Cube Highways Trust || Risk Management

RISK MANAGEMENT

Proactively Navigating Risks in a Dynamic Environment

At Cube InvIT, risk management is embedded at the core of decisionmaking. As the platform scales, our risk management approach evolves into a forward-looking system that identifies risks before they crystallize, continuously monitors emerging trends, and integrates mitigation strategies into operational and strategic planning

Enterprise Risk Management Framework

We have established a robust Enterprise Risk Management (ERM) framework aligned with the best global practices, including ISO 31000 and COSO principles. The framework is designed to systematically identify, assess, prioritize, and mitigate risks across the organization while ensuring alignment with business objectives.

The ERM framework acts as a strategic compass, helping to:

Align risk management with stakeholder expectations.

Integrate risk considerations into business planning

Enhance preparedness for emerging risks and opportunities.

Strengthen financial stability and operational continuity.

Structured Risk Management Approach

The risk management process is anchored in a structured and cyclical methodology:

Risk Identification and Assessment
Risk Appetite and Tolerance
Risk Mitigation and Control
Continuous Monitoring and Review
Technology Enablement

Governance and Oversight

Risk governance at Cube InvIT is driven through a centralized yet adaptive model:

Strategic risk decisions are taken at the central level.

Standardized approaches are implemented across assets.

Asset-level customization is applied for operational risks.

A three lines of defense model ensures accountability:

1

Operational teams manage risks at the source.

2

Risk and compliance functions provide oversight.

3

Internal audit ensure independent assurance.

Enterprise Risk Management (ERM) Overview

In its pursuit of sustainable value creation and operational excellence, Cube InvIT has implemented a comprehensive Enterprise Risk Management (ERM) framework.

1

Tailored Framework and Strategic Alignment

Cube InvIT has developed a bespoke ERM framework tailored to its business requirements and aligned with global best practices. This framework serves as a strategic guide to systematically identify, assess, and manage risks across the organization.

2

Risk Identification and Prioritization

Through collaborative efforts and extensive experience, the organization has built a comprehensive inventory of risks impacting operational resilience, financial performance, and strategic objectives. Each risk is evaluated based on its likelihood and potential impact, enabling focused prioritization of mitigation actions.

3

Industry Benchmarking

Regular benchmarking against industry peers helps identify emerging and prevalent risks. These insights are integrated into the ERM framework, ensuring it remains relevant, robust, and aligned with evolving industry dynamics.

4

Risk Register

A centralized risk register forms the backbone of the ERM framework, capturing identified risks, their potential consequences, and corresponding mitigation strategies. This structured repository supports proactive risk management and informed strategic decision-making.

5

Governance and Board Oversight

A strong governance structure underpins the ERM framework, led by the Board and its Risk Management Committee, comprising amongst other independent directors. Supported by a ‘three lines of defense model’, covering operational management, risk and compliance functions, and internal audit, the governance structure enables effective identification, assessment, and mitigation of risks across the organization.

Risk Management across the Asset Lifecycle

During Acquisition

A rigorous, multi-layered due diligence process is conducted, covering:

Legal and regulatory compliance
Financial and tax exposures
Traffic and operational assessments
Anti-bribery and corruption (ABAC) checks

Identified risks are addressed through valuation adjustments, indemnities, or contractual protections.

Post-Acquisition

Risk management is integrated into asset operations through:

Continuous monitoring of traffic and asset conditions
Preventive maintenance planning
Standardized operating procedures

Risk Management Responsibility Mapping

The Risk Management Committee functions in line with the roles and responsibilities prescribed under the Securities and Exchange Board of India (Listing Obligations And Disclosure Requirements) Regulations, 2015 (“SEBI Listing Regulations”), as amended from time to time. Its scope also includes ensuring compliance with other applicable SEBI laws and regulations, along with any additional responsibilities delegated by the Board of Directors.

