As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Mrs. Sakshi Garg, Head of Investor Relations and Strategy for Embassy REIT. Ma'am, you may begin.
Thank you. Welcome to the second quarter FY 2027 earnings call for Embassy REIT. Embassy REIT released its financial results for the quarter and half year ended September 30, 2026 yesterday. As is our standard practice, we have placed our financial results, earnings presentation discussing our performance, and a supplemental financial and operating data book in the investor 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 forward-looking statements. Please be advised that the actual results may differ from [audio distortion] Embassy REIT does not guarantee these statements or results and is not obliged to update them at any time. Specifically, any financial guidance and pro forma information that we provide on this call are management estimates based on certain assumptions not being subjected to any audit, review or examination. We caution not to place undue reliance on such information and they take no assurance that we will be able to achieve the-
I am sorry to interrupt. Ma'am, your voice is breaking every now and then. Could you come a little closer to the microphone, please?
Yes. Let me try again.
Yeah, sure.
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.
Thank you, Sakshi. Good morning, and thank you all for joining us early today to discuss our quarterly results. This was our 30th quarter as a listed REIT, and yet another strong broad-based delivery. Four highlights that stand out. We pre-leased 0.5 million sq ft full building in Bengaluru at a 15% premium to the current market rents. We registered early signs of revival in our Pune portfolio, expanding the occupancy by 30 basis points quarter-on-quarter. We declared our highest ever quarterly distribution of INR 670 crore or INR 7.07 per unit, and we have delivered double-digit growth across our key metrics, growing our revenue by 16%, NOI by 15%, and our NAV by 18% year-on-year.
Alongside this strong business performance, I am pleased to share that Embassy REIT is now part of the Nifty 500 and the Nifty Midcap 150, along with several other NSE and BSE indices. This has brought in a meaningful passive inflows and broadened our investor base well beyond our 1.5 lakh direct retail unit holders. As many more investors now own us indirectly through index, funds, and ETFs.
Coming back to our leasing performance this quarter, we leased 1.5 million sq ft during quarter two, with GCCs contributing to 85% of our total leasing. This 1.5 million sq ft included 0.9 million sq ft of new leases, 0.1 million sq ft of renewals, and 0.5 million sq ft of re-leasing. This re-lease deal was a standout transaction as we leased an entire 0.5 million sq ft block at Embassy Tech Village, Bengaluru, to a global engineering company at 15% premium to the current market rents.
One of the other encouraging trends this quarter has been the early green shoots emerging in our Pune portfolio with the metro connectivity as a key catalyst. We leased over 0.2 million sq ft across our three assets in Pune, contributing around 25% of new leasing in quarter two. With this, our Pune occupancy grew by 300 basis points quarter-on-quarter.
Turning to the rent growth, we continue to lease above market rents. New leases during the quarter were signed at an average 9% premium to the market rents. Also, our portfolio market rents have grown by 8% year-on-year to INR 106 per sq ft. The blended market rents from Manyata and ETV have reached INR 107 per sq ft, but we are signing most of the deals in Embassy Manyata and Embassy Tech Village at between INR 115-INR 130 per sq ft now. Overall, as of September 26, we've maintained our portfolio occupancy at 90% with all our cities except Pune at 94% or above occupancy level. With a healthy leasing pipeline, we remain on track to close the financial year with an occupancy of approximately 92%-93% by area.
A few other updates. We have received the occupancy certificate for 0.6 million sq ft, block one at Embassy Splendid TechZone in Chennai and have handed over the fully pre-leased building for setting up the GCCs of a leading U.S. company. Our total development pipeline now stands at 5.6 million sq ft across Bengaluru and Chennai. Of the 2.3 million sq ft delivery scheduled over the next two years, 67% is already pre-leased, including expansion options.
