EMBASSY — earnings call

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Prepared remarks

Unattributed

Q3 FY2026 Earnings Call Transcript

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Q3 FY2026 Earnings Call

February 9, 2026

Q3 FY2026 Earnings Call Transcript

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CORPORATE PARTICIPANTS

Amit Shetty – Chief Executive Officer (CEO)

Abhishek Agrawal – Chief Financial Officer (CFO)

Sakshi Garg – Head of Investor Relations

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MANAGEMENT DISCUSSION SECTION

Operator: Good evening, everyone.

A very warm welcome to all for Embassy REIT’s third quarter FY2026

Earnings Conference Call.

Currently, all participants are in listen-only mode.

Our speakers will address

Questions and answers

Unattributed

your questions during the question-and-answer session at the end.

As a reminder, this conference call is

being recorded.

I would now like to introduce your host for today’s conference – Ms.

Sakshi Garg, Head of Investor

Relations for Embassy REIT.

Mam, you may begin.

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Head of Investor Relations

Welcome to the third quarter FY2026 Earnings call for Embassy REIT.

Embassy REIT released its financial results for the quarter and nine months ended December 31, 2025,

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.

You 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 Amit Shetty, our CEO, 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, Amit.

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Amit Shetty

Thank you, Sakshi.

Good morning and thank you all for joining us on the call today.

Q3 was a standout quarter for us, with strong leasing and financial performance as well as a clear focus

on accelerating growth by adding quality assets through organic and inorganic expansions.

key highlights are:

We announced the acquisition of Pinehurst in our prime asset Embassy GolfLinks, from a third party.

We received an invitation to offer for Embassy Zenith, a landmark office tower in central Bangalore

which is leased to one of the world’s largest tech companies.

We have launched a new re-development project in Embassy Manyata at a 23% yield on cost, and

we are looking to expand our hospitality portfolio with a new hotel in Pune.

We also delivered a 0.4 msf fully leased new office tower in Chennai, a market which has seen a

strong rebound and increased traction from some of the largest global companies.

And we once again registered double-digit growth across our key financial metrices and grew our

NOI by 19% and DPU by 10% YoY.

Let me take you through the details.

Starting with an update on the Indian office market

On the back of a record closing quarter, calendar year 2025 clocked the highest-ever gross

absorption of 80 msf and net absorption of 51 msf, up 8% and 14% YoY, respectively.

GCCs and flex operators were at the forefront of this demand, contributing to 60% of total leasing.

Bangalore outshined once again with the highest market share of 27%.

With vacancies tightening, rents have started to grow across key micro-markets.

For our portfolio,

market rents have gone up by 9% YoY, with a 19% growth in Mumbai, 16% in Noida and 7% in

Bangalore assets.

This has resulted in increasing the total MTM potential of our portfolio to 11%, a

600 bps jump just in the last 3 months.

We see this positive momentum to continue for India office, with over 170 msf of absorption vs around

130 msf of new supply expected over the next 2 years.

With this backdrop, let me delve deeper into our Q3 leasing performance

We leased 1.1 msf across 22 deals, bringing our total YTD leasing to 4.6 msf.

Our Q3 leasing included 0.8 msf of new leases signed at 17% re-leasing spreads, implying a 5%

premium to market rents, on average.

This was over and above the 9% YoY growth already seen in

the market rents for our portfolio assets, demonstrating the superior quality of our portfolio and the

strength of our leasing teams.

With limited vacancy available in these properties, we believe that this

rent growth momentum will continue, further solidifying the MTM opportunity available in our portfolio.

Our core Bangalore portfolio contributed to over two-thirds of the total leasing and 3 of our 5

properties in this city are now 100% occupied.

We are also noting early green shoots in our Pune properties with an increase in lease enquiries and

around 0.5 msf of leases signed across our 3 assets in the last 9 months.

Overall, we maintained our portfolio occupancy of 90% by area and 94% by value, with 3 out of 5

cities at over 95% occupancy.

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Next, on our development portfolio

We launched our third redevelopment project at Embassy Manyata, aimed at increasing the leasable

area of E1 block from 0.2 msf to 0.8 msf through utilization of unused FAR.

