Factors affecting DPU of INVITs

Key Themes:

• Valuation of Infrastructure Assets (Transmission and Solar): The primary valuation methodology employed is the Discounted Cash Flow (DCF) method.

• Financial Projections and Performance Metrics: Detailed financial projections, including revenue, expenses, EBITDA, and Free Cash Flow to Firm (FCFF), are calculated for individual SPVs over their projected operational lives.

• Cost of Capital Analysis: calculations for the Weighted Average Cost of Capital (WACC) for each SPV, a critical input for the DCF valuation. This involves determining the Cost of Equity (using factors like Risk Free Rate, Beta, and Equity Risk Premium) and the Cost of Debt.

• Sensitivity Analysis: demonstrates the impact of changes in the WACC on the calculated Enterprise Value (EV) of the SPVs, illustrating the sensitivity of valuations to key assumptions.

• Operational Expenses and Major Maintenance: Detailed breakdowns of projected operational and maintenance expenses, including specific line items like O&M, Repairs and Maintenance, Legal and Professional charges, and Employee Benefit costs, are provided for various SPVs. Future planned major maintenance expenses are also considered.

• Inflation Assumptions: Inflation rates are specified for different SPVs, indicating how future revenues and expenses are projected to change over time.

• Regulatory and Licensing Status: Summaries of key approvals and licenses for various SPVs are included, such as Power and Telecommunication Coordination Committee (PTCC) clearances, Railway Crossing approvals, and Aviation Clearances. For solar assets, Consents to Establish and Gram Panchayat No Objection Certificates etc

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