The Committee is composed of:

Mr. Jayesh R. Desai

Chairman

Mr. Sandeep Lakhanpal

Non-Independent Director

Ms. Helly B. Ajmera

Non-Independent Director

Mr. Raviraj V. Acharya

Non-Independent Director

Risk Management Matrix

Risk Type	Risk Description	Example Mitigation Strategies
Traffic and Revenue Risk	Variability in traffic volumes, arising from economic slowdown, competing routes, seasonal patterns, or changes in user behavior, may impact toll collections and cash flows	Diversified portfolio across geographies and asset types Annuity and HAM revenues provide a contractual, traffic-independent income floor, partially de-linking cash flows from volume volatility In-house Toll Management System (TMS) deployed across assets with FASTag-based electronic tolling, AI-powered vehicle classification, and automated cash-management controls to minimize leakage and misclassification Independent periodic traffic studies commissioned from reputed consultants (Steer Davies Gleave/CRISIL Intelligence) to forecast volumes and recalibrate operational strategy Dynamic corridor management: ATMS integration with CCTV, automatic incident detection, and variable-message signage to optimize traffic flow and reduce congestion-driven diversion Concession agreements provide for contractual WPI-linked toll escalation (e.g. 3% + 40% of WPI change) and, in specified circumstances, concession-period extensions if traffic falls below threshold volumes, offering a structural revenue backstop
Regulatory and Policy Risk	Changes in government policies, toll regulations, concession frameworks, or taxation could adversely affect project revenues and returns	Strict adherence to the terms of all concession agreements, the InvIT Regulations, and the InvIT Master Circular, with a dedicated in-house legal and compliance function Continuous engagement with NHAI, MoRTH, SEBI, and state concessioning authorities; proactive monitoring of proposed regulatory changes and submission of industry representations Portfolio diversified across NHAI, state-authority, and multiple concession-model types (BOT, DBFOT, TOT, HAM, annuity) to limit single-jurisdiction or single-policy exposure Change-in-law protections embedded in concession agreements entitling SPVs to compensation or concession-period adjustments if new regulations impose material additional cost Board-level Audit Committee and Risk Management Committee provide independent oversight of legal, tax, and regulatory compliance
Concession Agreement Risk	Dependence on concession agreements exposes the Cube InvIT to risks related to termination, non-compliance, or unfavorable amendments	Strong contractual governance: dedicated internal tracking of all concession obligations, milestones, condition precedents, and compliance deadlines across SPVs Deployment of proprietary technology platforms (Road-Aid for maintenance workflow digitization, HiRate for standardized assetcondition scoring, Build-Aid for quality monitoring, Setu Sthiti for bridge inspections per IRC standards) to ensure measurable, auditable contractual performance Periodic internal and third-party audits; independent-engineer oversight as mandated under each concession agreemen
Operational and Maintenance Risk	Inefficient operations, poor maintenance, or disruptions (including accidents or natural calamities) may affect asset performance and user experiences	Lifecycle-based asset management combining preventive and predictive maintenance, with advanced non-destructive testing (falling-weight deflectometers, laser profilers, network survey vehicles) feeding segment-level structural data into maintenance planning In-house R&D centre with pavement laboratory, AI laboratory, and the MINDS innovation framework; use of advanced materials such as polymer-modified bitumen (PMB) and highly modified asphalt (HiMA) to extend pavement life Dedicated Project Manager team of maintenance professionals overseeing 8,000+ lane kilometres, supported by an expert services agreement with Cube Highways Technologies Pvt. Ltd., inter alia, engineering oversight, major-maintenance planning, and ATMS operations Centrally managed procurement with a dedicated bitumen procurement team; strategic mix of bundling, long-term master service agreements, and vendor partnerships to control cost inflation and assure supply reliability AI-powered dashcam-based defect detection (cracks, potholes, signage deficiencies) for proactive scheduling of interventions and reduction of manual inspection dependency Modernized Route Patrol Vehicle (RPV) fleet with standardized SOPs, incident-management coordination, and rapid-response capability across all SPVs; 24/7 helpline and emergency communication systems Naturally hedged for inflation risks to a large extent as our toll concessions revenue is linked with inflation
Financial and Leverage Risk	High leverage or adverse changes in interest rates could impact profitability and cash distributions to unitholders	Prudent capital-structure management: net borrowing ratio maintained at ~47% ‘AAA/Stable’ credit ratings from all three agencies (CRISIL, ICRA, India Ratings) for long-term facilities providing access to the deepest pools of domestic debt capital Active refinancing program to reduce the average cost of debt Our revenue structure provides a built-in inflation hedge: concession receipts are directly linked to inflation indices or bank rates Diversified lender base including domestic banks, institutional lending agencies and international DFIs Financing covenants and compliance monitored continuously
