Embassyofficeparksreit Ltd — Q3 FY26

Embassy Office Parks REIT Ltd Q3 FY2025-26 Earnings Conference Call https://www.youtube.com/watch?v=xfjaWy3_KB0 Published: 3 months ago

0:01 1 second Good morning everyone. A very warm welcome to all for embassy reads third quarter FI 2026 earnings conference 0:08 8 seconds call. Currently all participants are in a listenon mode. Our speakers will address your questions during the question and answer session at the end. 0:18 18 seconds As a reminder, this conference call is being recorded. 0:23 23 seconds I would now like to introduce your host for today's conference, Mrs. Sakshi, head of investor relations for Embassy REITs. Ma'am, you may begin. 0:33 33 seconds Thank you, Ryan. Uh, welcome to the third quarter FI 2026 earnings call for Embassy REIT. Embassy REIT released its 0:42 42 seconds financial results for the quarter and 9 months ended December 31st, 2025 last Friday. 0:47 47 seconds [clears throat] 0:47 47 seconds As is our standard practice, we have placed a financial results earnings presentation discussing a performance and a supplementary financial and 0:55 55 seconds operating data book in the investors section of our website at www.mboffsparks.com. 1:02 1 minute, 2 seconds As always, we would like to inform you that management may make certain comments on this call that one could deem forward-looking statements. Please 1:10 1 minute, 10 seconds be advised that the re's actual results may differ from these statements. Mbd does not guarantee these statements or results and is not obliged to update 1:18 1 minute, 18 seconds them at any time specifically any financial guidance and for information that provides all our management estimates based on certain assumptions 1:27 1 minute, 27 seconds and have not been subject to any audit or examination procedures you're cautioned not to place undue reliance such information and they get no 1:35 1 minute, 35 seconds assurance be able to achieve the same joining me today are Amit Shetty our CO and Abhishek Aaral our CFO we will start 1:44 1 minute, 44 seconds off with remarks on our business and financial performance and then open floor to over. 1:50 1 minute, 50 seconds Thank you Sakshi. Good morning and thank you all for joining us today. Quarter 3 was a standout quarter for us with a 1:58 1 minute, 58 seconds strong leasing and financial performance as well as a clear focus on accelerating growth by adding quality assets through 2:05 2 minutes, 5 seconds organic and inorganic expansion. Some of the key highlights for the quarter are we announced the acquisition of 2:12 2 minutes, 12 seconds Pinehurst in a prime asset embassy golf links from a third party. We received an innotation for offer for embassy zenith 2:19 2 minutes, 19 seconds a landmark office star in central Bangalore which is leased to one of the world's largest tech companies. We have 2:26 2 minutes, 26 seconds launched a new redevelopment project in Embassy Manita at an impressive 23% yield on cost and we are now looking to 2:34 2 minutes, 34 seconds expand our hospitality portfolio with the new hotel in Pune. We also delivered 2:41 2 minutes, 41 seconds a 0.4 million square ft fully leased new office star in Chennai, a market which has seen a strong rebound and increased 2:50 2 minutes, 50 seconds traction from some of the largest global companies. And we once again registered a double-digit growth across all our key 2:57 2 minutes, 57 seconds financial metrics and grew our NOI by 19% and our DPU by 10%. Let me take you 3:05 3 minutes, 5 seconds through some of the details. Let me start with an update on the Indian office market. On the back of a record 3:12 3 minutes, 12 seconds closing quarter, the calendar year 2025 clocked the highest ever gross absorption of 18 million square ft and 3:19 3 minutes, 19 seconds net absorption of 51 million square ft which is 8% and 14% up respectively. The 3:27 3 minutes, 27 seconds GCC and the flex operators were at the forefront of this demand contributing to about 60% of the total leasing. 3:34 3 minutes, 34 seconds Bangalore again outshined with the highest market share of about 27%. 3:40 3 minutes, 40 seconds With vacancies tightening, rents have started to grow across key micro markets. For our portfolio, market rents 3:48 3 minutes, 48 seconds have gone up by 9% yearon-year with a 19% growth in Mumbai, 16% in Nida and a 3:54 3 minutes, 54 seconds 7% in the Bangalore assets. This has resulted in increasing the total marktomarket potential of our portfolio 4:01 4 minutes, 1 second to 11% a 600 basis point jump in the last 3 months. We see this as a positive 4:08 4 minutes, 8 seconds momentum to continue for the Indian office with over 170 million square ft of absorption expected versus around 130 4:18 4 minutes, 18 seconds million square ft of new supply over the next 2 years. With this backdrop, let me delve deeper into our quarter 3 leasing 4:25 4 minutes, 25 seconds performance. We leased 1.1 million square ft across 22 deals, bringing our total YTD leasing to 4.6 million square 4:35 4 minutes, 35 seconds ft. Our quarter 3 leasing included 0.8 million square ft of new leases signed at an impressive 17% releasing spread, 4:44 4 minutes, 44 seconds implying a 5% premium to