III) - (IV) | 1,013.53 | 26.09 | 5,270.47 | 34.28 | 628.68 | 3.93 | 1,494.46 | 6.89 |
Six month period ended September 30, 2023 Income
Total income for the six month period ended September 30, 2023 was Rs3,885.40 million, principally comprising revenue from operations of Rs3,680.65 million, interest income on deposits with banks of Rs173.91 million, interest income from vendor advance and income tax refund of Rs19.94 million and other income of Rs10.90 million.
Revenue from operations
Revenue from operations for the six month period ended September 30, 2023 was Rs3,680.65 million. Revenue from operations represented 94.73% of our total income for the six month period ended September 30, 2023.
• Revenue from contracts with customers: Revenue from contracts with customers for the six month period ended September 30, 2023 was Rs536.00 million. Revenue from contracts with customers represented 13.80% of our total income for the six month period ended September 30, 2023.
• Construction income: Construction income for the six month period ended September 30, 2023 was Rs143.99 million, which was principally attributable to civil construction revenue under contracts. Construction income represented 3.71% of our total income for the six month period ended September 30, 2023.
• Operation and maintenance income: Operation and maintenance income for the six month period ended September 30, 2023 was Rs392.01 million, which was principally attributable to O&M income, as recognized in accordance with applicable accounting standards. Operation and maintenance income represented 10.09% of our total income for the six month period ended September 30, 2023.
• Other operating revenues: Other operating income for the six month period ended September 30, 2023 was Rs3,144.65 million, which was principally attributable to finance income on financial assets carried on amortised cost. Other operating revenues represented 80.94% of our total income for the six month period ended September 30, 2023.
Interest on deposits with banks
Interest income from deposits with banks for the six month period ended September 30, 2023 was Rs173.91 million. Interest income from deposits with banks represented 4.48% of our total income for the six month period ended September 30, 2023.
Interest from vendor advance and income tax refund
Interest income from vendor advances and income tax refunds for the six month period ended September 30, 2023 was Rs19.94 million. Interest income from vendor advances and income tax refunds represented 0.51% of our total income for the six month period ended September 30, 2023.
Other income
Other income for the six month period ended September 30, 2023 was Rs 10.90 million. Other income represented 0.28% of our total income for the six month period ended September 30, 2023.
Expenses
Total expenses for the six month period ended September 30, 2023 was Rs2,529.67 million, which principally comprised sub-contractor charges of Rs372.76 million, employee benefits expenses of Rs2.05 million, finance costs of Rs2,007.86 million and other expenses of Rs147.00 million.
• Sub-contractor charges: Sub-contractor charges for the six month period ended September 30, 2023 was Rs372.76 million, which was principally attributable to sub-contracting charges paid to O&M and EPC contractors. Sub-contractor charges represented 14.74% of our total expenses for the six month period ended September 30, 2023.
• Employee benefits expenses: Employee benefits expenses for the six month period ended September 30, 2023 was Rs2.05 million, which was principally attributable to salaries, wages and bonuses payable to employees. Employee benefits expenses represented 0.08% of our total expenses for the six month period ended September 30, 2023.
• Finance costs: Finance costs for the six month period ended September 30, 2023 was Rs2,007.86 million, which was principally attributable to interest payable on borrowings from banks, debentures and interest payable on unsecured loans availed from GRIL. Finance costs represented 79.37% of our total expenses for the six month period ended September 30, 2023.
• Other expenses: Other expenses for the six month period ended September 30, 2023 was Rs147.00 million, which was principally attributable to electricity expenses, insurance expenses, independent engineers fees and labour cess. Other expenses represented 5.81% of our total expenses for the six month period ended September 30, 2023.
Profit before tax
As a result of the factors outlined above, our profit before tax was Rs1,355.73 million for the six month period ended September 30, 2023.
Tax expenses
Tax expenses for the six month period ended September 30, 2023 was Rs342.20 million which was principally attributable to current tax expenses.
Net profit for the period
As a result of the factors outlined above, our net profit for the period was Rs1,013.53 million for the six month period ended September 30, 2023.
