IIP Infrastructure India Plc

27 March 2024

Infrastructure India plc

("IIP" or the "Company" and together with its subsidiaries, the "Group")

Interim results for the six months ended 30 September 2023

Infrastructure India plc, an AIM quoted infrastructure fund investing directly into assets in India, announces its unaudited interim results for the six months ended 30 September 2023 and information on its Annual General Meeting ("AGM").

The AGM will be held in May 2024 at the offices of FIM Capital Limited, 55 Athol Street, Douglas, Isle of Man IM1 1LA and the Company will in due course confirm the date and circulate the Notice of AGM and Forms of Proxy to shareholders.

Lifting of Suspension and Resumption of Trading

As a result of the publication of the Annual Report for the year ended 31 March 2023 and announcement of the interim results for the six months ended 30 September 2023, trading in the Company's ordinary shares on AIM is expected to be restored with effect from 07.30 a.m. GMT today.

Financial performance

·      Value of the Company's investments were £99.6 million as at 30 September 2023 (£99.1 million as at 31 March 2023; £194.1 million as at 30 September 2022).

·      Net liabilities were £217.4 million as at 30 September 2023 (against net liabilities of £184.9 million as at 31 March 2023; £85.7 million as at 30 September 2022).

·      The net liability position is based on preliminary terms with a third party and the ascribed consideration for the disposal of IIP's largest holding, Distribution Logistics Infrastructure Limited ("DLI"). The other significant factor is the Group's net debt.

·      As at 30 September 2023, the Group had gross cash resources of £0.4 million. The sale of Indian Energy Limited is expected to complete imminently for total cash consideration of approximately US$4.3 million (approximately £3.3 million). IIP is also discussing preliminary terms for the sale of DLI and further announcements with regard to this will be made as and when appropriate.

·      The Board has been active in securing sources of financing to ensure the Group has adequate funding to continue to meet liabilities as they fall due and, as announced, this includes asset sales. As a result of this process, the Group has prepared the accounts on a basis other than going concern due to the uncertainty in relation to the timing of potential transactions, ultimate receipt of sale proceeds and the specifics of any deferred consideration. This basis was considered the most appropriate method for the reporting period.

Duration of the Company and AIM cancellation proposal

·      In accordance with IIP's Articles of Association, a 5-yearly vote on the Duration of the Company will be tabled at the AGM in May 2024.

·      IIP's assets, other than India Hydropower Development Company ("IHDC"), are already held for sale in the Company Accounts and, as a consequence, the Board intends to propose an orderly winding up of the Group at the upcoming AGM, together with a proposal for AIM cancellation of the Company's shares.

Enquiries:

JOINT STATEMENT FROM THE CHAIRMAN AND THE CHIEF EXECUTIVE

We would like to report Infrastructure India plc's ("IIP" or the "Company" and, together with its subsidiaries, the "Group") unaudited interim results for the period ended 30 September 2023.

The Group has prepared the interim results on a basis other than going concern due to the uncertainty in relation to the timing of potential transactions, ultimate receipt of sale proceeds and the specifics of any deferred consideration. This basis was considered the most appropriate method for the reporting period.

The activity during the interim reporting period largely reflects the previous period, the fiscal year ended 31 March 2023, which was dominated by discussions and due diligence around the sale of both Distribution Logistics Infrastructure Limited ("DLI") and Indian Energy Limited ("IEL").

Net liabilities were £217.4 million as at 30 September 2023 (net liabilities of £184.9 million as at 31 March 2023 and £85.7 million as at 30 September 2022). The net liability position was based on preliminary terms with a third party and the ascribed consideration for the disposal of IIP's largest holding, DLI. The increase in Group net debt was also a contributor to the net liability position.

