EMBASSY — earnings call
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Prepared remarks
Embassy REIT
Q1 FY2026 Earnings Call Transcript
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Q1 FY2026 Earnings Call
Q1 FY2026 Earnings Call Transcript
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CORPORATE PARTICIPANTS
Ritwik Bhattacharjee – Chief Executive Officer (CEO)
Amit Shetty – Chief Operating Officer (COO)
Abhishek Agrawal – Chief Financial Officer (CFO)
Amit Kharche – Head – Corporate Finance
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MANAGEMENT DISCUSSION SECTION
Operator: Good evening, everyone.
A very warm welcome to all for Embassy REIT’s first quarter
FY2026 Earnings Conference Call.
Currently, all participants are in a listen-only mode.
Questions and answers
Embassy REIT
speakers will address your questions during the question-and-answer session at the end.
reminder, this conference call is being recorded.
I would now like to introduce your host for today’s conference – Mr.
Amit Kharche, Head of
Corporate Finance for Embassy REIT.
Sir, you may begin.
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Amit Kharche
Head – Corporate Finance
Welcome to the first quarter FY2026 Earnings call for Embassy REIT.
Embassy REIT released its financial results for the quarter ended June 30, 2025, a short while
As is our standard practice, we have placed our financial result, earnings presentation
discussing our performance, and a supplemental financial and operating databook in the Investors
section of our website at www.embassyofficeparks.com.
As always, we would like to inform you that management may make certain comments on this call
that one could deem forward-looking statements.
Please be advised that the REIT’s actual results
may differ from these statements.
Embassy REIT does not guarantee these statements or results
and is not obliged to update them at any time.
Specifically, any financial guidance and proforma
information that we will provide on this call are management estimates, based on certain
assumptions and have not been subjected to any audit, review, or examination procedures.
are cautioned not to place undue reliance on such information and there can be no assurance that
we will be able to achieve the same.
Joining me today are Ritwik Bhattacharjee, our CEO, Amit Shetty, our COO, and Abhishek
Agrawal, our CFO.
We will start off with brief remarks on our business and financial performance
and then open the floor to questions.
Over to you, Ritwik.
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Embassy REIT
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Ritwik Bhattacharjee
Thank you, Amit.
Good evening everyone and thank you for joining us on the call today.
Before I discuss the earnings for the quarter, I am pleased to announce that the Board has approved
the appointment of Amit Shetty as the Chief Executive Officer of Embassy REIT, effective August 1st,
Amit is currently the COO and known to many of you already as a member of our leadership team.
Amit has played an instrumental role in building Embassy REIT into India’s leading commercial office
enterprise, and I wish him the very best.
I will be a Senior Adviser to the REIT.
It’s been a real privilege to have led Embassy REIT and been
a part of this organization and I thank Jitu, Aditya, the Board, and the entire REIT team for their
continued support and trust.
I will pass it on to Amit to say a few words.
Amit Shetty
Good evening, everyone.
I am really pleased to lead the REIT at such an exciting time
for our business.
I look forward to working with the team and interacting with you all.
Let me now hand over to Ritwik to present the highlights for this quarter.
Ritwik Bhattacharjee
We’re pleased to report a strong start to FY2026.
Highlights for the quarter:
We leased 2.0msf across 25 deals, up 9% YoY.
The 2.0msf marks our highest ever Q1 Fiscal
quarter leasing.
Leasing includes ~1msf of new leases done at re-leasing spread of 38%, ~0.4msf of renewals,
and ~0.7msf of pre-commitments – GCCs, technology, and healthcare companies accounted
for the majority of leases.
Our occupancy stands at 88% by area and 91% by value, both up by 300 basis points YoY.
Excluding Quadron in Pune, our occupancy is 91% by area and 92% by value.
All Bangalore assets are now over 90% leased, reaffirming the strength of our core market,
which contributes 75% of our GAV.
Overall, 10 of our 14 properties are above 90% occupancy,
including 6 at 100%.
GCCs continue to drive demand and account for 64% of portfolio rentals across ~100 tenants.
Pre-leasing activity, led by our Chennai portfolio, has been the clear theme this quarter:
Block 10 (0.43msf) at Embassy Splendid TechZone in Chennai, scheduled for delivery in Q2
FY26, has been fully pre-leased to a global healthcare company already present in our portfolio.
