CapitaLand India Trust Sells Two Major IT Assets for S\$161.7 Million: What Investors Need to Know

Key Points of the Announcement

• Assets Sold: CapitaLand India Trust (CLINT), via its subsidiary Ascendas Property Fund (India) Private Limited, has entered into an agreement to divest its 100% interest in Cyber Pearl Information Technology Park Private Limited, which holds two major assets:
  • CyberVale (CV): Located in Mahindra World City, Chennai, comprising approximately 0.8 million sq ft IT SEZ and 0.2 million sq ft Free Trade Warehousing Zone.
  • CyberPearl (CP): Located in HITEC City, Hyderabad, comprising approximately 0.4 million sq ft IT park.
• Total Sale Consideration: Estimated at INR11,031 million (approximately S\$161.7 million), to be paid wholly in cash.
• Valuation: Independent valuation by Savills puts the combined assets at INR9,502 million (S\$139.3 million). The actual sale price is about 3% higher than the independent valuation.
• Net Proceeds: After expenses, net proceeds are expected to be INR10,828 million (S\$158.8 million), generating an estimated net gain of INR364 million (S\$5.3 million).
• Intended Use of Proceeds: Repayment of debt, reinvestment in higher yielding projects, and/or enhancement of distributions to unitholders.

Strategic Rationale Behind the Divestment

• Portfolio Optimization: The sale is aimed at monetising non-core assets with limited strategic value, strengthening the balance sheet, and recycling capital into higher-yielding and accretive investments.
• Financial Flexibility: The divestment is expected to improve CLINT’s financial flexibility and support future growth initiatives.

Financial Effects and Implications for Shareholders

• Distribution Per Unit (DPU): The pro forma DPU for FY2024 remains unchanged at 6.84 Singapore cents, assuming net proceeds are used to repay debt and after adjusting for management fees. This signals that the divestment will not dilute immediate income distributions to unitholders.
• Net Asset Value (NAV): The NAV per unit remains stable at S\$1.38 post-divestment, indicating the transaction is not value-dilutive to asset holders.
• Gearing: Pro forma gearing is expected to decrease from 38.5% to 36.8%, strengthening the trust’s balance sheet and lowering financial risk.
• Relative Figures: The divestment constitutes 8.0% of the group’s NAV, 18.7% of net profits, and 10.2% of market capitalization, making it a “disclosable transaction” under SGX rules. No unitholder approval is required.

Other Critical Shareholder Information

• Transaction Process: The sale is to an unrelated third party, with cash payment and post-closing adjustments. Key documents (SPA and valuation reports) are available for inspection at CLINT’s Singapore office for three months.
• Director and Unitholder Interests: Certain directors hold interests in CLINT units, but none have direct or indirect interests in the transaction itself.
• No Board Changes: No new director appointments are related to this divestment.
• Forward-Looking Risks: The announcement notes that future performance may differ due to market and industry risks, competition, policy changes, and other factors.

Potential Price Sensitive Aspects

• Share Price Impact: The divestment improves CLINT’s financial flexibility and lowers its gearing, which could be viewed positively by investors seeking a stronger balance sheet and potential for future growth or distribution enhancements.
• Non-Core Asset Monetisation: The trust is recycling capital into higher-yielding assets, potentially improving long-term returns for unitholders.
• No Dilutive Impact: The transaction does not reduce DPU or NAV per unit, limiting downside risk for current holders.
• Increased Cash Reserves: The net proceeds may be used to repay debt, invest in new projects, or enhance distributions—any of which could be price sensitive depending on management’s allocation decisions.

Conclusion

CapitaLand India Trust’s divestment of CyberVale IT SEZ and CyberPearl IT Park is a significant portfolio move, designed to monetise non-core assets, strengthen the balance sheet, and recycle capital into higher-yielding opportunities. With a transaction value above independent valuations, a stable DPU and NAV, and a drop in gearing, the deal positions CLINT for greater financial flexibility and future growth. Investors should watch closely for further announcements regarding the deployment of net proceeds, which could influence future distributions and share price action.

Disclaimer

The information provided here is for informational purposes only and does not constitute investment advice. Investors should consult their financial advisors and read official documents before making any investment decisions. Past performance is not indicative of future results. All forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from those anticipated.

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