Capital Infra Trust Management Discussions

Global Economy

Economic Momentum and Forecasts:

The global economy has shown signs of recovery in 2024, with falling inflation, stable labour markets, and steady growth near 3%. After enduring a prolonged and unprecedented series of shocks, the global economy appeared to have stabilized, with steady yet underwhelming growth rates.

Recent shifts in global trade policy are creating a complex but potential opportunity-rich environment for investors. While the U.S. has introduced a series of tariffs since February—culminating in a broad application on April 2 that briefly unsettled markets—investor sentiment has stabilized somewhat following an April 9 policy pause and new exemptions. Despite elevated uncertainty, especially around trade, global trade volumes have remained resilient, partly due to front-loaded activity ahead of anticipated measures. Equity markets have corrected but they remain relatively strong by historical standards, and elevated price-to-earnings ratios may suggest selective overvaluation rather than systemic weakness. Meanwhile, inflation trends remain mixed, with services inflation on a gradual downward path and some core goods inflation ticking up. Labor markets are softening slightly, but overall economic adjustments reflect an evolving macro landscape that may present targeted investment opportunities. For investors, this is a time to stay agile—balancing risk management with a focus on resilient sectors, geographies with fiscal space, and companies well-positioned to navigate global trade realignments. Growth projections for advanced economies from 2024 to 2030 point to a stable but modest recovery path. The U.S. is expected to lead with a stronger-than-expected 1.8% real GDP growth in 2025, before easing to moderate levels. The Euro Area, following a sluggish 2024, is projected to close at 1.3% by 2025. Across the broader group of advanced economies, growth is forecast at 1.4% in 2025, rising slightly to 2026 and holding steady through 2030. While structural factors such as aging demographics and productivity headwinds continue to limit upside potential, the overall outlook suggests a period of low-volatility, low-growth stability.

Inflation Trajectory and Central Bank Strategy :

Global inflation is projected to decline steadily, reaching 4.3% in 2025 and 3.6% in 2026, signalling a continued progress on price stability. While advanced economies see slightly higher inflation expectations, emerging and developing markets benefit from improved outlooks. Despite ongoing challenges—including trade uncertainty and structural pressures—many emerging markets have shown strong resilience. With the potential for easing trade tensions and clearer policy direction, the global environment could shift toward renewed growth momentum and improved investor confidence.

Inflation projections from 2024 to 2030 show a clear downward trend globally. Advanced economies are on track to return to pre-pandemic inflation levels—around 2.5%—by 2025, ahead of emerging and developing economies, which are expected to reach their 5.5% targets a year later. Overall, the improving inflation outlook supports a more stable investment environment over the medium term.

While global growth is expected to moderate in 2025, this environment creates strategic opportunities for long-term investors. The recent market volatility—driven by trade tensions and policy uncertainty—has begun to subside, highlighting the resilience of financial markets. For Emerging Market and Developing Economies (EMDEs), especially commodity exporters, this period presents a chance to accelerate diversification and structural reform, potentially unlocking new areas for investment. As markets adjust to the new landscape, selective, well-informed positioning can yield attractive returns amid evolving global dynamics.

Indian Economy:

India is poised to remain one of the fastest-growing major economies in 2025 and 2026, as noted by the International Monetary Fund (IMF). Even amid global uncertainty and slower growth in other leading economies, India continues to demonstrate strong momentum. Backed by solid economic fundamentals and proactive government policies, the country is well-equipped to navigate global challenges. Key reforms in infrastructure, innovation, and financial inclusion are enhancing

Indias growth potential and strengthening its global economic influence. The IMFs optimistic projections underscore Indias resilience and its growing role in shaping the future of the world economy.

(Source: https://www.pib.gov.in/PressNoteDetails.aspx?id=154474 &NoteId=154474&ModuleId=3)

As global supply chains undergo transformation, India is uniquely positioned to emerge as a central player in the new global economic landscape, driving both stability and growth.

Indias economy is forecast to grow by 6.2 per cent in 2025.

Resilient private consumption and strong public investment, alongside robust services exports, will support economic growth. Additionally, corporate investment is expected to gain further traction, supported by favourable financial conditions and a sustained increase in government capital spending.

(Source:https://www.un.org/development/desa/dpad/publication/world-economic-situation-and-prospects-as-of-mid-2025/)

Source: https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/IND

Sectoral Outlook

INFRASTRUCTURE AND CONSTRUCTION

The sector has experienced positive tailwinds from the governments sustained capital outlay, with a pronounced focus on roads and railways. This countercyclical fiscal strategy aims to catalyze economic recovery and crowd in private investment—providing a conducive backdrop for infrastructure-focused entities such as InvITs to scale operations and optimize asset performance.