Next on our hotels, we remain on track to launch the 318 key five-star Hilton Hotel at Embassy Tech Village during the course of this year. The recent delivered Hilton Garden Inn Hotel in the same complex turned operating cash break even, and clocked ADRs of over INR 20,500 and an occupancy of 22% during the quarter. Overall, for our hotel portfolio, we recorded a 58% occupancy and INR 13,500 blended ADRs in quarter two, resulting in a 22% revenue growth year-on-year.
During this month, we have also concluded the acquisition of 8,048 sq ft of fully leased retail area at FIFC, our flagship Bombay asset, further consolidating the ownership in Mumbai. We will continue to pursue such selective value-additive opportunities that further strengthen our portfolio. Beyond our own performance, some of the macro tailwinds remain firmly in our favor.
India's top seven cities recorded their highest ever office absorption in the first nine months of the year at 64 million sq ft, up 10% year-on-year. With supply at 46 million sq f t, pan-India vacancy fell 102 basis points year-on-year. GCC and flex players drove around 70% of this demand, undeterred by the ongoing geopolitical uncertainties or AI-related narratives. I would like to refer to a recent macro study published by Embark, named "India's GCCs in the AI Era," which highlights a few structural trends that position our GCC-led portfolio well for the years ahead.
One of the interesting points that was made is India's GCC occupied area is expected to reach 390 million sq ft by FY 2031, growing at 11% CAGR, while BFSI and TMT sectors are expected to drive around 55% of this growth.
What is interesting to note is that 80% of the headcount growth over the next five years is projected to come from brownfield expansion by the existing GCCs, and the rest from the 120-plus new GCCs set up expected every year. The study shows that 92% of the GCC leaders are beyond selective AI adoption in India, yet realized productivity gains stay below 15%.
As AI mandates move from function-specific pilots to broader build-outs, India stands to gain significantly with its AI skill talent projected to grow threefolds to around 0.8 to 0.9 million by FY 2031. So AI productivity and GCC expansion will clearly coexist. These trends play directly to our strengths. Our Bengaluru anchored portfolio sits at the heart of India's AI talent ecosystem, making our campuses a natural choice for GCC scaling their AI mandates.
With this, I will now hand it over to Abhishek to present our financial updates.
Thank you, Amit, and good morning, everyone. Let me take you through the financial highlights for quarter two. We delivered another quarter of strong double-digit year-on-year growth, with revenue up 16% to INR 1,303 crore and NOI up 15% to INR 1,069 crore. This was driven by our continued leasing momentum, healthy rent growth, and the addition of new office and hotel buildings to our operating portfolio. We declared our highest ever quarterly distributions of INR 670 crore or INR 7.07 per unit for the quarter, representing a 9% year-on-year growth. This increase was driven by an uptick in our NOI, which was partially offset by higher interest expenses.
During quarter two, we raised INR 2,050 crore of debt at 7.14% per annum blended interest rate, which was 18 basis point lower than our Q1 in-place debt cost. This included INR 1,000 crore raised through a three-year floating rate NCD, fully subscribed by a leading multinational bank at an initial coupon of 6.97%. This is the first financing by a scheduled commercial bank to an Indian REIT at the trust level under the RBI's new framework, opening up an important new source of long-term capital for us and the wider REIT sector.
With this, our net debt stood at INR 22,389 crore as of September end, implying a 30% leverage ratio at 7.33% in place cost. In addition, around 57% of our debt is locked in at fixed rates. While the rate environment has turned firmer following the RBI's recent rate hike, our strong credit profile and access to diverse capital pools position us well to manage our borrowing costs. Next on our portfolio valuation.
As per the independent valuer's assessment as of September 26, our portfolio GAV grew by 16% year-on-year to INR 73,990 crore and our NAV by 18% to INR 524.74 per unit. This impressive growth was mainly driven by an increase in our market rent, new building additions, as well as cap rate compression in some of our high-performing properties.
Also, I am happy to report that due to the recent amendment in income tax laws, we have recognized MAT credits in our books amounting to INR 594 crore, which we believe can be utilized over the next few years. Also, as many of our SPVs will now move to a lower tax rate or will stop paying MAT, we expect to save cash taxes to the tune of around INR 120- INR 130 crore per year going forward.