Fiscal 2023 compared to Fiscal 2022
Income
Total income decreased by Rs627.10 million, or 3.92%, from Rs16,001.80 million for Fiscal 2022 to Rs15,374.70 million for Fiscal 2023, primarily due to a decrease in revenue from operations.
Revenue from operations
Revenue from operations decreased by Rs762.15 million, or 4.81%, from Rs15,857.02 million for Fiscal 2022 to Rs15,094.87 million for Fiscal 2023, primarily due to a decrease in construction income on account of two projects, namely GASHPL and GSSHPL, achieving PCOD in Fiscal 2022 and one project, namely, GDDHPL, achieving PCOD in Fiscal 2023. Revenue from operations represented 98.18% and 99.10% of our total income in Fiscals 2023 and 2022, respectively.
• Revenue from contracts with customers: Revenue from contracts with customers decreased by Rs7,545.40 million or 62.97%, from ^ 11,983.11 million in Fiscal 2022 to Rs4,437.71 million in Fiscal 2023, which was principally attributable to a decrease in construction income. Revenue from contracts with customers represented 28.86% and 74.89% of our total income in Fiscals 2023 and 2022, respectively.
• Construction income: Construction income decreased by Rs7,774.40 million or 66.16%, from 11,751.29 million in Fiscal 2022 to Rs3,976.89 million in Fiscal 2023, which was principally attributable to two projects achieving PCOD in Fiscal 2022 and one project achieving PCOD in Fiscal 2023, as a result of which the benefit of recognising revenue at construction cost in Fiscal
2022 was not available in Fiscal 2023 (resulting in lower revenues). Construction income represented 25.87% and 73.44% of our total income in Fiscals 2023 and 2022, respectively.
• Operation and maintenance income: Operation and maintenance income increased by Rs229.00 million or 98.78% from Rs231.82 million in Fiscal 2022 to Rs460.82 million in Fiscal 2023, which was principally attributable to increase in O&M income in respect of our operational projects. Operation and maintenance income represented 3.00% and 1.45% of our total income in Fiscals 2023 and 2022, respectively.
• Other operating revenues: Other operating revenue increased by Rs6,783.25 million or 175.10%, from Rs3,873.91 million in Fiscal 2022 to Rs10,657.16 million in Fiscal 2023, which was principally attributable to financial income on financial assets carried on amortised cost from certain of our projects which achieved PCOD in Fiscals 2022 and 2023. Other operating revenues represented 69.32% and 24.21% of our total income in Fiscals 2023 and 2022, respectively.
Interest on deposits with banks
Interest income on deposits with banks increased by Rs121.04 million or 115.54%, from Rs104.76 million in Fiscal
2022 to Rs225.80 million in Fiscal 2023, which was principally attributable to an increase in the deposits placed with banks towards debt service reserve accounts and major maintenance reserve accounts for certain of our operational projects which achieved PCOD in Fiscals 2022 and 2023. Interest income on deposits with banks represented 1.47% and 0.65% of our total income in Fiscals 2023 and 2022, respectively.
Interest from vendor advances and income tax refund
Interest income from vendor advances and income tax refunds decreased by Rs5.23 million or 13.07%, from Rs40.02 million in Fiscal 2022 to Rs34.79 million in Fiscal 2023, which was principally attributable to lower interest income on mobilization advances given to the EPC contractor upon certain projects achieving PCOD in Fiscals 2022 and 2023. Interest income from vendor advances and income tax refunds represented 0.23% and 0.25% of our total income in Fiscals 2023 and 2022, respectively.
Other income
Other income increased by Rs19.24 million, from Rs0 in Fiscal 2022 to Rs19.24 million in Fiscal 2023, which was principally attributable to mark-to-market gains on certain investments in liquid mutual funds and a one-time insurance claim receipt. Other non-operating income represented 0.12% and 0.00% of the total income in Fiscals 2023 and 2022, respectively.