On 6 September 2023, IIP announced that it, along with DLI Group and Distribution and Logistics Infrastructure India, Mauritius, IIP's wholly-owned subsidiary ("DLI Mauritius"), had entered into a share purchase and shareholders' agreement (the "Agreement") for the conditional sale of DLI to Pristine Malwa Logistics Park Private Limited ("Pristine Malwa") (the "Transaction"). The Transaction comprised a share swap of up to 33% of Pristine Malwa's issued share capital and an upfront cash consideration of approximately US$10 million. Post-period, on 15 February 2024, IIP announced that it would not be proceeding with the Transaction. Some key areas of the Agreement were subject to final agreement, which could not be reached in a manner satisfactory to the IIP Board, in the best interests of IIP shareholders, and potentially materially undervalued DLI in the Board's view. Consequently, DLI Mauritius issued a termination notice to Pristine Malwa. Neither Pristine Malwa nor DLI had fulfilled all conditions precedent and the long stop date had expired without a mutually agreed extension.

Further to the announcement on 15 February 2024, the Company is in early discussions with a third party with regard to the proposed sale of DLI and is evaluating the potential transaction and related timelines, with due diligence underway, although there can be no guarantee that discussions will lead to definitive agreements for the sale of DLI. Further announcements will be made in due course.

Subsequent to the period end, on 4 April 2023, IIP entered into a conditional agreement for the sale of IEL to FA Power Renewables Private Limited. The sale of IEL is expected to complete imminently. The total aggregate cash consideration for IEL is approximately US$4.4 million.

Annual General Meeting, Duration of the Company and AIM Cancellation proposal

Further to the Company's announcement on 25 September 2023, with regard to delay in publication of the Company's Accounts, the timing of the 2023 Annual General Meeting ("AGM") was also impacted. Pursuant to the Company's Articles of Association, the Company should hold an AGM in each calendar year providing notice and a copy of the published annual audited accounts to shareholders not less than 21 clear days before the AGM date. IIP will therefore convene an AGM to be held in May 2024.

At the upcoming AGM, in accordance with IIP's Articles of Association, a 5-yearly vote on the Duration of the Company will be tabled.

The Board has considered the financial position of the Company, in light of the 5-yearly vote, and with IIP's assets, other than India Hydropower Development Company ("IHDC"), already held for sale in the Company Accounts, and the Board intends to propose an orderly winding up of the Group at the AGM. The estimated timeline of an orderly process is approximately 24 months, which is also in line with IIP's Articles of Association.

In light of the proposal for the orderly winding up of the Company, and being mindful of the costs of being a public quoted company, the Board intend to table a resolution at the AGM for the cancellation of the Company's shares from trading on AIM. 

Further details will be set out in due course within the notice of AGM.

Group liquidity

As at 30 September 2023, the Group had gross cash resources of £0.4 million. Group gross cash resources on 31 December 2023 were £0.7 million.

The sale of IEL is expected to complete imminently. The total cash consideration for IEL is approximately US$4.4 million. IIP is also discussing preliminary terms for the sale of DLI and further announcements with regard to this will be made as and when appropriate.

Financing

IIP has three fully drawn facilities: a secured term loan provided by IIP Bridge Facility LLC (the "Term Loan"), an unsecured working capital loan provided by GGIC, Ltd (the "Working Capital Loan") and an unsecured bridging loan provided by Cedar Valley Financial (the "Bridging Loan").

The Term Loan was originally provided to IIP's wholly owned Mauritian subsidiary, Infrastructure India Holdco, in April 2019, in multiple tranches totalling US$105 million on a four-year term with an interest rate of 15% per annum and maturing on 1 April 2023. On 31 August 2022, the Term Loan was increased by US$6 million, taking the principal to US$111 million, with all other terms and conditions remaining the same. On 17 April 2023, the Term Loan was increased by US$8 million, taking the principal to US$119 million, with all other terms and conditions remaining the same. The current amount of interest accrued is approximately US$95 million.

In April 2019, the Group extended the maturity of the Working Capital Loan and extended and enlarged the Bridging Loan.

The Working Capital Loan was originally provided to the Group in April 2013 by GGIC in an amount of US$17 million and increased to US$21.5 million in September 2017. The Working Capital Loan carried an interest rate of 7.5% per annum on its principal amount. The Group and GGIC agreed to increase its interest rate to 15% per annum from 1 April 2019. The current amount of interest accrued is approximately US$31 million.