MANUFACTURING

The manufacturing sector shows stable growth, driven by strong domestic demand and government-led capital spending.

Growth in automobiles and pharmaceuticals highlights the sectors strength, while emerging areas like green energy and renewables offer promising investment opportunities.

SERVICES

Indias services sector, contributing over 50% to GDP, is on a strong growth path. Backed by robust domestic demand, policysupport,andrisingforeigninvestment,thesectoroffersattractiveopportunities,particularlyinIT,financialservices,and digital infrastructure.

Inflation Overview and RBI Policy

Indias inflation trajectory for FY26 appears favorable, with the Reserve Bank of India (RBI) projecting Consumer Price Index (CPI) inflation at 4.2%. This projection is supported by expectations of a normal monsoon, which should help moderate food prices and bolster agricultural output. The RBIs accommodative monetary policy stance, including recent rate cuts, aims to balance inflation control with support for economic growth. (Source: https://www.livemint.com/economy/rbi-monetary-policy-central-bank-projects-inflation-for-fy26-at-42-11738904477272.html)

Moderate inflation and stable input costs provide a conducive environment for the road infrastructure sector. Key raw materials such as cement, steel, and bitumen, which are sensitive to inflationary pressures, are likely to see stable prices, helping to contain project costs. This stability encourages increased government and private investment in road projects, aligning with Indias ambitious infrastructure development plans.

Furthermore, controlled inflation supports favorable interest rates, reducing the cost of financing for large-scale infrastructure projects. This is critical for entities like Capital Infra Trust and other infrastructure investment trusts, as lower borrowing costs can improve project viability and returns being value accretive to unitholders.

However, the sector remains sensitive to global crude oil price volatility, which can affect transportation and construction costs. Effective management of such risks, coupled with the RBIs supportive monetary stance, is expected to sustain growth momentum in the road infrastructure space over the medium term.

Trusts Outlook

In response to prevailing global and domestic economic conditions, Capital Infra Trust is executing a focused approach on strategic fiscal management and the optimization of operational efficiencies. We continuously analyze regulatory developments and market trends to inform data-driven decisions aligned with our growth trajectory and sustainability. Our ongoing commitment to innovation and infrastructure expansion is supported by the global economic recovery and anticipated market growth. The

Trusts strategy is to deliver consistent and superior yields, by combining expert asset management with innovative structuring, prioritizing transparency, disciplined risk management and long-term value creation.

Industry Overview

Road Sector

Indias road infrastructure sector is one of the most dynamic and investment-ready segments of the countrys economy. With the second-largest road network in the world (over 6.7 million kilometers), the sector facilitates over 70% of freight and 85% of passenger traffic, making it critical to Indias growth story.

Backed by strong policy support, structural reforms, and an expanding economy, Indias road sector presents long-term, yield-generating opportunities for global and domestic investors.

Indias road network comprises:

National Highways (NHs): Approximately 2.3% of the total network but carry over 40% of road traffic. Managed by the National Highways Authority of India (NHAI).

State Highways (SHs): Managed by state governments, accounting for ~3%.

District and Rural Roads: Constituting the largest portion, connecting remote areas to urban centers.

The strategic importance of NHs and expressways continues to grow with the rapid expansion of economic corridors and access-controlled highways.

National Highways play a vital role in enabling the efficient movement of goods and passengers, improving market access, and driving regional connectivity. To further boost this infrastructure, the Government of India has implemented several major programs such as the Bharatmala Pariyojana, which integrates earlier initiatives like the National Highways Development Project (NHDP) and SARDP-NE, focusing especially on the North-East.

(Source: IBEF.org)

Highway Construction in India

Highway construction in India has emerged as a central focus of infrastructure development, playing a vital role in economic growth, regional connectivity, and national integration. With over 146,000 km of National Highways (NHs) as of 2024—accounting for ~2% of the road network but carrying more than 40% of total traffic—India is rapidly transforming its highway landscape.

The government aims to maintain road construction momentum with an expected addition of up to 13,000 km of highways in FY25, representing an annual growth of 5–8%. Ambitious targets have also been set under the Union Budget 2025–26, which allocates 2.87 lakh crore (US$ 32.94 billion) to the Ministry of Road Transport and Highways, alongside a private sector investment goal of 35,000 crore (US$ 4.02 billion). Specific high-impact projects include the 28.9 km Northern Patiala Bypass, with an investment of 1,255.59 crore (US$ 150 million).