Expenses
Total expenses decreased by Rs6,993.75 million, or 46.14%, from Rs15,158.61 million for Fiscal 2022 to Rs8,164.86 million for Fiscal 2023, primarily due to a reduction in sub-contractor charges on account of completion of underconstruction projects.
• Sub-contractor charges: Sub-contractor charges decreased by Rs7,262.83 million or 63.81%, from 11,381.55 million in Fiscal 2022 to Rs4,118.72 million in Fiscal 2023, which was principally attributable to two projects achieving PCOD in Fiscal 2022 and one project achieving PCOD in Fiscal 2023, as a result of which construction costs reduced in Fiscal 2023 as compared to Fiscal 2022. Sub-contractor charges represented 50.44% and 75.08% of our total expenses in Fiscals 2023 and 2022, respectively.
• Employee benefits expenses: Employee benefits expenses decreased by Rs0.15 million or 3.83%, from Rs3.92 million in Fiscal 2022 to Rs3.77 million in Fiscal 2023, which was principally attributable to transfer of employees to GRIL upon projects achieving PCOD and other employee redundancies. Employee benefit expenses represented 0.05% and 0.03% of our total expenses in Fiscals 2023 and 2022, respectively.
• Finance costs: Finance costs increased by Rs317.68 million or 9.23%, from Rs3,440.87 million in Fiscal 2022 to Rs3,758.55 million in Fiscal 2023, which was principally attributable to an increase in the interest payable on borrowings from banks and debentures. Finance costs represented 46.03% and 22.70% of our total expenses in Fiscals 2023 and 2022, respectively.
• Other expenses: Other expenses decreased by Rs48.45 million or 14.58%, from Rs332.27 million in Fiscal 2022 to Rs283.82 million in Fiscal 2023, which was principally attributable to a reduction in legal and professional fees, fees payable to independent engineers, labour charges and labour cess. Other expenses represented 3.49% and 2.19% of our total expenses in Fiscals 2023 and 2022, respectively.
Profit before tax
As a result of the factors outlined above, our profit before tax was Rs7,209.84 million for Fiscal 2023 compared to Rs843.19 million for Fiscal 2022.
Tax expenses
Tax expenses increased by Rs1,724.86 million or 804.09%, from ^214.51 million for Fiscal 2022 to Rs1,939.37 million for Fiscal 2023, which was principally attributable to an increase in deferred tax liabilities.
Net profit for the year
As a result of the factors outlined above, our net profit for the year was Rs5,270.47 million for Fiscal 2023 compared to Rs628.68 million for Fiscal 2022.
Fiscal 2022 compared to Fiscal 2021
Income
Total income decreased by Rs5,702.13 million, or 26.27%, from Rs21,703.93 million for Fiscal 2021 to Rs16,001.80 million for Fiscal 2022, primarily due to a decrease in revenue from operations.
Revenue from operations
Revenue from operations decreased by Rs5,682.63 million, or 26.38%, from Rs21,539.65 million for Fiscal 2021 to Rs15,857.02 million for Fiscal 2022, primarily due to a decrease in the construction income on account of two projects achieving PCOD during Fiscal 2021 and two projects achieving PCOD in Fiscal 2022. Revenue from operations represented 99.10% and 99.24% of our total income in Fiscals 2022 and 2021, respectively.
• Revenue from contracts with customers: Revenue from contracts with customers decreased by Rs4,786.12 million or 28.54%, from Rs16,769.23 million in Fiscal 2021 to ^11,983.11 million in Fiscal 2022, which was principally attributable to a decrease in construction income as three projects, namely VSEPL and PDEPL, achieved PCOD in Fiscal 2021, and two projects, namely GASHPL and GSSHPL, achieving PCOD in Fiscal 2022, resulting in only O&M revenue and construction income for remaining works in Fiscal 2022 from these projects. Revenue from contracts with customers represented 74.89% and 77.26% of our total income in Fiscals 2022 and 2021, respectively.
