Mindspace Business Parks REIT ($MINDSPACE)

Ladies and gentlemen, good day, and welcome to Mindspace Business Parks REIT Earnings Call for Q4 FY '26 Financial Results. [Operator Instructions]. Please note that this conference is being recorded. With that, I hand over the call to Mr. Shravan Kailasa from Mindspace Business Parks REIT. Thank you, and over to you.

Good evening, everyone, and thank you for joining the earnings call for Q4 financial year 2026 of Mindspace Business Parks REIT. At this point, we would like to highlight that the management may make certain statements that may be forward-looking in nature. Please be advised that our actual results may differ materially from these statements. We do not guarantee these statements or results and are not obliged to update them at any point in time. I would now like to welcome our CEO and MD, Mr. Ramesh Nair; CFO, Ms. Preeti Chheda; and Mr. Govardhan Gedela, Corporate Finance, who will take you through the business update and the financial performance during the quarter. We will then open the call to Q&A. I will now hand over the call to Ramesh.

Thank you, Shravan. Good evening, everyone. Thank you for joining us today. Q4 was another strong quarter for us. We achieved a gross leasing of 3.5 million square feet. This momentum is truly reflected in our financials. NOI grew by 37.4% year-on-year to INR 742 crores for the quarter. Distribution for the quarter increased by 9.7% year-on-year. Please note that we had a one-off tax refund in Q4 FY '25 of INR 46 crores. Excluding this one-off tax refund in Q4 last year, distribution has grown 24.5% year-on-year and DPU has grown 17% year-on-year. For the full year FY '26, NOI has grown 29.2% year-on-year to INR 2,664 crores. Distributions increased by 15.6% year-on-year, resulting in 9.7% DPU growth. Excluding INR 46.6 crores one-off tax refund in Q4 last year, distributions grew 19.8% year-on-year and DPU by 13.7%. Re-leasing spreads remained very healthy, 40.3% for the quarter and 31.8% for the full year. Rentals continue to trend upward, particularly in Madhapur, where we signed a transaction at INR 120 per square feet. That speaks of the market-to-market potential for our overall Hyderabad portfolio. We announced 2 acquisitions in Chennai in the well-established PTR Road, International Tech Park Chennai on Radial Road and Commerzone Pallikaranai on the same road. We are acquiring at a combined acquisition price of INR 5,541 crores. Happy to report that we have received the unitholder not for the Commerzone Pallikaranai acquisition. We are currently negotiating rentals at INR 85 per square foot per month for both these assets. To put the pricing in context, last year, TVH had acquired land adjacent to ITPC Chennai on PDR at INR 50 crores an acre. Currently, a U.S. tech company is at an advanced due diligence stage to acquire 12 acres on the same road at nearly INR 80 crores per acre. We are a dominant player across every market we are present in, and we cement our position in Chennai. Grade A office demand remains robust. The balance sheet is strong. That gives us the ability to move when the right opportunity presents itself. Our commitment remains unchanged, consistent execution, consistent delivery and reinforcing performance. Now I'd like to share highlights from various IPC and other research reports. The JLL report stated that India's office market posted a quarterly record 21.5 million square feet of gross leasing in Q1 2026, up 10.2% year-on-year. GCCs expanded their footprint by 43% year-on-year to 10 million square feet, commanding 45% of the total leasing activity. Pan-India vacancy dropped to a 5-year low of 14.7%. Net absorption reached a record 13.7 million square feet for the quarter. Citywide leasing status, Mumbai was 20%; Hyderabad, 17% and Pune 15%. Within GCCs, Tech and BFSI dominated leasing activity followed by manufacturing. Global headquartered firms accounted for 57% share of India's office leasing landscape in Q1 2026. The CBRE report stated that domestic firms account for 43% American companies, 38%; companies from Europe, 14%; and APAC companies, 5% of the leasing. Fortune 500 companies leased 5 million square feet, accounting for 21% of the share. 48% of GCC leasing is by Fortune 500 companies. Office stock expected to surpass 1 million square feet in 2026 as per CBRE. The Cushman & Wakefield report spoke about how pan-India stock weighted average rents crossed INR 100 per square foot per month for the first time. I'd like to also highlight an interesting report that came across from CRE matrix on the Navi Mumbai market. We spoke about Navi Mumbai having 32.7 million square feet of Grade A stock, posting 430 unique IT companies and 12.3 million square feet under construction. GCCs form 25% of the Grade A stock in Navi Mumbai. Buildings are 33% younger than the average age of buildings in Mumbai and 72% of the Grade A stock is green certified. Navi Mumbai also emerged as India's leading data center hub, which we all know. It has 628-megawatt operational IT load and 3,400 megawatts in the pipeline. As you are aware, we are the only REIT with data centers in our portfolio. I want to talk a little bit about the global headwinds on the Iran war. We are mindful of the macro environment. Oil-driven inflation and rising input costs are real. Steel is up 2%, RNG and cement is up 8%, paints up 15%, tiles up 10%, PVC pipes are up 16%. We observed some slowdown in decision-making on a few deals. Our long-term leases and strong balance sheet make us well positioned to ride through this cycle. Rupee depreciation has made India definitely more attractive to GCCs. In dollar terms, Indian office rents have effectively held flat, while our infrastructure and talent pool have strengthened as a country. Global headwinds and travel disruptions may delay some transaction in the near term. We have seen similar slowdowns in decision-making during April last year after the Liberation Day tariffs and May last year when India-Pakistan war start. When the pent-up demand releases, we are positioned to capture it. A 200,000 square feet GCC client in Hyderabad who are negotiating with for INR 120 rental had put their requirement in hold because of the war, we managed to lease the same space at INR 130 to another GCC in 15 days. Let's look at Artificial Intelligence and impact of what we have seen so far. I want to currently, take a glass half full view on AI. Many of you have been asking us about AI and its impact on office. One interesting aspect was many of the Magnificent 7 companies have taken good amount of office space in India last year for AI-related work. We have also seen many large IT services companies who gave up space during COVID due to work from home, come back and take more space with us. This could be because of flight to quality or they could be because no longer looking at old campus strategies.  