OCBC Investment Research Private Limited

25 April 2025

CapitaLand India Trust: Eyeing Growth with Strategic Acquisitions

Investment Overview

CapitaLand India Trust (CLINT) is positioned as a key player in the Indian real estate market, focusing on Information Technology (IT) parks and expanding into logistics, industrials, and data centers. CLINT distinguishes itself with an aggressive acquisition strategy, utilizing forward purchases to secure strategically located assets. This approach aims to capitalize on India’s economic growth, driven by e-commerce, data localization, and digital payments. Despite development risks, CLINT’s forward-looking philosophy positions it favorably in a rapidly expanding market.

Key Highlights from 1Q25 Performance

• Total property income and net property income (NPI) increased by 12% year-on-year (YoY).
• Growth was supported by strong operating performance.
• The divestment of CyberVale and CyberPearl is now expected to be completed by May 2025.
• A new forward purchase agreement has been established to enhance the office footprint in Bangalore.
• The fair value (FV) estimate has been revised to SGD1.23.

Financial Performance and Portfolio Metrics

CLINT’s financial performance shows robust growth, with significant increases in both property income and NPI. The trust benefits from higher rental income from existing properties and contributions from recent acquisitions. Operating performance remains strong, with stable occupancy rates.

• Total Property Income: Up 12% YoY (14% in local currency) to SGD74.6m.
• Net Property Income (NPI): Increased to SGD55.1m.
• Committed Occupancy: Stable at 92% (including options and rights of first refusal).

Update on Divestment Plans and Gearing

The divestment of CyberPearl and CyberVale has been delayed, impacting the gearing ratio. Management anticipates a reduction in gearing upon completion of these divestments.

• Gearing Ratio: Rose from 38.5% as of 31 Dec 2024 to 41.5% as of 31 Mar 2025.
• Divestment Delay: Divestments expected by the end of Feb 2025, now delayed until May 2025 due to market volatility.
• Cost of Debt: Stable at 6%, with 84.5% of debt on fixed rates.

New Forward Purchase Agreement: MAIA in Bangalore

CLINT has entered into a forward purchase agreement to acquire an office project in Nagawara, Outer Ring Road, Bangalore (MAIA). This strategic move is expected to enhance CLINT’s portfolio and DPU.

• Investment: CLINT will provide SGD156.4m over four years, starting in 2H25.
• Acquisition Cost: Estimated at SGD233.6m, to be completed in 2H28.
• Funding: Through divestment proceeds, debt, and internal resources.
• DPU Impact: Pro forma FY24 DPU would have increased by 1.8% to 6.96 Singapore cents.

Revised Fair Value Estimate

The fair value estimate has been adjusted to SGD1.23, reflecting changes in macroeconomic assumptions and the inclusion of the MAIA forward purchase agreement.

• INR Depreciation: Factoring in a steeper depreciation of INR vs SGD.
• Cost of Equity: Increased from 9.38% to 9.8% to account for near-term macroeconomic uncertainty.
• Terminal Growth Rate: Lowered by 25bps to 2.5%.
• DPU Forecasts: FY25 and FY26 DPU forecasts lowered by 3.6% and 4.9%, respectively.

ESG Updates

CLINT maintains a strong focus on ESG practices, particularly in green building initiatives and staff management.

• Green Building Initiatives: Leads peers in green leases and sustainable property use.
• Green Building Certification: 79.5% of total portfolio area certified to green building standards in FY23, surpassing the industry average of 47%.
• Staff Management: Outperforms peers in staff management practices, including grievance mechanisms.
• Board Independence: Majority of the board is independent.

Potential Catalysts and Investment Risks

Several factors could positively or negatively influence CLINT’s performance.

• Potential Catalysts:
  • Developments on DC partial divestment
  • Stronger-than-expected outsourcing demand
  • Increasing tenant pick up through denotification of SEZ space
• Investment Risks:
  • Forward purchases failing to meet pre-agreed building specifications.
  • Inability of sellers to repay loans.
  • Delays in DC development and divestment plans.
  • Unexpected appreciation of SGD over INR.

Valuation Analysis

CLINT’s valuation is compared against its peers, considering various financial metrics.

Company Overview

CapitaLand India Trust, listed on the Singapore Stock Exchange since Aug 2007, is the first Indian property trust in Asia. CLINT focuses on income-producing commercial real estate in India, with a portfolio including IT parks, data center developments, and logistics and industrial facilities. As of 31 Dec 2024, CLINT owns assets with a total completed floor area of 19.6msqf across major Indian cities, valued at SGD3.4b. The trust is managed by CapitaLand India Trust Management Pte. Ltd., a wholly owned subsidiary of CapitaLand Investment.

FY24 Base Rents Breakdown

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

Historical Financial Performance

CLINT has demonstrated consistent growth in Net Property Income (NPI) and Distribution per Unit (DPU) over the years.

• Net Property Income (SGD m): Increasing trend from FY2018 to FY2024.
• Distribution per unit (S cents): Rising from 6.10 in FY2018 to 6.84 in FY2024.

Detailed Financials

Key financial figures from the income statement and profitability ratios provide insights into CLINT’s financial health.

Profitability Ratios

Credit Ratios