On March 10, 2022, the Trust, acquired 100% equity shares in CDPL, a Company engaged in business of building, maintaining, leasing, renting and otherwise dealing in infrastructure for telecom sector for total purchase price of '12,829 million. The Trust entered into a Share Purchase Agreement ("SPA") providing the Trust the right to direct the relevant activities of the CDPL, thereby providing the Trust with full control. Accordingly, effective March 10, 2022, CDPL became Subsidiary (SPV) of the Trust.
Total purchase price includes upfront consideration paid in cash '3,166 million, 52,800,000 units of the Trust aggregating '5,832 million issued on a preferential basis to the sellers of CDPL, deferred working capital refunds '221 million and a contingent consideration linked to achievement of revenues for eligible contracts as specified in the SPA. The range of contingent consideration payable is between 'nil and '5,000 million. The fair value of the contingent consideration is estimated based on the method to acquire OCRPS of CDPL held by the sellers of CDPL, prescribed in the SPA. The estimated fair value of the contingent consideration, as at March 31, 2023 is '3,741 million (as at March 31,2022 is '3,610 million) which can be paid either in cash or through a combination of cash and units of the Trust.
The interest and principal is payable by the borrower (Subsidiary - SDIL) subject to availability of surplus cash.
If any amount due and receivable from the borrower is not received on the respective due date, interest shall accrue on the unpaid sum from the respective due date up to the date of actual receipt at a rate of 0.5% p.a. and the applicable interest rate, at the option of the Trust.
All outstanding amounts under the loan and all other obligations and liabilities of the borrower under the loan agreement constitute subordinated obligations and will be subordinated to its Senior Obligations in right of payment and upon liquidation.
The Trust has only one class of units. Each unit represents an undivided beneficial interest in the Trust . Each holder of unit is entitled to one vote per unit. The Unitholders have the right to receive at least 90% of the Net Distributable Cash Flows of the Trust at least once in each financial year in accordance with the SEBI InvIT Regulations. The Investment Manager approves distributions. The distribution will be in proportion to the number of units held by the unitholders. The Trust declares and pays distributions in Indian rupees. The distributions can be in the form of return of capital, return on capital and miscellaneous income.
A Unitholder has no equitable or proprietary interest in the Trust Assets and is not entitled to transfer Trust Assets (or any part thereof). A Unitholder's right is limited to the right to require due administration of Trust in accordance with the provision of the Trust Deed and the Investment Management Agreement.
The unitholder(s) shall not have any personal liability or obligation with respect to the Trust.
On August 31,2020, the Trust issued 2,521,500,000 units at an Issue Price of '100 per unit to the subscribers. BIF IV Jarvis India Pte. Ltd. subscribed 89.79% of the units and is the immediate parent company.
During the year 2021-2022, the Trust acquired 100% equity shares in CDPL. The acquisition was funded through issuance of 28,700,000 units of the Trust at an Issue Price of '110.46 per unit by way of rights issue and issuance of 52,800,000 units of the Trust at an Issue Price of '110.46 per unit on a preferential basis.
On August 31, 2020, the Trust acquired balance 49% of the equity shares of SDIL from Reliance Industries Limited (“RIL”) by entering into a Shareholder and Option Agreement (entered as part of the aforesaid acquisition by Trust). As per the Shareholder and Option Agreement , RIL shall be entitled (but not obligated) to require the Trust to sell to RIL (or RIL nominee, if applicable), the shares of SDIL at lower of '2,150 million or fair market value of shares. This call option liability was recognised on the date of acquisition by Trust amounting to '2,020 million with a corresponding debit to Retained earnings. The valuation of the option is carried out by independent party as at balance sheet date.
ED CONTINGENT LIABILITIES AND COMMITMENTS
i. Refer note 3 for contingent consideration in relation to acquisition of CDPL.
ii. Guarantee given by bank on behalf of the Trust to BSE Limited for ' Nil (March 31, 2022: '16 million).
