OCBC Investment Research Private Limited

25 April 2025

CapitaLand India Trust: Eyeing Growth with Strategic Acquisitions

Investment Thesis

CapitaLand India Trust (CLINT) stands out as a compelling investment opportunity, uniquely positioned as the first listed property trust in Asia focused on India. CLINT strategically concentrates on the Information Technology (IT) sector, managing 11 IT park clusters across major Indian cities such as Mumbai, Hyderabad, Bangalore, and Chennai. Over time, CLINT has diversified into logistics and industrials and maintains a robust pipeline of developmental projects, including data centers (DC). CLINT distinguishes itself among defensive Singapore-listed trusts and REITs with its proactive acquisition strategy, utilizing forward purchases to enhance its portfolio. Despite the inherent development risks, CLINT’s capacity to secure strategically advantageous assets and its forward-thinking approach make it a prime beneficiary of India’s rapidly expanding economy, bolstered by e-commerce growth, increasing data localization, and the proliferation of digital payments. Furthermore, the relaxation of the Special Economic Zones (SEZ) Act mitigates occupancy risk for its existing SEZ properties. [[1]]

1Q25 Performance Overview

• CLINT reported a 12% year-on-year (YoY) increase in both total property income and net property income (NPI) for 1Q25, driven by strong operating performance. [[1]]
• The divestment of CyberVale and CyberPearl is now expected to be completed by May 2025. [[1]]
• A new forward purchase agreement is set to bolster CLINT’s office footprint in Bangalore. [[1]]
• The fair value (FV) estimate has been adjusted to SGD1.23. [[1]]

Financial Highlights and Operating Performance

• CLINT’s total property income and NPI increased by 12% YoY (14% in local currency terms), reaching SGD74.6m and SGD55.1m, respectively. This growth was fueled by higher rental income from existing properties and contributions from assets acquired in 2024, constituting 22.5% of initial full-year forecasts. [[1]]-[[2]]
• Operating performance remained robust, with committed occupancy stable at 92%, which includes options and rights of first refusal. [[2]]
• The portfolio enjoyed a +9% rental reversion over the past 12 months, primarily driven by assets in Bangalore and Chennai. [[2]]

Update on Divestment Plans

• Gearing increased by 3 percentage points (ppt) from 38.5% as of December 31, 2024, to 41.5% as of March 31, 2025. This increase is attributed to debt drawdown for working capital and funding development projects. [[2]]
• Management anticipates a decrease below 40% following the completion of the CyberPearl and CyberVale divestments, now expected by May 2025 due to ongoing market volatility. [[2]]
• The cost of debt remained stable at 6%, with 84.5% of debt on fixed rates, and is expected to remain stable for the next quarter. [[2]]

New Forward Purchase Agreement

• In February 2025, CLINT announced a forward purchase agreement to acquire an office project in Nagawara, Outer Ring Road, Bangalore (MAIA). [[2]]
• CLINT will provide SGD156.4m in funding over four years, starting in 2H25. 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]]
• Pro forma analysis indicates that if the acquisition had been completed on January 1, 2025, CLINT’s FY24 distribution per unit (DPU) would have increased by 1.8% to 6.96 Singapore cents. [[2]]

Revised Fair Value Estimate

• The FV estimate has been reduced to SGD1.23. While U.S. tariffs have minimal direct impact on tenants, global economic uncertainty may slow service industry growth and leasing demand in the near term. [[2]]
• India remains an attractive relocation destination in the medium term. [[2]]
• Key adjustments include:
  • Factoring in a steeper depreciation of INR vs SGD. [[2]]
  • Increasing the cost of equity input from 9.38% to 9.8% to account for near-term macroeconomic uncertainty. [[2]]
  • Lowering the terminal growth rate assumption by 25bps to 2.5%. [[2]]
• The forward purchase agreement for MAIA has been factored in. 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

• CLINT’s ESG rating was maintained in December 2024. [[2]]
• CLINT leads peers in green building initiatives, including green leases to promote sustainable property use, and has the potential to further leverage growing demand for green buildings. [[2]]-[[3]]
• 79.5% of its 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, and its board is majority independent. [[3]]

Potential Catalysts

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

Investment Risks

• 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

The following table compares CAPITALAND INDIA TRUST (CAPC.SI) with its peers:

[[3]]

Historical Valuation Metrics

The Price/Book ratio (P/B) and Dividend Yield (Div Yld) of CapitaLand India Trust are key metrics for evaluating its valuation. The charts below illustrate the historical trends and statistical deviations for these metrics. [[3]]

Company Overview

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

FY24 Base Rents Breakdown

• By City (India):
  • Hyderabad: 27% [[4]]
  • Bangalore: 27% [[4]]
  • Chennai: 18% [[4]]
  • Pune: 20% [[4]]
  • Mumbai: 8% [[4]]
• By Tenant Sector:
  • Technology & Software Development: 61% [[4]]
  • Others: 8% [[4]]
  • Electronics, Semiconductor & Engineering: 11% [[4]]
  • Automobile: 6% [[4]]
  • Banking & Financial Services: 7% [[4]]
  • Design, Gaming and Media: 3% [[4]]

Historical Financial Performance

Net Property Income (SGD m) and Distribution per unit (S cents) over the years:

• Net Property Income (SGD m): From FY2018’s 128 to FY2024’s 206. [[4]]
• Distribution per Unit (S cents): From FY2018’s 6.10 to FY2024’s 6.84. [[4]]

Income Statement (In Millions of SGD)

[[5]]

Profitability Ratios

[[5]]

Credit Ratios

[[5]]

Analyst Declaration

The analyst who prepared this report certifies that the opinions accurately and exclusively reflect his views about the securities of the listed entity and has taken reasonable care to maintain independence and objectivity. [[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 its accuracy and completeness are not guaranteed. Opinions and estimates are subject to change without notice. [[6]]-[[7]]