OCBC Investment Research

25 April 2025

CapitaLand India Trust: Eyeing Growth with Strategic Acquisitions in India’s Thriving Market

Investment Thesis: CLINT’s Strategic Positioning in India

• CapitaLand India Trust (CLINT) is highlighted as a pioneering property trust in Asia, focusing on India’s IT sector with a portfolio of 11 IT park clusters across major cities like Mumbai, Hyderabad, Bangalore, and Chennai [[1]].
• CLINT has diversified into logistics and industrial assets and is developing data centers (DC) [[1]].
• CLINT’s aggressive acquisition strategy, utilizing forward purchases, sets it apart from other defensive Singapore-listed trusts and REITs [[1]].
• The trust’s strategy positions it to benefit from India’s fast-growing economy, supported by e-commerce expansion, increasing data localization, and the rise of digital payments [[1]].
• Relaxation of the Special Economic Zones (SEZ) Act is expected to reduce occupancy risk for CLINT’s existing SEZ properties [[2]].

1Q25 Performance Overview: Strong Operating Results

• CLINT’s total property income and net property income (NPI) increased by 12% year-on-year (YoY) in 1Q25, driven by strong operating performance [[1]].
• Total property income reached SGD74.6m, and NPI was SGD55.1m, reflecting higher rental income from existing properties and contributions from assets acquired in 2024 [[2]].
• These results constitute 22.5% of the initial full-year forecasts [[2]].
• Committed occupancy remained stable at 92%, including options and rights of first refusal [[2]].
• The portfolio experienced a +9% rental reversion over the past 12 months, particularly in Bangalore and Chennai [[2]].

Update on Divestment Plans and Gearing

• The divestment of CyberVale and CyberPearl has been delayed until May 2025 due to ongoing market volatility [[1], [2]].
• Gearing increased by 3 percentage points (ppt) from 38.5% as of 31 Dec 2024, to 41.5% as of 31 Mar 2025, due to debt drawdown for working capital and development projects [[2]].
• Management anticipates gearing will fall below 40% following the completion of the CyberPearl and CyberVale divestments [[2]].
• The cost of debt remained stable at 6%, with 84.5% of debt on fixed rates, and is expected to remain stable in the near term [[2]].

New Forward Purchase Agreement: Expanding Bangalore Footprint

• In Feb 2025, CLINT announced a forward purchase agreement to acquire an office project at Nagawara, Outer Ring Road, Bangalore (MAIA) [[2]].
• CLINT is expected to provide SGD156.4m in funding over the next four years, starting in 2H25 [[2]].
• The acquisition, set to occur after the building is completed 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 1 Jan 2025, CLINT’s FY24 distribution per unit (DPU) would have increased by 1.8% to 6.96 Singapore cents [[2]].

Revised Fair Value Estimate: Adjusting for Economic Uncertainty

• The fair value (FV) estimate has been reduced to SGD1.23 [[1], [2]].
• Global economic uncertainty may slow service industry growth and leasing demand in the near term [[2]].
• Adjustments to assumptions include:
  • Steeper depreciation of INR vs SGD to align with house view [[2]].
  • Increase in cost of equity input from 9.38% to 9.8% to factor in near-term macroeconomic uncertainty [[2]].
  • Lower terminal growth rate assumption by 25bps to 2.5% [[2]].
• The forward purchase agreement for MAIA has been factored in [[2]].
• FY25 and FY26 DPU forecasts have been lowered by 3.6% and 4.9%, respectively [[2]].

ESG Updates: Leading in Green Building Initiatives

• CLINT’s ESG rating was maintained in Dec 2024 [[2]].
• CLINT leads peers in green building initiatives, including green leases to promote sustainable property use [[2], [3]].
• 79.5% of its total portfolio area was certified to green building standards in FY23, surpassing the industry average of 47% [[3]].
• CLINT outperforms peers in staff management practices, such as grievance mechanisms, and has a majority-independent board [[3]].

Potential Catalysts and Investment Risks

• 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

Comparison with peers:

• MINDSPACE BUSINESS PARKS REIT (MINS.NS) [[3]].
• EMBASSY OFFICE PARKS REIT (EMBA.NS) [[3]].
• BROOKFIELD INDIA REAL ESTATE TRUST (BROF.NS) [[3]].

Company Overview (as of 31 December 2024)

• CapitaLand India Trust, listed on the Singapore Stock Exchange since Aug 2007, is the first Indian property trust in Asia [[4]].
• CLINT voluntarily adheres to the same restrictions as a Singapore real estate investment trust (S-REIT) to ensure distribution stability [[4]].
• CLINT provides investors exposure to the fast-growing Indian markets through investments in income-producing commercial real estate in India [[4]].
• As of 31 Dec 2024, CLINT’s portfolio includes 11 IT parks, four data centre developments, and three logistics and industrial facilities in India [[4]].
• These assets cover a total completed floor area of 19.6msqf across Bangalore, Chennai, Hyderabad, Mumbai, and Pune, valued at SGD3.4b [[4]].
• CapitaLand India Trust Management Pte. Ltd., a wholly-owned subsidiary of CapitaLand Investment, manages CLINT [[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]].
  • Electronics, Semiconductor & Engineering: 11% [[4]].
  • Banking & Financial Services: 7% [[4]].
  • Automobile: 6% [[4]].
  • Others: 8% [[4]].
  • Design, Gaming and Media: 3% [[4]].

Net Property Income and Distribution Per Unit

• Net Property Income (SGD m):
  • FY2018: 128 [[4]].
  • FY2019: 136 [[4]].
  • FY2020: 148 [[4]].
  • FY2021: 156 [[4]].
  • FY2022: 167 [[4]].
  • FY2023: 180 [[4]].
  • FY2024: 206 [[4]].
• Distribution per unit (S cents):
  • FY2018: 6.10 [[4]].
  • FY2019: 7.33 [[4]].
  • FY2020: 8.83 [[4]].
  • FY2021: 7.80 [[4]].
  • FY2022: 8.19 [[4]].
  • FY2023: 6.45 [[4]].
  • FY2024: 6.84 [[4]].

Company Financials

Profitability Ratios

Credit Ratios