1. TRUST INFORMATION AND NATURE OF OPERATIONS
National Highways Infra Trust (“Trust” or “InvIT”) is an irrevocable trust registered under the provisions of the Indian Trusts Act, 1882 on 19th October, 2020. It is registered under the Securities and Exchange Board of India (Infrastructure Investment Trust) Regulations, 2014 on 28th October, 2020 having registration number IN/InvIT/20-21/0014.
The Trust was setup by National Highways Authority of India (“NHAI” or the “Sponsor”). The Trustee to the Trust is IDBI Trusteeship Services Limited (the “Trustee”) and Investment Manager for the Trust is National Highways Infra Investment Managers Private Limited (“Investment Manager”).
The Trust has been formed to invest in infrastructure assets primarily being in the road sector in India. The Trust’s Road projects are implemented and held through special purpose vehicles (“Project SPVs”/ “Subsidiaries”). The units of the Trust were listed in Bombay Stock Exchange and National Stock Exchange on 10th November, 2021.
During FY 21-22, the Trust acquired 100% equity control in National Highway Infra Projects Private Limited (the “Project SPV”) from the Sponsor with effect from 3rd November, 2021. The Project SPV (NHIPPL) has entered into five concession agreements with National Highway Authority of India (“NHAI”) on 30th March, 2021 for Tolling, Management, Maintenance and Transfer of five toll road projects for a period of 30 years from the Appointed Date. The Appointed Date has commenced on 16th December, 2021.
In previous financial year, Project SPV (NHIPPL) entered into three new concession agreements with National Highway Authority of India (“NHAI”) on 26th September, 2022 for Tolling, Management, Maintenance and Transfer of three toll road projects for a period of 20 years from the Appointed Date. The Appointed Date has commenced on 29th October, 2022.
During Current financial year, the Trust has invested in the equity share capital of the NHIT Eastern Projects Private Limited (Project SPV - NEPPL) & holding 100% equity share capital.
The Project SPV (NEPPL)has entered into seven concession agreements with National Highway Authority of India (“NHAI”) for Tolling, Management, Maintenance and Transfer of seven toll road projects for a period of 20 years from the Appointed Date. The Appointed Date has commenced on 1st April, 2024.
The registered office of the Trust is G-5 & 6, Setor-10, Dwarka, Delhi - 110075.
The financial statements were authorised for issue in accordance with resolution passed by the board of directors of the Investment Manager on 27th May, 2024.
2. MATERIAL ACCOUNTING POLICIES a) Basis of Preparation
The Standalone Financial Statement of the Trust for the Year ended 31st March, 2024 has been prepared in accordance with Indian Accounting Standard, as defined in Rule 2(1)(a) of the Companies (Indian Accounting Standards) Rules, 2015 (as amended) (“Ind AS”) and other accounting principles generally accepted in India to the extent not inconsistent with the Securities Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014 (“the InvIT Regulations” (as amended) including SEBI Master Circular SEBI/HO/DDHS-PoD-2/P/CIR/2023/115 dated 6th July, 2023 herein after referred to as “SEBI Master Circular”. Refer note 11 on presentation of “Unit capital” as “Equity” instead of compound financial instruments under Indian Accounting Standard (Ind AS) 32-Financial Instruments: Presentation). The Trust has applied the accounting policies consistently during the periods presented.
The Standalone Financial Statements of the Trust comprising of the Standalone Balance Sheet as at 31st March, 2024, and the Standalone Statement of Profit and Loss (including Other Comprehensive Income), the Standalone Statement of Cash Flows, the Standalone Statement of Changes in Unitholders’ Equity for the year then ended, the Standalone statement of Net Assets at fair value as at 31st March, 2024, the Standalone statement of Total return at fair value, and the Standalone statement of Net Distributable Cash Flows (NDCFs) for the year then ended and a summary of material accounting policies and other explanatory notes have been prepared in accordance with the requirements of Indian Accounting Standards as defined in Rule 2(1)(a) of the Companies (Indian Accounting Standards) Rules, 2015, as amended to the extent not consistent with the SEBI (Infrastructure Investment Trusts) Regulations, 2014, as amended and the circulars issued thereafter.
The Standalone Financial Statements have been prepared on going concern basis in accordance with accounting principles generally accepted in India. Further, the Standalone Financial Statements have been prepared on historical cost basis using uniform policies as explained in the accounting policies below for like transactions and other events in similar circumstances, except for certain financial instrument and contingent consideration which are measured at fair value at the end of each reporting period as explained in relevant accounting policies.
The financial statements are presented in Indian Rupees (inr) which is the Trust’s functional and presentation currency, and all amounts are rounded to the nearest Lakh ('00,000) and two decimals thereof, except as otherwise stated.