The Bridging Loan was originally provided to the Group in June 2017 by Cedar Valley Financial and was subsequently increased in multiple tranches to US$64.1 million in March 2019. The Bridging Loan carried an interest rate of 12.0% per annum on its principal. The Group and Cedar Valley Financial agreed increase its interest rate to 15% per annum from 1 April 2019. The current amount of interest accrued is approximately US$71 million.

Post-period, the maturity for the three facilities has been extended until 15 May 2024.

Tom Tribone & Sonny Lulla

26 March 2024

REVIEW OF INVESTMENTS

Investment details

DLI is a supply chain transportation and container infrastructure company headquartered in Bangalore and Gurgaon with a material presence in central, northern and southern India. DLI provides a broad range of logistics services including rail freight, trucking, handling, customs clearing and bonded warehousing with terminals located in the strategic locations of Nagpur, Bangalore, Palwal (in the National Capital Region) and Chennai.

Developments

Operations were muted due to liquidity constraints and the focus on due diligence. Operations at Nagpur remained steady although domestic volumes were impacted by the limited working capital funding.

In southern India, additional construction required by Customs has been completed and DLI has received a final approval. DLI expects to commence operations from Bangalore during the first half of 2024. DLI continues to handle the steel business of JSW, an important customer.

DLI was granted a period of grace for debt servicing by its Indian lenders until February 2024. DLI management is currently in discussion with its lenders regarding settlement of its dues.

Valuation

The reported DLI valuation of £78.9 million as at 30 September 2023 is based on preliminary terms received from a third party for the disposal of DLI, and the ascribed consideration for DLI.

Investment details

The IHDC portfolio has installed capacity of approximately 74 MW across seven projects - Bhandardara Power House I ("BH-I"), Bhandardara Power House II ("BH-II"), Darna in Maharashtra; Birsinghpur in Madhya Pradesh; and Sechi, Panwi and Raura in Himachal Pradesh. IHDC has an additional 13 MW of capacity under development and construction.

Project update

Overall generation from IHDC's projects was 135.4 GWh in the first half of the fiscal year, against 128.7 GWh during the same period last year. The increase in production was a result of higher generation at Raura and Sechi in Himachal Pradesh, Bhandardara 2 project in Maharashtra and Birsinghpur in Madhya Pradesh.

IHDC received a 10-year extension for the Bhandardara 2 PPA from 2026 to 2036 consistent with the order from the Maharashtra Electricity Regulatory Authority. In December 2023, Maharashtra State Electricity Distribution Company Limited signed an amendment agreement aligning the Bhandardara 2 PPA with the lease agreement for a 30-year term.

Trading of Renewable Energy Certificates ("REC") continued. The price of REC's as at 31 March 2023 was INR 1,000 per REC. The price of REC's as at 30 September 2023 was INR 500 per REC.

Valuation

The IHDC portfolio was valued in accordance with the Group's stated valuation methodology by using a composite risk premium of 2.67% over the risk free rate of 7.29%. The composite risk premium is computed using a MW-based weighted average of risk premia of individual assets related to their stage of operations.

The value for IHDC investments as at 30 September 2023 is £17.4 million (31 March 2023 £17.3 million; 30 September 2022 £18.5 million). The factors driving the valuation are movement in the risk-free rate, changes in currency and business updates. Business updates include changes in management assumptions and delays in projected completion for the Melan project.

Consolidated Statement of Comprehensive Income
for the period ended 30 September 2023

The accompanying notes form an integral part of the financial statements.

Consolidated Statement of Financial Position
as at 30 September 2023

These financial statements were approved by the Board on 26 March 2024 and signed on their behalf by

Sonny Lulla                                                       Graham Smith

Chief Executive                                                 Director

The accompanying notes form an integral part of the financial statements.

Consolidated Statement of Cash Flows
for the period ended 30 September 2023

The accompanying notes form an integral part of the financial statements.

Notes to the interim consolidated financial statements
for the six months ended 30 September 2023

1. General information

The Company is a closed-end investment company incorporated on 18 March 2008 in the Isle of Man as a public limited company. The address of its registered office is 55 Athol Street, Douglas, Isle of Man.

The Company is listed on the AIM market of the London Stock Exchange. 

