CapitaLand India Trust (SGX:CY6U), as the name implies, have all of its properties located in the country. It is focused on the fast-growing IT industry and logistics/industrial asset classes in India. At the same time, it is also diversifying into other new economy asset class such as data centres.
Currently, the REIT’s portfolio comprises 9 IT business parks, 1 logistics park, 1 industrial facility, and 4 data centre developments valued at approximately S$2.7 billion.
Early this morning (31 July 2023), it has made available results for the first half of FY2023, and in this post, you will find the most important aspects to take note about its financial performance, portfolio occupancy and debt profile, as well as its distribution payout to unitholders.
Let’s begin…
Financial Performance (1H FY2022 vs. 1H FY2023)
| 1H FY2022 | 1H FY2023 | % Variance | |
| Gross Revenue (S$’mil) | $103.3m | $110.5m | +7.0% |
| Property Operating Expenses (S$’mil) | $19.9m | $24.9m | +24.9% |
| Net Property Income (S$’mil) | $83.4m | $85.6m | +2.7% |
| Distributable Income to Unitholders (S$’mil) | $49.6m | $44.0m | -11.3% |
My Observations: A mixed set of results reported by the REIT in my opinion – where the positives include the single percentage improvement in its gross revenue and net property income, while negatives include a 20+% jump in its property operating expenses, and a 10+% decline in its distributable income to unitholders.
Gross revenue and net property income went up by 7.0% and 2.7% respectively (however, in Indian Rupee terms, it is up by 18% and 13% respectively) due to the following:
- Higher portfolio occupancy
- Income from Arshiya Warehouse 7, which was acquired in March 2022
- Income from Industrial Facility in Mahindra World City, which was acquired in May 2022
- Income from Block A, ITPH, which was completed in January 2023
- Income from ITPP-H, which was acquired in May 2023
The 24.9% jump in property operating expenses (in Indian Rupee terms, it went up by 38%) as a result of higher operational and maintenance expenses, property management fees, and property taxes from existing and newly acquired properties.
Finally, its distributable income to unitholders fell by 11.3% (or 2% in Indian Rupee terms), mainly due to higher net finance costs, higher current income tax expense.
Portfolio Occupancy (Q1 FY2023 vs. Q2 FY2023)
When it comes to reviewing a REIT’s portfolio occupancy, I like to compare the statistics reported for the current quarter under review (in this case, it is Q2 FY2023 ended 30 June 2023) against that reported in the previous quarter 3 months ago (in this case, it is Q1 FY2023 ended 31 March 2023) to find out if it has continued to remain resilient, or if it is showing signs of deterioration.
You can find a comparison of CapitaLand India Trust’s portfolio occupancy for the 2 quarters in the table below:
| Q1 FY2023 | Q2 FY2023 | |
| Portfolio Occupancy (%) | 88.0% | 94.0% |
| Portfolio WALE (years) | 3.7 years | 3.5 years |
My Observation: Portfolio occupancy went up by 6 percentage points (pp) as a result of improvements recorded in the occupancy rates of ITPC in Chennai (up from 92% in Q1 FY2023 to 94% in Q2 FY2023), Building Q1 in Mumbai (up from 58% in Q1 FY2023 to 62% un Q2 FY2023), and aVance Pune (up from 96% in Q1 FY2023 to 100.0% in Q2 FY2023).
Lease expiries are also well-staggered over the years, with just 8% of the leases due to renewal in the 2nd half of FY2023, 16% in FY2024, 8% in FY2025, and the remaining 68% due for renewal only in FY2026 and beyond.
In terms of rental reversion for new and/or renewed leases, all but ITPC saw a negative rental reversion (of -10%), which was due to expiry of certain short-term lease extensions, which were done at above-market rates.
