IRB Infrastructure Trust Management Discussions

1. Industry Review

Indias infrastructure opportunity

Indias firm resolve to increase its current $3.7 trillion economy to a $30-35 trillion economy by 2047, necessarily requires that our infrastructure sector, a key driver to propel the country economic growth, should be of the world class. Growing urbanisation, increasing population, growing disposable income, increasing demand for energy and financing needs for sustainable living pose a challenge for the infrastructural setup to be modern and upto the expectation of the citizen. Lack of adequate infrastructural facility is the main primary growth constraint, while good infrastructure is widely recognized as an enabler of economic growth. In the coming era of supply chain disruptions, new technologies and reversal of financial deleveraging, infrastructure growth must keep pace with the need created for it.

The Government of India has taken several reforms and initiatives and given a significant push for capital expenditures for key infrastructure sectors, especially highways. The total allocation for the highways sector has increased to Rs. 2.78 lakh crore from Rs. 2.17 lakh crore in the Union Budget for Financial year 2024-25. (Out of the total Rs. 2.78 lakh crore, the National Highways Authority of India (NHAI) has been allocated around Rs. 1.68 lakh crore as part of MoRTHs capital expenditure plan for 2024-25, a 3.9 % increase from 2023-24 (Source: Government of India, Ministry of Finance, Union Budget 2024-25). This substantial investment underscores the importance placed on enhancing the nations transportation infrastructure, which is crucial for boosting trade and connectivity.

Road and Highway sector

India has the second-largest road network in the world, spanning a total of 6.3 million kilometers (kms). Being the most preferred mode of transportation, the road network transports 64.5% of all goods in the country and 90% of Indias total passenger traffic. As of January 2024, the total length of National Highways in the country is146,145 km. Road transportation has been gradually increasing over the years with improvement in connectivity between cities, towns and villages in the country.

India aims to accelerate the development of its national highways, including high-speed access-controlled routes, to establish a world-class road network by 2047 as part of its goal to transition into a Developed Nation by 2047. The plan involves expanding the national highways network to over 2,00,000 kilometers, with a significant increase in access-controlled highways to 50,000 kilometers from the current 4,000 kilometers within the next 13 years. Additionally, the government aims to reduce road accidents by 95% over the next 25 years.

According to the MoRTH, Financial Year 2023-24 was the year of consolidation of the gains that accrued from major policy decisions taken in the previous ten years, a time for monitoring of ongoing projects, tackling roadblocks and adding to the impressive pace of work achieved during the past years. During the year, the MoRTH and its associate organizations have expanded the national highways network in the country, taking various steps to make these highways safe for the commuters and undertaking effective steps to minimize adverse impact on the environment. As a result, over the last ten years, length of National Highways has gone up by 60 % from 91,287 km in 2014 to 1,46,145 km in year 2023 out of the set target of 2,00,000 kms for 2024-25. (Source: MoRTH press release titled "Year End Review 2023 Ministry of Road Transport and Highways" dated January 5, 2024 and MoRTH Annual Report 2022-23). The length of 4-laned National Highways has increased by 2.5 times, from 18,387 km in 2014 to 46,179 km, as of November 2023. The average pace of NH construction has also seen a remarkable increase, rising to 33.83 km/ day in 2023 from the baseline 12.1 km/day in 2014.

Schemes

Bharatmala Pariyojana: This is the umbrella program for the highways sector that aims to optimize the efficiency of road traffic movement across the country by bridging critical infrastructure gaps. The Phase I of the Bharatmala Pariyojana approved in October 2017, focuses on development of 34,800 km of National Highways. The Pariyojana emphasized on a "corridor based National Highway development" to ensure infrastructure symmetry and consistent road user experience. The key components of the Pariyojana are Economic Corridors development, Inter-corridor and feeder routes development, National Corridors Efficiency Improvement, Border and International Connectivity Roads, Coastal and Port Connectivity Roads and Expressways. The Bharatmala Pariyojana phase 1 is to be completed by FY 2027-28. 34,800 km of

National Highway length was planned for development under Phase-I of Bharatmala Pariyojana. As of Dec- 2023, 26,418 km (i.e., 76% of 34,800 km) have been awarded for construction and 15,549 Km is constructed.

Under the Bharatmala Pariyojana, 60% projects have been envisaged on Hybrid Annuity Mode (HAM), 10% projects on BOT (Toll) Mode, and 30% projects on EPC mode.

Pradhan Mantri (PM) Gati Shakti National Master Plan (NMP): The seven engines that drive PM Gati Shakti are Roads, Railways, Airports, Ports, Mass Transport, Waterways and Logistics Infrastructure. The scope of PM Gati Shakti National Master Plan will encompass the seven engines for economic transformation, seamless multimodal connectivity and logistics efficiency. The projects pertaining to these 7 engines in the National Infrastructure Pipeline will be aligned with PM Gati Shakti framework. PM Gati Shakti National Master Plan is a critical tool for integrating economic & infrastructural planning and development (Source: National Master Plan (pmgatishakti.gov.in)). With multimodal infrastructure development, Indias logistics cost will reduce further, improve ease of living and ease of doing business in the country. The main aim of this program is to fasten the approval process which can now be done through the Gati Shakti portal and thus digitized the approval process completely.