• Construction income: Construction income decreased by Rs4,861.00 million or 29.26%, from Rs16,612.29 million in Fiscal 2021 to ^11,751.29 million in Fiscal 2022, which was principally attributable to three HAM projects achieving PCOD in Fiscal 2021 and two HAM projects achieving PCOD in Fiscal 2022, as a result of which the benefit of recognising revenue at construction cost in Fiscal 2021 was not available in Fiscal 2022 (resulting in lower revenues). Construction income represented 73.44% and 76.54% of our total income in Fiscals 2022 and 2021, respectively.
• Operation and maintenance income: Operation and maintenance income increased by Rs74.88 million or 47.71% from Rs156.94 million in Fiscal 2021 to Rs231.82 million in Fiscal 2022, which was principally attributable to increase in O&M income in respect of our operational projects. Operation and maintenance income represented 1.45% and 0.72% of our total income in Fiscals 2022 and 2021, respectively.
• Other operating revenues: Other operating revenue decreased by Rs896.51 million or 18.79%, from Rs4,770.42 million in Fiscal 2021 to Rs3,873.91 million in Fiscal 2022, which was principally attributable to a one-time impact in financials due to the applicability of GST on annuities received from the NHAI pursuant to certain directives issued by the NHAI in Fiscal 2022. Other operating revenues represented 24.21% and 21.98% of our total income in Fiscals 2022 and 2021, respectively.
Interest on deposits with banks
Interest income on deposits with banks increased by Rs68.17 million or 186.31%, from Rs36.59 million in Fiscal 2021 to Rs104.76 million in Fiscal 2022, which was principally attributable to an increase in the deposits placed with banks towards debt service reserve account (DSRA) for certain of our operational projects. Interest income on deposits with banks represented 0.65% and 0.17% of our total income in Fiscals 2022 and 2021, respectively.
Interest from vendor advances and income tax refund
Interest income from vendor advances and income tax refunds decreased by Rs84.65 million or 67.90%, from Rs124.67 million in Fiscal 2021 to Rs40.02 million in Fiscal 2022, which was principally attributable to lower interest income on mobilization advances given to the EPC contractor upon certain projects achieving PCOD. Interest income from vendor advances and income tax refunds represented 0.25% and 0.58% of our total income in Fiscals 2022 and 2021, respectively.
Other income
Other income decreased by Rs3.02 million or 100%, from Rs3.02 million in Fiscal 2021 to 0 in Fiscal 2022, which was principally attributable to a one-time insurance payment received in Fiscal 2021 in relation to a claim made by VSEPL. Other non-operating income represented 0.00% and 0.01% of the total income in Fiscals 2022 and 2021, respectively.
Expenses
Total expenses decreased by Rs4,202.10 million, or 21.70%, from Rs19,360.71 million for Fiscal 2021 to Rs15,158.61 million for Fiscal 2022, primarily due to a reduction in sub-contractor charges on account of completion of underconstruction projects.
• Sub-contractor charges: Sub-contractor charges decreased by Rs4,984.23 million or 30.46%, from Rs16,365.78 million in Fiscal 2021 to ^11,381.55 million in Fiscal 2022, which was principally attributable to two HAM projects achieving PCOD in Fiscal 2022, as a result of which the construction costs reduced in Fiscal 2022 as compared to Fiscal 2021. Sub-contractor charges represented 75.08% and 84.53% of our total expenses in Fiscals 2022 and 2021, respectively.
• Employee benefits expenses: Employee benefits expenses decreased by Rs0.66 million or 14.41%, from Rs4.58 million in Fiscal 2021 to Rs3.92 million in Fiscal 2022, which was principally attributable to the transfer of employees to GRIL upon projects achieving PCOD and other employee redundancies. Employee benefit expenses represented 0.03% and 0.02% of our total expenses in Fiscals 2022 and 2021, respectively.
• Finance costs: Finance costs increased by Rs792.29 million or 29.91%, from Rs2,648.58 million in Fiscal 2021 to Rs3,440.87 million in Fiscal 2022, which was principally attributable to an increase in the interest payable on borrowings from banks and debentures. Finance costs represented 22.70% and 13.68% of our total expenses in Fiscals 2022 and 2021, respectively.
