Summary
Embassy Office Parks REIT - Q3 FY2026 Earnings Call Summary Monday, February 09, 2026, 08:30 AM IST
Event Participants
Executives 3 Abhishek Agrawal (CFO), Amit Shetty (CEO), Sakshi Garg (Head of Investor Relations)
Analysts 5 Kunal Lakhan (CLSA), Mohit Agrawal (IIFL), Pritesh Sheth (Axis Capital), Puneet Gulati (HSBC), Yashas Gilganchi (BOB Capital Markets)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue from Operations | ₹1,193 crores | +17% YoY; Driven by new lease-ups at high spreads, escalations, and new deliveries. |
| Net Operating Income (NOI) | ₹985 crores | +19% YoY; Highest-ever quarterly NOI reported. |
| Distributions (DPU) | ₹6.47 per unit | +10% YoY; Total distribution of ₹613 crores for the quarter. |
| Portfolio Occupancy | 90% (by area) / 94% (by value) | Maintained stable occupancy; 3 out of 5 cities currently over 95% occupied. |
| Re-leasing Spreads | 17% | Applied to 0.8 msf of new leases; implies 5% premium over average market rents. |
| Net Debt | ₹20,631 crores | 32% leverage ratio; average in-place interest rate at 7.29%. |
| Cost of Debt | 7.29% | -61 bps over the last 9 months through active management and commercial paper issuance. |
| Hospitality NOI | N/A (reported growth) | +13% YoY; Driven by 60% occupancy (+100 bps) and 11% ADR growth. |
Geographic & Segment Commentary
- Bangalore: Continued market leader with 27% share of India’s gross absorption. Embassy Manyata is 94% occupied with market rents rising 7% YoY; management launched a 0.6 msf redevelopment project here at a 23% yield on cost.
- Mumbai: Significant rental growth of 19% YoY driven by infrastructure developments like the Coastal Road. Express Towers achieved a 26% MTM spread with new leases signed at nearly ₹400 per sq ft.
- Pune: Showing “green shoots” with 0.5 msf leased in the last 9 months and a 0.4 msf pipeline. Anticipated metro completion in Hinjewadi by mid-2026 is expected to drive further demand and narrow the rent gap with Eastern Pune.
- Chennai: Delivered 0.4 msf fully-leased office tower (Block 10) in Splendid TechZone. A second 0.6 msf block (Block 4) is expected to receive its occupancy certificate by late February 2026.
Company-Specific & Strategic Commentary
- Inorganic Growth: Announced acquisition of Pinehurst (0.3 msf) at Embassy GolfLinks for ₹852 crores at a 7.9% NOI yield. Received invitation to offer for Embassy Zenith (0.4 msf) in Bangalore CBD, currently under evaluation.
- Development Pipeline: Active 7.6 msf project pipeline with a ₹4,000 crore capital outlay. Expected to add ₹740 crores to stabilized NOI by FY2030, funded primarily through debt.
- Capital Recycling: Divested 376k sq ft of strata-owned blocks at Embassy Manyata for ₹530 crores to optimize portfolio ownership.
- Hospitality Expansion: Exploring a new 116-key mid-scale hotel at Embassy TechZone, Pune (₹45 crore outlay). The 518-key Hilton at TechVillage remains on track for October 2026.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Net Operating Income (NOI) | ₹3,589 - ₹3,811 crores | FY2026 target; implies 13% YoY growth at the mid-point. |
| Distribution Per Unit (DPU) | ₹24.50 - ₹26.00 | FY2026 target; implies 10% YoY growth at the mid-point. |
| New Deliveries NOI | ~₹100 crores | Incremental NOI contribution expected in FY2027 from 2 msf of upcoming deliveries. |
| Leverage (LTV) | ~30% | Long-term target as GAV increases from project deliveries. |
Risks & Constraints
| Risk | Context |
|---|---|
| Interest Cost Drag | Rising debt levels for capex may temporarily drag DPU growth relative to SPV-level NOI growth. CFO noted a 6-month lag between interest hitting NDCF and rent generation post-delivery. |
| Concentrated Vacancy | 3.7 msf of current vacancy is in SEZ space. Management is mitigating this by converting 3 msf of SEZ space to non-SEZ via demarcation/denotification to meet GCC demand. |
| Tech Sector Volatility | Global tech layoffs are monitored. Management views current layoffs as business-specific productivity recalibrations rather than a structural decline in India office demand. |
Q&A Highlights
Market Rents & MTM Potential
- Question: What is driving the meaningful rise in market rentals this quarter? (Puneet Gulati)
- Answer: Tightening vacancies (down to 20%) and high net absorption (+14% YoY) led to a 9% portfolio rent growth. MTM potential jumped 600 bps to 11% in just 3 months (Amit Shetty).
Debt & Interest Rates
- Question: Will new RBI proposals for bank lending to REITs lower interest costs further? (Pritesh Sheth)
- Answer: Rates are likely at the bottom; management is moving to longer-term, 60% fixed-rate debt. Bank participation will provide more liquidity and longer tenors rather than significant further rate reductions (Abhishek Agrawal).
Leasing Demand & GCCs
- Question: Is current high leasing a result of pent-up demand from 2020-22 hiring? (Kunal Lakhan)
- Answer: Pent-up demand from domestic ITES is largely consumed. Current demand is structural, driven by GCCs (65% of leasing) and mid-tier US/European firms setting up in India for AI and data talent (Amit Shetty).
Key Takeaway
Embassy REIT delivered a strong Q3 performance, characterized by its highest-ever quarterly Revenue (₹1,193 crores) and NOI (₹985 crores). The REIT capitalized on a robust Indian office market, specifically in Bangalore and Mumbai, achieving 1.1 msf of leasing and increasing its mark-to-market potential to 11%. Strategically, the firm is shifting toward aggressive growth through both a 7.6 msf organic development pipeline and inorganic acquisitions like Pinehurst and the potential Zenith deal. While interest costs related to ongoing capex present a temporary drag on distributions, management has successfully reduced debt costs by 61 bps to 7.29%. With 30% LTV targets and a focus on converting SEZ spaces to meet high GCC demand, the REIT remains on track to hit its FY2026 DPU guidance of ₹24.50–₹26.00. Management expects continued rental appreciation and NAV growth as new high-yield developments stabilize in FY2027.
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