Block 4 (0.6msf) in Chennai has been 14% pre-leased, including the expansion option, to
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In Embassy Manyata, Block D1/D2, slated for delivery in Q4 FY2026, saw additional pre-
leasing of ~160ksf, which brings the total pre-commitment for this block to ~80%.
Our FY26 deliveries of 3.2msf are now 84% pre-leased, including expansion options.
Strategic capital recycling and inorganic growth related updates:
We’ve entered binding documents for divestment of ~376ksf at Embassy Manyata, comprising
two strata owned blocks, including a vacant vintage block that requires significant capex.
exit aligns with our capital recycling strategy.
The deal is expected to close in the coming
quarter, subject to conditions precedent.
In addition, we’ve received an invitation to offer from Embassy Developments Limited (EDL),
for a potential ~3.3msf commercial project in Whitefield, Bangalore.
The opportunity is under
evaluation in line with applicable regulations and governance protocols.
The 518-key Hilton Hotels at Embassy TechVillage is on track for Oct-26 delivery.
remaining 2.8msf commercial pipeline, scheduled for FY27–28, is 30% pre-leased including
expansion options.
The hospitality segment is tracking in line with expectations, with 60% occupancy and 9% YoY
growth in Revenue & EBITDA, aided by 10% growth in ADR.
Given geopolitical events in the
Middle East, travel plans were disrupted in the quarter, and we did see that impact on our
Solar performance remains muted due to lower unit generation coupled with reduced tariffs in
Overall, this was a very solid quarter which positions us well for the rest of FY26.
I will now hand it over to Abhishek to present our financial updates.
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Abhishek Agrawal
Thank you Ritwik, and good evening everyone.
Let me take you through the financial highlights for
Revenue from Operations stood at ₹1,060 crores, up 13% YoY, and NOI at ₹872 crores, up
This increase was largely driven by new leasing, rental escalations, recent deliveries
and contributions from the fully integrated Embassy Splendid TechZone asset.
We declared distributions of ₹550 crores or ₹5.80 per unit for the quarter, representing a growth
This was supported by NOI growth and working capital changes, partially offset by
increase in interest expenses.
During the quarter, we raised ₹4,225 crores of debt at a blended coupon of 7.18%, which was
largely used to refinance higher cost debt.
This includes NCD issuance of ₹750 crores at a
coupon of 6.97%, which is the lowest coupon we've achieved in the last four years, reaffirming
our position as a top-tier credit in India’s commercial real estate sector.
Our net debt stands at ₹20,183 crores as on June 30, 2025, implying a leverage ratio of 33%,
with an average in-place coupon of 7.59%.
Following the debt refinance post quarter closure,
our in-place coupon now stands at 7.55%, reiterating our strong balance sheet position with
dual AAA credit ratings.
In addition to above, we recently raised a 10 year NCD of ₹2,000 crores at an effective coupon
The issuance saw strong participation from leading insurers, pension funds, and
This marks the first 10-year issuance by a REIT in India, underscoring the
strength and quality of our credit profile.
Moving on to the Forward Outlook for FY2026
We remain on track with the FY2026 guidance that we provided last quarter.
We continue to expect
our NOI to be in the range of ₹3,589 to ₹3,811 crores and DPU to be in the range of ₹24.50 to
₹26.00 per unit.
At mid-point, this guidance implies a 13% growth in NOI and a 10% growth in DPU,
on a YoY basis.
I will now go through some of the key assumptions underlying our full-year FY26 guidance, with
one quarter of the year behind us:
We continue to expect portfolio occupancy to be between 90% and 91% by area, or
between 93% and 94% excluding Quadron at the end of FY26
Hotel NOI is expected to grow by ~9% YoY, supported by steady improvements in both
occupancy and ADR
Interest costs are anticipated to rise by 10%–12% YoY, primarily due to the impact of the
asset deliveries in FY25 and the planned deliveries during the remainder of FY26
We remain committed to delivering on these growth metrics while optimizing capital efficiency and
maintaining strong cash flows.
Let us now move to Q&A please.
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QUESTION & ANSWERS SESSION
(Note: The Q&A has been edited for clarity)
Yes, thank you so much.