market rents on an average. This was over and above the 9% year-on-year growth already seen in 4:53 4 minutes, 53 seconds the market rents of our portfolio assets, demonstrating the superior quality of our portfolio and the strength of our leasing teams. With 5:01 5 minutes, 1 second limited vacancies available in these properties, we believe that this rental growth momentum will continue further solidifying the marktomarket 5:10 5 minutes, 10 seconds opportunities available in our portfolio. Our core Bangalore portfolio contributed to over twothirds of the 5:17 5 minutes, 17 seconds total leasing and three out of our five properties in this city are now 100% occupied. We are also noting early green 5:26 5 minutes, 26 seconds shoots in our Pune properties with an increase in leasing inquiries and around 0.5 million square ft of leases signed 5:34 5 minutes, 34 seconds across our three assets in the last 9 months. Overall, we maintained our portfolio occupancy of 90% by area, 94% 5:43 5 minutes, 43 seconds by value, and three out of our five cities are at over 95% occupancy. 5:49 5 minutes, 49 seconds Next on our portfolio development, we launched our third redevelopment project at Embassy Maneta aimed at increasing 5:57 5 minutes, 57 seconds the leasable area of E1 block from 0.2 million square ft to 0.8 8 million square ft through utilization of 6:06 6 minutes, 6 seconds unutilized F. The project is highly attractive at an yield on cost of 23%. 6:13 6 minutes, 13 seconds We continue to evaluate more such opportunities in Bangalore and will update the market in due course. We've 6:19 6 minutes, 19 seconds received occupancy certificate for 0.4 million square ft block 10 in embassy splendid tech zone in Chennai which is leased to a global healthcare company. 6:30 6 minutes, 30 seconds We expect to receive the occupancy certificate for another 0.6 million square ft block 4 in the same park by 6:37 6 minutes, 37 seconds the end of this month. With this, our total development pipeline now stands at 7.6 million square ft, which will result in an area increase of 19% organically. 6:49 6 minutes, 49 seconds With a total capacity, sorry, with a total capital outlay of about 4,000 crores, we expect these projects to add 6:57 6 minutes, 57 seconds around 740 crores in stabilized NOI by FI2030. 7:03 7 minutes, 3 seconds The 518 key Hilton hotels at Embassy Tech Village remain on track for October 26th delivery. We are also exploring a 7:12 7 minutes, 12 seconds new 116key midscale hotel in Embassy Tech Zone in Pune. Similar to our hospitality portfolio in Bangalore, this 7:21 7 minutes, 21 seconds new hotel is envisaged as a strategic ancillary offering for our tenants in our park and the vicinity areas. 7:30 7 minutes, 30 seconds Moving ahead to updates on our inorganic growth and capital recycling, we have received an invitation to offer to 7:37 7 minutes, 37 seconds acquire Embassy Zenit, a 0.4 4 million square ft² office star located in CBD Bangalore. The building is fully leased 7:44 7 minutes, 44 seconds to one of the world's largest tech companies which can add meaningful uh meaningfully to our tenant roster. We 7:52 7 minutes, 52 seconds will start our evaluation and will update the market as we progress. During the quarter, we announced a third party acquisition of Pinehurst, a fully leased 8:01 8 minutes, 1 second 0.3 million square ft² office building aimed to consolidate our ownership in Embassy Golf Lings. The transaction 8:08 8 minutes, 8 seconds valued at 852 crores implies a NOI of 7.9% and aligns with our strategy of 8:15 8 minutes, 15 seconds disciplined acrative growth. In addition, we continue to evaluate multiple third party acquisition opportunities available in the market. 8:24 8 minutes, 24 seconds We also completed the divestment of 376,000 uh square ft of two strata owned blocks 8:31 8 minutes, 31 seconds in embassy Manita for a total consideration of 530 crores. In summary, we delivered another strong quarter to 8:40 8 minutes, 40 seconds wrap up the calendar year. We happy to report that during the year we delivered a total return of 25% significantly 8:47 8 minutes, 47 seconds outperforming the nifty's 12% return and nifty reality 16% decline reinforcing the strong riskadjusted appeal of REIT 8:55 8 minutes, 55 seconds asset class. We are determined to carry forward this benchmark and continue our growth trajectory to the benefit of our 9:03 9 minutes, 3 seconds 125,000 plus investor base. I will now hand over to Abhishek to present our financial updates. 9:10 9 minutes, 10 seconds Thank you Amit and good morning everyone. [clears throat] Let me take you through the key financial highlights for the quarter. We delivered strong 9:18 9 minutes, 18 seconds double-digit year-on-year growth across our financial number and reported our highest ever revenue in NOI. We grew our 9:26 9 minutes, 26 seconds revenue by 17% to rupes 1,193 crores and NOI by 19% to rupes 985 crores. Year on 9:34 9 minutes, 34 seconds year the increase was mainly driven by new lease up at high releasing spreads contracted rent escalations and new buildings delivered during the period. 9:44 9 minutes, 44 seconds Our hotel segment NOI grew by 13% yearon year due to an occupancy uptick of 100 basis point to 60% as well as an ADR growth of 11%. 