NHAI Awarding:

In FY25, the total award under MoRTH was lower as compared to average awarding in last 5 FYs, due to the model code of conduct for the general elections.

Pace of NH construction increased 2.8 times to 33.8 km/day (2023-24) from 12.1 km/day (2014-15) but has slowed down to 21.3 Km/day in FY25 . *The data is till December 2024

Structure of the Industry:

Historically, infrastructure development in India has been largely driven by public sector investment. However, in recent years, the Government of India (GoI) has introduced several initiatives to attract greater private sector involvement. This approach aims to enhance project design and execution quality, reduce costs, and ensure timely completion. To support this, various Public-Private Partnership (PPP) models have been implemented, offering structured frameworks for collaboration. Some commonly used construction business models are

Type of project	Description	Development risk	Financing risk	Traffic risk and accrual of toll fee collection	Net cash outflow for the government	Revenue for private party	Concession period	Award criteria
BOT-Toll	Private party builds road, undertakes O&M and collects toll	Concessionaire	Concessionaire	Concessionaire	Yes (In form of grant/ equity support)	Toll	Around 20- 30 years for the NHAI and other authorities	Highest revenue sharing bid / Highest premium/ lowest equity support
BOT- Annuity	Private party builds road, undertakes O&M* and collects annuity from the granting authority	Concessionaire	Concessionaire	Authority	Yes, net payment to be made is the difference between the toll collection and the annuity payable	Annuity payment	Around 15-20 years for NHAI and other authorities	Lowest annuity
BOT- HAM	Private party builds road,undertakes O&M. Gets 40 percent of payment during construction and 60 percent as annuity along with interest	Concessionaire	Concessionaire	Authority	40 percent during construction and 60 percent as semi-annual annuity along with interest, net of toll collected	Construction grant plus annuity payments interest on annuities, inflation indexed O&M payments	Around 15 years of operations plus additional construction period	Lowest project cost plus O&M cost
EPC	Private party builds road, based on the cost incurred by the government	Concessionaire	Authority	Authority	Yes	Contract amount	Not required	Lowest contract price requester
OMT	Private party collects toll and undertakes O&M and major maintenance	No development risk except minimal risk in case of paved shoulders	Concessionaire	Concessionaire	No	Toll	Up to nine years for NHAI projects	Highest percent of toll revenue share or highest premium per year
Tolling	Private party pays the estimated toll upfront to the authority and collects the toll during concession period	No development	Concessionaire	Concessionaire	No	Toll	Around one year for NHAI projects	Highest revenue- sharing bid

 

Type of project	Description	Development risk	Financing risk	Traffic risk and accrual of toll fee collection	Net cash outflow for the government	Revenue for private party	Concession period	Award criteria
TOT	Private party pays the estimated toll (revenue share) upfront to the authority, undertakes O&M plus certain capex and collects the toll duringconcession period	Authority (in case upgradation of lanes is taken up during the concession period)	Concessionaire	Concessionaire	No	Toll	15-20 years	Highest upfront payment

Highway Sector Growth Drivers:

Government Initiatives and Increased Spending

• Large-scale projects like Bharatmala Pariyojana and National Infrastructure Pipeline (NIP) focus on expanding and upgrading road infrastructure.

• Enhanced budget allocations and policy reforms accelerate project execution.

Rising Freight and Passenger Traffic

• Over 70% of freight and 85% of passenger movement happens via roads, driving demand for better connectivity and road quality.

Public-Private Partnerships (PPP) and FDI

• Increased private sector participation through toll-operate-transfer (TOT) models, infrastructure investment trusts (InvITs), and PPP projects.

• 100% Foreign Direct Investment (FDI) allowed in the sector boosts funding and technology transfer.

Economic Growth and Urbanization

• Rapid industrialization, urban expansion, and rising vehicle ownership increase road usage and necessitate infrastructure development.

Technological Advancements

• Adoption of smart technologies like Intelligent Transportation Systems (ITS), electronic toll collection (FASTag), and digital monitoring improves efficiency and safety.

Focus on Sustainable Infrastructure

• Growing emphasis on eco-friendly construction methods and materials supports environmentally responsible growth.

Improved Financing and Regulatory Frameworks

• Streamlined project approvals, land acquisition reforms, and improved contract enforcement enhance investor confidence.