National Electronic Toll Collection (FASTag) programme: the flagship initiative of MoRTH and NHAI has been implemented on pan India basis to remove bottlenecks and ensure seamless movement of traffic and collection of user fee as per the notified rates, using passive Radio Frequency Identification (RFID) technology which is made compulsory with effect from February 15, 2021. The implementation of the FASTag system for toll collection in India has been a resounding success, with a consistent growth trajectory. The daily revenue collected from tolls through the use of FASTag has reached an all-time high, of over Rs. 193 crore as on 29 April 2023 (Source: MoRTH press release dated November 21, 2019 and NHAI press release dated May 2, 2023). In FY 23-24 the total ETC collection was 54,750 crores with total ETC counts of 3,175 million. Average Daily collection via FASTag on NH fee plazas is Rs. 147.31 Crores and Number of average daily ETC transactions on NH fee plazas is 86.61 Lakhs in F.Y. 23-24 (Till Nov 2023). (Source: MoRTH press release titled "Year End Review 2023: Ministry of Road Transport and Highways" dated January 05, 2024)

Growth Drivers

To accelerate the pace of construction, several initiatives have been taken by the Government to revive the stalled projects and expedite completion of new projects:

• Identification of Model National Highway in the state for development by the Government.

• Streamlining of land acquisition and acquisition of major portion of land prior to invitation of bids

• Award of projects after adequate project preparation in terms of land acquisition, clearances etc.

• Disposal of cases in respect of Change of Scope (CoS) and Extension of Time (EoT) in a time bound manner

• Procedure for approval of General Arrangement Drawing for ROBs simplified and made online.

• Close coordination with other Ministries and State Governments.

• One-time fund infusion

• Regular review at various levels and identification/ removal of bottlenecks in project execution.

• Proposed exit for Equity Investors

• Securitization of road sector loans

• Disputes Resolution mechanism revamped to avoid delays in completion of projects.

• Mandatory Electronic toll collection through FASTag with effect from February 15, 2021

• For faster settlement of claims through conciliation and reduce liabilities, NHAI has rigorously started the process of conciliation by constituting three Conciliation Committees of Independent Experts (CCIE) of three members each.

In addition, the following initiatives will also add up to drive growth for the infrastructure sector in India:

Massive infrastructure push: The Union Budget has given much-needed impetus to infrastructure development which could reduce trade and transaction costs and improve factor productivity. Moreover, the focus on roads and railways will create a unified market in India for seamless movement of goods and human resources. The Government of India has given a massive push to the infrastructure sector. The Union Budgets are continuously giving an investment push to lift economic growth, for this fiscal, the governments revenue expenditure is budgeted to grow less than 1% after growing 2.7% in the previous fiscal. The total capex of the government (budgetary capex plus revenue grants for capital creation and capex by central public sector enterprises) is budgeted to rise 14.5% as compared with only 3.1% in the current fiscal. Hence, the government has tightened the belt around revenue expenditure and frontloaded infrastructure spending, which would lead to faster economic growth.

NH expansion: The Gati Shakti program has consolidated a list of 81 high impact projects, out of which road infrastructure projects were the top priority. The major highway projects include the Delhi-Mumbai expressway (1,350 kilometres), Amritsar-Jamnagar expressway (1,257 kilometres) and Saharanpur- Dehradun expressway (210 kilometres). The main aim of this program is to give faster approval and is done through the Gati shakti portal and digitized the approval process completely.

Growing demand: With the increase in consumer demand and nuclear families, need for two-wheelers and compact cars has been on the rise and is expected to grow even further. The market for roads and highways in India is projected to exhibit a CAGR of 36.16% during 2016-2025, on account of growing government initiatives to improve transportation infrastructure in the country.

Government initiatives:

The road networks enhancement also includes green initiatives, such as utilizing recycled materials and integrating eco-friendly technologies. Additionally, technological advancements are set to redefine Indias highway transportation landscape, with the likely adoption of Global Navigation Satellite System (GNSS)- based tolling systems and the integration of IoT, AI, and GIS in road infrastructure, the toll collection will become seamless.

The major initiatives undertaken by the Government such as National Infrastructure Pipeline (NIP) and the PM Gati Shakti National Master Plan will raise productivity and accelerate economic growth and sustainable development. The approach is driven by seven engines, namely, Roads, Railways, Airports, Ports, Mass Transport, Waterways, and Logistics Infrastructure. All seven engines will pull forward the economy in unison. The projects pertaining to these 7 engines in the NIP will be aligned with PM Gati Shakti framework. The major initiatives undertaken by MoRTH are described under:

1. MORTH, through its implementing agencies NHAI / NHLML and NHIDCL has kept pace with the work of implementing of 35 Multi-Modal Logistics Parks (MMLPs) Projects identified for development under Bharatmala Pariyojana - Phase I.