The project is at a highly

attractive yield on cost of 23%.

We continue to evaluate more such opportunities in Bangalore and

will update the market in due course.

We received occupancy certificate for the 0.4 msf Block 10 in Embassy Splendid TechZone in

Chennai, which is leased to a global healthcare company.

We expect to receive the occupancy

certificate for another 0.6 msf Block 4 in the same park, by the end of this month.

With this, our total development pipeline now stands at 7.6 msf, which will result in an area expansion

of 19% organically.

With a total capital outlay of ₹4k crores, we expect these projects to add around

₹740 crores in stabilized NOI by FY2030.

The 518-key Hilton hotels at Embassy TechVillage remain on track for Oct-26 delivery.

We are also exploring a new 116-key mid-scale hotel in Embassy TechZone in Pune.

hospitality portfolio in Bangalore, this new hotel is envisioned as a strategic ancillary offering for the

tenants in our park and vicinity areas.

Moving to updates on our inorganic growth and capital recycling

We have received an invitation to offer to acquire Embassy Zenith, a 0.4 msf office tower located in

CBD, Bangalore.

The building is fully leased to one of the world’s largest tech companies, which can

add meaningfully to our tenant roster.

We will start our evaluation and will update the market as we

During the quarter, we announced a third-party acquisition of Pinehurst, a fully leased 0.3 msf office

building, aimed to consolidate our ownership in Embassy GolfLinks.

The transaction, valued at ₹852

crores implies a NOI yield of ~7.9% and aligns with our strategy of disciplined, accretive growth.

addition, we continue to evaluate multiple third-party acquisition opportunities available in the market.

We also completed the divestment of 376k sf of two strata-owned blocks in Embassy Manyata for a

total consideration of ₹530 crores.

In summary, we delivered another strong quarter to wrap up the calendar year.

We are happy to report

that during the year, we delivered a total return of 25%, significantly outperforming the Nifty‘s 12% return

and the Nifty Realty’s 16% decline, reinforcing the strong risk-adjusted appeal of the REIT asset class.

We are determined to carry forward this benchmark and continue our growth trajectory to the benefit of

our 125k+ investor base.

I will now hand it over to Abhishek to present our financial updates.

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Abhishek Agrawal

Chief Financial Officer (CFO)

Thank you, Amit and good morning, everyone.

Let me take you through the key financial highlights for the quarter.

We delivered strong double-digit YoY growth across our financial numbers to report our highest-ever

Revenue and NOI.

We grew our Revenue by 17% to ₹1,193 crores and NOI by 19% to ₹985 crores

The increase was mainly driven by new lease-up at high re-leasing spreads, contracted rent

escalations and new buildings delivered during the period.

Our hotel segment NOI grew by 13% YoY, due to an occupancy uptick of 100 bps to 60% as well as

an ADR growth of 11%.

We declared distributions of ₹613 crores or ₹6.47 per unit for the quarter, representing a 10% YoY

This increase was driven by an uptick in our NOI, which was partially offset by net SD refunds

and an increase in our interest costs.

During the quarter, we successfully raised ₹400 crores through a commercial paper at an impressive

effective rate of 6.44% per annum.

Post this, our net debt stood at ₹20,631 crores as of Dec’25, implying a 32% leverage ratio at 7.29%

average in-place interest rate.

I want to highlight that we have successfully reduced our in-place debt

cost by 61 bps in the last 9 months, through our active debt management.

Lastly, on the forward financial outlook

Based on our YTD performance, we remain on track to achieve our FY2026 guidance.

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

With this, let’s now move to Q&A please.

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QUESTION & ANSWERS SESSION

(Note: The Q&A has been edited for clarity)

Puneet Gulati

Congratulations on the good performance once again.

My first question is with

respect to the market rentals that you have disclosed in your presentation.

rentals in Embassy Manyata, Embassy TechVillage, FIFC and Embassy 247 have

all gone up meaningfully in this quarter.

Can you talk about these things, whether

this is a this-quarter phenomena or are you just recognizing it?

And second, how

different are these from your last leasing rentals?