9:54 9 minutes, 54 seconds We declared distributions of rupes 613 crores or rupes 6.47 47 per unit for the quarter, representing a 10% year-on-year growth. 10:04 10 minutes, 4 seconds This increase was driven by an uptick in our NOI, which was partially offset by net SD refunds and an increase in our interest costs. 10:13 10 minutes, 13 seconds During the quarter, we successfully raised Rs 400 crores through a commercial paper at an impressive effective rate of 6.44% peranom. 10:22 10 minutes, 22 seconds Post this our net debt stood at rupes 20,631 crores as of December 25 implying 10:29 10 minutes, 29 seconds a 32% leverage ratio at 7.29% average in place interest rate. 10:35 10 minutes, 35 seconds I want to highlight that we have successfully reduced our inplace debt cost by 61 basis point in the last 9 months through our active debt management. 10:44 10 minutes, 44 seconds Lastly, on the forward financial outlook, based on our YTD performance, we remain on track to achieve our our FY26 10:53 10 minutes, 53 seconds guidance, we continue to expect our NOI to be in the range of Rs 3,589 to Rs 3,811 crores and DPU to be in the range of Rs 24.5 to rupes 26 per unit. 11:07 11 minutes, 7 seconds At midpoint, this guidance implies a 13% growth in NOI and a 10% growth in DPU on a year-on-year basis. With this, let's move to Q&A, please. 11:21 11 minutes, 21 seconds Thank you. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their 11:30 11 minutes, 30 seconds touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. 11:37 11 minutes, 37 seconds Participants are requested to use their handsets while asking a question. We would also request participants to restrict their questions to two per participant. 11:46 11 minutes, 46 seconds If you have a follow-up questions, please rejoin the queue. 11:51 11 minutes, 51 seconds Ladies and gentlemen, we will wait for a moment while the question queue assembles. 11:58 11 minutes, 58 seconds We take the first question from the line of Punit from HSBC. Please go ahead. 12:04 12 minutes, 4 seconds Uh yeah thank you so much and congratulations on you know good performance once again. My first question is with respect to the market rentals that you've disclosed in your 12:12 12 minutes, 12 seconds presentation uh bulk of it embassy manata ETV uh FIFC you know 24/7 have 12:19 12 minutes, 19 seconds all gone up meaningfully in this quarter. Uh can you talk about two things whether this is it this quarter phenomena or are you just recognizing it 12:27 12 minutes, 27 seconds and second how different are these from your last uh leasing rentals? 12:34 12 minutes, 34 seconds Uh Prate you want to uh continue your next question as well so we'll take that together. 12:41 12 minutes, 41 seconds Uh yeah secondly on your uh hotel at Hijari if you can talk a bit more about what is the capex you're looking at and 12:49 12 minutes, 49 seconds where will the where will it really come up and also lastly how much did you spend during the quarter in terms of capex that's all 12:57 12 minutes, 57 seconds okay so let me take the first question uh the market rentals that you're seeing uh you know just to give you a a broader 13:04 13 minutes, 4 seconds picture the market saw about 82.6 6 million square ft of absorption and about 80 million square ft in the top 13:12 13 minutes, 12 seconds seven cities of the country. Now what it did was the vacancy was uh declined which was 21% is now moved to 20%. And 13:21 13 minutes, 21 seconds thereby you know there's a increased demand given the supply that came into the market was about 57 million square ft itself. If you see the net absorption 13:30 13 minutes, 30 seconds that's taken place in the market is about 14% and thereby across the country we've seen tightening of the rental values. Given this we've seen 13:39 13 minutes, 39 seconds particularly we've seen a 17% releasing spread across our 0.8 million new leasing that we've done and from a 13:47 13 minutes, 47 seconds market potential we have now reassessed to 11% marktomarket opportunity that we have seen with a 9% rental growth across 13:56 13 minutes, 56 seconds all our portfolio. you know some of the outliers being Mumbai. Mumbai like we said you know is seen uh you know 14:04 14 minutes, 4 seconds doubledigit rental growths. Noa has seen double digit rental growths as well right with Bangalore being at about 7%. 14:11 14 minutes, 11 seconds And we believe that the Bangalore given the market and the supply I think the uh in the uh coming days the Bangalore 14:18 14 minutes, 18 seconds rents will also climb higher. Now moving on to the next question which is the hotel at Hijadi. We believe like we've 14:26 14 minutes, 26 seconds always said to the market that we believed in building a larger business ecosystem and this is again aimed at 14:33 14 minutes, 33 seconds that. We're planning to build a 116key midscale hotel in Hijabari in embassy 14:40 14 minutes, 40 seconds tech zone uh with a capital outlay of about 45 crores. 