2. MoRTH developed a comprehensive Port Connectivity Masterplan to ensure adequate last-mile connectivity to all the operational/under implementation ports in the country. As part of the Masterplan, connectivity requirements of all the operational and under implementation ports were assessed and connectivity projects were identified. The 59 projects (1,249 km) will be taken up under PM Gati Shakti National Master Plan for improving last mile connectivity to ports in the country.

3. To improve the comfort and convenience of the highway users, the Ministry has planned development of state-of-the-art Way Side Amenities (WSA) at approximately every 40 kms along the National Highways.

4. Launch of Surety Bond Insurance: MoRTH launched Indias first-ever Surety Bond Insurance product from Bajaj Allianz on 19th December, 2022. With this new instrument of Surety Bonds, the availability of both liquidity and capacity will be boosted, and the infrastructure sector will be strengthened.

5. To ensure seamless movement of traffic through fee plazas and increase transparency in collection of user fee using FASTag, the National Electronic Toll Collection (NETC) programme, the flagship initiative of MoRTH, has been implemented on pan-India basis. FASTag implementation has also reduced the wait time at National Highway fee plazas significantly, resulting in enhanced user experience. In order to ensure that the payment of fees at Toll Plazas is through Electronic means only and vehicles pass seamlessly through the Fee Plazas, the FASTag drive has been very well supported by the highway users as it has achieved over 95% penetration with more than three crore users in the country.

6. Green Highways Policy 2015 was adopted to develop eco-friendly National Highways with participation by the community, farmers, NGOs, private sector, institutions, government agencies, and the Forest Department for the countrys economic growth and development.

7. MoRTH brought out changes in the Model Concession Agreement (MCA) & Request for Proposal (RFP) of the Road Construction Models such as HAM and BOT (Toll).

i) Much needed changes have been made in the relevant clauses of the model RFP and MCA of the HAM project to allow the Lowest quoted Bid Project Cost (BPC) as the basis for awarding the HAM Project and O&M cost to be fixed as being done in EPC projects. It will now bring out the winner immediately after the opening of financial bids in a transparent manner as in EPC mode of bidding.

ii) Changes have been made in the relevant clauses of the Model Concession Agreement of the BOT (Toll) project permitting the change of ownership from existing 2 years to 1 year after the Commercial Operation Date (COD). This move will free the equity/funds of construction companies for taking up other projects.

8. In November 2020, the MoRTH in modified the change in ownership clause in the Hybrid Annuity Mode ("HAM") projects and permitted the bidders/ consortium members to dilute their equity after a period of six months from the commercial operations date ("COD"). Prior to the relaxation, the concessionaire/bidders/consortium members had to retain their equity for a period of two years from COD. Further, MoRTH in May 2022 approved changes in the model concession agreements of Build-Operate-Transfer projects and permitted the change of ownership from the existing two years to one year after COD/issuance of completion certificate and completion of punch list items.

Increasing investments: With the Government permitting 100% Foreign Direct Investment (FDI) in the road sector, several foreign companies has formed partnerships with Indian players to capitalise on the sectors growth.

Opportunities

The roads and highways sector has pioneered several innovative public-private partnership (PPP) models besides having a strong contractual framework compared with other sectors. These factors have led to significant investments from private players in the sector. Several incentives have also been announced by the Government to attract private sector participation and foreign direct investment, which include Government bearing the cost of project feasibility study, land for the right of way and way side amenities, shifting of utilities, environment clearances, etc.100% FDI in roads and highways is allowed under automatic route. The following few initiatives taken by the Government of India make the sector attractive for investment for the private players, namely ;-

Electronic toll collection: National Electronic Toll Collection (FASTag) programme, the flagship initiative of MoRTH and NHAI has been implemented on pan India basis for ensuring seamless movement of traffic and collection of user fee as per the notified rates, using passive Radio Frequency Identification (RFID) technology since 2021 adding certainty to the toll collection figures.

Different models: Public-Private Partnership (PPP) models used in road projects are Build Operate Transfer (BOT) toll, TOT and HAM (Hybrid Annuity Model). The government of India keeps on innovating new flexible policies to create investor-friendly highway development initiatives. By permitting monetization of highway assets under TOT mode and reviving the BOT model, the Government has provided an impetus to the highway infrastructure to be more investment- friendly and attractive for private partnerships. This will not only strengthen the road infrastructure but will have a ripple effect that will further strengthen the countrys economy, increase employment opportunities, and reduce logistics cost

Asset Monetization: The National Highways Authority of India (NHAI) has drawn up an ambitious plan to monetize 46 operational highway stretches of total length of 2,742 kms in the Financial Year 2024-25 through TOT/ InvIT mode to beef up resources for its road building program.

Other favourable policies: These include 100% exit policy for stressed BOT players, providing secured status for PPP projects while lending, and proposal to scrap slow-moving highway projects, among others.

Outlook

Indias infrastructure sector is rapidly growing and the key trends demonstrate positivity and optimism. The market for roads and highways in India is projected to exhibit a CAGR of 36.16% during 2016-2025, on account of growing Government initiatives to improve transportation infrastructure in the country. For the period of 2016-17 to 2021-22, the CAGR stands at 20%.