Lastly, an update on our FY 2027 guidance. Based on our half year one performance, we remain on track to achieve our annual guidance. We continue to expect our NOI to be in the range of INR 4,150 to INR 4,350 crore, and DPU to be in the range of INR 27- INR 28.6 per unit. At midpoint, this guidance implies a 13% growth in NOI and a 10% growth in DPU on a year-over-year basis.
We remain committed to delivering on our growth targets for this year and growing our DPU in the years ahead while optimizing our balance sheet and maintaining strong cash flows. With this, let's now move to Q&A, please.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. We would also request participants to restrict their questions to two per participant. If you have a follow-up question, please rejoin the queue.
Our first question comes from the line of Puneet with HSBC Bank. Please go ahead.
Yeah. Thank you so much, and congratulations on great performance. My first question is on your guidance for 93% occupancy end of year. Does that include Pune as well, or are you counting it excluding Pune?
Hi, Puneet. Puneet, do you want to ask all the questions, and then we will probably answer this?
Sure. Second, also is on the Splendid TechZone 0.6 million sq ft. When does the cash rent start? And thirdly, on your guidance, are you factoring in any potential increase in interest rates, or does it factor current prevailing interest rates?
Okay. So let me begin with the first question. The 93% guidance is including the Pune portfolio as well.
Okay.
Okay? The 0.6 million rent, it starts from next year sometime, Puneet.
Okay.
Okay.
On the third question, Puneet, on the guidance for interest cost. See, if you look at the maturity which is coming in, even if there is, let's say, one or two interest rate hikes of 25 basis points each, we think we'll still be in the range which we had provided earlier, which is that this year's interest cost will be around 11%-13% higher than previous year in total for the full year.
So I think we'll comfortably be within the range. The reason for that is, if you look at from here on, we have only around INR 4,000 crore of refi that is coming up. Out of that, INR 1,100 crore already refinanced from the money that we had borrowed, as per my prepared remark. So that we utilized to refi.
The balance INR 2,800 crore, we have already tied in almost around INR 1,450. We are in active discussion and almost closing it at a very attractive rate, because this is a deal where we were discussing even prior to the quarter close. So it's coming to an end, so that INR 1,450 will be within, let's say, a week, it will be in our hands, and we'll be able to refi.
The balance is at the far end of this year, which is March 27th. So even if there's a repo hike there, not much impact. So that's the reason we think that we will still be in the range.
Okay. For your next year also, there is some debt coming for maturity. Is that a fixed cost debt or is it floating cost debt there?
Total debt is coming is around INR 4,200 crore. Most of that is fixed cost. The average interest rate there is around 7.5%.
Okay. That is good. That is all from my end. Thank you so much, and all the best.
Thank you, Puneet.
Thank you.
The next question comes from the line of Girish Choudhary with Avendus Spark. Please go ahead.
Yeah. Hi. Good morning. Thanks for the opportunity. Just wanted to start with a broader demand environment. Obviously, we have seen leasing has been pretty strong for Embassy and in general, the Grade A office market, and GCC has driven a big part of that. When you look at the conversations you're having with some of these global companies, are they largely existing GCCs expanding operations, or are you also seeing meaningful pickup in new GCCs entering India?
Just a follow-up to that, again, as per your discussions with AI and productivity, are these companies beginning to rethink their space requirements? Yeah.
Let me take these questions. Firstly, from a demand perspective in the market, we're seeing still strong demand drivers, like you rightly mentioned, largely from the GCC guys as well as from the flex operators in the market. I think this quarter has been a record quarter from an overall country perspective, absorption of about 21 million sq ft. The first nine months, we saw about 66 million sq ft of leasing absorption across the country. We believe that there is about 20 odd million sq ft of RFPs in the market, with about 85% of that actually towards Bengaluru.