When we did the glass half full view, we believe there's a lot of evidence which supports it. PC, Internet, cloud computing, each was supposed to reduce employment, none did. Spreadsheets eliminated bookkeeping clouds, but created financial analysts. E-commerce disrupted retail jobs but built warehousing, logistics and delivery jobs. Technology changes how people work far more than it eliminates work.  Now let's look at the data. The AI narrative has been running for the last 3 years. In that period, office demand has grown 18%, 16%, 15% year-on-year and this quarter, 7%. GCC, technology, consulting, BFSI clients, the biggest adopters of AI are all hiring at scale. There is no evidence of mass vacancy increases. In fact, the very AI companies blamed for killing offices are themselves taking new office spaces in some parts of the country. These are high-value occupiers who seek grade A quality spaces. AI is also creating entirely new roles, ML engineers, prom specialists, AI product managers, data governance teams, cybersecurity experts.  The logic is quite straightforward. AI increases productivity, productivity drives growth of companies, growth needs talent and talent needs space. So job displacement will obviously happen in certain functions, but job creation and role evolution will also happen alongside it. I believe the workforce will become augmented, not replaced. India has a lot of structural advantages here, a young tech trained workforce, strong AI hiring growth and growing AI skills density. That makes India more attractive, not less attractive.  There's also a qualitative shift. When AI handles the repetitive task, human work becomes more collaborative, more strategic, more judgment-driven, all requiring office space. In regulated industries like health care, retail, pharma, human oversight is not optional. Client-facing work still matters. R&D cannot function remotely. Breakthrough ideas will come from unplanned hallway conversations. The future is not No-Office, it is Better Office. I believe AI will accelerate the flight to quality. Companies will seek upgraded spaces, stronger LLDs, better sustainability credentials. I also believe that offices are shifting from roles of test to collaboration hubs.  Workplaces now express corporate identity, attractive spaces remain key to winning talent. And for a portfolio like ours, which is grade A low-rise business park focused, sustainability led, this shift works firmly in our favor.  Now let's look at the REIT performance update. Let's look at some of the operating and growth highlights. A quick update on the annual performance for the 12 months as we closed FY '26. Gross leasing for the year was 7.1 million square feet, the second highest since listing. Last year, we had at 7.6 million square feet. More importantly, committed occupancy reached 95.7%, the highest we have ever reported since listing, up from 93% in FY '25.  We also delivered healthy NOI of INR 2,664 crores, our highest year-on-year growth since listing, up 29.2% year-on-year. This reflects the compounding of higher occupancy, stronger rents and disciplined operations. Distribution stood at INR 1,516 crores, up 15.6% year-on-year. DPU this year grew 9.7% year-on-year and 13.7%, excluding the one-off tax refund, which I spoke about. Our increased rents have moved north of INR 80 from INR 71 a year ago.  Now for our Q4 FY '26 performance highlights. Gross leasing hit 3.5 million square feet, the second highest quarter since listing, up from 2.8 million square feet in Q4 FY '25. Every leasing metric is at or near a record. NOI stood at INR 742 crores, our highest year-on-year growth rate since listing, at 37.4% year-on-year. We delivered INR 431 crores in distributions, up 9.7% year-on-year. We set a new record with the highest ever quarterly DPU at INR 6.64 per unit. DPU grew 3.1% year-on-year. DPU 17% excluding tax refund. NAV closed at INR 527 per unit, up 9% from INR 483.7 as of September '25. Our unitholders are seeing both income and capital appreciation working together.  Let's look at some of the other business highlights. We have pre-leased 2 million square feet across P8 and B18 in Hyderabad. We signed 1.5 million square feet in P8 and 0.53 million square feet in B18 during the quarter. Pre-leased 0.8 million square feet to a health care GCC at INR 110 per square foot. We pre-leased another 0.7 million square feet to Indian MNC who will build operate transfer the premises to a BFSI GCC at INR 121 per square foot. Rental traction is only building from here. Mindspace Madhapur committed occupancy touched 99%, the highest ever. Mindspace Airoli West reached nearly 99%, also the highest ever. Some of you may remember, we used to be around 2 years back, 72%.  The largest assets in our portfolio are essentially full. JV has increased to INR 47,600 crores and NAV is now INR 527 per unit. This shows the steady growth and the strong quality of the portfolio over time. Currently, dry runs are underway at the World Club at Mindspace Madhapur, and we are scheduled to go live in this quarter, which would be India's best club. Under construction pipeline today stands at 5.4 million square feet, well on track, out of which, please don't forget that 4.5 million square feet out of these 5.4 million square feet is already pre-let.  Let's look at portfolio expansion. Portfolio growth remains a strategic priority, and we have delivered on it. Over the past year, we grew our completed portfolio by over 2 million square feet. This came largely through inorganic growth. We acquired 3 branded CBD assets in Mumbai and Pune. We also brought in 0.8 million square feet of our external third-party assets, the Square Financial District, called Q City, and we consolidated 50,000 square feet within our existing parks. As you are aware, we have recently announced another 2 further acquisitions in Chennai, which is underway and expected to close over the next 10 days.  We have built a strong platform, operate in clear markets and have an active pipeline. We will continue to pursue high-quality assets and move decisively when the right opportunities present themselves.  Let's look at the REIT development update.  At Mindspace Airoli East, committed occupancy has risen to 83%. Following the success of Mindspace Fusion, our F&B hub, we're exploring an expansion of F&B offerings within the business park. Upgrade work has building B1, 9, 10, 11, 12 has made much progress and will conclude in the next couple of months. The lobbies today look a lot more sophisticated, functional and suited to a best-in-class park. Client feedback has also shaped our infrastructure plans. We are building covered walkways across the park to create more comfortable connected experience. In Mindspace Airoli West, when the demarcation was announced, committed occupancy stood at 72%. Last quarter, it was 96%. This quarter is 99%, a great indication of how well the leasing team has performed. Across our 5.4 million park, total vacancy is just down to 72,000 square feet. This progress strengthens our confidence in Navi Mumbai's growth and our long-term plan for the micro market. Rentals have also followed. Recent deals in Airoli have been signed at INR 74 per square foot, a clear signal of where the micro market is