Secondly, on your hotel at Hinjewadi, if you can talk a bit more about what is the

capex you are looking at and when will the hotel come up.

And lastly, how much

did you spend during the quarter in terms of capex?

Amit Shetty

So let me take the first question.

Just to give you a broader picture, the

market saw about 82.6 msf of absorption and about 80 msf in the top seven cities

of the country.

Now what it did was that the vacancy declined, from 21% to 20%

And thereby, there is an increased demand given the supply that came into

the market was about 57 msf.

If you see the net absorption that has taken place in

the market is about 14% higher YoY.

And thereby, across the country, we have

seen tightening of the rental values.

Particularly, we have seen a 17% re-leasing

spread across our 0.8 msf new leasing that we have done.

And from a market

potential, we have now reassessed to 11% mark-to-market opportunity that we

have seen with a 9% rental growth across our portfolio.

Some of the outliers being

We have seen double-digit rental growth in Mumbai and in Noida as well,

with Bangalore being at about 7%.

And we believe that in Bangalore, given the

demand and the supply, I think in the coming days, the Bangalore rentals will also

Now moving on to the next question, which is on the hotel at Hinjewadi.

like we have always said to the market that we believe in building a larger business

And this is again aimed at that.

We are planning to build a 116-key

mid-scale hotel in Hinjewadi in Embassy TechZone with a capital outlay of about

Puneet Gulati

Just a bit on the rental part again.

So, in Embassy Manyata, the market rental

you claim is ₹105 and the same as well in Embassy TechVillage.

There, if you can

suggest whether you have been able to lease at higher rentals and what are those

numbers, or are these your rentals not just the market rentals?

Amit Shetty

See, this is our rental to start off with.

And we have actually been very conservative

of what we have actually disclosed to the market.

And we have achieved higher

rentals beyond these rentals as well, given that Embassy Manyata is now 94%

Vacancy is about 800k sf, including H1 block of about 375k sf, which is

undergoing refurbishment.

So, effectively the vacancy that we have is about 500k

sf in Embassy Manyata.

So, with this, we believe that the rental rates will only move

up, given the expiries and also some of the new redevelopments that we are doing

in Embassy Manyata.

We are really excited for Embassy Manyata right now.

Puneet Gulati

Understood, that is very helpful.

That is all from my side.

Thank you and all the

Amit Shetty

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Moderator

We take the next question from the line of Mohit Agrawal from IIFL.

Please go ahead.

Mohit Agrawal

Yes, good morning, everyone and thanks for the opportunity.

continuing with the previous question about market rental growth.

Mumbai has seen very strong reset and in your presentation, you have mentioned

that in Express Towers you have been able to get 26% mark to market and a

premium of 22%, which means you know almost ₹400 rental for Express Towers

and similarly for Embassy 247.

So, can you explain what is happening there?

have been able to get a meaningful premium to the market.

small transactions or do you expect the mark-to-market potential, especially in

Mumbai portfolio, to continue to go up?

So that's my first question.

Second, on Pune as well, I think you mentioned about green shoots there.

is the outlook for Pune?

Something that you mentioned about the general tightness

in supply and demand, is that driving it?

Or is it something particular about the

western part of Pune, where things are now looking up?

So, comments on that?

Amit Shetty

So, first let me take the Mumbai market.

I think Mumbai from an overall market

perspective, given the infra developments that have happened - the coastal road,

the Atal Setu, a couple of other flyovers and also the metro lines.

I think there is a

meaningful demand in Mumbai.

Mumbai is the second largest city in terms of

Having said that Express Towers, you know, is located in South

Bombay, given the coastal road, is seeing a large increase in the demand.

believe that this demand will continue to grow and if you see Mumbai as a city as

well, given that even Embassy 247 has done extremely well, we believe that we

will see this uptick going forward.

Moving on to the Pune market, if you see in the last 9 months, we have actually

leased about 500k sf and about 100k sf of leasing is in Embassy Quadron itself.

We have got meaningful enquiries, and we have got a pipeline of about 400k sf in

Pune that we have already built up.

The reason is that the metro is now finally in

Hinjewadi with the Phase 3 trials of the metro ongoing.