First of all, thank you Ritwik for holding the fort in the
interim and Amit (Shetty), welcome to your new role and best wishes for that.
My first question is to do with the thought behind divestment of 2 strata owned
blocks at Embassy Manyata.
If you can reveal a bit more about who you are
selling to, what is driving the thought process for the divestment and how
should one think about valuations, yields, etc., and what does it do to your
future thought of at one point of time acquiring more of these assets within
Embassy Manyata?
Second is, if we can get your thoughts on the divestment of the Pune asset
which was at one point of time contemplated.
Is that now not in consideration
And lastly, if you can also talk a bit about leasing environment right now in the
context of what is happening around the globe?
Any updated thoughts would
be very helpful.
Okay, I think on Embassy Manyata, I will let Amit Kharche handle that and then
we will move on to talking about Pune for a little while.
I will start with Pune a
little bit and then Amit Shetty can add on to that and then move on to leasing.
But Amit (Kharche), why don’t you go first?
Amit A Kharche:
We would not be able to share who we are selling to on this call as we
have a confidentiality clause with them.
But the rationale behind the divestment
is simple - These are, let us say 20-year-old blocks facing an occupancy risk
and will require a substantial refurbishment if we were to bring them up to the
occupancy we are seeing in Embassy Manyata now.
Second, someone was
willing to pay us 2.2% higher than the independent valuation.
So, we intend to
divest these and use the proceeds for future propositions such as to repay debt
or to use these proceeds for any strategic acquisition or anywhere else.
that is the plan right now.
We have entered into binding documents and as and
when we move closer to the closing, we will keep the market updated about
the use of proceeds.
Abhishek Agrawal
Puneet, just to add to what Amit (Kharche) said, these are strata owned blocks
in two of the buildings in Embassy Manyata which have lots of other strata
So, operationally also it makes sense to divest.
This also helped us to
take this decision to divest.
Amit Shetty
Just adding Puneet, this asset has about 17 other strata owners and the fact of
the matter is that, of the 376k sf that we owned, 231k sf is currently leased,
145k sf is vacant.
Of that 231k sf, for about 105k sf there is an exit notice as
So, it just made logical sense for us to divest because new leasing will
require significant amount of investment plus the risk of holdover and
weightage of time.
We just thought that there was a great opportunity for us to
recycle capital which we thought is the right thing to do for the business.
On Embassy Quadron, yes, we had spoken to the market about taking it off our
portfolio, maybe if somebody wanted to have it, given the fact that there were
a number of issues, such as the location, the fact that a large IT services tenant
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left it which kind of wreaked havoc on occupancy.
And I think we did get sort of
people kicking it around for a few numbers, but there certainly was not anything
we were interested in.
And, ultimately, we just took the call internally having
a chat with the board at various times that look at some point in time the cycle
Clearly, I think we have always approached it from the point of view that,
if the market is absent of good price for Embassy Quadron, we are more than
happy to think about keeping it with us for the moment.
Pune is obviously
expanding, it is doing well, and yes, while it may not be like some of the other
pricier parts of Pune, at some point when the metro comes in, the Navi Mumbai
airport sort of picks up, you see that kind of traction and we could see a
I mean, we are seeing a turnaround in Noida at this point in time,
where you wait long enough for the asset eventually to turn.
So, I think for now,
we are content to keep Embassy Quadron.
I will be totally transparent, looking
at the portfolio and the numbers of the portfolio ex Embassy Quadron for a bit,
it is just a fraction of the value of the portfolio and the contributing analysis of
And yes, it is unfortunate that it has reached that position, but I
think at some point in time, Embassy Quadron will turn.
But yes, I will leave it
Amit (Shetty), do you have anything to add?
Amit Shetty
I think you covered it all, Ritwik.
And I will probably move to the third question
that Puneet asked, which is, how do we look at the overall market from a leasing
Puneet, I mean, look, the markets look really good.
of activity in the market.
It was a very robust first quarter, about 20 msf getting
absorbed and the supply actually chasing the demand.
projected approximate drop in vacancies across the country, which is really
The rental rates are moving up, at about 5% to 7% in certain
So, I think it is overall a great story for us.
And also, Chennai is
really firing for us.