Across the country as well, the demand is strong. We've got a very strong pipeline of about 1.4 million sq ft across the country, and we're very confident about this.
Coming to the next question on AI productivity, and therefore how it's impacting. Our conversations have been very clear. We're seeing a lot of the existing GCCs take up space. I think in the last quarter we declared that we spoke about Target Corporation as well, which actually took up space with us. Similarly, multiple of our existing clients are actually talking to us for growth. Similarly, we are seeing a lot of new incoming mid-market GCCs that are actually taking positions within our ecosystem. Overall, we feel very confident about the market at large.
In terms of AI productivity, very early days, but what we've seen, and this is something which is echoed in the report that we referred to just a while ago as well. A lot of leaders are still saying that the AI productivity gains is less than 15%, and the cost of implementation of AI is very steep as well. It is a wait-and-watch game, but at least in the short term, we do not see that productivity gains leading to job losses.
Got it. My next question is on the interest rates and then also on NAV. We have seen a meaningful increase in NAV in the last one to two years, and supported both by the market rate rentals and then also the interest rate. How do you see that going ahead in a rising interest rate? Do you see pressure on cap rates and property valuations?
Girish, couple of things. Yes, I agree interest rates are going up, but what we are seeing in the market is that the cap rates are still not widening. The impact will start coming in once the cap rates see some widening, which we are not seeing as of now. We will have to wait and see how the markets react to this interest rate cycle, whether this is a sustained cycle. Because even the valuer does not take cognizance of any increase for the first one or two quarters, similar to what they had done when the interest rates went down. For three to four quarters, they waited, and then they saw that this is a sustained one, and then they took that call.
Similarly, when the interest rates are going up, they will see what is happening on a sustained basis. If it sustains, let us say, for a couple of half years, and the market sees that the cap rates are broadening, that is when the valuer will take an impact on that.
Okay. From here on, how do you see the headroom on NAV purely led by the rental growth?
Girish, there are a couple of things. One is the disclosed MTM. We have disclosed around 10%, but the actual leasing that we are doing is far more than the 10%. We will have to wait and see how the market rents are growing, which we see that there are green shoots that the market rents are still growing. If that happens, then the next valuation will take impact of that.
Also, the leasing is happening. If you see now we are at 92%, Amit said in his prepared remarks that now it is 90%, we are gunning for 92%, 93%. All those also will be taken. We think that there is still quite some headroom which is left for the NAV to grow.
Thank you, and all the very best.
Thank you.
The next question comes from the line of Kunal with Bank of America. Please go ahead.
Okay. Thank you so much. A couple of questions from me, Amit. This GCC 0.5 million sq ft deal sounds very interesting and a good one. Any additional color you could give as to, is this just one more typical case of what you've been describing as brownfield expansion, or is there something different about it, as in company wanting to shift an entirely new process to India, so on and so forth?
The second question is: the survey you were referring, if you could just give a little bit more color around it as to who were the participants. Just very curious to know as to who the feedback is coming from. Thank you so much.
On the first question, the 0.5 million sq f t, it happens to be an existing tenant of ours in our ecosystem who's actually expanding by keeping the existing footprint within our portfolio. This was an RFP that was out in the market that we won the RFP. Interestingly, like I said, it's 9% premium to the market and probably one of the highest ever rent in that micro market that we have achieved.
Next, Sakshi, do you want to add color on the-
So this survey, Kunal, was done with about 100 GCCs in India. There have been around 55 [audio distortion] , around 80 conversations which were done by Embark with GCC leaders, which are either already in India or looking towards setting up bases in India. It's very widespread, actually, if you look at from a geography perspective, how they covered the regions, how they covered the designation-wise also, how they covered the people. Almost 50 to, I would say, 50% to 60% were CXO or GCC India heads, which were interviewed.
Got it.
There is a lot of detail in the report as well. I can also send that around.
Of course. Yeah, no, it is a pretty interesting outcome, so I was curious. All right. Thank you so much.
Thank you.
Thank you.
