Do you have visibility on where the AUM could reach by the end of this fiscal year and over the next couple of fiscal years?
We don’t really track AUM as a target number. Our focus is always on delivering predictable distributions and then growing them. Normally, growing distributions requires growing AUM. We look at every acquisition or investment to see whether it will grow distributions for unitholders.
We already have around ₹13,000 crore of projects being executed at our asset development platform EnerGrid. Those projects will eventually be acquired by IndiGrid when they are completed and will add to our AUM. Looking at the projects that we have already won and for which we have signed agreements, our AUM will reach around ₹45,000 crore over the next two to three years. Beyond that, we can add more depending on the bids, projects and acquisition opportunities that come our way. This fiscal year, considering the projects that we have already signed and are in the completion phase, we will add assets worth approximately ₹2,000 crore to our portfolio.
Transmission, renewables, and storage are the areas you are focusing on. How should we look at the composition of your portfolio going ahead?
Whenever we get good projects at a reasonable price, we will pursue them. Currently, 75 per cent of our portfolio is occupied by transmission projects and 25 per cent by renewables. We consider battery storage as part of transmission. We can go up to 35 per cent renewables in our portfolio, but broadly we will remain within the 25-35 per cent range for renewables, with the rest being transmission. IndiGrid’s net debt-to-AUM is around 58.5 per cent as of Q1 FY27.
How comfortable are you with that ratio?
We are very comfortable. We are AAA-rated. The Securities and Exchange Board of India has capped the ratio at 70 per cent; we remain within that limit. We think 70 per cent is also a very comfortable position for us to grow. We are not worried about that. We have solid cash flows, so we are perfectly fine.
With this ratio, how much further leverage or headroom do you believe you have for acquisitions?
We have another ₹12,000 crore of headroom. All the projects we have signed off for growth from EnerGrid already have equity capital available. We are just going to borrow and acquire them.
We have sufficient headroom to reach a ₹45,000-crore asset base.
Are there any fundraising plans?
No. We don’t plan to raise any equity right now. Our net debt-to-AUM is at around 58 per cent, which is lower than what we feel it should be. As we acquire the projects and reach around 65 per cent, that is when we would really think about raising more capital.
IndiGrid’s Q1 FY27 distribution per unit (DPU) grew 3 per cent year-on-year (YoY) to ₹4.12 per unit. How do you see that growth in the coming quarters, and what are your strategic priorities to deliver to investors?
Our DPU is not going to grow over the next two or three quarters. We give guidance on DPU growth on an annual basis. Our DPU grew by 6 per cent in FY26. For FY27, we have guided for 3 per cent DPU growth, which we are delivering. We are on track, having delivered ₹4.12 per unit in the first quarter, and this is expected to cross ₹16.5 by the year-end. We give guidance based on projects acquired during the year and the existing pipeline, when we have visibility on yields. Growth will therefore come towards the end of the year as we assess the pipeline and the market. Beyond that, we remain well on track. We work towards delivering 3-5 per cent YoY growth.
What needs to change in the market structure for storage to become commercially viable and large-scale infrastructure in India? Do you have enough assets to acquire in the storage segment?
Within storage, we believe we should only build assets, not acquire them. Unlike transmission and solar, which are more mechanical in nature and where one can inspect and conduct due diligence, it is very difficult to assess what has gone into a battery. Unless we are involved from the beginning, including quality checks and factory acceptance tests at each stage, it is difficult for us to get comfortable with somebody else’s batteries or what they have built. So, we have chosen a strategy of only building battery storage projects. We have approximately 0.5 GW already commissioned and another 0.5 GW ready for commissioning over the next 15 days, which will take our operational capacity to 1 GW of commissioned projects, and we are looking to commission another 0.8 GW. That will make us one of the largest independent battery storage owners.
What is the strategy behind not acquiring third-party battery projects?
We have good experience building and operating battery storage plants. It is impossible to verify the quality of plants built by third parties.