We have just pre-leased about half a million square feet plus
We have done some interesting pre-leases in Bangalore.
leasing momentum continues in both markets.
We have done some exciting
work in Noida as well.
We have already leased about 225k sf.
active pipeline of about 1.5 msf.
The market is seeing potentially about 12 msf
of active RFPs and we are participating in about 90% of these RFPs.
story cannot be greater for us.
And just lastly, on the walk-down from NOI growth to NDCF
growth, you did talk about some bit of interest rate impact.
But should it have
been that stark of 15% NOI growth translates into less than 4% NDCF growth?
What are some of the other factors?
And how should we think about this?
Because a lot of new assets also came in, right, in the last couple of quarters.
Abhishek Agrawal
So, there are total three parts to it.
One is the interest portion.
The second is the payment of property tax.
So, the property tax of Bangalore
properties was paid for the full year in the first quarter itself.
And the third impact
is the properties that we delivered in the last year, last quarter.
NOI has kicked in right now.
However, the cash NOI will kick in from Q2 and
You are saying they are not rent yielding, but they are still in the rent-free
Yes, because we delivered in the last quarter.
Now, for the cash rent the
Rent commencement date (RCD) starts in Q2 or Q3 onwards.
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But the interest on the debt you had taken for that, you start paying that now
from the last quarter onwards?
Abhishek Agrawal
And the property tax, if you can share the quantum, and should it not be
a part of pre-NOI expense because the NOI also grew 15%, right?
So, property tax is a pre-NOI expense, but the cash went out and the
non-cash NOI chunk was larger.
All taken together explains the difference
between 15% of NOI growth and 4% of DPU growth.
So, non-cash rent and interest, I should assume, is the gap between NOI
growth versus NDCF growth?
Thank you so much and all the best.
Moderator
Our next question comes from the line of Pritesh Sheth from Axis Capital
Please go ahead.
Pritesh Sheth
Thanks for the opportunity and congrats, Amit (Shetty), for your elevation.
First, on this divestiture, we are just trying to understand.
So, these blocks that
we are now hiving off, they were not contributing to rents as of now?
is the NOI rental kind of impact?
Obviously, it will be minuscule but just trying
to understand whether they were contributing anything or not.
Amit Kharche
So, Pritesh, right now, the occupancy is around 60% and we have
received additional exit notices for this block.
Post the exits, occupancy will
drop to around 32% and we see the rentals in the range of Rs.8 crores, which
will be close to 2% NOI yield post the exits.
Pritesh Sheth
This is part of that MFAR block, is it?
Second question is on Embassy Splendid TechZone.
I think the first
block that is coming up in September, saw good pre-leasing.
outlook on the second one - will that also be fully leased before it is delivered
completely or 5 lakh square feet leasing a year should be a good leasing run
rate in Chennai that we see?
Amit Shetty
Pritesh, firstly, thank you for your wishes.
And from an overall
Chennai perspective, the market is actually really, really hot.
So, in terms of the
overall supply, there is actually no quality supply in the market, and we are
probably one of those developers who have actually got stock that is coming
up into the market at the right point of time.
Having said that, to answer your
question on Block 4, we have already pre-leased about 14% to a company
called Dexian and we have got a very strong pipeline.
We are confident that at
least 50% of the building will be pre-leased before delivery.
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Pritesh Sheth
That is pretty helpful.
And just one last question on the cash taxes.
been pretty much in the 5% of EBITDA kind of a range since quite a few
Would that run rate remain for medium to longer term or eventually
would you start paying little higher taxes once your previous losses get
completely absorbed, so, just guidance on that.
Abhishek Agrawal
So, the expectation is that for medium term, cash taxes will remain
similar to 5%, but it will increase by let’s say a percent in the longer term for the
reasons which you mentioned.
Pritesh Sheth
You are saying by a percent or so, so it can go to like from 5% to 6% or 7%
Abhishek Agrawal
5% can go to 6% or max 7% but expectation is it will be around 6%.
Pritesh Sheth
That is it from my side.
Moderator
Our next question comes from the line of Parvez Qazi from Nuvama Group.
Please go ahead.
Parvez Qazi
Good evening and thanks for taking my question.
So, my first question, I’m
not sure if you have already covered this.
Moderator
I am really sorry.
Parvez sir, you are sounding a bit muffled.