The next question comes from the line of Mohit Agrawal with IIFL Capital. Please go ahead.
Yeah. Good morning, everyone, and congratulations on a good quarter. Two questions. Firstly, on the Pune demand, and you have seen green shoots on that. Where is the demand, the mix of demand based on your discussions? Is it similar to what you are seeing in your Bengaluru markets? Is GCC and flex driving demand or is it different kind of tenants that are talking to you? So some sub-color on that.
Secondly, on the previous question around rent growth, where do you see broadly we are in terms of the cycle on the rental growth? Is there a big difference in, let us say, how a Mumbai market probably has seen a sharp rental growth? Do you see from a rental growth perspective, different markets being in different stages? Or do you see that generally we have a fair bit of runway for rental growth increases going forward as well?
Okay, let me take the first question, the Pune demand. Interestingly, the Pune demand comes from GCCs, mostly from GCCs, given the fact that it is a Hinjewadi market. But obviously, if you see Pune as a whole overall market, both flex players, GCCs, as well as domestics have been contributing to the market. But Hinjewadi, we are seeing more traction from the GCC operators. Right?
Interestingly, we have done two deals, significant sizes, both of it, overall about 200,000 sq ft, in Quadron as well as in ETZ. So, that gives us a lot of confidence because, with the metro that is being scheduled to be inaugurated by the Prime Minister, and it is finally announced in the media, we see a lot more traction and a lot more inquiries coming our way.
The second, on the rent growth runway. Across the country, we are seeing the rental rates firming up anywhere between 5%-10%. Key micro markets where activity is, I think we are seeing rental growth of about 10%. Like you rightly said, I think, two markets, one is Bombay, which has just been an outlier and that is something that we have been reporting quarter on quarter, is that the premium to the market as well as the in-place market rents that have grown in Bombay is being very healthy.
Secondly, I think, also Hyderabad, just from one micro market, which is HITEC City, we have seen the rentals almost double in the last two years. Apart from that, Bengaluru is seeing very healthy rent and similar trends to Hyderabad is Outer Ring Road as well as the Whitefield market.
Okay. Just one clarification from Abhishek on the leverage levels. For the last four to five quarters, we are seeing the LTV coming down from a peak of 33% to 30%. Obviously, this is driven by a very healthy NAV growth. How do you see this trending, let us say, over the next four quarters? Some color on that.
Lastly, you mentioned INR 120 crore-INR 130 crore of cash tax saving. You still maintain the 5%-6% tax rate on revenue or will that meaningfully come down? Yeah, those were-
I will take the second one first. Earlier I had said that it will be around 6%, but now we think that it will be closer to 5%.
Okay.
Second point on the leverage levels, yes, we are around 30% now. I think for the next couple of quarters, it will hover around 30% only because of all the CapEx spends on the 5.2 million sq f t that we will be doing. Post this getting capitalized, this project's 5.2 million sq ft getting capitalized, I think it will start coming down to around 28%-29% levels.
Okay. 28%, 29% levels in about by end of FY 2028?
Or 2029, yeah. Somewhere around in FY 2029. Because, see, we want to maintain it below 30%, so we think that 28%, 29% is a healthy level of CapEx.
Perfect. Thanks a lot. Those were my questions. All the best.
Thank you.
The next question comes from the line of Pritesh Sheth with Axis Capital. Please go ahead.
Yeah, good morning and thanks for the opportunity. First is on Manyata occupancy outlook there. I think we have seen the bulk of the exits in the first two quarters and have been consistently leasing around 5 lakh sq ft in last two quarters. Can we maintain same run rate going ahead in second half, which would mean that occupancy should climb to 95%+ kind of levels. Is the visibility suggesting that kind of increase there?
Definitely. Sorry. Go on.
Sorry. I will just take the second question as well, and you can answer both together then.
Yeah.
It is with regards to the recent job cuts announcement from some of the larger corporations. What is your reading on that? Because they are also talking about some of those in India as well. What kind of processes, if you have had conversation, what kind of processes where we are seeing the job cuts, and how do you read that? Just two questions.