Industry Outlook:

The roads sector continues to be a focus area for the government with 22% of the capex allocation towards the Ministry of Road Transport and Highways (MoRTH). Growth in capex during FY26 is likely to be slower than that seen during FY18-FY24. Project awards are likely to improve in FY26 across BOT, HAM, toll-operate transfer (TOT). Resolving land-related issues in HAM projects, completing the planned BOT awards and a road map for road connectivity are required to increase the construction momentum compared to the lull witnessed during FY25, majorly due to the elections and unseasonal/excess rains.

Furthermore, the governments aim to increase the focus on the quality of construction and maintenance, including the introduction of performance assessment rating system, evaluated bi-annually and monitored digitally, augurs well for the sector.

Moderate toll growth trend to continue at 7%-7.5% yoy in FY26, given the expected Wholesale Price Index level and intermodal shift in traffic. The aggregate toll income growth was 4.3% yoy in H1FY25 and the overall growth is estimated to be 5.5%-6% yoy in FY25. Traffic growth for specific projects could moderate due to an improvement in alternate routes, start of greenfield expressways, a volume pick-up in dedicated freight corridors as the extent of operations improve with completion, among others. These considerations are critical in BOT and TOT bids as well.

INFRASTRUCTURE INVESTMENT TRUSTS (InvITs)

Introduced in 2014 through SEBIs Infrastructure Investment

Trust (InvIT) regulations, InvITs have rapidly evolved to become a significant force in Indias infrastructure financing landscape.

They have helped democratize infrastructure ownership by allowing a broad range of investors to participate in income-generating assets such as roads, transmission networks, telecom infrastructure, fibre optics, warehousing, and renewable energy projects.

InvITs have emerged as a highly regulated, safe and transparent investment vehicle providing an opportunity to investors to participate in the countrys infrastructure growth story. With stringent regulations governing InvITs, they operate with high quotient of corporate governance and provide superior risk-adjusted returns to its unitholders.

Features and Benefits of an Invit

Key Regulatory Tenets

Minimum 90% NDCF distributed to unitholders, at least semi-annually

Minimum 80% portfolio of operational assets

Leverage ceiling at 70%

Mandatory AAA credit rating

Unitholder approval for all key decisions

Board representation for unitholders with stake beyond 10%

Benefits of InvITs

Provide long-term financing option for existing infrastructure projects

Free up developer capital for reinvestment into new infrastructure projects

To bring higher standards of governance into infrastructure development and management

Facilitation of ownership of diversified infrastructure assets for retail investors

Low-risk investments option to benefit long-term investors

Growth potential for investors

Infrastructure Investment Trusts have gained traction as a means of asset monetisation, offering investors relatively stable returns and fostering Infrastructure development. As on March 31, 2024, the AUM of InvITs in India stood at 5.39 lakh crore representing a significant 29% growth compared to March 31, 2023. AUM of

InvITs further rose to 5.87 lakh crore by September 30, 2024.

Assets under InvITs represent diverse sectors, such as roads, transmission, telecom, pipeline, renewable and warehousing, with a leading share of telecom of more than 50% of the AUM, followed by roads at 35% and transmission at 7%. InvITs are anticipated to further contribute to Indias infrastructure development by offering fresh investment opportunities and unlocking growth capital for developers.

(Source: CARE Ratings)

InvITs offer a transparent, regulated investment structure that accommodates both large and small investors. As on date, there are 26 InvITs registered with SEBI—five of which are publicly listed and 18 privately listed. Together, these trusts have raised approximately 1.4 lakh crore in equity since 2019.

Recognized for their high standards of corporate governance and regulatory oversight, InvITs provide a relatively safe and stable investment option, delivering strong risk-adjusted returns. They have firmly established themselves as an essential vehicle for channeling capital into Indias long-term infrastructure development.

Road InvITs

Roads InvITs contributed the highest in terms of the number of assets, spread across 152 road assets, with an Assets under management (AUM) of ~ 2 lakh crore, as on September

30, 2024. The segment is dominated by mature toll roads, constituting 57% of the assets, followed by Hybrid Annuity Model (HAM) assets at 28%.

During the 15 months ended September 30, 2024, 49 additional assets have been transferred to InvITs, these include 26 HAM assets, 22 toll assets, and an annuity asset. Key drivers for this trend include 1) increased monetisation activity for HAM assets, 2) transfer of toll projects to National Highways

Infrastructure Trust (NHIT, rated CARE AAA; Stable, CARE A1+), and 3) transfer of some Toll Operate-Transfer (TOT) assets as well as mature toll roads.

AUM of infrastructure investment trusts (InvITs) in the road sector are poised to surge ~68% to ~ 3.2 lakh crore by March 2026, from ~ 1.9 lakh crore as of September 2024. The growth will be fuelled by the expansion of existing InvITs asset pool and the emergence of new InvITs. The AUM growth will be accompanied by diversification in terms of geography and concession type, which will help build resilience. This, along with leverage levels being under control will keep credit profiles of road InvITs strong.