Impact of the initial application of new and amended IND ASs that are effective for current year
In the current year, the Trust has applied the below amendments to Ind ASs that are effective for an annual period that begins on or after 1st April, 2023.
(a) The Trust has adopted the amendments to Ind AS 1 - “Presentation of Financial Statements” for the first time in the current year. The amendments change the requirements in Ind AS 1 with regard to disclosure of accounting policies. The amendments replace all instances of the term ‘significant accounting policies’ with ‘material accounting policy information’. Accounting policy information is material if, when considered together with other information included in an entity’s financial statements, it can reasonably be expected to influence decisions that the primary users of general-purpose financial statements make on the basis of those financial statements.
(b) The Trust has adopted the amendments to Ind AS 8 - “Accounting Policies, Changes in Accounting Estimates and Errors” for the first time in the current year. The amendments replace the definition of a change in accounting estimates with a definition of accounting estimates. Under the new definition, accounting estimates are “monetary amounts in financial statements that are subject to measurement uncertainty”. The definition of a change in accounting estimates was deleted.
2.1 Summary of Material accounting policies
a) Current versus non-current classification
Based on the time involved between the acquisition of assets for processing and their realisation in cash and cash equivalents, the Trust has identified twelve months as its operating cycle for determining current and non-current classification of assets and liabilities in the balance sheet.
b) Revenue Recognition
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Trust expects to be entitled in exchange for those goods or services. The Trust has concluded that it is the principal in its revenue arrangements because it typically controls the services before transferring them to the customer. Revenue is measured at the transaction price of the consideration received or receivable, excluding the estimates of variable consideration that is allocated to that performance obligation, taking into account contractually defined terms of payment and excluding taxes or duties collected on behalf of the government.
The specific recognition criteria described below must also be met before revenue is recognised.
Revenue is recognised either at a point in time or over time, when (or as) the Trust satisfies performance obligations by transferring the promised goods or services to its customers.
Interest income - Interest income is recognised using the effective interest method.
Dividends - Dividend income is recognised when the Trust’s right to receive the payment is established.
Other items - Other items of income are recognised as and when the right to receive the income arises.
c) Taxes on income Current income tax
The income tax expense or credit for the year is the tax payable on current year’s taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. The current income tax charge is calculated based on tax laws enacted or substantively enacted at the end of the reporting period.
Deferred tax
Deferred income tax is provided in full, using the liability method on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However deferred income tax is not accounted if it arises from the initial recognition of an asset or liability that at the time of the transaction affects neither the accounting profit nor taxable profit (tax loss). Deferred income tax is determined using tax rates and laws that have been enacted or substantively enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset/liability is realized or settled.
Deferred tax assets are recognized for all deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilize those temporary differences and losses.
d) Provisions, Contingent Liabilities, Contingent Assets and Capital Commitments Contingent Liabilities
Contingent liabilities are disclosed in notes in case of a present obligation arising from past events, when it is not probable that an outflow of resources will be required to settle the obligation or a present obligation arising from past events, when no reliable estimate is possible
Provisions
Provisions are recognised when the Trust has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
e) Financial Instruments
Financial assets and financial liabilities are recognized when the Trust becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. However, transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss (“FVTPL”) are recognized immediately in the Statement of Profit and Loss.
If the Trust determines that the fair value at initial recognition differs from the transaction price, the Trust accounts for that instrument at that date as follows:
• at the measurement basis mentioned above if that fair value is evidenced by a quoted price in an active market for an identical asset or liability (i.e. a Level 1 input) or based on a valuation technique that uses only data from observable markets. The Trust recognises the difference between the fair value at initial recognition and the transaction price as a gain or loss.
• in all other cases, at the measurement basis mentioned above, adjusted to defer the difference between the fair value at initial recognition and the transaction price. After initial recognition, the Trust recognises that deferred difference as a gain or loss only to the extent that it arises from a change in a factor (including time) that market participants would take into account when pricing the asset or liability.
Subsequent measurement of financial assets and financial liabilities is described below.
Financial Assets
All recognized financial assets are subsequently measured in their entirety at either amortized cost or fair value, depending on the classification of the financial assets.
1. Classification of Financial Assets
Financial Assets that meet the following conditions are subsequently measured at amortised cost (unless the same are designated as fair value through profit or loss (FVTPL)):
• The asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and
• The contractual terms of instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial Assets at FVTPL is a residual category for debt instruments and all changes are recognized in profit or loss.
2. Amortized cost and effective interest method
Income is recognized on an effective interest method as per Ind AS 109 for financial assets other than
those financial assets classified as at FVTPL. Interest income is recognized in the Statement of Profit and Loss and is included in the “Other income” line item.
3. Impairment of financial assets (Expected credit loss model)
An impairment loss on financial asset is established when there is objective evidence that the Trust will not be able to collect all amounts due according to the original terms of the receivables. Impairment loss, if any, are recognised in Statement of Profit or Loss for the period.
