Capital Infra Trust Q1 FY2026 Concall Summary

Key Takeaways

• Net loss driven by notional accounting, not cash flow: A Rs. 73 crore net loss was booked, driven by a Rs. 330 crore impairment and a modification loss, both triggered by a 75 bps RBI bank rate cut. Management stressed these are non-cash, Ind AS entries with no impact on operational cash flows or distribution capacity.
• Distribution guidance reaffirmed with a 14.75% yield: Management is confident of achieving the FY26 DPU guidance of Rs. 14.61 per unit, translating to a 14.75% yield on the issue price, backed by stable annuity cash flows from operational assets.
• A 60% AUM jump is targeted this year: The trust plans to add over Rs. 2,500 crores in AUM in FY26, growing the portfolio from Rs. 4,185 crores by roughly 60%, with three identified sponsor assets to be acquired by Q3-Q4.
• A regulatory breach requires a fix within six months: Debt-to-AUM crossed the 49% InvIT limit due to the bank rate change, and management has committed to the trustee to rectify this within six months.
• What to watch next quarter: Progress on the due diligence for the three new assets, the plan to rectify the debt-to-AUM breach, and the execution of the Rs. 900 crore equity fundraise.

Financial Performance: The Accounting Noise

• Net loss was a paper event: The Rs. 73 crore net loss (vs. Rs. 37 crore loss last quarter) stems from a modification loss on financial assets and a Rs. 330 crore impairment in the value of investments. Both are non-cash entries mandated by Ind AS, triggered by a 75 bps cut in the RBI bank rate since the start of the quarter.
• The impairment’s three drivers: The Rs. 330 crore impairment was driven by interim distributions paid to unit holders in June 2025, the change in bank rates, and pending approval for a GST change-in-law claim from the NHAI.
• Modification loss mechanics explained: Under Ind AS, any change in estimated cash flows from NHAI for HAM projects forces a modification gain or loss to be booked. The 75 bps rate cut reduced the discount rate, which mechanically lowered the present value of future expected cash flows, creating a notional loss that depicts the overall cash flows expected from NHAI in coming years.
• Operational performance remains steady: All nine assets maintained satisfactory conditions with consistent routine maintenance and stable driving quality. Six projects are fully completed with COD received, and the remaining three have applied for their completion certificate during the quarter.

Portfolio Growth: The ROFO Pipeline

• Three named assets are entering due diligence: The trust received a ROFO notice from its sponsor and the board has authorized due diligence on three fully operational, NHAI annuity-backed road assets: JRR Highways (Rajasthan), Hasanpur Bhaktiyarpur Highway (Bihar), and Korba Highway (Chhattisgarh). The trust will acquire 100% ownership.
• A 60% AUM expansion is the FY26 target: Management is targeting over Rs. 2,500 crores in AUM additions this year, growing the current base of Rs. 4,185 crores by around 60%. The three ROFO assets are expected to close by Q3-Q4 FY26.
• FY27 will see a similar pace: The plan for next year is to add around four assets, with an AUM addition similar to FY26 at roughly Rs. 3,000 crores, sourced primarily from the sponsor’s remaining ROFO pipeline.
• Third-party deals are opportunistic, not core: While the 17 ROFO assets from the sponsor capture the next four years of growth, management remains open to value-accretive third-party HAM acquisitions, though no timeline is set for such deals.
• BOT toll assets are a longer-term play: The strategy includes adding BOT toll assets, but this is expected to materialize a couple of years down the line, with the near-term focus remaining on HAM assets in an 80-20 mix.

Satnaliwala: "We are looking at adding three to four assets this year. Three are going to add by Q3-Q4 FY26. And next year also, we will have a similar kind of target of adding around four assets. AUM can be around Rs. 3,000 crores, but similar four assets will be there."

Distribution & Return Profile

• FY26 DPU guidance is firmly reiterated: Management expressed confidence in achieving the Rs. 14.61 per unit distribution for FY26, which translates to a 14.75% yield on the issue price.
• Current DPU level has multi-year visibility: Management believes the current DPU level can survive for at least three to four years, anchored by the predictable and stable cash flows from HAM assets.
• Long-term return objective is double-digit: The stated goal is to deliver a double-digit return for the longest period of time, a profile management believes is sustainable as long as HAM assets continue to be added to the portfolio.
• DPU accretion is a condition of growth: Management stated that the planned equity fundraise and acquisitions will be value-accretive for existing investors, with an objective to maintain or increase the DPU.

Satnaliwala: "So, HAM asset has a very predictable and stable cash flows. So, we are hoping that the kind of DPU that we are maintaining now, it should be able to survive for three to four years at least."

Capital & Funding Strategy

• A Rs. 900 crore equity raise is planned for FY26: The funding plan for the current year’s acquisitions includes an equity fundraise of Rs. 900 crores via a PREP and QIP, alongside the sponsor taking units.
• A dynamic debt-equity cycle is mapped out: For FY27, management may fund acquisitions entirely through debt, taking the debt-to-AUM ratio to around 60% and using the regulatory headroom up to 70%. An equity raise is then expected roughly once every two years, though the plan remains dynamic.
• A regulatory breach demands near-term action: Debt-to-AUM crossed the 49% mark, breaching InvIT regulations, primarily due to the market movement in bank rates. Management has a six-month timeline from the trustee to rectify the breach.

Satnaliwala: "And DPU will be value-accretive in any case for the existing investors. So, there will be an incremental value addition. So, the DPU will be value-accretive on that part of it."

Regulatory & Macro Context

• SEBI rule changes offer new flexibility: New InvIT regulations now require at least 80% of assets to be invested in completed and revenue-generating assets, permit surplus cash to be deployed in selected liquid funds, and allow interest rate hedging using derivatives such as swaps, futures, and FRAs.
• RBI rate cut is a double-edged sword: The 75 bps bank rate cut with a neutral stance may reduce interest income on the trust’s financial assets, but management noted this impact is meaningfully offset by reduced debt servicing costs.
• One ROFO asset already meets the new SEBI test: The Hasanpur Bhaktiyarpur package has achieved PCOD, meaning it qualifies as a completed, revenue-generating asset under the new InvIT regulations, smoothing its path into the portfolio.

Guidance & Commitments

Key Metrics