The Company and its subsidiaries (together the Group) invest in assets in the Indian infrastructure sector, with particular focus on assets and projects related to energy and transport.

The Company has no employees.

2. Basis of Preparation

These condensed consolidated interim financial statements for the six-month period ended 30 September 2023 have been prepared in a form consistent with that which will be adopted in the Group's annual accounts having regard to the accounting standards applicable to such annual accounts namely International Financial Reporting Standards ('IFRS') and should be read in conjunction with the Group's last annual consolidated financial statements as at and for the year ended 31 March 2023 ('last annual financial statements'). They do not include all of the information required for a complete set of financial statements prepared in accordance with IFRS Standards. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual financial statement.

These interim consolidated financial statements were approved by the Board of Directors on 26` March 2024.

3. Going Concern

As disclosed within the 31 March 2023 consolidated financial statements, the Board has concluded that the Group cannot be considered a going concern and as a result a basis other than that of going concern has been adopted. The investments holdings in DLI and IEL have been moved to available for sale and carried at the expected realisable amounts as per IFRS 5. Other than this, there is no impact to the financial information as result of changing to this basis as investments were already being carried at realisable amounts.

The financial statements do not include any provision for the future costs of except to the extent that such costs were committed at the end of the reporting period.

4. Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries and subsidiary undertakings). Control is achieved where the Company has power over an investee, exposure or rights to variable returns and the ability to exert power to affect those returns.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated Statement of Comprehensive Income from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

The Directors consider the Company to be an investment entity as defined by IFRS 10 Consolidated Financial Statements as it meets the following criteria as determined by the accounting standard;

·      Obtains funds from one or more investors for the purpose of providing those investors with investment management services;

·      Commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both; and

·      Measures and evaluates the performance of substantially all of its investments on a fair value basis.

As an investment entity under the terms of the amendments to IFRS 10 Consolidated Financial Statements, the Company is not permitted to consolidate its controlled portfolio entities.

5. Significant accounting policies

The accounting policies applied by the Group in these interim consolidated financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 March 2023.

6. Critical accounting estimates and assumptions

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense.

Actual results may differ from these estimates. In preparing these interim consolidated financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 March 2023.

During the six months ended 30 September 2023 management reassessed its estimates in respect of:

Valuation of financial instruments

The Group holds investments in several unquoted Indian infrastructure companies. The Directors' valuations of these investments, as shown in note 11 and note 12, are based on a discounted cash flow methodology or recent transaction prices, prepared by the Company's Asset Manager (Franklin Park Management). The valuations are inherently uncertain and realisable values may be significantly different from the carrying values in the financial statements.

The methodology is principally based on company-generated cash flow forecasts and observable market data on interest rates and equity returns. The discount rates are determined by market observable risk free rates plus a risk premium which is based on the phase of the project concerned.

7. Financial risk management policies

The Group's financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements as at and for the year ended 31 March 2023.

8. Other administration fees and expenses

9. Investment management, advisory and valuation fees

On 14 September 2016, the Group entered into a revised and restated management and valuation and portfolio services agreement (the "New Management Agreement") with Franklin Park Management, LLC ("Franklin Park" or the "Asset Manager"), the Group's existing asset manager, to effect a reduction in annual cash fees payable by IIP to the Asset Manager. The other terms of the New Management Agreement were unchanged from those of the prior agreement between the parties. A further revision was made in June 2019.

Under the New Management Agreement, the Asset Manager is entitled to a fixed annual management fee of £5,520,000 per annum (the "Annual Management Fee"), payable quarterly in arrears. The Fee Shares will be issued free of charge, on 1 July of each calendar year for the duration of the New Management Agreement.

Fees including the accrued Fee Shares and consulting fees for the period ended 30 September 2023 were £2,760,000 (30 September 2022: £2,760,000).

10. Basic and diluted earnings per share

Basic earnings/(loss) per share are calculated by dividing the loss attributable to shareholders by the weighted average number of ordinary shares outstanding during the year.

There is no difference between basic and diluted earnings/(loss) per share.