Parvez Qazi
So, my first question is, I am sorry if you have already answered it.
wanted to get your views on the recent tariff issue.
How do you see things
panning out for us, especially in the GCCs market?
Because there have been
talks about global leaders not wanting more US jobs to come to India.
wanted to get your views on that.
And second is some progress on the SEZ
front, any de-notifications, etc., this quarter?
Let me take the first one, Parvez.
Just look, I think very frankly, it is too
I think these conversations on tariffs generally point to the fact that
the US administration is always looking to make a deal.
And it does not
necessarily always pan out that it tends to be a zero-sum game.
is a lot of noise in the market, but I think the market is also learning to deal with
And it is something that we do not expect to subside over the coming
quarters or even the coming year in this administration.
It is not the first time
that we have thought about the fact that, look, could US companies be subject
to sort of some kind of conditions about not hiring jobs in India and moving it
I mean, these are also capitalistic corporations, right?
deliver returns for their shareholders.
And I do not think it is sort of just such a
binary outcome that you stop hiring.
The economics of competitive advantage
simply do not lend themselves to that.
So, I think it is just, frankly, while there
are tariffs, while tariffs do have consequences, and they will obviously cause
inflation and at the same time could even lead to sort of a slowdown in
economic activity and output.
I do not think necessarily that it just means that
people are going to stop hiring in India.
And the other thing is that effectively
what we are seeing in our portfolio is that there is massive migration towards
GCCs and companies from other parts of the world.
We have got Australian
banks, we have got Danish healthcare companies, we have got Japanese
companies, and we have British companies as well.
There is a whole host of,
GCCs worldwide and across sectors looking to hire in India simply for the talent.
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So, I think there is an incredible hedge that we have in the portfolio against sort
of some of the risks to the US part of the portfolio.
But even there I think there
might be some degree of rationalization in some form, but that I would say is
normal course rationalization and not sort of structural, sort of fleeing off labor
by US companies.
On the SEZ if you want to take that, Amit (Shetty)?
Amit Shetty
Okay, just quickly recap, Parvez, the total SEZ space that we have de-notified
so far is about 7.9 msf.
Last quarter, we have de-notified about 1.4 msf, and in
future, we plan to de-notify, demarcate additionally 3.2 msf.
Parvez Qazi
And how much of the 7.9 msf has been already leased?
Amit Shetty
So, of that, about 74% is already leased.
Parvez Qazi
Thanks, and all the best for future.
Moderator
Our next question comes from the line of Vikas from Kotak
Securities Limited.
Please go ahead.
The transaction which you guys did in Embassy Manyata for the two
strata owned blocks for Rs.530 crores, you are saying that part of it around
145k sf is vacant and some of the leased portions also will get vacated.
any claw back from the buyer in terms that you have to guarantee a yield for
certain period of time or there are no guarantees from the REIT to the buyer
and the entire leasing, and revenue risk is on the hands of the buyer?
Amit Kharche
So, there is no claw back and we have already entered into a binding
And no guarantee of returns on the purchase price?
This is M&A as usual.
Once we do the deal, the risk and reward gets
Moderator
Our next question comes from the line of Vishal Parekh from Kotak Alternate
Asset Managers Limited.
Please go ahead.
Hi, good evening, team.
I wanted to check regarding the recent consultation
papers which SEBI has floated and various news reports regarding
classification of REITs as equity for the mutual fund schemes.
And there is also
certain one paper which they floated in July which mentions that the REITs and
InVITs can be a part of the residual portion of mutual fund schemes.
are your views around that -- is it positive or it could potentially be detrimental
if debt and hybrid funds are not able to hold the REIT units?
I think for me, and this is my view, I have always thought of
REIT as being high dividend paying stock.
At the end of the day, the way that
REIT has been structured worldwide is that they actually operate as
companies, they enter equity indices, they are part of the S&P 500, the S&P
400 in America, they are part of the STI in Singapore and, I could go on and on
with every country about how they treat it.
I think the problem actually lies in
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the way we view it.
And I think the problem is the fact that it offers the
characteristics, and the security of a bond while giving you equity upside,
maybe not the way that it does for high growth stocks, but it certainly has mid-
level very attractive growth prospects.
And I think it should be in the indices.
