Knowledge Realty Trust Q3 FY26 Earnings Call Summary

Summary

Knowledge Realty Trust - Q3 FY26 Earnings Call Summary Thursday, February 05, 2026 4:00 PM

Event Participants

Executives 4 Neeraj Toshniwal (CFO), Quaiser Parvez (COO), Senthil Kumar (VP - IR), Shirish Godbole (CEO)

Analysts 5 Murtaza Arsiwalla (Kotak Securities), Nilesh Doshi (Prospero Finvest), Parvez Qazi (Nuvama Group), Pritesh Sheth (Axis Capital), Sumit Kumar (JM Financial)

Financials & KPIs

Geographic & Segment Commentary

• Mumbai (BKC & Lower Parel): Occupancy improved 100 bps QoQ to 89%. Notable leasing at One BKC (₹430/sq ft, 17% spread) and One International Center (₹222/sq ft, 19% spread) demonstrates strong pricing power in core micro-markets.
• Bangalore (ORR & Others): Blended occupancy stands at 87% (ORR at 89%) with a marginal dip in Cessna due to specific exits. Management noted high demand in the Outer Ring Road stretch and expects a recovery in Q4 as deal closures shifted timing.
• Hyderabad (Sattva Global City): Current occupancy at 79% (Non-SEZ at 91%). Management is de-notifying 0.9 million sq ft of SEZ space, with 0.7 million sq ft already re-leased, targeting IT services and universities at ₹65-₹70 price points.

Company-Specific & Strategic Commentary

• Leasing Momentum & Spreads: Achieved 2.4 million sq ft leasing in 9M FY26 with a 25% average spread. Annual rent escalations (vs. standard 3-year) now cover 90% of new leasing to drive steady compounding.
• Inorganic Growth Strategy: Evaluating acquisitions with strict “NAV and DPU accretive” guardrails. While peers explore data centers, KRT remains focused on its core institutional office mandate.
• Development & ROFO Pipeline: Organic growth is backed by a 1.2 million sq ft under-construction pipeline (commissioning early FY27) and a 6.7 million sq ft Right of First Offer (ROFO) pipeline over the next 2-3 years.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Leasing & Occupancy Gap

• Question: Why has revenue grown 21% while occupancy remained stable? (Pritesh Sheth)
• Answer: Growth is due to the “economic occupancy” gap narrowing from 9% to 6%, alongside 5-6% contractual escalations and 26% re-leasing spreads on renewals. (Quaiser Parvez, Senthil Kumar)

Distribution Trajectory

• Question: Why hasn’t distribution increased despite lower borrowing costs? (Nilesh Doshi)
• Answer: Interest rate transmission (December rate cut) will only fully reflect in Q4. FY26 remains capped by listing projections, but FY27 will see a step-up to ₹7.03. (Senthil Kumar, Neeraj Toshniwal)

Asset Specific Performance

• Question: Why did Bangalore assets see a sequential drop? (Murtaza Arsiwalla)
• Answer: Cessna saw marginal exits (97% to 95%), but ORR remains supply-constrained. Deals pushed from Q3 to Q4 provide confidence for a recovery. (Quaiser Parvez, Senthil Kumar)

Growth Strategy

• Question: What is the plan for acquisitions or data centers? (Tanveer)
• Answer: KRT is evaluating the market but remains disciplined on DPU accretion. Core focus remains institutional offices; no current plans for data centers. Organic growth is supported by a 6.7 million sq ft ROFO pipeline. (Shirish Godbole, Quaiser Parvez)

Key Takeaway

Knowledge Realty Trust delivered a robust Q3 FY26, characterized by 19% YoY NOI growth to ₹1,040.7 crores and a maiden DPU of ₹1.57. While portfolio occupancy remained stable at 92%, the narrowing gap between committed and economic occupancy (now 6%) acted as a primary revenue driver. Strategically, the firm is successfully capturing high mark-to-market spreads (25% YTD) and shifting toward annual rent escalations to improve cash flow predictability. With a low LTV of 18%, a 6.7 million sq ft ROFO pipeline, and a confirmed FY27 DPU guidance of ₹7.03, the REIT is well-positioned for growth. Management remains focused on stabilizing the Bangalore portfolio and commissioning its 1.2 million sq ft development pipeline in early FY27, while maintaining a disciplined approach to inorganic acquisitions in the institutional office sector.