Development and maintenance of road infrastructure is a key Government priority, the sector has received strong budgetary support over the years. During the past years, the standardized processes for Public Private Partnership & public funded projects and a clear policy framework relating to bidding and tolling have also been developed. The major initiatives undertaken by the Government such as National Infrastructure Pipeline (NIP) and the PM Gati Shakti National Master Plan will raise productivity and accelerate economic growth and sustainable development.

Viksit Bharat @ 2047 is the vision of the Government of India to make India a developed nation by 2047. In line with the objective, the MoRTH is set to embark on an ambitious plan to construct 50,000 km of highspeed (access-controlled) corridors by the year 2047 The highways sector in India has been at the forefront of performance and innovation. The government is committed towards expanding the National Highway network over 2 lakh kilometers by 2047 emphasizing the construction of the World Class Road infrastructure in time bound & target oriented way.

India has a well-developed framework for Public- Private-Partnerships (PPP) in the highway sector. The Asian Development Bank ranked India at the first spot in PPP operational maturity and also designated India as a developed market for PPPs. The Hybrid Annuity Model (HAM) has balanced risk appropriated between private and public partners and boosted PPP activity in the sector. In the recent past, the Build Operate Transfer (BOT) projects have witnessed renewed interest from private players, therefore NHAI has come out with more tenders on BOT mode in the current fiscal year. NHAI has identified 53 highway projects worth Rs. 2.1 trillion to be developed through BOT model.

Asset recycling, through the Toll Operate Transfer (TOT) model has also been taken up by the NHAI and other State Government agencies is garnering increased interest among the investors. Since its launch in 2018, NHAI has successfully completed 6 rounds of the Road Asset (bundle of roads) of monetization through TOT mode and raised Rs. 26,366 crores. NHAI plans to monetise 33 operational highway stretches of total length of 2742 kms in the FY 2024-2025 through TOT/ InvIT mode. In the current FY 2023-24, NHAI has already awarded four TOT Bundles and monetized value of Rs. 15,968 Crore. With this, MoRTH and NHAIs Total Asset Monetization Program has crossed 1 Lakh Crore ( 42,334 Crore through TOT, Rs. 26,125 Crore through InvIT and Rs. 42,000 Crore through Securitization).

To improve the comfort and convenience of the highway users, the Ministry has planned development of state- of-the-art Way Side Amenities (WSA) at approximately every 40 kms along the National Highways. A total of 1000+ sites are planned to be awarded by 2024-25 of which 198 Wayside Amenities (WSAs) have already been awarded.

A network of 35 Multimodal Logistics Parks is planned to be developed as part of Bharatmala Pariyojana, with a total investment of about Rs. 46,000 crore, which once operational, shall be able to handle around 700 million metric tonnes of cargo. Of this, MMLPs at 15 prioritized locations will be developed with a total investment of about Rs. 22,000 Crore. These Multi-Modal Logistics Parks shall serve as regional cargo aggregation and distribution hubs for various industrial and agricultural nodes, consumer hubs and EXIM gateways such as seaports with multi-modal connectivity. In certain cases, the MMLPs are also being developed in tandem with the Inland Waterway Terminals under the Sagarmala Pariyojana to further reduce the cost of inland cargo movement at a much larger scale as compared to conventional road-based movement.

India currently has 87 operational and under implementation ports along its coastline. All major operational ports currently have 4 lane and above last mile road connectivity. MORTH and its implementing agencies have planned the development of 108 Port Connectivity Road (PCR) projects of length ~3,700 km to improve the last mile connectivity of all 87 operational and under implementation ports.

Working towards development of around 10,000 km of Optic Fibre Cables (OFC) infrastructure across the country by FY2024-25, National Highways Logistics Management Limited (NHLML), a fully owned SPV of NHAI, is implementing the network of Digital Highways by developing integrated utility corridors along the National Highways to develop OFC infrastructure. Around 1,367 km on Delhi - Mumbai Expressway and 512 km on Hyderabad - Bangalore Corridor have been identified for the Digital Highway Development.

Under Parvatmala Pariyojana, ropeway projects of ~60 kms length are planned for award by FY2023- 24. Ropeways have emerged as a convenient, safe and preferred mode of transportation to provide both, first as well as last mile connectivity to such hilly & inaccessible areas or to help de-congest urban congestion areas.

The second phase of the Government of Indias Bharatmala programme has been announced for launch. 5,000 km worth of projects are expected to be constructed under the aegis of this programme and Detailed Project Reports (DPRs) are being prepared prior to the approval of the projects so as to speed up the implementation process. In order to facilitate seamless travel between important economic centres, Bharatmala Phase-2 seeks to improve connectivity to a number of infrastructure projects, including multi-modal logistics parks (MMLPs) and under-construction expressways. The new phase would also take up the construction of highways that decongest existing roads, ring roads around major industrial centres and bypasses. The simultaneous implementation of phase-II projects will help in operationalising the remaining projects under phase-I, which is now scheduled to be completed by 2027.