• Other expenses: Other expenses decreased by Rs9.50 million or 2.78%, from Rs341.77 million in Fiscal 2021 to Rs332.27 million in Fiscal 2022, which was principally attributable to reduction in fees payable to independent engineers and labour cess. Other expenses represented 2.19% and 1.77% of our total expenses in Fiscals 2022 and 2021, respectively.
Profit before tax
As a result of the factors outlined above, our profit before tax was Rs843.19 million for Fiscal 2022 compared to Rs2,343.22 million for Fiscal 2021.
Tax expenses
Tax expenses decreased by Rs634.25 million or 74.73%, from Rs848.76 million for Fiscal 2021 to Rs214.51 million for Fiscal 2022, which was due to a reduction in deferred tax liabilities. There were no current tax expenses in Fiscal 2021.
Net profit for the year
As a result of the factors outlined above, our net profit for the year was Rs628.68 million for Fiscal 2022 compared to Rs1,494.46 million for Fiscal 2021.
Cash Flows
The following table sets forth certain information relating to the cash flows of the SPV Group on a combined basis for the six month period ended September 30, 2023 and the years ended March 31, 2023, March 31, 2022 and March 31, 2021 :
| Particulars | Six month period ended September 30, 2023 | Year Ended March 31, 2023 | Year Ended March 31, 2022 | Year Ended March 31, 2021 |
| Net cash generated from / (used in) operating activities | 4,980.97 | 4,726.22 | (3,980.93) | (9,439.11) |
| Net cash (used in) investing activities | (741.71) | (1,508.92) | (1,506.47) | (1,191.97) |
| Net cash from (used in)/ generated from financing activities | (4,454.68) | (4,718.40) | 6,257.81 | 11,784.37 |
Operating activities
Net cash flow generated by operating activities for six month period ended September 30, 2023 was Rs4,980.97 million, which was principally attributable to operational revenue from annuities received from the NHAI.
Net cash flow generated by operating activities for Fiscal 2023 was Rs4,726.22 million, which was principally attributable to operational revenue from annuities receivable from the NHAI, which was partially offset by the construction expenses for projects under construction.
Net cash flow used in operating activities for Fiscal 2022 was Rs3,980.93 million, which was principally attributable to construction expenses for new projects.
Net cash flow used in operating activities for Fiscal 2021 was Rs9,439.11 million, which was principally attributable to construction expenses for new projects.
Investing activities
Net cash flow used in investing activities for six month period ended September 30, 2023 was Rs741.71 million, which was principally attributable to investments in fixed deposits with banks and investments in liquid mutual funds.
Net cash flow used in investing activities for Fiscal 2023 was Rs1,508.92 million, which was principally attributable to investments in liquid mutual funds and fixed deposits with banks.
Net cash flow used in investing activities for Fiscal 2022 was Rs1,506.47 million, which was principally attributable to investments in fixed deposits with banks.
Net cash flow used in investing activities for Fiscal 2021 was Rs1,191.97 million, which was principally attributable to investments in fixed deposits with banks.
Financing activities
Net cash flow used in financing activities for six month period ended September 30, 2023 was Rs4,454.68 million, which was principally attributable to repayment of borrowings and interest thereon.
Net cash flow used in financing activities for Fiscal 2023 was Rs4,718.40 million, which was principally attributable to repayment of borrowings and interest thereon.
Net cash flow generated by financing activities for Fiscal 2022 was Rs6,257.81 million, which was principally attributable to receipt of proceeds from borrowings.
Net cash flow generated by financing activities for Fiscal 2021 was Rs11,784.37 million, which was principally attributable to receipt of proceeds from borrowings.