While the government has

declared that March '26 is when the metro will be officially opened, but even if we

are a little pessimistic, we are very confident that the metro will be operational by

We are seeing about 2.1 msf of RFPs in the Pune market, and also given

the fact that the arbitrage of rent between the eastern side and the western side of

Pune is between a ₹80-₹100 market to a ₹50-₹60 market, respectively, we believe

that a meaningful demand will now shift to Hinjewadi given the metro

operationalization.

Mohit Agrawal

So, any Pune portfolio occupancy targets that you have like for Embassy

Quadron, Embassy TechZone, and for Embassy Qubix?

Amit Shetty

See, Pune is currently at 62% occupancy.

We would like to move that up.

not like to comment on any forward-looking statements here, but as I said there is

a 400k sf pipeline, which we are confident of converting.

And in due course we will

announce to the market as and when these trades happen.

Mohit Agrawal

Just one last clarification.

This should mean that when your NAV is

being revised next quarter, the fourth quarter, there should be a meaningful revision

in that as well?

Amit Shetty

Absolutely, absolutely.

See obviously from a leasing occupancy perspective as well

as the mark-to-market opportunity, I think these two factors will be considered when

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we revise the NAV in the next quarter.

Mohit Agrawal

And could this also mean that the Embassy Quadron write-off that you had taken

that could be revalued?

Is that a possibility?

Abhishek Agrawal: So, Mohit, on the revaluation once we see that actual leasing has happened and it

is a reversal, that is when we will want to take the reversal of impairment.

Okay, understood.

Thank you so much, those were my questions.

Moderator

We take the next question from the line of Yashas Gilganchi from BOB

Capital Markets Limited.

Please go ahead.

Yashas Gilganchi

Thank you for taking my questions.

Re-leasing spreads at around

17% were significantly lower than what was achieved over the past 5 years.

with Bangalore driving leasing activity and your portfolio over there operating at

over 95% occupancy, please help me understand what is keeping the spreads

under pressure?

And my second question, for the developments that are planned to come online

this calendar year, the ones especially at Embassy Manyata and Embassy

Splendid TechZone, what is the NOI contribution you are expecting to flow through

And how long would these developments take to stabilize, once they

start contributing rental revenue?

How is the approximately ₹38 billion of capex that is expected to be spent through

FY28 to be funded, and how do you think LTV is likely to evolve over the period?

Amit Shetty

So, Abhishek, you want to take the second and the third question, and I will take

the first question later.

Abhishek Agrawal: Yes.

So, Yashas, if you look at the total 2 msf that we will be delivering, you can

expect a NOI of almost around ₹100 crores in FY27.

And on the third question, our

strategy is to fund all the capex through debt only.

Now if we look at the LTV

position, we are expecting in the next 1 to 2 years that it will go down because the

GAV today does not factor the increase because of the deliveries of these projects;

once these projects get delivered, the GAV will also increase.

However, in the long

term, we expect the LTV to be around 30%.

Yashas Gilganchi

Just one clarification here.

Like when do you think the projects are going to stabilize

once they start contributing rent, at Embassy Manyata and Embassy Splendid

Like how many years approximately?

Abhishek Agrawal: So, once the buildings are delivered, you can take 6 months for them to start

generating the rent.

Amit Shetty

Also on your first question, my request to the market is that please don't see

quarter-on-quarter trends of leasing spreads.

My request is to see the mark-to-

market potential that is there in the portfolio organically.

Yashas Gilganchi

Thank you very much.

Moderator

We take the next question from the line of Pritesh Sheth from Axis

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Please go ahead.

Pritesh Sheth

Thanks for taking my questions.

First is on the inorganic growth that

we have started seeing emerging now.

So, between these third-party opportunities

and sponsor assets which keep getting offered, what kind of opportunity we are

looking at over next 3-4 years in terms of our portfolio addition?

Like are there still

those third-party owned areas if you can quantify that, and where we have a ROFO

on those third-party areas and other sponsor assets, which are completed and

might not be offered, but just a broad sense on how the sponsor portfolio now

stands in terms of completed portfolio.