The highways sector in India has been at the forefront of performance and innovation. The government is committed towards expanding the National Highway network to 2 lakh kilometres by 2025 emphasizing the construction of the World Class Road infrastructure in time bound & target oriented way. India has a well- developed framework for Public-Private-Partnerships (PPP) in the highway sector. The Asian Development Bank ranked India at the first spot in PPP operational maturity and also designated India as a developed market for PPPs. The Hybrid Annuity Model (HAM) has balanced risk appropriated between private and public partners and boosted PPP activity in the sector. In the recent past, the BOT projects have witnessed renewed interest from private players, therefore it is envisaged that the NHAI may come out with more tenders on BOT mode in the coming year. Asset recycling, through the TOT model has also been taken up by the NHAI and other State Government agencies.

Other Sources:

i) https://morth.nic.in/

ii) https://www.ibef.org/

iii) https://pib.gov.in/

iv) https://indbiz.gov.in/

v) https://www.indiabudget.gov.in/

vi) https://www.investindia.gov.in/

2. Trust Overview

IRB Infrastructure Trust is the Trust settled by its Sponsor, IRB Infrastructure Developers Limited and is registered under the SEBI (Infrastructure Investment Trusts) Regulations, 2014. It comprises of 15 operational road projects having length of 9790 Lane km includes 11 BOT assets and 4 TOT assets with aggregate enterprise value of approx. Rs. 51,979 crores. It has presence across 9 states in India with average residual concession period of ~22 years.

The Sponsor ofthe Trust i.e. IRB Infrastructure Developers Ltd., is one of the largest infrastructure development and construction companies in India in terms of net worth in roads and highways sector. The Sponsor has been listed on the Stock Exchanges since 2008. As of March 31, 2024, the Sponsor has 26 projects, which include 18 BOT, 4 TOT, and 4 HAM projects.

Distribution

The InvIT Regulations provide that not less than 90% of net distributable cash flows of each project SPV are required to be distributed to the Trust in proportion to its holding in each of the project SPVs, subject to applicable provisions of the Companies Act, 2013. Further, not less than 90% of net distributable cash flows of the Trust shall be distributed to the unitholders.

Such distributions shall be declared and made not less than once in every financial year and shall be made not later than fifteen days from the date of such declaration.

For FY 2023-24, the Net Distributable Cash Flow (NDCF) of the Trust was Rs. 470.92 crores, out of which the Trust has distributed 99.83%. The Total pay-out from the NDCF for FY 2023-24 was Rs. 4.58 per unit to the unitholders.

Statement of Net distributable cash flows (NDCFs) of IRB Infrastructure Trust

(Rs. in Millions)

Sr. No.	Particulars	Year ended March 31, 2024	Year ended March 31, 2023
1	Cash flows received from Project SPVs in the form of Interest	3,748.20	2,097.00
2	Cash flows received from Project SPVs in the form of Dividend	-	-
3	Any other income accruing at the Trust level and not captured above, including but not limited to interest/return on surplus cash invested by the Trust	199.49	0.92
4	Cash flows received from the project SPVs towards the repayment(Net) of the debt issued to the Project SPVs by the Trust	8,897.76	(1,928.34)
5	Total cash inflow at the Trust level (A)	12,845.45	169.58
	Less:
6	Any payment of fees, interest and expense incurred at the Trust level, including but not limited to the fees of the Investment Manager	(2,634.54)	(113.33)
7	Income tax (if applicable) at the Standalone Trust Level	-	-
8	Repayment of external debt	(646.69)	-
9	Promoter contribution in under construction Project SPVs	(4,855.00)	-
10	Total cash outflows / retention at the Trust level (B)	(8,136.23)	(113.33)
11	Net Distributable Cash Flows (C) = (A+B)	4,709.22	56.25

Factors affecting operations

The business of Project SPVs prospects and results of operations and financial condition are affected by a number of factors including the following key factors:

Terms of the Concession Agreements for tariff revision

Toll fees are pre-determined by the relevant government entities and cannot be modified to reflect the prevailing circumstances other than the annual adjustments to account for inflation as specified in the Concession Agreements.

For the current BOT and TOT projects, the tariff revision structure and details of the last revision are as follows:

