­Acuité has considered the consolidated financials and business profile of IRB Infrastructure Trust and its subsidiaries to arrive at the rating.
*refer Annexure 2 for list of entities considered in consolidation.

IRB Infrastructure Trust (IRB InvIT II) is sponsored by IRB Infrastructure Developers Limited (IRB). IRB holds 51% stake in IRB InvIT II and rest 49% is held by GIC affiliates. IRB is one of the leading players in the domestic infrastructure sector which is engaged in EPC and O&M business for roads & highways, airports, and real estate segments. IRB has an established track record of more than two decades in executing EPC contracts and has constructed more than 12,500 lane kilometres of road since its inception. As of June 2022, IRB has portfolio of two fully owned BOT, one TOT and four hybrid annuity mode (HAM) projects. Of the seven projects, one projects each in BOT, TOT and HAM are operational, two HAM projects are under construction and the balance one project each in BOT and HAM are awaiting appointed date. The company has in-house Engineering Procurement, Construction (EPC) and Operation & Maintenance (O&M) activities primarily handled by its subsidiary, Modern Road Makers Pvt. Limited, (MRMPL). GIC is a Singapore based entity which manages Singapore’s foreign reserves. The company has presence across 40 countries ranging across different industries. Further, IRB already sponsored one InvIT is listed on NSE and BSE viz. IRB InvIT Fund which has 7 operational BOT projects of around 4,055 lane kms where IRB holds 16 per cent stake. IRB has a strong order book position of ~Rs.16000 Cr. as on March 31, 2022. Further, IRB has also to raised Rs.5,347 Cr. via preferential issue of equity shares to Cintra Global SE (A subsidiary of Spanish Infrastructure Group Ferrovial SA) and Singapore’s sovereign wealth Fund GIC. Acuité believes that IRB InvIT II will benefit from the established position and resource raising ability of its Sponsors. In case of tepid growth in traffic volumes leading to depressed cash flows, the sponsor can infuse funds whenever required. Further, Acuité believes that the operating performance of the InvIT is expected to improve significantly over the medium term with experience of IRB in managing road assets. The financial flexibility of the InvIT is likely to remain strong with the presence of Unitholders like GIC affiliates.

Diversified Asset base of the InvIT
The IRB InvIT II manages 10 toll road projects across 6 states of which 8 projects has already received final COD, 1 project received Partial COD (PCOD) and 1 recently added toll project is under construction. However, the toll collection activities for all the 10 projects have already been commenced with Rs. 1237 Cr. of revenues in FY22.  the revenues registered YoY growth of around  in 20 percent in FY22 as compared to FY21. The revenues grew post the lifting of restrictions on account of spread of Covid 19. The asset diversity is reflected in the fact that these assets are located in 6 different states and are not dependent on any one particular geography. Acuité also observes that there is no significant concentration of revenues from any particular road asset and post achievement of the COD for the WIP projects, the composition of revenues is not likely to change materially. The financial closure for all the projects has been achieved. The long term agreements ranging from 28 to 35 years for all 10 projects are also in place. Going ahead, Acuité expects these projects to generate healthy and steady cash flows from toll collection on account of diversified geographic location and strategically located tolls.

IRB InvIT II has been established in 2020. The SPVs have a long term concession agreement with NHAI under the BOT model. The SPVs under the trust will be responsible for toll collection, maintenance of road asset and also major maintenance as per the agreement. The cash flows of the SPVs are entirely toll based, thus operations are susceptible to fluctuations in traffic movements. The traffic movement is linked to the level of economic activity in and around the operational area. Any event or regulatory interventions likely to affect traffic movement may create pressure on toll revenues thereby affecting the cash flows of the trust. In such situations, the SPVs will be dependent on the InvIT for funding support.