In India, there is too much aggressive bidding taking place in the battery storage sector. We believe there needs to be stringent qualification criteria. Right now, we assess that two out of three projects are not going to be built. We will see that a year from now, when it is time for all the announcements and aggressive bids that have taken place to translate into actual projects. Many of them may not get built because they are not financially viable. We see that as a material risk to the sector. The only way to really contain aggressive bidding is to have qualified players with the right experience in bidding and executing projects. In the absence of that, we run the risk of those capacities not coming up. That’s what we believe is the current state of affairs.
Apart from EnerGrid assets, are you planning to acquire other third-party assets?
We keep looking for other projects and participating in bidding processes. There are many renewable energy platforms available for sale, starting from solar and hydro to a variety of projects. We are looking at a few lakh crore of opportunities in transmission that will come up for bidding, and obviously the opportunity is much bigger across the broader sector. EnerGrid will participate in bidding processes where the returns are reasonable. If the returns make commercial sense, EnerGrid will look to bid and build. And post the requisite approvals, IndiGrid will acquire. Since we have clear visibility on the project pipeline, we have the next three to four years to acquire additional projects. We can afford to wait for good projects.
With competition for transmission assets increasing, how are you protecting your returns on acquisitions? Has the return threshold for new acquisitions changed compared with the last two to three fiscal years?
It is evolving. In general, as transmission projects are priced better, there is a better appreciation of the risks within the lender ecosystem and among investors. There are more buyers, so the overall price has improved. It is a sign of maturity in the sector. Returns depend on where a particular bid is and how risky it is. On the acquisition side, there has not been much change. We haven’t seen many acquisitions taking place. Most of the investment is happening on the greenfield side.
Returns vary from very competitive to very high, depending on the risk of the project. It is always relative to the cost of capital available for a particular sector or asset. Certainly, the cost of capital for transmission has dropped, which is great. The ability to bid, close and acquire consistently remains a big differentiator for anyone in the sector. The sector is maturing, and we are seeing good price discovery for assets.
From an industry perspective, where do you see the biggest bottleneck emerging?
It depends on the type of investors. For a renewable investor today, the biggest concern is that grid capacity is limited and there is more curtailment happening. On the transmission investor side, the key concern is that reverse auctions need to stop because they are making projects unviable again. People with a lack of experience and a low threshold start bidding for projects, delay them and don’t complete them. Eventually, that will impact the sector. It makes sense to consider going back to the earlier system, where there was more weight given to the technical and commercial parameters from day one, and to the economics of the project. There is a serious need for the government to consider this if it wants to increase the capacity to execute projects.
Power infrastructure is a sector with trillions of rupees of investment opportunities. How do you see the role of InvITs in financing India’s power infrastructure?
InvITs are just one of many options. They are essentially well-governed corporate entities. There are a variety of ways in which InvITs can help.
InvITs are one of the easiest ways to mobilise capital in India for operating projects. We have seen that in roads and transmission.
The central and state governments can have a lot of capital available to invest if they start monetising these assets. There are guidelines available for states to monetise assets. However, there is a huge reluctance among states to let go of assets, and that reduces the ability to raise capital as a country. Eventually, it becomes a fiscal burden.
There is resistance from public sector undertakings (PSUs) and state-owned companies to let go of assets. But effectively, asset monetisation mechanisms need to be utilised more often to raise more capital because there is capital waiting to come into India. Generally, it is about wanting to control the asset because it is a government undertaking. There are procedures involved, and there is also the question of who is going to make that decision. Political will is needed to actually generate revenue by selling assets.
What are your top three strategic priorities for the next few fiscal years?
Our priority remains that there is a tremendous pipeline of projects that India needs to build on the transmission and battery storage side. We would like to participate in those projects and win them at reasonable returns. Second will be to execute those projects. These are the two key priorities for us as we grow over the next few years.