E3 FINANCIAL INSTRUMENTS:
FAIR VALUE MEASUREMENT HIERARCHY:
The financial instruments are categorized into three levels based on inputs used to arrive at fair value measurements as described below: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities; and
Level 2: Inputs other than the quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: Inputs which are significantly from unobservable market data.
Valuation methodology:
All financial instruments are initially recognized and subsequently re-measured at fair value as described below:
a. The Trust considers that the carrying amount recognised in the financial statements for financial assets and financial liabilities measured at amortised cost approximates their fair value.
b. The fair value of call option written to sell the shares of subsidiary is measured using Black Scholes model. Key inputs used in the measurement are:
(i) Stock Price: It is estimated based on the stock price as of the date of the transaction August 31,2020 of INR 2,150 million, as increased for the interim period between August 31,2020 and March 31,2023 by the Cost of Equity as this would be expected return on the investment for the acquirer.
(ii) Exercise Price: '2,150 million
(iii) Option Maturity: 30 years from August 31,2020 i.e., August 31,2050.
(iv) Risk free rate as on date of valuation - 7.4% (March 31, 2022 - 7.2%) and cost of equity - 15.3%.
(v) The fair value on the date of acquisition of '2,020 million was recognised as a liability with a corresponding debit to equity as this is part of the acquisition transaction described in Corporate Information.
E3 LIQUIDITY RISK
Liquidity risk arises from the Trust's inability to meet its cash flow commitments on the due date. Trust's objective is to, at all times, maintain optimum levels of liquidity to meet its cash and collateral requirements. Treasury monitors rolling forecasts of the Trust's cash flow position and ensures that the Trust is able to meet its financial obligation at all times including contingencies.
The Trust's liquidity is managed centrally with operating units forecasting their cash and liquidity requirements. Treasury pools the cash surplus from across the different operating units and then arrange their to either fund the net deficit or invest the net surplus in the market.
Credit Risk
Credit risk is the risk that a counter party will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Fund is exposed to credit risk from its investing activities including investments, trade receivables, loans, deposits with banks and other financial instruments. As at March 31,2023, and as at March 31,2022 the credit risk is considered low since substantial transactions of the Trust are with SDIL.
E3 SEGMENT REPORTING
The Trust activities comprise of owning and investing in Infrastructure SPVs to generate cashflow for distribution to the beneficiaries. Based on guiding principles given in Ind AS 108 "Operating Segment" this activity falls within a single operating segment and accordingly the disclosures of Ind AS 108 have not separately been provided. The Trust has invested in the subsidiaries which has all the business operations in India. Hence, there is only one geographic segment.
E3 DUES TO MICRO, SMALL AND MEDIUM ENTERPRISES AS DEFINED UNDER THE MSMED ACT, 2006:
There are no Micro and Small Enterprises as defined in the Micro and Small Enterprises Development Act, 2006 to whom Trust owes dues on account of principal amount together with interest and accordingly no additional disclosures have been made. The above information regarding Micro and Small Enterprises has been determined to the extent such parties has been identified on the basis of information available with the Trust.
i. Other audit services represents audit fees accrued/ paid for group reporting as per group referral instructions under PCAOB standards.
ii. Certification fees towards unit issuance are adjusted in other equity as unit issuance cost.
E9 CAPITAL MANAGEMENT
The Trust adheres to a disciplined capital management framework which is underpinned by the followings guiding principles:
i. Ensure financial flexibility and diversify sources of financing and their maturities to minimize liquidity risk while meeting investment requirements.
ii. Leverage optimally in order to maximize unit holder return while maintaining strength and flexibility of the Balance Sheet. As on March 31, 2023 and March 31, 2022, The Trust has no borrowings and hence net gearing ratio is zero.
E3 APPROVAL OF FINANCIAL STATEMENTS
The financial statements have been approved by the Data InvIT Committee and the Board of Directors of the Investment Manager to the Trust at their respective meetings held on May 26, 2023.
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