headed. As you are aware, Mindspace is the only Indian REIT with a data center portfolio. Two data centers are already operational, three more are in various stages of development. Once complete, our data center portfolio will span approximately 1.7 million square feet. Our confidence in Navi Mumbai's long-term trajectory has never been higher. In Mindspace Madhapur, we have 10 million square feet with 99% occupancy. Just over 100,000 square feet of vacancies remaining. Madhapur is full for all practical purposes. Rentals have demonstrated marked improvement. A large American banking GCC has taken up space at 125. A large American health care GCC has taken up space at 110. We are also redeveloping assets to keep the park modern, competitive and tenant ready for the next decade. At Commerzone Yerwada, we are entering an exciting phase. A comprehensive phase-wide upgrade is underway. The entrance refurbishment has already begun. Building has a new food court and will be completed over the next few weeks. Lobby and kiosk extension, facade upgrades, terrace amenities, [Indiscernible] and even Central Garden are all in the pipeline. Ascent, the new building we acquired in Worli. When we acquired Ascent Worli, occupancy stood at 86%. Today, it is at 97% with only 15,000 square feet vacant. Average rents in Worli stand at 306, and we have just signed a fresh deal at 345. The rental trajectory again here is firmly upward. Let's look at what we are doing on the customer centricity side. We also bring in sustainability into each of our offerings with nearly 50% of the electricity today currently sourced from green energy. Our H23 program offering the true hospitality-led experience has also accelerated the '23 focus items to bring a more premium hospitality-led field across our parks. Another area of focus is our infrastructure and amenity upgrades. Our life cycle assessment study has guided our amenity upgrades, and we will be investing significant amounts of money in upgrading our amenity this year. We divided our budget between front of house and back of house. Front-of-house operations will have a direct positive impact on client satisfaction and back of house ensures uptime compliance, safety and efficiency. CapEx is prioritized for asset modernization to drive tenant stickiness and sustainable rental growth. The second addition of Mindspace EcoRun grew 8,200 participants across Airoli and Madhapur, cementing our position as a community-first business park operator. Every decision we make starts with one question, what do our tenants need. Feedback from surveys, audits, daily engagement feeds directly into how we run and improve our parks. The playbook is simple: build, lease, upgrade, repeat, simple and compounding. Modernized assets drive stickiness, stickiness drive renewals and renewals drive rental growth. We are not just building parks; we are building ecosystems where businesses grow and people belong. On the valuation front, GAV rose to INR 47,600 crores, NAV rises to INR 527 per unit. In Madhapur, leases are being signed at 85 to 90 just a year ago. This quarter, like I mentioned, we signed at INR 121 per square foot. In Navi Mumbai, rentals have moved from INR 65 to INR 70 with the highest transaction rate INR 81 per square foot in Airoli region. Rents and occupancy have moved meaningfully leading to value creation. On ESG credentials, our ESG credentials are not just strong, they're globally recognized. Very happy to report that Mindspace REIT ranks #3 globally in DJSI, which is the #1 global brand in environmental performance. At 73 out of 100, we are India's highest-rated REIT. We are also the only Indian organization in our sector to achieve industry distinction in the S&P Global Sustainability Yearbook 2026. We have been recognized at The Asset Triple A Sustainable Finance Awards 2026 in Hong Kong for leadership in integrating sustainability into our financial framework. We also launched a [ Greenmind Ideathon ]. This initiative puts sustainability ideas in the hands of people who matter most, our tenants and employees. Our ESG commitments again extend beyond our parks to the communities around them. In partnership with Navi Mumbai Municipal Corporation and NGO Project Mumbai, our Plastic & E-waste Recyclothon is making tangible progress. FY '26 has been a landmark year and the numbers speak for themselves. In conclusion, record committed occupancy of 95.7%, NOI growth of 29.2% year-on-year, the highest since listing and distribution growth of nearly 16%, 20% excluding the one-off of last year. Here are some broad annual performance metrics. In the start of FY '26, committed occupancy stood at 93%. We closed the year at 95.7%. Vacancy at the start of the year was 2 million square feet. After all the acquisitions, it now stands at 1.35 million square feet. In-place rents moved from INR 71 to INR 80 per square foot. GAV grew from INR 36,647 crores to INR 47,635 crores. NAV grew from INR 432 to INR 527 per unit, and our portfolio has expanded from 37.1 million square feet to 39.3 million square feet. Since listing, we expanded our portfolio by approximately 9.1 million square feet through accretive acquisitions valued at INR 10,600 crores, including the announcements of ITPC and Commerzone Pallikaranai in Chennai recently. Our unit price has been appreciated 63% since IPO. Our unitholder count has crossed 1 lakh when we listed, it was 8,000 unitholders. The investor base is broadening and deepening. GCCs now represent 52% of our tenant base. Hyderabad, our largest market, has emerged as India's most sought-after GCC destination. In FY '26, we have leased 3.4 million square feet to IT services in spite of the slowdown of IT services. Geopolitical risks and commodity cost inflation are real, but they are also manageable. Our portfolio is domestically anchored. Our leases are long and our tenant base is deep. Our LTV today stands at 24.3%. Cost of debt is 7.41%, amongst the lowest in several quarters and now comfortably below our cap rates. Regulatory tailwinds on equity classification and bank lending to REITs will further deepen our capital access over time. Beyond FY '26, our growth agenda is well defined. Data centers in Airoli West are progressing. 1A and 1B pre-development in Madhapur will commence soon. The World Club and Ascent residences go live this year, and our acquisition pipeline remains active across core markets. Each of these is a distinct value driver, and all are moving in parallel.  Stepping back, FY '26 delivered record performance, demonstrated resilience through cycles, and validated every pillar of our growth strategy. And as we enter FY '27, we are entering the strongest position since listing. Our proposition remains unchanged and strengthened, with high-quality occupiers, disciplined growth, sustainability leadership, and stable growing returns. We continue to maximize value and build lifestyle workspaces and portfolio investors' trust. Thank you for your continued confidence in Mindspace REIT. I will now hand it over to Preeti for further financial updates of the quarter.