And second question on the interest rates, with now the bank channel getting

opened up for borrowing, how do you see interest rates trending forward?

be a meaningful downward shift in terms of interest cost?

Or we are already at

7.3%, so already pretty optimized on that front?

So yes, those would be my 2

Amit Shetty

Let me take the first question.

In terms of inorganic growth, third-party

acquisition as well as sponsor acquisition, we have always maintained that we are

continuously evaluating the marketplace to look at opportunities that are actually

accretive, which are similar to our asset quality and which match our portfolio, and

we want to be in the top 6 cities.

So having said that, the team is building a strong

pipeline on the third-party acquisitions.

With respect to the sponsor assets, we have

One is Embassy Zenith.

And the other one is Embassy Concord in

So, these are the 2 assets that we are currently evaluating and when

we are ready, we will come back to the market.

But having said that, we are also planning to do an Analyst Day which will outlay

the entire plan that we have in terms of acquisition, both from a third-party

acquisition as well as from the Sponsor assets.

Sakshi will come back shortly to

Abhishek Agrawal: So, on your second question, Pritesh, if you look at the interest rate, it is tightening

up in the market.

We are currently around 7.3%.

We think this is almost the bottom

of the rate cut cycle.

I mean, you know better, there can be a maximum one more

rate cut, which can come in.

So hence, we are going for more longer-term debt and

And hence, you see our debt book is around 60% fixed.

Now what this RBI revised proposal can do is that it can allow us to get more and

longer-term debt at trust level because earlier, we were only dependent on the

capital market for NCDs.

Now banks can also participate in that.

And banks can do

longer-term debt.

What it will do is, there will be more liquidity in our debentures.

There will be more participation in our debentures.

And we can see some rate

reductions, but I don't think that it can be meaningful from here on.

Pritesh Sheth

And just on the first one, while obviously we can wait until the Analyst Day,

but on the third-party area owned by other owners in our assets already in the

portfolio, can you quantify some numbers on that?

Obviously, we won't extrapolate

that, everything will be offered to us.

But just trying to understand how the portfolio

stands, between what we own and what third-party owns?

Amit Shetty

So, I mean, you are actually driving me to give you forward-looking statements.

Probably we can pick this up separately.

Pritesh Sheth

That is it from my side.

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Moderator

We take the next question from the line of Kunal Lakhan from CLSA.

Kunal Lakhan

My first question is a little bit generic in terms of some of these MNCs have been

announcing layoffs just as recent as Amazon announcing their shutting down of the

AWS business last couple of weeks.

Just trying to understand, what are you

hearing incrementally from your tenants, especially GCCs, in terms of the road map

for the next 3 to 5 years?

Because some of these leases, they are signing is like

really long term in nature.

So just trying to understand, what kind of outlook they

have or a road map they have in terms of like job creation, office demand for the

next 3 to 5 years?

When you look at breakdown of your distribution, the reconciliation from the NDCF

from SPVs to the NDCF at the REIT level.

There is a big dent because of the

interest costs.

And your overall debt levels have gone up by about 10%-15%,

But your debt interest cost has gone up by 33%.

And incrementally, when

you look at your capex, also that you spoke about ₹4,000 crores of incremental

capex, and mostly that will be funded by debt.

When do you see this trend kind of

reversing where your SPV-NDCF is growing at about 18%-19% but DPU is getting

dragged because of this interest cost, where do you see that trend reversing?

like DPU growth to be in line with your NDCF at SPV level growth?

Amit Shetty

Let me take the first question.

From an overall market perspective, like I mentioned,

the markets have actually been robust and what we predict for the next 2 years by

the industry analysts or the IPCs is that the markets will outperform this calendar

So, the expected absorption is about 82msf – 83 msf for the next 2

Having said that, what we are seeing is while there are cases of layoffs here

and there, these are very business-specific, when businesses are migrating from

one technology to another technology.

There will be some layoffs.

some productivity recalibration.

But having said that, what we are actually seeing

in the market is that given the fact that India has the second largest AI talent pool

and the largest data science pool, we are seeing a large number of projects of the

existing occupiers also moving in this direction and therefore, they are hiring a lot