As the world’s most populous country according to Statista and the fifth-largest global economy in a report by Investopedia, India presents significant investment opportunities. Its rapidly growing economy, young and highly skilled workforce, and expanding urban infrastructure make it an attractive destination for businesses and investors alike.

For Singaporean investors seeking exposure to India’s real estate market, CapitaLand India Trust (SGX: CY6U), or CLINT, is one you can consider.

Listed on the Singapore Exchange since August 2007, CLINT focuses on investing in income-generating business spaces across India, catering to the rising demand for office, industrial, logistics, and data centre properties.

As of 31 December 2024, its portfolio consists of:

• 10 IT Business Parks (3 in Hyderabad, 3 in Pune, 2 in Chennai, 1 in Mumbai, and 1 in Bangalore)
• 4 Industrials & Logistics Facilities (3 in Chennai, and 1 in Mumbai)
• 4 Data Centre Developments (1 each in Mumbai, Hyderabad, Chennai, and Bangalore)

As a current unitholder of CLINT, I have reviewed its latest 4Q and FY2024 results (and you can read the article in full here).

Recently, I had the honour of meeting CLINT’s CEO, Mr Gauri Shankar Nagabhushanam, and CFO, Mr Cheah Ying Soon in-person to learn more about CLINT’s growth strategy, as well as seek clarifications on various investors’ concerns.

In this post, you will find a summary of key insights shared during the session:

India’s Economic Appeal and CLINT’s Growth Strategy

Favourable Market Conditions:

• India boasts one of the highest office leasing rates globally, driven by its young, highly educated, and English-speaking workforce.
• Lower operating costs, particularly in rentals (where typical rent for commercial properties in India is about S$1.00 to S$1.50 per square feet, compared to about S$14 to S$15 per square feet for prime area commercial properties in Singapore) and labour, have attracted multinational corporations to establish Global Capability Centres in India. For instance, JPMorgan & Chase initially set up back-office operations and have since expanded significantly, benefiting from cost advantages.
• The demand for office space remains robust, with occupancy levels of 70-80%. Market-wide office property occupancies stand at approximately 60-70%, but CLINT outperforms this average (with its committed occupancy at 95% as at 31 December 2024, excluding acquisitions made in FY2024) due to strategic locations near amenities and metro stations.

Rental Growth Trends:

• CapitaLand (formerly Ascendas) pioneered India’s first business park, International Tech Park Bangalore (ITPB) located at Whitefield, Bangalore, in 1994, commanding a rental premium at the time.
• Over the years, as more developers entered the market, rental premiums declined. However, post-COVID-19, the market has consolidated, with businesses preferring to work with top-tier international developers, including CapitaLand.
• This shift is expected to sustain rental growth as businesses favour reputable, established developers.

Potential Impact of US Trade Policies:

• CLINT’s management shared that India’s economy is primarily domestically driven, at around 70% (you can read more about it here), insulating it from external trade uncertainties, such as US tariff threats under a potential second Trump presidency.
• Also, most of CLINT’s tenants operate in sectors not directly affected by US trade policies. Furthermore, tenant demand remains strong, with the business trust facing pressure to expedite property handovers under development.

Portfolio Growth Strategy:

• CLINT targets property acquisitions yielding above 10% while actively managing its asset portfolio.
• It plans to embark on a capital recycling strategy, divesting stabilised assets to unlock value and reinvesting in high-yield properties.
• Since its IPO in 2007, CLINT’s portfolio has expanded fivefold, growing from 3.6 million sq. ft. to 21.9 million sq. ft. as of December 2024. This was done both organically (i.e. redevelopments, new developments and sponsor related acquisitions) and through acquisitions from third parties (i.e. forward purchase strategy).
• Management views CLINT as a growth-oriented stock within the Singapore REITs and business trusts space.
• CLINT typically enters into forward purchase agreements with local developers, who don’t have the expertise in developing Grade A office properties. Under this arrangement, CLINT provides loans required for property development (typically at double-digit interest rates), oversees the leasing of spaces, and assuming operational control upon project completion.

Future Distribution Growth:

• The newly completed MTB 6 at International Tech Park Bangalore, which is 100% pre-leased, obtained its occupancy certificate in December 2024. By 2Q 2025, the full rental yield will contribute to CLINT’s FY2025 distributions.
• Additionally, ahead of completion, CLINT signed a long-term agreement with a leading global hyperscaler for one DC in January 2025, pre-leasing about half of the total capacity, with the revenue contribution expected to commence in 2Q FY2025. The Navi Mumbai and Hyderabad DCs will be operational by 2Q25, with keen interest already expressed by hyperscaler and enterprise clients.
• The business trust is also planning to divest 2 mature IT parks above valuation and sell one-third of its data centre portfolio at valuation price.

Financial Performance Overview

Rising Operating Expenses:

• Property operating expenses increased by 34.1% year-on-year for 2H FY2024 and 32.7% year-on-year for FY2024 in SGD. This was due to costs associated with 2 newly acquired properties and 1 property previously under a master lease, where the tenant covered operating expenses. Following the tenant’s insolvency, CLINT had to assume these costs.
• Management reassured that this was a one-off, with operating expenses expected to return to the stabilised level over the next 12 months.

Capital Management

Debt Refinancing and Borrowing Costs:

• CLINT has S$400 million in debt maturing in FY2025, with S$85.5 million in long-term debt and S$283.7 million in short-term debt.
• Post-refinancing, short-term debt is expected to reduce to below S$100 million.
• Borrowing costs are stabilising at around 6% (with SGD-denominated debt at 3-4%, and INR-denominated debt at 8-9% on average), improving from 6.5% at peak interest rates.
• CLINT’s management aims to maintain its gearing ratio remains around 40%.

Distribution Payouts

Decline in Distribution Payouts on a Quarter-on-Quarter Basis:

• Investors noted a 12% half-on-half decline in distributions from S$0.0364 per unit in 1H FY2024 to S$0.032 per unit in 2H FY2024, to which the management clarified that CLINT, like many other REITs and companies, typically books operating expenses in the second half of the financial year.

Closing Thoughts

I would like to extend my most sincere gratitude to Mr Zay Kyaw, Manager for Investor Relations and Sustainability, for facilitating this engagement and to CLINT’s CEO and CFO for their valuable insights.

This one-hour session has provided me a deeper understanding of India’s economic potential and CLINT’s strategic growth initiatives. The management’s vision remains clear: to balance distribution growth with yield-accretive acquisitions and asset recycling. Personally, I am confident in their ability to drive the business trust forward.

Lastly, I have endeavoured to address key concerns raised by my blog readers, and I hope this article provides a clearer picture of CLINT’s position and prospects.

With that, I have come to the end of my post to summarise key points in my meet-up with CLINT’s management. Please note that all the information within does not constitute any buy or sell calls for the business trust, and you should always do your own due diligence before making any investment decisions.

Disclaimer: At the time of writing, I am a unitholder of CapitaLand India Trust.

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