Debt Profile (Q1 FY2023 vs. Q2 FY2023)
Just like how I have reviewed the REIT’s portfolio occupancy in the previous section, I will also be reviewing its debt profile by comparing the statistics reported in the current quarter under review against that reported in the previous quarter 3 months ago (i.e., Q1 FY2023 vs. Q2 FY2023), as follows:
| Q1 FY2023 | Q2 FY2023 | |
| Aggregate Leverage (%) | 39.0% | 40.0% |
| Interest Coverage Ratio (times) | 2.9x | 2.7x |
| Average Cost of Debt (%) | 6.1% | 6.3% |
| % of Borrowings Hedged to Fixed Rates (%) | 78% | 73% |
My Observations: On the whole, CapitaLand India Trust’s debt profile have weakened compared to the previous quarter – particularly, a huge portion of borrowings, 37.7% (or S$519.4m) of its borrowings will be due for refinancing in the 2nd half of the year – and with interest rates at a high right now, its average cost of debt is set to increase once again, which will impact its aggregate leverage and interest coverage ratio, as well as its distribution payout to unitholders.
Distribution Payout to Unitholders (1H FY2022 vs. 1H FY2023)
Just like the other CapitaLand REITs, the management of CapitaLand India Trust declares a distribution payout to its unitholders on a semi-annual basis – i.e., once when it reports its results for the first half of the year (which is now), and once when it reports its results for the second half of the year.
For the first half of FY2023, a distribution payout of 3.36 cents/unit was declared. Compared to a payout of 4.28 cents/unit declared in the same time period last year (i.e., the first half of FY2022), this represents a 21.5% decline, which can be attributed to a higher unit base due to preferential offering in June 2023 to fund the development and construction of properties in aVance A1 in Hyderabad and Gardencity in Bangalore, as well as to partly finance the development and construction of Block A of International Tech Park Hyderabad – you can read the full news report about the REIT’s preferential offering here. Excluding the dilution impact, distribution per unit would have been 3.76 cents/unit.
If you are a unitholder of the REIT, do take note of the following dates on its distribution payout:
Ex-Date: 21 August 2023
Record Date: 22 August 2023
Payout Date: 30 August 2023
CEO Sanjeev Dasgupta’s Comments & Outlook (from the REIT’s Press Release)
“We are pleased to announce that CLINT’s property income grew mainly due to higher portfolio occupancy which improved from 92% from the start of the year to 94%6 as at 30 June 2023. Our DPU is however lower year-on-year at 3.36 Singapore cents for 1H FY 2023 due to an enlarged unit base after the successful preferential offering in July 2023, higher finance costs and depreciation of the INR against the Singapore Dollar. Excluding the impact of the preferential offering, the INR DPU is ₹2.31 per unit which is lower by 3% on a year-on-year basis, while SGD DPU fell by 12% year-on-year to 3.76 Singapore cents due to SGD/INR currency movements.
We grew our portfolio leasable area significantly by 24% since the start of the year with the addition of Block A in International Tech Park Hyderabad (“ITPH”) and acquisition of International Tech Park Pune – Hinjawadi (“ITPP-H”). We believe these additions to our portfolio will provide steady returns to our unitholders.”
Closing Thoughts
The biggest negative to note about the REIT’s latest results is its debt profile – where there are 30+% of borrowings due for refinancing in the 2nd half of FY2023. With interest rates at a high, its all-in cost of borrowing is poised to go up further in the quarters ahead, its distribution payout to unitholders will be affected. It is definitely something I am keeping a close watch on in the coming quarters ahead.
On its financial results, it could have been better if not for a weaker Indian Rupee against the Singapore Dollar – pretty much within my expectation, with its distribution payout affected by a larger unit base.
The biggest positive to note is its portfolio occupancy profile, where I note that apart from CyberVale (with its occupancy at 78%), ITPH Block A (with its occupancy at 67%), aVance Hyderabad (with its occupancy at 84%), and Building Q1 in Mumbai (with its occupancy at 62%), the REIT’S 7 other properties have occupancy rates of above 90%.
With that, I have come to the end of my review of CapitaLand India Trust’s results for the 1st half of FY2023. As always, I hope you have found the contents presented above useful. Do note that all the comments you have just read above are purely mine which I am sharing for educational purposes only. You are strongly encouraged to do your own due diligence before you make any investment decisions.
Related Documents
Disclaimer: At the time of writing, I am a unitholder of CapitaLand India Trust.
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