Thank you, Ramesh. Good evening, everyone. I'm pleased to present the financial results for the quarter and the financial year ended 31st March 2026. We delivered a quarter of very robust operating and financial performance. Ramesh has already spoken about the operating performance.  On the financial side, our NOI for Q4 FY '26 grew a healthy 37% year-on-year to INR 740 crores and for the full financial year by 29% to INR 2,660 crores. Revenue from operations for Q4 '26 increased by 35% Y-o-Y to INR 888 crores, while full-year revenue grew 26% to INR 3,200 crores.  Excluding the one-off tax refund, which Ramesh alluded to, our distribution growth was 9.8% for FY '26 and about 25% for Q4 FY '26. In aggregate for FY '26, we distributed around INR 24 per unit to every holder. The Gross Asset Value of our portfolio increased by about 16% from September 2025 to INR 47,600 crores. The Chennai acquisitions will add another INR 4,400 crores to the GAV.  NAV of our portfolio also grew by a healthy 9% from INR 484 per unit in September '25 to INR 527 per unit in March '26. This strong growth was driven mainly on account of one, the rental increases across our micro markets, particularly Madhapur, Hyderabad, and Navi Mumbai; two, the rising occupancy across our portfolio, and the cap rate compression of about 25 bps across some of our projects at the value-add considered.  Our loan-to-value at March 2026 was about 24.3%. The 2 acquisitions that we did in Chennai would take this LTV to 28.7%. Our cost of debt remained largely flat sequentially at 7.4% PPF, which was lower by almost 75 bps Y-o-Y. We expect the financing cost to remain around these levels or marginally rise because of the geopolitical challenges.  On the operational front, as Ramesh has already spoken of, rising occupancy at Airoli has been very encouraging. Rentals across our markets have been moving up. In addition, the embedded development pipeline and the third-party acquisition, as we may undertake, will all aid the growth of NOI and DPU going forward. With this, I hand over the call to the operator to open the floor for questions.