Borrowings
The following table provides the types and amounts of the SPV Groups outstanding borrowings as on September 30, 2023, March 31, 2023, March 31, 2022 and March 31, 2021:
| As at September 30, 2023 | As at March 31, 2023 | As at March 31, 2022 | As at March 31, 2021 | |||||
| Non current | Current Maturities | Non current | Current Maturities | Non current | Current Maturities | Non current | Current Maturities | |
| Loan from banks - Secured | ||||||||
| Term loan - Indian rupees | 23,052.51 | 1,930.17 | 24,070.95 | 1,846.97 | 23,980.84 | 1,549.65 | 26,953.14 | 1,516.67 |
| Debentures - Secured | ||||||||
| Listed Redeemable non convertible debentures | 10,035.30 | 1,815.07 | 11,229.83 | 1,012.03 | 12,027.61 | 905.26 | ||
| Unsecured | ||||||||
| Loan from a related party | 6,550.07 | - | 7,670.15 | - | 8,329.26 | - | 8,634.52 | - |
| Total | 39,637.88 | 3,745.24 | 42,970.93 | 2,859.00 | 44,337.71 | 2,454.91 | 35,587.66 | 1,516.67 |
As of September 30, 2023, the SPV Groups total borrowings were Rs43,383.12 million, comprising secured loans of Rs36,833.05 million and unsecured loans of Rs6,550.07 million. The financing arrangements of the Project SPVs are secured by way of charges created over their moveable and fixed assets, including charges on bank accounts, present and future revenues and benefits accruing to the SPV Group under the project agreements.
Related Party Transactions
The Project SPVs have, in the course of their business and operations, entered into various transactions with related parties, such as operation and maintenance charges, loans and advances and EPC costs.
For further information on our related party transactions, see "Related Party Transactions" on page 230.
Known Trends or Uncertainties
Other than as described in "Risk Factors" on page 18 and this section, to our knowledge there are no known trends or uncertainties that have had or are expected have a material adverse impact on our revenues or income from continuing operations.
Sufficiency of working capital
The InvIT Assets are HAM projects and require working capital only to the extent of employee costs. To that extent, the Investment Manager has confirmed that the InvIT has the ability to meet such working capital requirements for a period of at least 12 months from the date of listing of the Units.
Seasonality
All the InvIT Assets comprise HAM projects and accordingly, our business is not seasonal.
Unusual or infrequent transactions
Except as disclosed in this Offer Document, there have been no events or transactions to our knowledge which could be categorized as unusual or infrequent.
Total turnover from each major segment of the InvIT
All the Project SPVs currently operate only road projects and therefore we have only one business segment. Quantitative and Qualitative Disclosures on Market Risks Interest rate risk
As the infrastructure development and construction business is capital intensive, the Project SPVs are exposed to interest rate risk. Interest rates for borrowings have been volatile in India in recent periods. The Project SPVs infrastructure development and construction projects were funded to a large extent by debt and increases in interest expense could have an adverse effect on their results of operations and financial condition. As of March 31, 2023,
the majority of the Project SPVs total indebtedness was subject to variable rates. Although from time to time we may engage in interest rate hedging transactions and enter into new financing arrangements, there can be no assurance that we will be able to do so on commercially reasonable terms, that our counterparties will perform their obligations, or that these agreements, if entered into, will protect us adequately against interest rate risks.
Credit Risk
Credit risk on trade receivables is limited as the customers of the InvIT mainly consists of government promoted entities having strong credit worthiness.
Liquidity Risk
Liquidity risk relates to the risk that the InvIT or the Project SPVs will not be able to meet their respective obligations associated with its financial liabilities. The InvIT and the Project SPVs are exposed to liquidity risk in respect of financing arrangements and short-term and long-term investment programs mainly in their growth projects.
It is expected that the InvIT, through the Investment Manager, will regularly monitor liquidity requirements to ensure that it maintains adequate means of obtaining funds necessary in order to meet liquidity requirements in the short and longer term. Further, the InvIT and the Project SPVs aim to minimize the risk by generating sufficient cash flows from their current operations, cash and cash equivalents, liquid investments and by deploying a robust cash management system.
Significant Developments since September 30, 2023
Except as disclosed in this Offer Document and except in the ordinary course of business of the Project SPVs, we are not aware of any circumstances that have arisen since September 30, 2023 that materially and adversely affect, or are likely to affect, our operations or profitability, the values of our respective assets or our ability to pay our respective liabilities in the next twelve months.