14:47 14 minutes, 47 seconds Okay. Just a bit on the rental part again. Right. And so in your embassy mana the market rentals you claim is 105 14:54 14 minutes, 54 seconds rupees ETV also 105 uh there if you can uh suggest that whether you've been able to lease at 15:02 15 minutes, 2 seconds higher rentals than this and and what are those numbers and are or are these are your rentals not just the market rentals? 15:10 15 minutes, 10 seconds See uh a this is our our rentals to start off with uh and also you know you know we've actually been very 15:18 15 minutes, 18 seconds conservative of what we've actually disclosed to the market and you know we've actually achieved you know higher rentals as well beyond these uh rentals 15:27 15 minutes, 27 seconds but we just continue to see given that Mana is at now 94% occupied and uh you know of that vacancy of about 800,000 15:35 15 minutes, 35 seconds ft² which has H1 block which is actually about uh 375,000 ft² which is undergoing refurbishment. So effectively the the 15:45 15 minutes, 45 seconds the vacancy that we have is about 500,000 ft² in Manita. So with this we believe that you know the rental rates 15:52 15 minutes, 52 seconds will only move up given the expireies and also uh you know some of the new redevelopments that we are doing in 15:59 15 minutes, 59 seconds Maneta. We're really excited for Mana right now. 16:03 16 minutes, 3 seconds Understood. That's very helpful. Uh that's all from my side. Thank you and all the best. Thank you. 16:09 16 minutes, 9 seconds Thank you. We take the next question from the line of Mohit Azarval from IFL. Please go ahead. 16:17 16 minutes, 17 seconds Yeah, good morning everyone and thanks for the opportunity. Uh so I'm just continuing with the previous uh question on market rental growth. uh particularly 16:26 16 minutes, 26 seconds Mumbai has seen very strong uh reset when in your presentation uh you've mentioned that in express stars you'll be able you've been able to get 26% M2M 16:35 16 minutes, 35 seconds and a premium of 22% which means you know almost 400 rupees uh rental for express stars and similarly for embassy 16:43 16 minutes, 43 seconds so can you explain what's happening there you've been able to get a meaningful premium to the market uh is it a trend are these small transactions 16:50 16 minutes, 50 seconds or do you expect then you know the uh mark to market in these uh especially Mumbai portfolio to continue to go up. 16:58 16 minutes, 58 seconds Yeah. 16:58 16 minutes, 58 seconds So that's my first question. I I I I just you know and again on Pune as well I think you you you mentioned about green shoots there. Uh so what's the 17:06 17 minutes, 6 seconds outlook? What is the kind of is it something that you mentioned about the general tightness in on supply demand is that driving it or is it something 17:13 17 minutes, 13 seconds particular about the western part of Pune where you know things are now looking up. So comments on that. Yeah. 17:19 17 minutes, 19 seconds Yeah. So first let me take the Mumbai market. I think uh Mumbai from you know overall market perspective given the 17:27 17 minutes, 27 seconds infra development that's have happened uh given the coastal road the atal setu and you know a couple of other flyovers 17:34 17 minutes, 34 seconds and also the metro uh lines I think you know there's a meaningful demand in Mumbai if you see Mumbai is the second 17:42 17 minutes, 42 seconds largest city in terms of absorption uh you know uh having said that express stars where you know which is located in 17:50 17 minutes, 50 seconds south Bombay given in the coastal road is seen a a large increase in the demand there itself uh you know and we believe 17:59 17 minutes, 59 seconds that this demand will continue to grow and you know if you see Mumbai as a city as well given that even embassy 247's 18:07 18 minutes, 7 seconds done extremely well we believe that you know the continue to we'll see this uptick going forward so that's first the 18:15 18 minutes, 15 seconds moving on to the Pune market again like we mentioned Pune market if you see for the last 9 months We've actually done 18:23 18 minutes, 23 seconds about 500,000 ft² of leasing and about 100,000 ft² of leasing is in Quadron itself. We've got meaningful inquiries. 18:31 18 minutes, 31 seconds We've got a pipeline of about 400,000 ft in Punea that we've already built up. 18:37 18 minutes, 37 seconds The reason is that the metro is now finally in Injavadi with phase three trials of the metro while the government 18:44 18 minutes, 44 seconds declared that March 26 is when the metro will be officially opened. But you know even if you're a little pessimistic and 18:51 18 minutes, 51 seconds think that June 26 is is is something which you know we very confident that the metro will be operational given that we seeing about 2.1 million square ft of 19:00 19 minutes RFPs in the Pune market and also given the fact that you know the arbitrage of rent between the eastern side and the 19:06 19 minutes, 6 seconds western side of Pune between uh 80 rupee market to a 50 60 rupee market we believe that a meaningful demand will 19:14 19 minutes, 14 seconds now shift to Hijavari given the metro operationalization. 19:20 19 minutes, 20 seconds Okay. So any any Pune portfolio occupancy targets that you have like uh for quadron for uh tech zone for cubics. 