Counterparty Risk	Dependence on government authorities for annuity payments, or on contractors and vendors for execution, may lead to delays or defaults	All our annuity assets are based on NHAI concessions with strong track records of timely payments Contractor/vendor base spread across project clusters to avoid single-party concentration Contractual safeguards including performance guarantees, liquidated damages, defect-liability provisions, and step-in/substitution rights enabling replacement of non-performing contractors Regular performance monitoring through Road-Aid ticketing, HiRate scoring, independent-engineer inspections, and buildquality tracking via Build-Aid during major maintenance
Project Acquisition and Integration Risk	Challenges in identifying, acquiring, or integrating new assets may affect growth strategies and returns	Disciplined investment-evaluation framework, applied consistently to all acquisition opportunities Comprehensive multi-layered due diligence covering technical traffic, legal, financial, and ESG parameters before every acquisition Sponsor and Sponsor Group acquires, stabilizes, and de-risks assets before dropdown to the Trust Structured integration playbooks encompassing tolling process alignment, maintenance standard harmonization, reporting and governance standardization, and technology platform onboarding ROFO Agreement with Sponsor providing visibility on a pipeline of three identified assets with a structured evaluation and binding-offer process
Environmental and Social Risk	Environmental regulations, land acquisition issues, or social opposition may impact operations or expansion plans	ESG framework embedded across investment, operations, and financing decisions, governed by the Environmental and Social Due Diligence Policy and overseen at Board and management levels Sustainability-linked bond with defined performance targets on greenhouse gas emission intensity, materials circularity, and gender diversity, aligning financing incentives with ESG outcomes Sustainable construction and maintenance practices: CCPR (cold central plant recycling) and HiMA for materials reuse and pavement durability; solar energy generation, water conservation systems, and Miyawaki afforestation across project sites Procurement standards mandating energy-efficient equipment, high-performance lighting, and ESG-aligned sourcing; ongoing fleet electrification and alternative-fuel pilots (natural gas DG sets) Proactive stakeholder and community engagement: route patrols for highway safety, local employment and livelihood programs, training and upskilling initiatives, and focus on expanding gender participation Land-acquisition and right-of-way responsibilities contractually rest with NHAI/state authorities; change-in-law provisions allow SPVs to seek compensation for incremental environmental compliance co
Tax Risk	Changes to tax regimes and interpretation of tax provisions	We have mitigated the tax related risks through detailed, structured documentation justifying all tax positions, and monitoring legislative changes regularly to update tax/accounting policies. Wherever necessary, we have procured external expert opinions in relation to contentious issues prior to adopting a tax position.
Force Majeure Risk	Events such as natural disasters, pandemics, or unforeseen disruptions can impact traffic and operations	Comprehensive insurance coverage across all Portfolio Assets, including industrial all-risk, commercial general liability, employees’ compensation, and group medical insurance Concession-agreement force-majeure provisions entitling SPVs to compensation or concession-period extensions for prolonged events Documented emergency-response protocols and incidentmanagement SOPs, with 24/7 patrolling, ATMS-enabled automatic incident detection, and coordinated RPV fleet response Centralized digital systems for real-time field-operations visibility Geographic diversification across 12 states and one union territory limits aggregate portfolio impact of any single localized event Climate-resilient asset design: use of advanced pavement materials (PMB, HiMA), drainage correction, and predictive-maintenance models calibrated for monsoon, heatwave, and geological-risk conditions
Dependence on Key Stakeholders	Reliance on the sponsor, investment manager, and key personnel may impact strategic execution	Strong governance framework: Board of Directors of the Investment Manager includes independent professionals alongside Sponsor nominees Formalized committee structure: Audit Committee, Risk Management Committee, Nomination and Remuneration Committee, and Stakeholder Relationship Committee, each with defined terms of reference and quorum requirements Experienced management team: CEO of Investment Manager with 16+ years in infrastructure financing; CEO of Project Manager with 25+ years in the roads sector; supported by 900+ employees across the platform Nomination and Remuneration Committee responsible for succession planning, talent development, qualification criteria for directors, and remuneration policy for key personnel