Company Name	Tariff rate revision	Revision date	FY 2023-24 (%)
IRB Westcoast Tollway Limited#	3% + 40% of WPI as per NHAI Fee Rules, 2008	1st April every year as per provisions of Concession Agreement	5%
Yedeshi Aurangabad Tollway Limited	3% + 40% of WPI as per NHAI Fee Rules, 2008	1st April every year as per provisions of Concession Agreement	5%
Solapur Yedeshi Tollway Limited	3% + 40% of WPI as per NHAI Fee Rules, 2008	1st April every year as per provisions of Concession Agreement	5%
Kaithal Tollway Limited	3% + 40% of WPI as per NHAI Fee Rules, 2008	1st April every year as per provisions of Concession Agreement	5%
AE Tollway Limited	3% + 40% of WPI as per NHAI Fee Rules, 2008	1st April every year as per provisions of Concession Agreement	5%
Udaipur Tollway Limited	3% + 40% of WPI as per NHAI Fee Rules, 2008	1st April every year as per provisions of Concession Agreement	5%
CG Tollway Limited	3% + 40% of WPI as per NHAI Fee Rules, 2008	1st April every year as per provisions of Concession Agreement	5%
Kishangarh Gulabpura Tollway Limited	3% + 40% of WPI as per NHAI Fee Rules, 2008	1st April every year as per provisions of Concession Agreement	5%
IRB Hapur Moradabad Tollway Limited#	3% + 40% of WPI as per NHAI Fee Rules, 2008	1st April every year as per provisions of Concession Agreement	5%
Palsit Dankuni Tollway Private Limited	3% + 40% of WPI as per NHAI Fee Rules, 2008	On receipt of Completion certificate and 1st April every year thereafter as per provisions of Concession Agreement	N/A
Samakhiyali Tollway Private Limited	3% + 40% of WPI as per NHAI Fee Rules, 2008	On receipt of Completion certificate and 1st April every year thereafter as per provisions of Concession Agreement	N/A
IRB Golconda Expressway Private Limited	3% (compounded annually) + 40% of WPI as per NORR User Fee Rules, 2012	1st April every year as per provisions of Concession Agreement	N/A
IRB Lalitpur Tollway Private Limited	3% + 40% of WPI as per NHAI Fee Rules, 2008	1st April every year as per provisions of Concession Agreement	N/A
IRB Kota Tollway Private Limited	3% + 40% of WPI as per NHAI Fee Rules, 2008	1st April every year as per provisions of Concession Agreement	N/A
IRB Gwalior Tollway Private Limited	3% + 40% of WPI as per NHAI Fee Rules, 2008	1st April every year as per provisions of Concession Agreement	N/A

* WPI - Wholesale price index

# Apart from above rate revision, these projects have received ~5% rate hike on account of completion of project length.

Growth in Traffic Volumes

The Trusts target portfolio revenue of CAGR of 9-10% can be achieved with tariff revision of 4.5-5% combined with traffic growth of 5-5.5%. Going by historical performance, the intrinsic potential as well as current performance of the projects owned by the Trust, it is envisaged that the Trust will achieve its targets.

Operating and Maintenance cost

The Concession Agreement spells out significant costs during the concession period including operating and maintenance expenses, such as periodic maintenance required to be performed. Periodic maintenance involves repair of wear and tear of roads, including overlaying the surface of the roads, if required.

The O&M of Project SPVs is managed by the IRB Infrastructure Developers Limited, (Sponsor and Project Manager), as per the fixed price agreements/contracts executed by respective Project SPVs. The O&M cost covers routine and periodic maintenance, details for FY 2023-24 and FY 2022-23 are as follows:

(Rs. in Millions)

Project Name	FY 2023-24	FY 2022-23
IRB Westcoast Tollway Limited	702.73	678.26
Yedeshi Aurangabad Tollway Limited	260.76	243.59
Solapur Yedeshi Tollway Limited	188.38	175.96
Kaithal Tollway Limited	671.34	200.82
AE Tollway Limited	791.34	370.77
Udaipur Tollway Limited	823.26	209.10
CG Tollway Limited	361.38	337.63
Kishangarh Gulabpura Tollway Limited	251.49	234.99
IRB Hapur Moradabad Tollway Limited	138.54	87.00
Palsit Dankuni Tollway Private Limited	408.89	181.30
Samakhiyali Tollway Private Limited	36.60	-
IRB Golconda Expressway Private Limited	594.30	-

Regulatory Commitments

As per the Concession Agreements, some of the Project SPVs are required to pay revenue share/premium to the NHAI. Following are the summary of premium payable to NHAI in 5 SPVs:

Company Name	Annual Premium ( in Million)	Subsequent year
AE Tollway Limited	810.00	Additional 5% every year
IRB Hapur Moradabad Tollway Limited*	315.00	Additional 3% every year till ninth anniversary of COD and 8% every year thereafter
CG Tollway Limited*	2,286.00
Kishangarh Gulabpura Tollway Limited*	1,863.00
Udaipur Tollway Limited*	1,638.00

* The premium is commencing as per the terms of the Concession Agreement.

In case of Palsit - Dankuni project, revenue share will be payable after the first anniversary of the project completion date, a premium in the form of an additional concession fee for every year of the remaining concession period. The premium to be paid for the second year after the project completion date is equal to 10.8% of the realisable fee and is required to be paid by PDTPL as due to the NHAI during that year. For subsequent years, the premium will be determined based on the total realisable fee in the respective year at the percentage to be arrived at by increasing the percentage of premium in the respective year by an additional 1% as compared to the immediately preceding year.

In case of Samakhiyali - Santalpur project, revenue share will be payable after the first anniversary of the project completion date, a premium in the form of an additional concession fee for every year of the remaining concession period. The premium to be paid for the second year after the project completion date is equal to 42.84% of the realisable fee and is required to be paid by STPL as due to the NHAI during that year. For subsequent years, the premium will be determined based on the total realisable fee in the respective year at the percentage to be arrived at by increasing the percentage of premium in the respective year by an additional 1% as compared to the immediately preceding year.