The InvIT and the Investment Manager confirm that there has been no material change in contingent liabilities since September 30, 2023, which is the date of the latest financial information included by way of the Special Purpose Combined Financial Statements.
The InvIT and the Investment Manager confirm that there has been no material change in the capital and other commitments since September 30, 2023, which is the date of the latest financial information included by way of the Special Purpose Combined Financial Statements.
Further, the following table sets forth the monthly revenue of the Project SPVs since September 30, 2023:
For the month of |
|||||
| Project SPV | Particulars | October 2023 | November 2023 | December 2023 | January 2024 |
| GR Akkalkot Solapur | Revenue from operations | 45.95 | 46.42 | 41.19 | 46.93 |
| Highway Private Limited | Other income | 2.21 | 0.08 | 3.56 | 0.15 |
| Total Income | 48.16 | 46.49 | 44.75 | 47.08 | |
| GR Sangli Solapur Highway | Revenue from operations | 60.76 | 60.09 | 59.55 | 61.41 |
| Private Limited | Other income | 0.22 | 3.05 | 12.80 | 0.62 |
| Total Income | 60.98 | 63.15 | 72.35 | 62.03 | |
| GR Gundugolanu | Revenue from operations | 97.61 | 97.73 | 98.92 | 113.93 |
| Devarapalli Highway Private | Other income | 0.88 | 8.55 | 6.30 | 0.07 |
| Limited | Total Income | 98.49 | 106.28 | 105.22 | 114.00 |
| GR Phagwara Expressway | Revenue from operations | 60.76 | 56.52 | 24.72 | 53.56 |
| Limited | Other income | 0.22 | 0.57 | 8.69 | 0.06 |
| Total Income | 60.98 | 57.09 | 33.41 | 53.62 | |
| Porbandar Dwarka | Revenue from operations | 79.49 | 77.93 | 39.25 | 74.20 |
| Expressway Private Limited | Other income | 1.27 | 1.40 | 10.77 | 0.49 |
| Total Income | 80.76 | 79.32 | 50.02 | 74.69 | |
| Varanasi Sangam | Revenue from operations | 146.38 | 146.50 | 130.88 | 136.15 |
| Expressway Private Limited | Other income | 3.06 | 0.06 | 32.74 | 0.31 |
| Total Income | 149.44 | 146.56 | 163.62 | 136.46 | |
| Revenue from operations | 65.39 | 65.62 | 244.00 | 65.96 | |
| GR Dwarka Devariya | Other income | 0.38 | 0.56 | 11.52 | 0.89 |
| Highway Private Limited | Total Income | 65.77 | 66.18 | 255.52 | 66.85 |
Certain of the Project SPVs, namely VSEPL, GPEL, GASHPL and GDHPL, have NCDs listed on the BSE. As a result, each of VSEPL, GPEL, GASHPL and GDHPL are subject to continuous disclosure obligations under the SEBI Listing Regulations, including disclosure of their quarterly financial results for every quarter within 45 days from completion of the previous quarter. Such financial results are subject to limited review by their respective statutory auditors and are published on the websites of the abovementioned Project SPVs and BSE Limited, including for the three-month period ended December 31, 2023.
Further, in addition to the abovementioned Project SPVs, certain Project SPVs namely PDEPL, GSSHPL and GDDHPL are at present, subsidiaries of an Associate of the Investment Manager, whose equity shares are listed on the Stock Exchanges and is required to disclose quarterly financial results, on a consolidated basis, within 45 days from completion of the previous quarter. Accordingly, the financial results of each of the Project SPVs i.e. PDEPL, GSSHPL and GDDHPL for the three-month period ended December 31, 2023, have been prepared by their respective management and have been subjected to limited review by their respective statutory auditors. Such limited review financial results of the respective Project SPVs i.e., PDEPL, GSSHPL and GDDHPL have been made available on their respective websites and the website of such Associate of the Investment Manager.
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