Powering Integrity through Scale and Culture

Our compliance framework operates through a hub-and-spoke model, wherein central oversight is anchored at the corporate level, while execution is driven across SPVs.

Digital Backbone for RealTime Compliance

A key pillar of our compliance architecture is a centralized compliance management system, which serves as the backbone of all compliance activities. The platform enables real-time tracking of statutory requirements, maintains a comprehensive repository of evidences, and supports proactive monitoring.

Structured Monitoring and Transparent Reporting

We have established robust reporting mechanisms to ensure accountability and transparency. Periodic compliance certifications and structured review processes allow us to track adherence levels across SPVs. Any instances of non-compliance are promptly escalated and shared with relevant stakeholders, including trustees, reinforcing trust and governance discipline.

Strengthening Ethical Practices and ABAC Framework

Our Anti-Bribery and Anti-Corruption (ABAC) framework is deeply embedded into day-to-day operations. We have standardized key processes such as vendor onboarding, supported by mandatory due diligence and integration with supply chain workflows. Additionally, registers for gifts, hospitality, and site visits are maintained to ensure transparency in all interactions, particularly those involving government interfaces.

Multilingual Policies for a Diverse Workforce

DISPLAY OF TEASERS/POSTERS AT SITE - ETHICS (WHISTLE BLOWER) HELPLINE
IMPARTING TRAININGS AT SITES
HR HANDBOOK AVAILABILITY IN ALL 6 LOCAL LANGUAGES
DISPLAY TEASERS/POSTERS OF MANUALS AT SITES

Ethical behavior at Workplace

If you are unsure, Before you act - ASK!

Is this legal?
Is this fair?
Is this as per the company policies?

If you witness any Code of Conduct violations, please reach out to the Ethics Helpline at:

The Compliance team has translated the Whistleblower Policy into various languages for better understanding by native speakers. This aids in identifying malpractices and facilitates prompt action.

Site Training

1Hazaribagh Tollway Private Limited.
2Jhansi-Vigakhet Tollway Private Limited
3Srirangam Infra Private Limited
4Salaipudhur Madurai Tollway Private Limited.
5Madurai Kanyakumari Tollway Private Limited.

Celebrating Compliance and Ethics Month, October 2025

Focused Departmental Training: Conducted targeted sessions across HR, SCM, IT, and Operations & Maintenance to strengthen awareness of ethical standards and compliance practices.
Leadership Messages by CXOs: Thought-provoking messages shared from leadership, reinforcing the organization’s commitment to ethics and integrity.

Case Studies in Comic Format: Presented real-life compliance scenarios through interactive comic formats to enhance understanding and retention

Interactive Quizzes: Organized quizzes on key topics such as Code of Conduct, Whistleblower Policy, ABAC, and POSH, with recognition for top performers.

Q&A Sessions with Senior Management: Facilitated open forums to address employee queries and discuss practical compliance and ethical dilemmas.
AI-Generated Case Study Video: Released an in-house video on procurement fraud, developed using Generative AI to drive engagement and learning.

ETHOS 2025

We hosted knowledge-sharing sessions with external experts and industry leaders to deepen awareness and reinforce our commitment to ethics and compliance under ETHOS 2025.

Future Focus

Going forward, we aim to further strengthen our compliance ecosystem by leveraging data analytics, automation, and real-time monitoring tools. Our focus will remain on proactive risk identification, enhanced transparency, and continuous engagement with stakeholders, ensuring a resilient and futureready compliance framework that supports sustainable growth.