Interest Rates Scenario:

Interest rates impact both growth and inflation. Higher the interest rate, higher is the cost of capital. This reflects on the slowdown of investments in the economy. Interest rate is a significant factor affecting any new acquisition of asset. Banks and financial institutions provide the debt under floating or fixed rate depending on the asset class, Cash flow generation and the credit rating of the borrower.

The floating interest rates are linked to Marginal Cost of Funds Based Lending Rate (MCLR) of the bank with a spread margin. It is perceived that any change in the interest rate on the reset date would affect the cash flows of the Fund. However rising interest rate will have a direct impact on inflation that in turn results in higher tariff revision for the projects, thus mitigating the risk of higher interest rate on cash flows of the Fund.

General economic conditions in India - level of investment and activity in infrastructure development sector

The central and state governments have renewed their focus on infrastructure that is evident from the fact that the budgetary allocations for construction and augmentation of roads and highways in India have increased significantly. This increased budgetary allocation, when complemented by the private sector participation would generally result in large infrastructure projects in India.

Innovative bidding structures like HAM and TOT provide scopes for increase in portfolios of highway developers. This would provide huge scope for future acquisitions for the Trust and thereby enhance stakeholders value.

Financial Review

The total consolidated income for FY 2023-24 has increased to Rs. 39,771 million from Rs. 27,176 million in FY 2022-23.

The consolidated toll revenues for FY 2023-24 stood at Rs. 27,470 million from Rs. 21,097 million for 2022-23.

EBITDA for FY 2023-24 stood at Rs. 10,267 million from Rs. 10,761 million in FY 2022-23.

Interest costs for FY stood at Rs. 14,457 million as against Rs. 10,255 million for FY 2022-23.

Depreciation (including amortization) for FY 2023-24 stood at Rs. 3,648 million from Rs. 2,810 million in FY 2022-23.

Profit before tax for the year ended March, 2024 stood at Rs. (7,838) million from Rs. (2,304) million in March, 2023.

Profit after tax for the year ended March, 2024 stood at Rs. (6,650) million from Rs. (2,271) million in March, 2023.

Critical Accounting Policies:

The preparation of financial statements in conformity with applicable accounting standards and the Companies Act, 2013 requires the Trust management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations at the end of the reporting period. By their nature, these judgments are subject to a degree of uncertainty. Although these estimates are based upon the best knowledge of the Trusts management of current events and actions, the actual results could differ from these estimates.

While all aspects of the Financial Statements should be read and understood in assessing their current and expected financial condition and results, the Trust believes that the following critical accounting policies warrant particular attention.

Intangible assets

As permitted under Ind AS, the group has elected to continue with the carrying value of its toll collection rights (which form part of its intangible assets), as recognised in the financial statements as at the date of transition to Ind AS and measured as per the previous GAAP.

Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in statement of profit or loss in the period in which the expenditure is incurred.

Toll Collection Rights:

Toll collection rights including premium to NHAI are stated at cost, net of accumulated amortisation and impairment losses. Cost includes toll collection rights awarded by the grantor against construction service rendered by the Project SPV on a DBFOT basis - direct and indirect expenses on construction of roads, bridges, culverts, infrastructure and other assets at the toll plazas.

• Toll collection rights are stated at cost net of accumulated amortisation and impairment losses.

• Toll collection rights awarded by the grantor against construction service rendered by the Project SPV on Design, Build, Finance, Operate, Transfer (DBFOT) basis, which consists of direct and indirect expenses on construction of roads, bridges, culverts, infrastructure and other assets at the toll plazas.

• Toll collection rights are amortised over the period of concession, using revenue-based amortisation as per exemption provided in Indian Accounting Standard (Ind AS) 101. Under this method, the carrying value of the rights is amortised in the proportion of actual toll revenue for the year to projected revenue for the balance toll period, to reflect the pattern in which the economic benefits of the assets will be used. At each balance sheet date, the projected revenue for the balance toll period is reviewed by the management. If there is any change in the projected revenue from previous estimates, the amortisation of toll collection rights is changed prospectively to reflect any variations in the estimates.

• Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit or loss when the asset is derecognised.

• Intangible assets are assessed for impairment whenever there is an indication that the intangible asset may be impaired.

Amortisation

Toll Collection Rights are amortised over the period of concession, using revenue based amortisation as prescribed in Ind AS-38. Under this method, the carrying value of the rights is amortised in the proportion of actual toll revenue for the year to projected revenue for the balance toll period, to reflect the pattern in which the assets economic benefits will be consumed. At each balance sheet date, the projected revenue for the balance toll period is reviewed by the management. If there is any change in the projected revenue from previous estimates, the amortisation of toll collection rights is changed prospectively to reflect any changes in the estimates.

Provisions

Provisions are recognised when the Project SPV Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Project SPV Group expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimates.