[Operator Instructions] Thank you. Our first member is Mr. Karan Khanna of AMBIT Capital.

So just a couple of questions from my side. Ramesh, firstly, while GCCs data centers and to some extent, the flex workspaces were key demand drivers in FY '26. For the commercial REIT markets at large and for mind space assets, what are likely to be the major demand driver categories one should enter going into FY '27? Will it largely remain the same as FY '26? Or are there any new demand drivers that you would want to point out?

We look at if we can do more data center deals within our portfolio for sure, given that 100 acres and there are any good redevelopment opportunities, we'll definitely look at data centers. Today, our portfolio, as I mentioned, GCC is around 52%, foreign MNC is around 20%, and Indian domestics, the balance 28%. And if you look at our top clients, it's a good mix of R&D, energy, IT services, GCC banking, some flex players, Indian BFSI, Indian large domestic global telecom, global energy, again, I was just going through the list of our top 10, 15 clients, global banking. So, I think this will definitely continue going forward.  Our flex today is 8.4% of our portfolio. And within that 8.4% portfolio, most of the space has actually been done by enterprise clients, which includes people like IBM, Prudential, Nationwide, Telstra, Fujitsu, L'Oreal, and Mastercard. We obviously look at who the enterprise clients of these Flex players are. And I was looking at our top 5, top 6 exposures to, again, Flex players. Again, we deal with the top 6 players, all of them are listed, and 2 of them are planning to list. So that's a list of 6 players. So, I see this continuing. I don't see any big change in the tenancy profile.  Although when I look at the RFPs, Hyderabad seems to having the most number of RFPs in the country, massive RFPs like there's a 2.5 million square feet RFP from a global bank. There's a 1.2 million square feet RFP from a global tech player. There's a 1.2 million square feet RFP from a bank, another bank, 800,000 square feet, pharma, 500,000, BIG 4, 500,000 pharma, 200,000, and pharma. So that's like massive, so much RFPs happening, and we are closely tracking all that. So it's a mix, and I don't see that trend changing.

And just on the portfolio occupancies, given that you're already at close to 95%, what would be the realistic peak occupancy that you expect the portfolio to reach? And with 1.8 million and 1.9 million square feet of expiries in FY '27 and '28, could you share early talks on re-leasing and re-leasing spreads you are likely expecting across these assets? And a follow-up given that, yes, please go ahead, Ramesh.

So, from a re-leasing spread point of view, we're looking at the portfolio still, that's still 20% potential MDM we have in our portfolio. But given the way rentals have been behaving in some of these markets, especially Hyderabad, I definitely see that going up. Out of the expiries, 73% of the 3.6 million square feet of expiries we had, we have already kind of released it. And one good news is all the new deals which we did, 71% of it came from existing tenants in our India portfolio, which means that tenants are happy with whatever we are doing. Our asset management teams are doing a good job. So that is again an interesting data point. So, FY '27 expiries are lesser compared to this year, we had, and FY '26, the expiries were 3.6 million. FY '27, the numbers show 1.8 million square feet. The key focus, obviously, is going to be making sure the new parks which we acquired in Chennai, we managed to fill it up and reducing vacancy in Airoli East.

Sure. And then last question for you, Preeti, on the Board approval to raise up to INR 157 billion. When you say upper cap of 33%, what does that number translate to? And how much headroom does that leave you versus the current net debt of INR 115 billion?

So as such, from a cap perspective, we can obviously. The board keeps approving from time to time. As and when we find opportunities and we want to invest and if that requires additional debt headroom, then we go to the Board and approve. So, I don't think that's a challenge. And as we have always said, we would keep our LTV around 30, 35, which is our stated position. There are about 28.7 now with these two acquisitions. So that leaves us enough headroom for growth. As I said again, 30, 35 is what we'll be comfortable with. So, I think for now, we have enough headroom. But as I said in the last call also, if there are opportunities which require us to raise capital, we will do that at an appropriate time.

We'll move to our next speaker. We have Puneet Gulati of HSBC.

Congratulations on great performance. My first question is with respect to the development CapEx, which you outlined. Can you sort of quantify how much do you intend to spend on upgrades? And how much you intend to spend on new area addition during the current year?