4. De-recognition of financial assets
The Trust derecognize a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.
On de-recognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss if such gain or loss would have otherwise been recognized in the Statement of Profit or Loss on disposal of that financial asset.
b) Financial Liabilities
All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.
Loans and borrowings are subsequently measured at amortized costs using Effective Interest Rate method. Financial liabilities at fair value through profit or loss (FVTPL) are subsequently measured at fair value. De-recognition of financial liabilities
Financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of the new liability. The difference in the respective carried amount is recognized in the Statement of Profit and Loss
Financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.
c) Classification as debt or equity
Debt and equity instruments issued by Trust are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
f) Statement of Cash Flows
Statement of Cash Flows is prepared segregating the cash flows into operating, investing and financing activities.
Cash flow from operating activities is reported using indirect method adjusting the net profit for the effects of:
• changes during the period in operating receivables and payables, transactions of a non-cash nature;
• non-cash items such as depreciation, provisions, deferred taxes, unrealised foreign currency gains and losses;
• all other items for which the cash effects are investing or financing cash flows.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Trust’s cash management.
g) Investment in subsidiaries
The Trust accounts for its investments in subsidiaries at cost less accumulated impairment losses (if any) in its separate financial statements.
h) Cash and Cash Equivalents
Cash and cash equivalents in the balance sheet comprise balance with banks and short-term deposits with an original maturity of three months or less, and investments in overnight mutual funds which are subject to an insignificant risk of changes in value.
For the purpose of the statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Trust’s cash management.
i) Borrowing Costs
Borrowing costs include interest calculated using the effective interest method, amortization of ancillary costs and other costs the Trust incurs in connection with the borrowing of funds.
Borrowing costs are expensed in the period in which they are incurred.
j) Distribution to unit holders
The Trust recognises a liability to make cash distributions to unit holders when the distribution is authorised and a legal obligation has been created. As per the SEBI InvIT Regulations, a distribution is authorised when it is approved by the Board of Directors of the Investment Manager. A corresponding amount is recognised directly in other equity.
k) Earnings per Unit (EPU)
Basic EPU are calculated by dividing the profit for the period attributable to unitholders by the weighted average number of units outstanding during the period.
Diluted EPU are calculated by dividing the profit/(loss) attributable to unitholders by the weighted average number of units outstanding during the period plus the weighted average number of units that would be issued on conversion of all the dilutive potential units into unit capital.
l) Recent Pronouncements
As on 31st March 2024, there are no new standards or amendment to the existing standards applicable to the trust which has been notified by Ministry of Corporate Affairs.
m) Significant accounting judgements, estimates and assumptions
The preparation of the Trust’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these
assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
Judgements
In the process of applying the Trust’s accounting policies, management has made the following judgments, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements.
Classification of unit holders Funds
The Unit Capital has been presented as “Equity” in accordance with the InvIT Regulations instead of compound financial instrument. Refer note 11 on presentation of “Unit capital” as “Equity” instead of compound financial instruments under Indian Accounting Standard (Ind AS) 32-Financial Instruments: Presentation).
Fair value measurements
Management applies valuation techniques to determine the fair value of financial instruments (where active market quotes are not available). This involves developing estimates and assumptions consistent with how market participants would price the instrument. The Trust engages third party valuers, where required, to perform the valuation. Information about the valuation techniques and inputs used in determining the fair value of investments are disclosed in the notes to Standalone Financial Statements.
Fair valuation and disclosures
SEBI Master Circular issued under the SEBI InvIT Regulations requires disclosures relating to net assets at fair value and total returns at fair value. In estimating the fair value of investments in subsidiaries (which constitute substantial portion of the net assets), the Trust engages independent qualified external Registered Valuers to perform the valuation. The Investment Manager works closely with the valuers to give all the required inputs to the model. The valuation report and findings are discussed at the meeting of the Board of Directors on yearly basis to understand the changes in the fair value of the subsidiaries. The inputs to the valuation models are taken from Independently conducted Technical and Traffic studies and observable markets, where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of inputs such as weighted average cost of capital, tax rates, inflation rates, etc. Changes in assumptions about these factors could affect the fair value.
Impairment of investments and loans in subsidiaries
Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The recoverable amounts for the investments in subsidiaries are based on value in use of the underlying projects. The value in use calculation is based on a DCF model. The cash flows are derived from forecasts over the remaining SCA period of the projects.
Expected Credit Loss on financial assets
As per Ind AS 109, Financial Assets that are measured at amortised cost are required to compute the Expected Credit Loss (ecl). As at the reporting period, Investment manager of the Trust assessed the credit risk of the financial assets and concluded that no provision for ECL is required.
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