Capital Infra Trust

Corporate Structure and Infrastructure Portfolio

Capital Infra Trust core focus is management and maintenance of roads and highways. With a diversified portfolio of nine Build-Operate-Transfer (BOT) assets under the Hybrid Annuity Model (HAM) as initial portfolio, Trust aspire to be a key contributor to the nations infrastructure development. The Trust is open to expand its footprints through the strategic addition from its sponsor (under ROFO agreement) as well as third parties to further strengthen its portfolio.

Trusts success is underpinned by its meticulous assets in its pool, presently only HAM assets. The Trusts experienced leadership team, with deep sectoral expertise, enables it to mitigate risks effectively, and make data-driven decisions. Insummary,Trustremainscommittedtosustainableinfrastructure development, driven by strategic asset management, prudent investment, and a forward-looking vision aligned with Indias long-term growth objectives.

Enhancing Operational Performance

We are dedicated to achieving operational excellence by implementing standardized processes, integrating advanced technologies, and actively engaging with local communities. These efforts are designed to enhance user experience and ensure optimal operational efficiency. Through strict adherence to standard operating procedures (SOPs) and data-driven decision-making, we maximize resource utilization and improve strategic outcomes.

Our community engagement initiatives help us building strong local relationships and provide valuable insights into regional priorities. At the same time, our focus on compliance, cost control and process optimization strengthen operational discipline and reduces risk. By leveraging automation and predictive maintenance, we look forward to enhancing asset performance, improve cost efficiency and solidify our position as a trusted leader in infrastructure management.

As we look ahead, our continued investment in operational capabilities and stakeholder relationships will remain a key driver of value creation and long-term growth.

Financial Performance:

Revenue Performance:

Since, FY2025 was the maiden year for Trust, the financials pertains for the period starting from January 14, 2025 to March 31,2025. Trust has concluded FY25 with a strong AUM of J49,120 million. On a consolidated basis, total income works out to J1,700 million with net loss of J 370 million since the accounts have been prepared for the first time for the period January 14, 2025 (i.e date of acquisition) to March 31, 2025.

Funding Overview and Strategy:

Following its listing, Capital Infra Trust has successfully refinanced all third-party debt across its Special Purpose Vehicles (SPVs) and consolidated borrowings at the Trust level. Trust has accessed diverse capital sources by raising Non-

Convertible Debentures (NCDs) amounting to 23,630 million from private sector banks and financial institutions.

These NCDs, with an average tenor of approximately 13 years, have been assigned a AAA rating by CRISIL, reflecting strong creditworthiness. The entire issuance was fully subscribed at a average coupon rate of around 7.68% per annum, with interest payable on a semi-annual basis.

In total, the Trust has on-lent 34,050 million to its SPVs, drawing 10,420 million from the initial issue proceeds and an additional 23,630 million from NCD issuances. These loans have been used in extinguishing outstanding debt obligations, including unsecured loans, thereby reducing the overall cost of capital and strengthening the balance sheet.

This approach underscores the Trusts commitment to prudent financial management, ensuring optimized leverage and enhanced credit metrics to support sustainable growth and investor confidence.

Distributions:

During the reporting period, Capital Infra Trust received total distributions of approximately 6,911.57 million from its project

Special Purpose Vehicles (SPVs). This inflow was composed of three key components: 5,461.65 million in dividend income, 495.94 million in interest income, and 953.98 million in the form of debt repayments. These distributions reflect the underlying strength and consistent cash-generating ability of the SPV portfolio.

After accounting for finance costs, trust-level expenses, and necessary statutory provisions, the Net Distributable Cash Flow

(NDCF) available at the Trust level stood at approximately 6,580 million. This figure underscores the operational efficiency and financial discipline maintained at both the SPV and Trust levels.

For the quarter, the Distribution Per Unit (DPU) was 23.89. This was split into two tranches, with 12.71 per unit distributed in February 2025 and the remaining 11.18 per unit paid out in

June 2025. The distribution structure was carefully designed to optimize tax efficiency for unitholders.

The total payout included 18.09 per unit as taxable dividend, 1.38 per unit as tax-free dividend, 1.04 per unit as interest income, and 3.37 and other income 0.01 per unit representing repayment of capital. This comprehensive distribution highlights the Trusts commitment to delivering stable and value-accretive returns while maintaining a balanced approach to capital allocation and compliance.