19:30 19 minutes, 30 seconds Pune is currently uh at 62% occupancy right we would like to move that up. Uh I would not like to comment on any 19:39 19 minutes, 39 seconds forward-looking statements here but you know like I said there's a 400,000 ft² pipeline which we are confident of converting and in due course you know 19:48 19 minutes, 48 seconds we'll announce to the market as and when these trades happen understood just one last clarification 19:56 19 minutes, 56 seconds this should mean that when your uh NAV is being uh you know revised uh next uh 20:03 20 minutes, 3 seconds quarter the fourth quarter there should be a meaningful revision in that as Absolutely. Absolutely. See the NAV obviously from a leasing occupancy 20:11 20 minutes, 11 seconds perspective as well as the market uh marktomarket opportunity as well. I think these two factors will be considered when we revise the next uh 20:20 20 minutes, 20 seconds NAV in the next quarter and this could also mean that the uh quadron write off that you had taken by 20:28 20 minutes, 28 seconds like that could again be revalued. Is that is that a possibility? So mh this is [clears throat] Abhishek. 20:34 20 minutes, 34 seconds So on the revaluation what will happen is once we see that actually leasing has happened and it's a reversal that is 20:42 20 minutes, 42 seconds when we'll want to take the reversal of that impairment. Okay understood. Thank you so much. 20:49 20 minutes, 49 seconds Those were my questions. All the best. Thank you. Thank you. 20:53 20 minutes, 53 seconds Thank you. We take the next question from the line of Vash Gilganchi from Bob Capital Markets Limited. Please go ahead. 21:03 21 minutes, 3 seconds Good morning. Thank you for taking my question. The leasing spreads at around 17% uh were significantly lower than what was achieved over the past five 21:11 21 minutes, 11 seconds years. Now with Bangalore driving leasing activity and your portfolio over there operating at uh 95% occupancy, 21:20 21 minutes, 20 seconds please help me understand what's uh keeping the spreads under pressure. And my second question would be for the developments that are planned to come 21:28 21 minutes, 28 seconds online this com uh this calendar year the ones especially at Tamika and Splendid Tech Zone what is the NOI contribution you're expecting to flow 21:37 21 minutes, 37 seconds through over FI27 and how long would these developments take to stabilize once they start contributing federal revenue. 21:50 21 minutes, 50 seconds you want to continue your next question as well. 21:54 21 minutes, 54 seconds All right, that was my uh second question. But uh I do have another question. So it is uh how is the uh approximately 38 billion of capex that 22:02 22 minutes, 2 seconds is expected to be spent through FI28 uh to be funded and how do you think LTV is likely to evolve over the period? 22:11 22 minutes, 11 seconds Yes. So Vishek, you want to take the second and the third question and I'll I'll take the first question later. 22:17 22 minutes, 17 seconds Yeah. So uh just if you look at the total 2 million square ft that we will be delivering you can expect a NOI of 22:25 22 minutes, 25 seconds almost around 100 crores in FI27 and on the third question see our strategy is to fund all the capex 22:33 22 minutes, 33 seconds through debt only. Now if you look at the uh LTV position which we are expecting in the next 1 to two years we 22:40 22 minutes, 40 seconds are expecting that it will go down because of two reasons. one the GAV today doesn't factor the increase because of the deliveries of this 22:49 22 minutes, 49 seconds project. Once this project gets delivered the GAV will also increase uh and hence we expect it see in the long term we expect the LTV to be around 30%. 23:04 23 minutes, 4 seconds Just one uh clarification here uh like when do you think the projects are going to stabilize once they start uh uh 23:12 23 minutes, 12 seconds contributing rent monetiz like how many months approximately see after uh the deliveries each of this 23:21 23 minutes, 21 seconds we have given in the SD so once the delivery happens after this uh let's say you can take 6 months for them to start generating the rent 23:30 23 minutes, 30 seconds understood Also also on your first question my request to the market is that you know please don't see quarteronquarter trends 23:38 23 minutes, 38 seconds of leasing uh of uh leasing spreads. My request is to see the marktomarket potential that is there in the in the portfolio organically. 23:51 23 minutes, 51 seconds Okay, understood. Thank you very much. Thank you. 23:58 23 minutes, 58 seconds We take the next question from the line of Kesh from Access Capital. Please go ahead. 