And I think because what that does is it brings in a whole bunch of passive
And let me tell you, we are already in the MSCI, we are already across
every passive structure worldwide.
So, you can actually buy it as a stock
somewhere else.
So, I just think that to make the asset class attractive, in turn,
for India, you have got to treat it with that whole thing about being a stock and
having that same mindshare.
Because I think we get told a lot that people do
not know about it.
They do not know about it because you treat it like a fixed
income security.
And listen, I have nothing but the highest respect for the
security of fixed income.
But I think for this asset class to be more mainstream,
more liquid, and also be safer in a way from the way it trades, it needs to have
the balance of sort of an equity, the liquidity and that kind of exposure.
does that mean that debt and a hybrid security do not do that?
I am sure that is what I think we are trying to ask ourselves.
does that happen?
We value the response of it.
It is totally up to you how you
have your mandate and your return profile work within your fund, I think if the
volatility of the security basically sits there and messes up your returns, I think
that is not a good thing for you.
But at the same time, if there is a way you can
participate because you can assume that, look, this is going to give you X over,
let us say, whether it is a G-Sec and then X over Y on your cost of capital on
an IRR basis, I think you can still invest in it.
But I think structurally, we think
about this and I mean, I have been personally talking to regulators for six years
And it is something that really needs to change at some point because
otherwise it is going to be very detrimental to the growth and the liquidity of the
Abhishek Agrawal
And Vishal, on the residual portion, definitely that is very positive for us.
Moderator
Our next question comes from the line of Sumit Kumar from JM Financial
Services Limited.
Please go ahead.
Sumit Kumar
Hi, good evening.
Congratulations on a good set of numbers and
congratulations to Amit (Shetty) as well and all the best for the future.
question is regarding the guidance of occupancy, which is in the 90% to 91%
Given that the deliveries of 3.2 msf, a large part of it is already pre-
leased, you are guiding for incremental 4.6 msf.
I would like to know your
thoughts on that.
Are you being conservative or is it something that has been
built in your business plan that way?
Amit Shetty
So, firstly, thank you for your wishes.
Just from an overall perspective, we have
about 5 msf of total vacancy.
And we believe that about 2 msf of that is sitting
And by the end of the year, we have another half a million square
feet of that to be delivered in Chennai and 2.4 msf is in Pune, which is a drag.
But, given that we will be able to fill our Bangalore and Chennai portfolio, we
are pretty confident of achieving our guidance on the occupancy range.
Sumit Kumar
Yes, but I think my question was that a lot of these deliveries are already sort
of fully leased or 100% leased, only one block that we have about 14%.
not this number be a little more given the run rate that you have achieved in
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Amit Shetty
Yes, I mean, when we started the year, we gave this number because of the
global tailwinds that we saw, and it is just we are hopeful that we will actually
beat these numbers.
Sumit Kumar
That is all from my side.
Moderator
Our next question comes from the line of Vaibhav Khandelwal from Laburnum
Capital Advisors Private Limited.
Please go ahead.
Hi, thank you for taking my question.
Recently, there was some news of an IT
player cutting some thousand jobs approximately across its workforce.
wanted to ask, are you hearing such news from any other IT players that are in
I understand that it is like a relatively smaller portion of our
occupancy base, around 7%-8%.
But I just wanted to sort of get a sense of how
you are thinking about it, how do you think this might impact us in the future if
other players do the same thing?
Amit Shetty
Actually, we are not hearing a lot of noise around this.
I mean, yes, obviously,
TCS made that announcement.
But if you see the Infosys results, that is very
strong and we felt encouraged by seeing Infosys results.
Having said that, as
you rightly mentioned, the overall ITES portfolio is about 8% and some of our
existing ITES occupiers have actually taken up more space with us.
encouraging for us.
Thank you so much.
Moderator
The next question comes from the line of Harsh Modi from JPMorgan Chase &
Please go ahead.
Harsh Modi
I just wanted to double click on the discussion around risk
from some of these discussions with the U.S, AI, all of that.
So, I understand
you are still getting a lot of enquiries, and you are confident in delivering.
are the potential lessees trying to negotiate a contract where they can now
basically walk out or figure out some way of reducing the commitment, or are
there any discussions which allow them to have a rethink, if need be, at a later
date, anything on those lines happening at all?