11. Investments - designated at fair value through profit or loss

Investments, consisting of unlisted equity securities, are recorded at fair value as follows:

(i) Shree Maheshwar Hydel Power Corporation Ltd ("SMH")

(ii) India Hydropower Development Company LLC ("IHDC")

As noted in the 31 March 2023 financial statements, it is assumed that SMH has no contribution to IIP's valuation.

The investments in IHDC has been fair valued by the Directors as at 31 March 2023 using discounted cash flow techniques, as described in note 6. The discount rate adopted for the investments is the risk free rate (based on the Indian government 10-year bond yields) plus a risk premium of 2.67% for IHDC (2022: 2.67%)

All the investments valued using discounted cash flow techniques are inherently difficult to value due to the individual nature of each investment and as a result, valuations may be subject to substantial uncertainty. There is no assurance that the estimates resulting from the valuation process will reflect the actual sales price even where such sales occur shortly after the valuation date.

12. Assets held for sale

13. Share capital and share premium

14. Net asset value per share

The NAV per share is calculated by dividing the net assets attributable to the equity holders at the end of the period by the number of shares in issue. 

15. Group entities

Since incorporation, for efficient portfolio management purposes, the Company has established or acquired the following subsidiary companies, with certain companies being consolidated and others held at fair value through profit or loss in line with the Amendments to IFRS 10 Consolidated Financial Statements:

16. Loans and borrowings

On 8 April 2013, the Group entered into a working capital loan facility agreement with GGIC Ltd ("GGIC") for up to US$17.0 million. The loans increased to US$21.5 million in September 2017. The working capital loan has an interest rate of 7.5% per annum, payable semi-annually during the facility period. The Group's ultimate controlling party during the year was GGIC and affiliated parties.

In addition, and on 30 June 2017, the Group entered into an US$8.0 million unsecured bridging loan facility with Cedar Valley Financial ("Cedar Valley"), an affiliate of GGIC and the loan was subsequently increased in multiple tranches to US$64.1 million. The bridging loan has an interest rate of 12% per annum, payable semi-annually during the facility period. Cedar Valley's ultimate controlling party during the year was GGIC and affiliated parties.

From 2 April 2019 both the GGIC and the Cedar Valley loans carried an interest rate of 15% per annum

The Group arranged further debt facility of up to US$105 million (approximately £87.5 million) with IIP Bridge Facility LLC (the "Lender"), an affiliate of GGIC originally on 2 April 2019. A further £6 million was drawn down in August 2022. At 31 March 2023, the US$111 million loan facility had been fully drawn down. The Loan is a secured term loan provided to the Group's wholly owned Mauritian subsidiary, Infrastructure India Holdco. The loan accrues interest daily in a manner that yields a 15% IRR to the Lender (increasing to 18% IRR in the event of default) and payable at maturity, and is secured on all assets of Infrastructure India Holdco, including 100% of the issued share capital of Distribution Logistics Infrastructure India ("DLII"), DLI's Mauritian parent company.

As at 30 September 2023 the Bridge Facility LLC, GGIC and Cedar Valley loans had a maturity date of 31 October 2023. Subsequently, the loan maturity has been extended until 15 May 2024.

17. Related party transactions

Management services and Directors' fees

Franklin Park Management LLC ("FPM") is beneficially owned by certain Directors of the Company, namely Messrs Tribone, Lulla and Venerus, and receives fees in its capacity as Asset Manager as described in note 9.

Loans and borrowings

See note 16 regarding loans from GGIC and Cedar Valley Financial, including interest charged in the year and accrued at the year-end.

18. Subsequent events

On 29 February 2024, the company announced that it was in early discussions with a third party with regard to the proposed sale of DLI following the termination of the conditional share purchase and shareholders' agreement with the Pristine Malwa Logistics Private Limited. The company is evaluating potential transaction and related timeliness, although there can be no guarantee that discussions will lead to definitive agreements for the sale of DLI.

IIP is in discussions with the Lenders with regard to a further extension to the maturity date of the Debt Facilities and the principal lender has agreed to an extension until 15 May 2024. The Company's expectation of timelines in respect of the potential DLI transaction is relevant to these discussions.

19. Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.