24:05 24 minutes, 5 seconds Yeah, good morning. Uh and thanks for taking my questions. Uh first uh is on the inorganic growth uh that we have uh 24:14 24 minutes, 14 seconds started uh seeing emerging now. Uh so between uh you know these third party opportunities 24:21 24 minutes, 21 seconds uh and uh you know uh sponsors uh you know assets which uh keeps on getting offered. What kind of opportunity we are 24:30 24 minutes, 30 seconds looking at over next 3 4 years in terms of our portfolio edition like are there still those third party owned areas if 24:38 24 minutes, 38 seconds you can quantify that you know overall and you know once uh where we 24:45 24 minutes, 45 seconds have a roof on those third party areas and uh you know other sponsor assets which are completed and 24:53 24 minutes, 53 seconds uh you know might not be offered but just broader sense on how how the sponsor portfolio uh stands in terms of completed portfolio. Yeah. And and 25:02 25 minutes, 2 seconds second question on the uh interest rates uh with this now bank uh channel getting 25:09 25 minutes, 9 seconds open uh you know how do you see uh you know interest rates uh trending forward uh you know will there be a meaning 25:17 25 minutes, 17 seconds meaningful downward shift in terms of u you know interest cost or we are already at 7 uh three so already pretty 25:26 25 minutes, 26 seconds optimized on on that front. So yeah those those would be my two questions but let me take the first question this 25:34 25 minutes, 34 seconds Amitita in terms of inorganic growth uh third party acquisition as well as sponsor acquisition you know while we've 25:42 25 minutes, 42 seconds always maintained this we are continuously evaluating the marketplace to look at opportunities that are actually accurative which have similar 25:50 25 minutes, 50 seconds asset quality you know which match our portfolio and we want to be in the top six cities. So having said that the team 25:57 25 minutes, 57 seconds is building a you know a strong pipeline on the third party acquisitions uh with respect to the sponsor uh assets we have 26:06 26 minutes, 6 seconds two roof assets one is uh embassy zenith and the other one is uh embassy conquets 26:15 26 minutes, 15 seconds that we're currently evaluating and when we are ready we'll come back to the market but having said that we are also planning to do an analyst day uh which 26:24 26 minutes, 24 seconds you know will give us which will outlay the entire plan that we have in terms of acquisition both from a third party acquisition as well as from the sponsor 26:32 26 minutes, 32 seconds assets and uh Sakshi we'll come back shortly to the market. 26:37 26 minutes, 37 seconds So on your second question uh if you look at the interest rate what's happening is uh it's tightening up in the market we are currently around 7.29 26:46 26 minutes, 46 seconds 7.3%. Now we think this is almost the bottom where we are there can be I mean you know better there can be max one 26:53 26 minutes, 53 seconds rate cut which can come in. So hence what we are preparing is we are going for more longerterm debt and that to fixed rate and hence you see today our 27:01 27 minutes, 1 second debt book is around 60% fixed. Now what this RBI uh revised proposal can do is it can allow us to get more and more 27:09 27 minutes, 9 seconds longerterm debt at trust level because earlier we were only dependent on the capital market for NCDS. Now banks can also participate in that and banks you 27:17 27 minutes, 17 seconds know can do longerterm debts. What it will do is there will be more liquidity in our debentures. there will be more participation in our debentures and we 27:25 27 minutes, 25 seconds can see some rate uh you know reducing but I don't think that it can be meaningful from here on 27:34 27 minutes, 34 seconds uh got it got it and and just uh you know on the first one while obviously we can wait till the analyst day but u uh 27:41 27 minutes, 41 seconds these third party area owned by uh I mean third party owners in our uh assets 27:48 27 minutes, 48 seconds already in the portfolio uh can you quantify some number to that. Uh obviously you know we won't extrapolate that everything will be offered to us 27:57 27 minutes, 57 seconds but just trying to understand you know how the portfolio stands uh uh you know between what we own and what third party owns. 28:06 28 minutes, 6 seconds So I mean I mean you're actually driving me to give you forward-looking statements you know probably we can pick this up separately uh you know. 28:16 28 minutes, 16 seconds No worry. Thank you. Okay. Uh that's it from my side. All the best. 28:21 28 minutes, 21 seconds Thank you ladies and gentlemen. A reminder if you wish to ask a question please press star and one. 28:30 28 minutes, 30 seconds We take the next question from the line of Kunal Lakan from CLSA. Please go ahead. 28:36 28 minutes, 36 seconds Yeah. Hi. Uh thanks for taking my question. And uh my first question is more u uh to do on the it's a little bit generic side in terms of like you know some of these uh MNC's have been 28:45 28 minutes, 45 seconds announcing these layoffs you know uh just as recent as Amazon announcing their you know shutting down of their AWS business last last couple of weeks. 28:53 28 minutes, 53 seconds Uh just trying to understand like know what are you hearing uh in incrementally from your tenants uh especially GCC's in terms of like know uh uh firstly the 29:02 29 minutes, 2 seconds road map for the next uh 3 to five years because you know some of these leases they're they're signing are like really really long-term in nature. 29:08 29 minutes, 8 seconds uh just trying to understand you know what kind of outlook they have or road map they have in terms of like know uh job creation uh and and so to speak like 29:15 29 minutes, 15 seconds you know office uh demand for the next uh 3 to 5 years. Uh yeah that's that'll be my first question. 