This year, our CapEx is INR 1,434 crores for build and upgrades is INR 203 crores. So, we have a balance CapEx of INR 4,075 crores, which is for finishing our B1, B8, the three data centers, B15,17,18. So all this put together, we have and the balance CapEx of INR 4,075 crores.

Okay. And versus the INR 1,600 crores that you spent in, that you plan to spend in '27, what was the spend in '26?

'26, I think was INR 1,000 plus INR 200 crores. I think INR 1,200 crores was the CapEx, so we are increasing that overall CapEx.

Right. Understood. Secondly, if you can also talk about the gap between the Mindspace Airoli East committed occupancy versus actual. For three quarters, it hasn't picked up. Should we expect the gap to narrow anytime soon? Or do you think there is more fit out finish that still needs to be done there?

So Airoli occupancy, the gap between committed occupancy, what we are seeing is it's only because of the timing difference between LOI to lease. There a lot of deals which we have done in March. So that's where the difference is. The difference is hardly anything for Airoli, I think the difference is only around 2%. And for Airoli East, I think is around 9%. All this will get done in the next quarter or so, and this will move towards signing and will move towards committed occupancy.

Next quarter, you said this?

Next few months.

Next few months. And lastly, if you can also talk about your acquisition strategy. Preeti talked about increasing or comfortable with 35% LTV from current 28.7%. Would you like to fund your acquisitions more with debt now versus equity? Or is it likely to be similar to what you've done in the past?

On the debt equity piece, we stay committed to acquiring more assets. We have already done 9 million square feet, like I said, INR 10,600 crores. So, a lot of deals across the country is coming up after people have seen our recent acquisitions. And obviously, it should be accretive for everybody. And we're looking at multiple strategies. And you've seen in the, during our acquisitions that we have done core plus, value-add, opportunistic, all types of acquisitions we have done. Preeti, do you want to talk about the debt?

Yes. So, Puneet, the way we all the sponsor acquisitions that are likely to come and, in the past, I expect them to be way of. So that effectively would not require us to do any kind of debt raise. Third-party acquisitions, mostly are all going to be cashed out. So those we will fund out of debt. But as I said, if we are getting closer to 35%, which we've been saying is our comfort level, then we will, at an appropriate time, raise equity. But for sponsors, as I said, we don't really need. And for third-party acquisitions outside the sponsor group, we will look at it at an appropriate time, whether that is good enough for us to do those acquisitions. And if we feel we need to raise equity, then at that point in time, we will look at it.

And in the next one year pipeline that you may have, is it more sponsors or more third party?

Early to tell right now, Puneet, we've just done two big acquisitions with the acquisitions, we go to from 24.5%, we go to 29%. I think it will again be a mix of both sponsor and third party.

Just lastly on my side, if you have any thoughts on the data center strategy, you already leased out some space. Is there a thought to start doing a bit more MEP sort of work for data center? Or would you largely limit yourself to core and sell?

We will continue with our strategy, what we have been doing so far, we are real estate experts. And we are looking at one data center opportunity within our park. And hopefully, we'll be able to announce something good and big from a data center point of view in the coming few months.

We'll take our next question from Deep Shah of 360 ONE Capital.

So, a couple of questions from my side. First is, so next year, about 3.2 million square feet comes in Madhapur, out of 55 that we have under construction, more than half will be ready. I guess you also have new construction in Chennai. So, this spread between NOI and NDCF growth, should we expect that to moderate starting '28 or even in FY '28, we expect NOI growth will be higher than our NDCF growth? So that is my first question. And my second question is on debt repayment. If I look at our debt schedule, I find about 85% of debt which is up for repayment next year is at coupons of 7.7% or higher. In fact, most of it is 7.9%. So would it be a fair assumption that our debt cost can actually still further remain in this range or even go down slightly. Would that be a fair assumption? That's from my side.

I'll let Preeti handle the debt question. But on the rent commencement date, so is 100% leased, that's 15 lakh square feet. And B8, which is 17 lakh square feet in that 15 lakh square feet is already absorbed. The 2 lakh square feet will get done this month in the next 15 to 30 days. That will also get done. In terms of RCDs of some of this, we have a large client RCD starting in December '27. We have something starting in September 28. We have something starting in March '28, something starting in Feb 29. So it's spread out where these large clients ask for large significant rent periods also. And so it's a mix. So rentals will, most of these deals, the actual rentals will start kicking in next financial year. And from that time onwards, things will start going up. So just a couple of points I want to talk here is in Hyderabad, our rental revenues have gone up in the last financial year by close to INR 110 crores just because we have managed to lease most of the vacant space and also because rentals have gone up. Again, in Gigaplex our rentals have gone up INR 80 crores. In Hinjewadi because we managed to lease some of these spaces, rentals have gone up INR 40 crores. So we looking at 2000, 30,000, 50,000 square, which is vacant to increase our cash inflow. I'll let Preeti talk over the debt part.