Amit Shetty
Not really, like, all our leases are very structured, very standard.
have a tenure period with a lock in that is predefined.
So, there is no claw out
of those contracts.
These are all watertight agreements that we have with the
The second thing that we would like to highlight is most of our
occupiers are actually guys who have fitted out their own fit outs, which means
that they have actually invested into the premises.
And having said that, they
walking out midway is very unlikely.
Harsh Modi
But in terms of an example, there were a lot of cases when there were
hell or high-water contracts in a different space.
And there was a clause that
said, I pay you X million dollars and then I can walk out of the lease.
what the legal term for that is.
But is there a request for something on those
lines, just to create some sort of leeway if things really become tough, let us
say, AI absolutely takes over, agentic AI takes over.
So how are you having
those discussions?
Amit Shetty
I mean, honestly, we have not had any discussions even remotely towards that
Embassy REIT
Q1 FY2026 Earnings Call Transcript
J u l y 2 0 2 5
In fact, I have always been advocating, a lot of AI work is actually
coming into India.
India happens to be the second largest AI talent pool across
And having said that, most of our occupiers within our portfolio are
fully doing AI and actually they are hiring a lot of AI talent.
And that is the
conversation that I am actually having with the CXOs today.
I think there is just a lot of early-stage sort of ruminations and discussions
around what AI does.
I think there is a lot of stuff that is going to fundamentally
change the way we work, maybe, but I think it also just means an opportunity
for people to reskill.
But I do not think the first thing that is going to put the
domino to fall is Indian real estate and people restructuring and having these
sorts of contracts that allows them to move out.
I mean, we did not even see
that during COVID, where you actually saw sort of a pandemic, because India
still represented such value for real estate that they kept the spaces.
you have got to realize compared to let us say, New York or San Francisco or
London or Hong Kong, this is still, one third to one fifth the cost.
So, I think you
can still hire people fast.
You can hire people at scale.
And it just makes sense.
So, no, we are not seeing that.
I mean, I think it takes a couple of more years
to play out for what AI really means for the job market, but nothing of this sort
Harsh Modi
Thanks for the color.
And the final question is a bit more housekeeping.
Cost of fund, if I am on slide 25, seems to decline 35 bps.
Is 7.90% an annual
number or is it for fourth quarter?
Just want to understand how much has it
gone down QoQ and let's say, knowing where interest rates are, how much
more shall we expect decline in cost of funds over second and third quarter?
Abhishek Agrawal
So, Harsh, the number that you are seeing, 7.90%, was as at 31st March 2025
and 7.55% is as at 30th June 2025.
Now, after considering all the refinance
that we have done with the NCDs that we raised up to 30th June and post the
quarter end, we raised a 10-year bond at an average of 7.33%, these will further
reduce cost of funds.
And now from here on, what will also happen is the loans
that we have from banks, which are at variable rate; however, bank loan
interest rate is not coming down right now.
It will take some time.
So, it is difficult
to say where we will land, let us say as at 31st March 2026, but definitely it
should be lower than where we are today.
Harsh Modi
Where I am coming from is, one is I just wanted to see if you would
quantify to the extent possible, a range is fine.
And also, just want to understand
sensitivity, in case we end up getting, let's take a number, 50 bps of cut, what
does that mean for your cost of fund?
And does it come with one quarter lag,
two quarter lag?
Just broad sensitivity is all I am looking for.
Abhishek Agrawal
So let me explain it this way.
The total debt book is around Rs.20,000
crores 58% is fixed now.
Out of fixed portion only Rs.2,000 crores come up for
refinance this year.
So, any rate cut from here on, we will get benefit only on
On balance 42% it depends because as of now, we have not received
the benefit from the last 50 bps reduction till now, because the MCLR of the
bank has not gone down, still to bake in.
But to give you a range, it can be, let
us say, 20 to25 basis points lower from here as at 30th March 2026.
will have to wait and watch.
Harsh Modi
That is all I was looking for.
Thank you so much.
Embassy REIT
Q1 FY2026 Earnings Call Transcript
J u l y 2 0 2 5
Moderator
As there are no further questions, on behalf of Embassy REIT, that concludes
this conference.
Thank you all for joining us and you may now disconnect your