29:25 29 minutes, 25 seconds Uh you want to take you want to talk about your second question as well and then we'll take both together. 29:30 29 minutes, 30 seconds Yeah. Okay. My second question was more so more so to to do with uh you know your uh uh when you look at your uh you 29:37 29 minutes, 37 seconds know just uh breakdown of your of your uh distribution right uh the reconciliation 29:44 29 minutes, 44 seconds from uh from the uh NDCF from from SPVS to to the NDCF at the REIT level uh 29:51 29 minutes, 51 seconds there's a uh a big uh dent because of the interest cost and you know if you look at your overall debt levels have gone up by about 10 odd% 10 15% maybe 30:00 30 minutes but your debt interest cost has gone up by 33% and incrementally when you look at your capex also right you spoke about you know 4,000 crores of incremental 30:07 30 minutes, 7 seconds capex and mostly that will be funded by debt uh when do you see this uh this trend kind of reversing where your you know you know SPV and DCF is growing at 30:16 30 minutes, 16 seconds about 18 19% uh but DPU is getting dragged because of this interest cost uh uh where do you see that trend reversing or or or like you know DPU growth to be 30:25 30 minutes, 25 seconds in line with uh your NDCF at the rate level or SP level growth So let me take the first question and 30:32 30 minutes, 32 seconds I'll hand over to Abhishek for your second question. From an overall p market perspective like I mentioned the markets actually been robust and what we 30:41 30 minutes, 41 seconds predict for the next two years by the industry analyst or the uh IPC's is that you know the markets will outperform 30:48 30 minutes, 48 seconds this calendar year as well. So the expected uh absorption is about 82 83 million square ft for the next 2 years. 30:57 30 minutes, 57 seconds Having said that, what we are seeing is while there are cases of layoffs, you know, here and there, that is very 31:04 31 minutes, 4 seconds business- specific, you know, uh when businesses are migrating from one process or one technology to another 31:12 31 minutes, 12 seconds technology, there will be some layoffs, there will be some produ productivity uh recalibration. But having said that, 31:19 31 minutes, 19 seconds what we are actually seeing in the market is that given the fact that India has the largest or the second largest uh 31:26 31 minutes, 26 seconds AI talent pool and the largest data science pool, we're seeing a large number of projects uh of the existing 31:35 31 minutes, 35 seconds occupiers also moving in this direction and then therefore you know they're doing a lot more hiring in these domains. Now the second that second 31:44 31 minutes, 44 seconds trend that we've clearly seen is a lot of mid tire companies from the US, Australia as well as Europe are actually 31:52 31 minutes, 52 seconds coming down into India and a case in point is that we have about 18.5 million square ft of RFPs in the market 32:01 32 minutes, 1 second floating. uh which we believe that you know given that you know the US has just come out of from a holiday season and 32:09 32 minutes, 9 seconds you know there will be more RFPs meaningful RFPs that will start floating in the market uh given this kind of traction given the mid tire GCC is 32:18 32 minutes, 18 seconds coming in you know we're doing a lot of uh new leasing inquiries inspections uh 32:25 32 minutes, 25 seconds traction in the market's been really uh high so you know we feel that for the next 2 3 years you know the market will uh see increased leasing velocity. 32:37 32 minutes, 37 seconds Just [clears throat] to follow up on that Amit uh just you know uh I mean uh do you see do you see that the demand that we are seeing currently uh or you 32:44 32 minutes, 44 seconds know FI2425 as a a function of like you know the kind of hiring that uh that the tech sector did uh between 2020 and 2025 32:53 32 minutes, 53 seconds almost like 1.2 million square feet 1.2 two million employees added during that time and you know obviously like during co times we saw like none of these guys 33:01 33 minutes, 1 second signed up new spaces because physical attendance was low. Do you think that was a pent-up effect of uh that hiring that happened between that time and you 33:09 33 minutes, 9 seconds know today we are seeing that residual pent-up effect playing out but you know incrementally uh incrementally like you know for for us to sustain this demand 33:16 33 minutes, 16 seconds going forward we'll have to depend on new job creation that would happen uh over the next few years. Uh just see if you Yeah. So if you see the 33:25 33 minutes, 25 seconds entire entire leasing uh if you break it down see the pent-up demand you know that kind of got a little bit consumed 33:33 33 minutes, 33 seconds is through the ITES players only right so it's the TCS vipros and you know cognizant those kind of guys who who 33:41 33 minutes, 41 seconds actually meaningfully came out into the market but having said that a lot of other guys like Axenture Cap Gemini have still not come into the market uh to you 33:50 33 minutes, 50 seconds know uh uh to consume that pent-up demand Now if you see the leasing itself 33:56 33 minutes, 56 seconds 65% of our leasing is actually GCC's right 20% of leasing plus you know is 34:03 34 minutes, 3 seconds come from co-working guys now you know the IT actually is a very small fraction right but we we will we you know some of 34:12 34 minutes, 12 seconds these names that I've taken will continue to elevate that leasing from an IT sector as well so that's why you know we're very confident about this 80 34:20 34 minutes, 20 seconds million you know growing to about 80 85 million square ft over the next uh two years. 