Infra.india Regulatory News (IIP)

17 August 2020

Infrastructure India plc

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

Trading Update

Infrastructure India plc, an AIM quoted infrastructure fund investing directly into assets in India, provides the following update on trading and the impact of COVID-19 on IIP's portfolio companies.

On 8 June 2020, following more than two months of national lockdown, the Government of India commenced a phased reopening of economic activities and adopted a cluster containment strategy in order to prevent spread of the disease.

IIP's largest asset, Distribution Logistics Infrastructure Limited ("DLI") has terminals located in each of the National Capital Region ("NCR"), Maharashtra and Tamil Nadu, which remain the most affected regions in India, and the restrictions in place have hindered construction progress and regulatory approvals.

Work at the terminal in Bangalore is materially complete, however the outstanding work and approvals continue at a slow pace. Work in the NCR and at Chennai are on hold due to local restrictions. At Nagpur, all Phase II work is complete and DLI awaits a regulatory clearance. The Nagpur terminal has been operating throughout lockdown, albeit at limited volumes.

Although activity has recommenced, operations remain at low capacity across most industrial sectors. This is due to both lower demand and critical shortages of labour and raw materials. Freight volumes - export, import and bulk cargo - remain depressed and are unlikely to pick up in the near term. Consequently, there has been aggressive discounting amongst operators in the logistics sector.

In May 2020, Prime Minister Modi announced a stimulus package aimed at improving liquidity, particularly for small and medium enterprises, increasing demand as well as long-term reforms related to land and labour. Although welcome, the package is largely viewed as beneficial in the long term. The Reserve Bank of India reduced the benchmark interest rate by 75 basis points and extended a moratorium on debt obligations by 6 months.

In an effort to provide fiscal stimulus to support investment and boost growth, the Government of India announced sweeping tax reforms with cuts to corporate tax with effect from fiscal year 2019-2020. For DLI in particular, the adoption of the new tax methodology is expected to materially improve long-term cash flows. The tax changes are also expected to benefit all of IIP's portfolio companies.

IIP's hydro assets are performing as expected with some disruption to administrative functions and localised delays, but overall the impact of COVID-19 has been limited with all sites accessible and fully staffed. The impact at Indian Energy Limited ("IEL") has been greater, with one wind farm project, Theni, which sells power under a Group Captive Scheme to manufacturing and retail customers, experiencing lower consumption of power particularly during lockdown. In response, IEL has begun diversifying its customer base.

Despite the extraordinary upheaval encountered by all businesses in India during the pandemic, infrastructure assets are long term and the IIP Board believes that the prospects of the logistics markets in India remain strong.

Although it remains difficult to predict when the wider market will return to normal levels, the IIP Board believes the individual portfolio company management teams have responded well to the crisis and that the Company is well positioned to effectively navigate current market conditions.

Further announcements will be made, as appropriate, in due course.

Enquiries:

The information communicated within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.