Yes. So on the financing cost, as I said, we are today at 7.4. We have about INR 2,700 crores of refinancing in FY'27. I expect our discussions with lenders and debt investors, we expect that the funding which we have for the balance of the year to maybe be around these levels because we really don't know how long it will take for these interest rates to actually stabilize. But keeping that in mind, I think overall for FY '27, either we will remain at these levels. I don't see us actually going below this. And if at all, it could be marginal 5, 10 bps increase. But I really am not seeing reduction from here. Either we'll remain around the same or maybe marginal increase.

If I can just squeeze in one more, apologies. So when we started this year, when I look at our FY '25 presentation, Madhapur, about 0.4 million expiries were expected. If you could help us understand what were the actual expiries? I'll just say the context. The context is that over the next 3 years, less than 10% of space comes for expiry in Madhapur. And that is, of course, our best asset in terms of the MTM opportunities that we have. So, if you could, maybe if you could give 2, 3 years data, that would be very useful or even in FY '25 data, is there a case to be made that generally actual expiries are higher than what is expected? Is that something you've seen historically or that would be a very optimistic assumption?

You're right, Deep. When we estimate these numbers in terms of expiries or exits, this is based on our client communication today. Given that most clients, they have 6 months to give notice. So a lot of guys who may come back. And so, this year when the year started, we were talking about 2.5 million square feet of expiries. The year ended at 3.6 million square feet inquiries. Right now, given where the market is today, we are not complaining of tenants exiting because it's giving us massive upside. Others we won't be achieving 40% mark-to-market what we did this quarter. But tough to kind of put an exact number now given the 6 months notice.

And based on the contracts, what are the expiries that are upcoming. There also happens sometimes that a client could prepone the rentals are moving up, they would like to lock in that. Sometimes they are doing early renewals as well. So even though the expiries, let's say, in the next year, but they would like to lock in, prep the renewals and they do a leasing much prior. So that also kind of, the expiries move forward in a bit.

We'll take our next question from Mohit Agrawal of IIFL.

My first question is the outlook on the rental increase in Hyderabad. Like last year, we've seen almost market rentals going up by 20%, 25%. You've been signing deals at 120 now. How do you think the trajectory will be for this year? Do you expect a similar increase? And if you could talk about, you spoke about RFPs being very strong. If you could also talk about a little bit of what kind of supply apart from us is coming in the micro market, that will be great. So just trying to understand where could probably the rentals be in the next 1, 2 years?

Definitely, in the next 1 year, we see rentals going up, not by 25% what we saw last year because obviously, companies will have their budget restrictions also. But Hyderabad market, wish we had more space to give. Everything has gone, like I said, B18 has gone, B1 has gone, B8 is gone. So, we don't have space. And maybe we could look at some of the sponsor acquisitions, which again will come quite later. So, it's a good place to be in. Very surprisingly, we were talking about redevelopment in Hyderabad, and which is going to be ready after we get approvals after we design, after we complete the building, all that. And there are already two inquiries for something which may come up four years down the line. So, the market is that. I'm sure some of you would have read that 46% of the GCC who came to India last year went to Hyderabad versus 32%, 33% who went to Bangalore. So, we've been big beneficiaries of that.

Okay. And the in-place rentals continue to grow by about high single digits, right, considering that you have low expiries in the next couple of years. Is that a fair assumption to make?

In-place rentals are obviously going up, but it all depends on when some clients will leave.

The CAGR on the in-place rents since the listing has been about 7%, north of 7% and expiries are giving us higher re-leasing spreads compared to earlier years, primarily by Hyderabad. We used to about 20% to 25% of re-leasing spreads. In the last couple of quarters, we've done 30%. This quarter, we've done 40%. So that's moving our pace of in-place rent growth also higher.

Sure. And Preeti, just on this year, we've done nearly 10% DPU growth. If you could give some comments, I understand you don't give a guidance, but if you could give some comments around what kind of DPU growth trajectory should we broadly expect for FY '27? Should it be similar, better? Because there will be, obviously, the NOI will see a lot of jumps because of the acquisitions and all, but how do you see that translating into, and this is also considering that your interest costs we are expecting to be stable, right? So how do you think about the DPU next year?

Right. So, you partly answered my question. We don't give guidance. So, I won't be able to give you the exact number. But I can tell you, NOI growth, as Ramesh has already said, there are multiple factors that are going to drive NOI growth for next year. NI growth is going to remain healthy. Interest costs, as I said, will remain stable at these levels. So given that, all I can say is that you should continue to see healthy growth in DPU. I will stop at that.

One of the things which Mohit used to, some of the analysts used to ask us to slow distribution growth. And over the last four quarters, we've given 18%, 16%, 20%, 10% growth. So, I think all double digits. That used to be a concern. Now not too many people ask us about distribution growth.

We'll next take Parvez Qazi of Nuvama Group.

