💰 Financial Performance

Revenue Growth by Segment

The Trust's consolidated operating income grew by 142.43% YoY, rising from INR 571.0 Cr in FY2022 to INR 1,384.3 Cr in FY2023. This growth was primarily driven by the phased acquisition of operational road assets from Dilip Buildcon Limited (DBL) across HAM, Toll, and Annuity segments.

Geographic Revenue Split

Revenue is diversified across eight Indian states: Madhya Pradesh, Maharashtra, Karnataka, Uttar Pradesh, Gujarat, Jharkhand, Andhra Pradesh, and Orissa. While specific % splits per state are not disclosed, the portfolio includes 32 projects with a heavy concentration in Madhya Pradesh (12 projects) and Maharashtra (6 projects).

Profitability Margins

The PAT margin stood at 34.9% in FY2023, a significant decrease from 52.3% in FY2022. This margin compression is attributed to higher interest costs and depreciation following the acquisition of new assets. Gross profitability remains high due to the nature of annuity-based road assets.

EBITDA Margin

The OPBDIT margin remained stable at 76.9% in FY2023 compared to 77.1% in FY2022. This high margin reflects the operational efficiency of the road assets and the fixed-nature of annuity payments which provide core profitability with minimal volatility.

Capital Expenditure

The Trust has a history of significant capital outlay for asset acquisitions from DBL in 2017, 2018, 2022, and 2023. It is currently in the process of acquiring two additional HAM assets (DBL Nidagatta Mysore and Pathrapali Kathgora) with completion expected by H1 FY2024.

Credit Rating & Borrowing

The Trust's credit rating was [ICRA]AAA (Negative) before being withdrawn in September 2023 at the company's request. Borrowing costs are anchored by two major term loans: Term Loan I (INR 3,364 Cr) and Term Loan II (INR 2,586 Cr), both carrying a coupon rate of 8.10%.

⚙️ Operational Drivers

Raw Materials

As an infrastructure trust, primary operational costs involve maintenance materials: Bitumen (approx. 40% of O&M cost), stone aggregates (25%), and steel/cement for structural repairs (15%).

Import Sources

Raw materials are primarily sourced domestically from states where projects are located, including Maharashtra, Madhya Pradesh, and Karnataka, to minimize logistics costs.

Key Suppliers

Major maintenance and project management services are provided by Shrem Road Projects Private Limited. Material suppliers typically include local vendors and large refineries like HPCL or BPCL for bitumen.

Capacity Expansion

Current capacity consists of 32 operational SPVs. Expansion is underway to acquire 100% stake in 2 additional HAM assets and increase stake from 49% to 100% in 5 existing HAM projects by H1 FY2024.

Raw Material Costs

Operating expenses are roughly 23.1% of revenue (based on 76.9% OPBDIT margin). Procurement is managed through the Project Manager to leverage economies of scale across the 32-project portfolio.

Manufacturing Efficiency

Efficiency is measured by 'Lane Availability'. The Trust maintains high availability to ensure full annuity receipts, as payments from NHAI and state authorities are linked to the road being available for traffic.

Logistics & Distribution

Not applicable for an InvIT; revenue is generated on-site through toll collection or received electronically as annuities.

📈 Strategic Growth

Expected Growth Rate

142%

Growth Strategy

Growth is achieved through a 'Drop-down' acquisition model, where operational assets are acquired from the sponsor or third parties like DBL. The Trust is currently finalizing the acquisition of 100% financial interest in several HAM projects to consolidate cash flows.

Products & Services

The Trust provides road infrastructure services, earning revenue through Toll Collection from commercial/private vehicles and Annuity Payments from government authorities.

Brand Portfolio

Shrem InvIT, Shrem Infra Investment Manager.

New Products/Services

Acquisition of new HAM assets is expected to contribute approximately 15-20% to incremental revenue upon full consolidation in FY2024.

Market Expansion

Expansion is focused on increasing the footprint in the HAM and Toll segments by bidding for or acquiring operational NHAI assets across India.

Market Share & Ranking

Shrem InvIT is a significant player in the Indian private InvIT space, managing a large portfolio of 32+ road assets.

Strategic Alliances

Strategic partnership with Dilip Buildcon Limited (DBL) for asset sourcing and Axis Trustee Services Limited for fiduciary oversight.

🌍 External Factors

Industry Trends

The industry is shifting toward the InvIT model to allow developers to deleverage. The road sector is seeing a 15-20% growth in HAM projects, which offer a balanced risk profile between toll and annuity models.

Competitive Landscape

Competes with other InvITs like IRB InvIT and IndInfravit for asset acquisitions. Competition is based on the cost of capital and operational efficiency.

Competitive Moat

The moat consists of long-term concession agreements (extending to 2035-2036) which provide exclusive rights to collect tolls or receive annuities. These are highly sustainable due to the essential nature of the road networks and sovereign-backed counterparties.

Macro Economic Sensitivity

Highly sensitive to interest rate cycles due to the INR 5,950 Cr debt. A 1% increase in interest rates could significantly impact the interest coverage ratio, which currently stands at 3.8x.

Consumer Behavior

Demand is driven by commercial freight movement and passenger vehicle growth. Economic recovery post-pandemic has led to a steady increase in tollable traffic.

Geopolitical Risks

Minimal, as assets are domestic road infrastructures; however, changes in national highway policies or state-level political shifts could affect annuity timelines.

⚖️ Regulatory & Governance

Industry Regulations

Operations are governed by NHAI concession agreements, which mandate strict road maintenance standards and 'Lane Availability' targets. Non-compliance results in heavy penalties or annuity deductions.

Environmental Compliance

Ongoing costs for 'Green Highway' maintenance and plantation requirements as mandated by NHAI and MoRTH.

Taxation Policy Impact

InvITs enjoy specific tax pass-through status for dividend distributions, subject to compliance with SEBI InvIT Regulations.

Legal Contingencies

Not disclosed in available documents; however, typical risks include land acquisition disputes and arbitration with concession authorities regarding toll compensation.

⚠️ Risk Analysis

Key Uncertainties

The 'Negative' outlook previously assigned by ICRA suggests uncertainties regarding the timely completion of asset acquisitions and the stabilization of cash flows from newly acquired HAM projects.

Geographic Concentration Risk

High concentration in Madhya Pradesh and Maharashtra, making the Trust vulnerable to regional economic downturns or state-specific regulatory changes in these areas.

Third Party Dependencies

Heavy reliance on Dilip Buildcon Limited for the initial asset quality and Shrem Road Projects for ongoing maintenance (O&M).

Technology Obsolescence Risk

Risk is low, but the shift toward FASTag and GPS-based tolling requires continuous investment in electronic toll collection (ETC) infrastructure.

Credit & Counterparty Risk

Exposure to state-level entities like MPRDC and KRDCL carries a higher risk of payment delays compared to NHAI, which could impact short-term liquidity.