OCBC Investment Research

25 April 2025

CapitaLand India Trust: Eyeing Growth with Strategic Acquisitions

Investment Thesis: CLINT’s Forward-Looking Strategy in India’s Growing Economy

CapitaLand India Trust (CLINT), a pioneering property trust in Asia focused on India, is strategically positioned to benefit from the country’s rapidly expanding economy. With a primary focus on the Information Technology (IT) sector, CLINT boasts 11 IT park clusters across major cities like Mumbai, Hyderabad, Bangalore, and Chennai. The trust has also diversified into logistics and industrials, maintaining a robust pipeline of developmental projects, including data centers (DC). CLINT distinguishes itself through an aggressive acquisition strategy, utilizing forward purchases to secure strategically located assets. This forward-thinking approach positions CLINT as a key beneficiary of India’s economic tailwinds, including e-commerce growth, increasing data localization, and the rise of digital payments. Furthermore, the relaxation of the Special Economic Zones (SEZ) Act reduces occupancy risk for CLINT’s existing SEZ properties. [[1]] [[2]]

1Q25 Performance: Strong Growth in Property Income

• CLINT’s total property income and net property income (NPI) increased by 12% year-on-year (YoY) in 1Q25, driven by strong operating performance. [[1]]
• In local currency terms, the increase was 14%. [[2]]
• Total property income reached SGD74.6m, and NPI was SGD55.1m. [[2]]
• Higher rental income from existing properties and contributions from assets acquired in 2024 bolstered the results. [[2]]
• These figures represent 22.5% of initial full-year forecasts. [[2]]
• Committed occupancy remained stable at 92%, including options and rights of first refusal. [[2]]
• The portfolio experienced a +9% rental reversion over the past 12 months, particularly in Bangalore and Chennai. [[2]]

Update on Divestment Plans and New Acquisitions

• The divestment of CyberVale and CyberPearl has been delayed until May 2025 due to ongoing market volatility. [[1]] [[2]]
• Gearing rose by 3 percentage points (ppt) from 38.5% as of 31 Dec 2024 to 41.5% as of 31 Mar 2025, due to debt drawdown for working capital and development projects. [[2]]
• Management expects gearing to fall below 40% following the completion of the CyberPearl and CyberVale divestments. [[2]]
• The cost of debt remained stable at 6%, with 84.5% of debt on fixed rates, expected to remain stable in the next quarter. [[2]]
• In Feb 2025, CLINT announced a forward purchase agreement to acquire an office project at Nagawara, Outer Ring Road, Bangalore (MAIA). [[2]]
• CLINT is expected to provide SGD156.4m in funding over the next four years, starting in 2H25. [[2]]
• The acquisition, slated for completion in 2H28, is estimated to cost SGD233.6m. [[2]]
• Funding will come from divestment proceeds, debt, and internal resources. [[2]]
• On a pro forma basis, if the acquisition had been completed on 1 Jan 2025, FY24 distribution per unit (DPU) would have increased by 1.8% to 6.96 Singapore cents. [[2]]

Revised Fair Value Estimate: SGD1.23

• The fair value (FV) estimate has been reduced to SGD1.23. [[1]] [[2]]
• While US tariffs have minimal direct impact, global economic uncertainty may slow service industry growth and leasing demand. [[2]]
• India remains an attractive relocation destination in the medium term. [[2]]
• Changes in assumptions include: [[2]]
  • Steeper depreciation of INR vs SGD to align with the house view. [[2]]
  • Increased cost of equity input from 9.38% to 9.8% to factor in near-term macroeconomic uncertainty. [[2]]
  • Lowered terminal growth rate assumption by 25bps to 2.5%. [[2]]
• The forward purchase agreement for MAIA is factored in. [[2]]
• FY25 and FY26 DPU forecasts are lowered by 3.6% and 4.9%, respectively. [[2]]
• Despite these adjustments, a BUY rating is maintained on the counter. [[2]]

ESG Updates: Leading in Green Building Initiatives

• CLINT’s ESG rating was maintained in Dec 2024. [[2]]
• CLINT leads peers in green building initiatives, including green leases to promote sustainable property use. [[2]] [[3]]
• The trust is well-positioned to leverage growing demand for green buildings. [[3]]
• Despite potentially intensive energy consumption due to its focus on office buildings, 79.5% of CLINT’s total portfolio area was certified to green building standards in FY23, significantly above the industry average of 47%. [[3]]
• CLINT outperforms peers in staff management practices, such as grievance mechanisms, addressing the challenge of skilled staff recruitment and retention. [[3]]
• The board is majority independent. [[3]]

Potential Catalysts and Investment Risks

Potential Catalysts: [[3]]

• Developments on DC partial divestment. [[3]]
• Stronger-than-expected outsourcing demand. [[3]]
• Increasing tenant pick up through denotification of SEZ space. [[3]]