Principal Components in the consolidated profit and loss

Income items

The Project SPVs income consists of revenue from operations and other income. Revenue from operations primarily consists of income from toll collection. Further, during the construction period of a project, the NHAI may ask the Project SPVs to carry out utility shifting work (which is incidental to the construction of the toll road and typically involves the shifting of utilities that are located at the construction site) or may award the Project SPVs additional scope of work, which is separately paid by the NHAI. Revenue from such utility shifting or change in scope contract and the sale of materials, among others, also forms part of the Project SPVs operating revenue.

The term Other income includes interest income on bank deposits, dividend income, gain on sale of investments and certain miscellaneous income. Other income also includes any gain on sale of investments and fixed assets.

Expense items

Expenses are made up of: (i) road work and site expenses, (ii) depreciation and amortisation expenses, (iii) finance cost, and (iv) other expenses.

Road work and site expenses

This expenditure includes contract expenses relating to utility shifting or change in scope contracts, operation and maintenance expenses, road works expenses, cost of material sold, independent engineer fees, sub-contracting and security expenses, and site and other direct expenses.

Depreciation and amortization

Depreciation and amortisation account shows depreciation on property, plant and equipment and amortisation of intangible assets of the Trust.

Finance costs

Finance costs of the Trust include interest on loans from banks/financial institutions, interest on debenture and other borrowing costs.

Other expenses

The day to day working of the Trust involves a number of administrative expenses which are listed as Other expenses. These include various administrative costs such as rent, rates and taxes, travelling and conveyance, membership and subscription, director sitting fees, Corporate social responsibilities expenditure, donations, security expenses, bank charges, insurance and other miscellaneous expenses.

Risk Management

The opportunity in the business of toll collection is the upbeat traffic movement which would help in improving the toll collection and thereby increase the return to the unit holders. Having said that, the biggest risk that the projects face is the slowdown in traffic and diversion of traffic. To overcome such risk, we have enough safeguards in the concession agreement with NHAI wherein our losses would be either cash reimbursed, or we would be provided an extension of time in our concession period.

Internal control and systems

IRB Infrastructure Trust has a strong internal control system to manage its operations, financial reporting and compliance requirements. The investment manager has clearly defined roles and responsibilities for all managerial positions. All the business parameters are regularly monitored, and effective steps are taken to control them. Regular internal audits are undertaken to ensure that responsibilities are executed effectively. The audit committee of the Board of Directors of Investment Manager periodically reviews the adequacy and effectiveness of internal control systems and suggests improvements to further strengthen them.

Cautionary Statement

The terms ‘IRB Infrastructure Trust, and ‘the Trust are interchangeably used and mean IRB Infrastructure Trust and its Project SPVs as may be applicable.

This annual report contains certain forward-looking statements and may contain certain projections. These forward-looking statements generally can be identified by words or phrases such as ‘aim, ‘anticipate, ‘believe, ‘expect, ‘estimate, ‘intend, ‘objective, ‘plan, project, ‘will, ‘will continue, ‘will pursue, ‘seek to or other words or phrases of similar import. Similarly, statements that describe strategies, objectives, plans or goals are also forward-looking statements.

All forward-looking statements and projections are subject to risks, uncertainties and assumptions. Actual results may differ materially from those suggested by forward-looking statements or projections due to risks or uncertainties associated without expectations with respect to, but not limited to, regulatory changes pertaining to the infrastructure sector in India and the Trusts ability to respond to them, the Trusts ability to successfully implement its strategy and objectives, the Trusts growth and expansion plans, technological changes, the Trusts exposure to market risks, general economic and political conditions in India that have an impact on the Trusts business activities or investments, the monetary and fiscal policies of India, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices, the performance of the financial markets in India and globally, changes in domestic laws, regulations and taxes and changes in competition in the infrastructure sector. Certain important factors that could cause the Trusts actual results to differ materially from expectations include, but are not limited to, the following:

• the business and investment strategy of the Trust;

• expiry or termination of the Project SPVs respective concession agreements;

• future earnings, cash flow and liquidity;

• potential growth opportunities;

• financing plans;

• the competitive position and the effects of competition on the Trusts investments;

• the general transportation industry environment and traffic growth; and

• regulatory changes and future Government policy relating to the transportation industry in India.

By their nature, certain market risk disclosures are only estimates and could be materially different from what actually occurs in the future. As a result, actual gains or losses could materially differ from those that have been estimated. Forward-looking statements and projections reflect current views as of the date hereof and are not a guarantee of future performance or returns to investors. These statements and projections are based on certain beliefs and assumptions that in turn are based on currently available information.

Although the investment manager believes that the assumptions upon which these forward-looking statements and projections are based are reasonable, any of these assumptions could prove to be inaccurate, and the forward-looking statements and projections based on these assumptions could be incorrect. None of the Trust, the trustee, the investment manager and their respective affiliates/advisors have any obligation to update or otherwise revise any statements reflecting circumstances arising after the date hereof or to reflect the occurrence of underlying events, even if the underlying assumptions do not come to fruition.

There can be no assurance that the expectations reflected in the forward-looking statements and projections will prove to be correct. Given these uncertainties, readers are cautioned not to place undue reliance on such forwardlooking statements and projections and not to regard such statements to be a guarantee or assurance of the Trusts future performance or returns to investors.