So congratulations for a great set of numbers. Two questions from my side. Apart from the recently acquired assets in Chennai, we largely have space left only maybe in Airoli East and the financial district. So how do we see leasing in these two assets? And I mean, let's say, a year down the line, what kind of occupancy can we have in these assets? That's the first question. And second, in terms of GCC contribution to our leasing for FY '26, fair to say roughly half of our space would have been leased to GCC?

That's the number now. The overall number is at 52. For this quarter, GCC breakup is 54%. So we have maintained that percentage. Coming from Chennai leasing, we have between both the parks, we have 14 lakh square feet of completed space with occupancy certificate. The focus over the next 12 months will be to lease this 14 lakh square feet. Airoli focus continues. We hear that there's not too much of competing supply also in Airoli. So I think we have around 9 lakh square feet in, 8 lakh to 9 lakh square feet in Airoli East now. The objective will be to kind of bring it down at least to 5 lakh square feet kind of a number. And hopefully, we should be able to take this 95.7% occupancy, which we have maybe early 97 to mid-97 by end of this year. That's going to be the focus. And like I mentioned in my speech, when we started the year, we had 20 lakh square feet. Today, we have 13 lakh square feet of vacant space.

Also a related question now with, I mean, overall, Madhapur as a market doesn't really have that much space either for you or for others. So your thoughts on the financial district market and the asset that we have there.

Definitely. We've been seeing a lot of demand for financial district just because there's no space available. And many companies are also cost conscious. So that's why our rentals in financial district when we picked up was around 55, 56. And today, already we are doing deals at around 62 which will only go up. We have some alternate usage ideas also within the Q-City park, which we acquired. And over the next few months, you'll be able to hear some good deals in that park at better rentals.

We have Yashas Gilganchi of BOB Capital Markets Limited.

Having expanded your presence in Chennai significantly, please shed some light on the opportunity you see in the city. More specifically, how do you expect in-place rents to trend over, say, the next two, three years? What is the growth that you expect?

So, Yashas, our strategy was very simple. We saw that the market with the lowest vacancy, India vacancy numbers were 15%. Chennai was 7%. When we looked at institutional supply on PTR Road, there was no institutional, hardly any institutional supply. We looked at OMR 1, which is a better market, higher rentals, absolutely no institutional supply coming for the next two years. So these are the reasons why we picked up the Chennai assets where we can control supply. Now we own the supply in that the two best micro markets, if you combine OMR 1 and PTR between these two markets, we kind of control the supply. So the strategy still Chennai domination. And this is, it will be nice if you could check out some of the pictures of this asset. This is truly institutional kind of a trophy kind of IT park asset in the country has the best low carbon, which anybody has ever built. And it's a new asset. So, and has the advantages of OMR 1, PTR and GST Road, all three widest road in Chennai Metro is coming up over the next 1.5, 2 years. And the nearest competing supply like DLF today, I heard from the IPCs, they're quoting 150. Sa a great project. Again, I hear from the IPCs, they're quoting 130. We have started already doing deals at 85. So I'm sure that will go up. And so multiple advantages, airport hotels, close to the airport, residential catchments, lots of a nice small clinics is not very far off, good senior executive housing, scalability potential. Now that we have two parks, clients can scale up. We're already getting an inquiry from someone who said that I've taken this park but giving scalability in the next park, large floor plates, the best size floor plates in the city. And 98% of CapitaLand is actually multinational clients, all GCCs. So low rise, given that it's airport zone, it's still low rise, overspin asset. And these kind of assets have eventual potential to become front office. What we saw in today, you asked the IPC, which is the CBD in Hyderabad, they will say Madhapur, which has already become a front office destination. This is the kind of asset which has potential for front of. So Chennai market, approximately 6 million square feet net absorption market, and we should be able to get some share. Like I said, the focus is 14 lakh square feet of vacant space, which we need to lease in both these buildings, which we hope to lease in the next 12 months.

Understood. And I understand that you expect a marginal increase in your cost of debt over the coming year. But as you refinance expiring debt over the next two years, do you expect to lock in a bigger portion of your outstanding debt at fixed rates? Or I'm just trying to understand what the strategy is to ensure a stable cost of debt?

So as you see over the last couple of years, we've actually been moving a lot of our variable cost debt, which is essentially at the SPV level to fixed cost at the range. We've already touched close to 70% in fixed. I think 70%, 75% where we want to be on the fixed side. We would want to continue with some LRDs at the SPV level also. So I would say since almost 75% is going to be fixed and to that extent, it provides a lot of stability. And I also mentioned in the last earnings call that we are now trying to do some long-term bonds so that we can have better, I would say, stability on the interest rates also. Of course, these last two months have not been the right time. But as we move ahead, we would like to actually lock ourselves for long-term debt so that when the interest rate stability is much better than what it is today.

Thank you. [Operator Instructions] As there are no further questions, on behalf of Mindspace Business Parks REIT, that concludes today's conference call. Thank you all for joining us, and you can now click on the leave icon to exit the meeting. Thank you all for your participation.