Investment Risks: [[3]]

• Forward purchases failing to meet pre-agreed building specifications and inability of sellers to repay loans. [[3]]
• Delays in DC development and divestment plans. [[3]]
• Unexpected appreciation of SGD over INR. [[3]]

Valuation Analysis

Here’s a comparative valuation analysis against its peers:

Company Overview (as of 31 December 2024)

CapitaLand India Trust, listed on the Mainboard of the Singapore Stock Exchange since Aug 2007, is the first Indian property trust in Asia. Structured as a business trust, it voluntarily adheres to the same restrictions as a Singapore real estate investment trust (S-REIT) to enhance distribution stability. CLINT provides investors exposure to the fast-growing Indian markets through investments in income-producing commercial real estate. As of 31 Dec 2024, CLINT’s portfolio includes 11 IT parks, four data center developments, and three logistics and industrial facilities in India, totaling 19.6msqf across Bangalore, Chennai, Hyderabad, Mumbai, and Pune, valued at SGD3.4b. CapitaLand India Trust Management Pte. Ltd., a wholly-owned subsidiary of CapitaLand Investment, manages CLINT. [[4]]

FY24 Base Rents Breakdown

By City (India): [[4]]

• Hyderabad: 27% [[4]]
• Bangalore: 27% [[4]]
• Chennai: 18% [[4]]
• Pune: 20% [[4]]
• Mumbai: 8% [[4]]

By Tenant Sector: [[4]]

• Technology & Software Development: 61% [[4]]
• Electronics, Semiconductor & Engineering: 11% [[4]]
• Banking & Financial Services: 7% [[4]]
• Automobile: 6% [[4]]
• Design, Gaming and Media: 3% [[4]]
• Others: 8% [[4]]

Net Property Income and Distribution Per Unit

Net Property Income (SGD m): [[4]]

• FY2018: 128 [[4]]
• FY2019: 136 [[4]]
• FY2020: 148 [[4]]
• FY2021: 156 [[4]]
• FY2022: 167 [[4]]
• FY2023: 180 [[4]]
• FY2024: 206 [[4]]

Distribution per unit (S cents): [[4]]

• FY2018: 6.10 [[4]]
• FY2019: 7.33 [[4]]
• FY2020: 8.83 [[4]]
• FY2021: 7.80 [[4]]
• FY2022: 8.19 [[4]]
• FY2023: 6.45 [[4]]
• FY2024: 6.84 [[4]]

Company Financials

Income Statement (In Millions of SGD except Per Share) [[5]]

Profitability Ratios [[5]]

Credit Ratios [[5]]

Analyst Declaration

The analyst(s) certify that the opinions in this report accurately reflect their views on the securities of the listed entity and have maintained independence and objectivity. The analyst(s) and their connected persons do not hold financial interests in the listed entity and do not receive compensation related to specific recommendations or views in this report. The analyst(s) or associate confirms that he or she does not serve on the board or in trustee positions of the listed entity, and the listed entity or other third parties have not provided or agreed to provide any compensation or other benefits to the analyst(s) in connection with this report. [[6]]

Disclaimer

This report is for information purposes only and should not be construed as an offer or solicitation for the subscription, purchase, or sale of securities. The information is from sources believed to be reliable, but OCBC Investment Research Private Limited does not guarantee its accuracy or completeness. The report does not consider the investment objectives, financial situation, or particular needs of any specific person or class of persons. Investors should seek advice from a financial adviser before making any investment decisions. OCBC Bank, Bank of Singapore Limited, OIR, OCBC Securities Private Limited, and their related persons may have interests in the investment products or issuers mentioned herein, including effecting transactions and providing related services. There may be conflicts of interest. The information may contain projections or other forward-looking statements, and actual events or results may differ materially. Past performance is not indicative of future performance. [[6]] [[7]]

Ratings and Recommendations

• OIR’s technical comments and recommendations are short-term and trading oriented. [[7]]
• OIR’s fundamental views and ratings (Buy, Hold, Sell) are medium-term calls within a 12-month investment horizon. [[7]]
• OIR’s BUY rating indicates total expected returns (excluding dividends) in excess of 10% based on the current price; a HOLD rating indicates total expected returns (excluding dividends) within +10% and -5%; a SELL rating indicates total expected returns (excluding dividends) less than -5%. For REITs and Business Trusts, total expected returns including dividends apply. [[7]]
• For companies with market capitalization of S\$150m and below, OIR’s BUY rating indicates total expected returns (excluding dividends) in excess of 30%; a HOLD rating indicates total expected returns (excluding dividends) within a +/-30% range; a SELL rating indicates total expected returns (excluding dividends) less than -30%. For REITs and Business Trusts, total expected returns including dividends apply. [[7]]