34:29 34 minutes, 29 seconds Sure. Understood. 34:30 34 minutes, 30 seconds So [clears throat] Kunal on your second question. So my request would be to look at the total interest at SPV and rate level together because you know we have 34:39 34 minutes, 39 seconds a choice to uh take the loans at SPV or take the loans at rate level and push it down to SPVS. It depends on the interest 34:46 34 minutes, 46 seconds rate. Uh I mean if we are getting lower interest rate in NCDS we go for REIT loan. So all of those things are there into play. Now if you look at the trend 34:55 34 minutes, 55 seconds what's going to happen to our interest cost is and what is actually happening to our interest cost is when we are delivering when we are constructing some assets the interest is getting capitalized and it doesn't hit the NDCF. 35:06 35 minutes, 6 seconds Now once we deliver the time we get the OC the interest starts hitting the NDCF but the income only starts getting 35:14 35 minutes, 14 seconds generated after a gap of 6 months and hence there is a temporary gap. Now this gap will continue for some time because of all the deliveries that we are doing 35:22 35 minutes, 22 seconds and every year we have plans to deliver some building or the other. So this gap will continue till the time all these deliveries are finished let's say 3 to 35:29 35 minutes, 29 seconds four years and post that only this you can see uh the interest rate doesn't go up much uh commensurate to the income 35:38 35 minutes, 38 seconds also in this 9 months if you see we have delivered 1.3 million square so the interest should have gone interest cost should have gone even higher but it was 35:47 35 minutes, 47 seconds not that high because of the interest saving because of the interest rate which went down 61 basis point in the last 9 months and hence you you see that 35:55 35 minutes, 55 seconds it is also in line with the guidance that we had given. 36:01 36 minutes, 1 second All right. Yeah, sure. Understood. Thank you and all the best. Thank you. 36:06 36 minutes, 6 seconds Thank you. We take the next question from the line of Vasuv from Numama. Please go ahead. 36:13 36 minutes, 13 seconds Yes, thank you for the opportunity. Uh this is my first question is on the new MAT provisions which were announced in the budget. So is there any impact of 36:21 36 minutes, 21 seconds that on us and going ahead what kind of cash tax rate should we look at and also the second question is on the SEC 36:29 36 minutes, 29 seconds conversion. So how much have we converted till Q3? Uh how much is still in process and if you can help me with 36:35 36 minutes, 35 seconds the occupancies in the SEC and the nonv portfolio. 36:40 36 minutes, 40 seconds Yeah. So if I have to take the first one, see this new MAT provision is still a proposal and we'll wait to see whether 36:47 36 minutes, 47 seconds it becomes uh an act in the same form because there are a lot of representations which the industry is doing. However, having said that, what 36:55 36 minutes, 55 seconds we see is that for the near future, there is not much impact on the NDCF because we were any which ways expecting these these credits to be utilized uh 37:02 37 minutes, 2 seconds after 5 6 years and we have always guided that our tax uh percentage to revenue is around 5% now which can go up 37:11 37 minutes, 11 seconds to 6%. So we think that for the near future it will be still in that zip code only. 37:18 37 minutes, 18 seconds uh on the second one if you look at the SEZ conversion we have been able to I mean till date we have been able to 37:24 37 minutes, 24 seconds convert almost 8.6 6 million square ft² and one portion which is parcel 6 is still under construction. So if you 37:31 37 minutes, 31 seconds strip that out then we are at 84 85% occupancy in this converted space. Uh if you look at the total SZ space uh I mean 37:40 37 minutes, 40 seconds out of the total vacancy 3.7 uh is in SEZ and only 0.7 is nonse vacant space. So, so that that's 37:50 37 minutes, 50 seconds and underway we have about uh 3 million square ft of uh you know sec that we are trying to convert into nonsez both 37:57 37 minutes, 57 seconds through uh demarcation and denotification uh routes. Yes sir that was helpful. Thank you. 38:06 38 minutes, 6 seconds Thank you. 38:09 38 minutes, 9 seconds Thank you ladies and gentlemen. As there are no further questions we conclude the question and answer session. On behalf 38:16 38 minutes, 16 seconds of Embassy Reap, that concludes this conference call. Thank you for joining us and you may now disconnect your lines.