Yes. Firstly, on Manyata, we will continue to see this run rate simply because in Manyata, we are now moving to a rate strategy given the occupancy levels that we have and the rate that we are actually able to get. Some of the expiries that you see are front-loaded simply because we are moving on to the rate strategy there.
Also, in terms of pipeline, I think we have got some very interesting pipeline there. A healthy mix of existing occupiers wanting to take up positions. Also a lot of new demand that is actually coming our way. For once, I can say it is a problem of plenty for us in Manyata.
Moving on to the second question on the job cuts. Look, we have always maintained this. It is a city of two tales. Basically, there is one side where there has been a little bit of churn, especially on the ITeS sector, and now we are seeing this with corporations like you mentioned right now. On the other hand, there is a lot of new entrants that are actually coming into the market. The existing GCC world is also increasing their footprint by bringing more functions into the country.
Therefore, we are seeing these mixed, one side there is churn and one side there is growth. But the overall construct is that the pie has become larger, and therefore, the volumes have increased. That is just purely on data. If you see 66 million sq f t of absorption in the first nine months is a record year compared to any time across the commercial real estate era in the country. We continue to see this in the form of RFPs that are there in the market and also the market activity. With that, we are very confident about the demand and the office story in the country.
Sure. Perfect. That is helpful. That is it from my side. All the best.
Thank you.
A reminder to all participants, you may press star and one to ask a question. The next question comes from the line of Abhinav Sinha with Jefferies Group. Please go ahead.
Hi. Abhishek, can you please help with the sensitivity of interest cost to 100 basis points rise on a full year basis?
Abhinav, the sensitivity that we prepared is in two parts. One is on the floating rate debt, and one is on the fixed rate debt. If there is an increase of 25 basis point in interest cost, for the floating rate, the cost for the year increases by around INR 20 crore. For the fixed debt, what will happen for at least, let's say this year, is that we have INR 4,000 crore to be refinanced. You can proportionate it to that, which comes to around INR 8 crore per annum, but then the time proportionate has to be done for every 25 basis point.
Okay.
Does it answer your question?
Yeah. Basically INR 4,000, and you said next year also you have about INR 4,200, which is at fixed, which is retiring.
Right.
So similarly, we can assume that this INR 4,200 + INR 4,000, so INR 8,200 should possibly see a 25 basis point increase, more or less.
No, I am saying that if there is a 25 basis point increase-
Yeah.
in this, let us say INR 4,200, then per annum increase in cost is, let us say, INR 8 crore.
Okay. Per annum cost is INR 8. Okay. Got it.
Yes.
On that, so have you seen bond markets reacting more to the rate sensitivities than what is being done by the RBI, or that's not really the case?
So two things. One is that the interest cost actually rose before even the RBI increased the rate. That's what you've seen in the market. For the bond market also, we are seeing that the interest rate actually has risen even more than what the interest rate actually increased in anticipation of a further increase. So we are seeing already that kind of interest rate hike in our country.
It's a full market which is disrupted as of now. So the actual rate where we will land and all, that we can maybe comment on when we go closer to that. But for now, we are seeing that there's an anticipation that there will be another one or two interest rate hike, and hence the bond market, the loan from banks, all have increased even higher.
Thanks. That is very helpful. Just another question. So Amit, we had seen, I think one of the occupiers in Manyata now, which was a GCC occupier being acquired by an Indian IT firm. So there are some GCC takeouts which are happening. What really happens here over the next two, three years? Does it become like, these guys move out because the takeover is by an ITeS company or what's your experience?
Honestly, our contracts are long-term contracts with lock-ins in place. If I've read your question right, I think you're talking about GCC facilitator or a GCC incubator operator there. Therefore, these guys have incubated or put in place companies which want their microculture and therefore their own identity and their own signages, their own offices, and therefore, I don't think that they would be able to disrupt simply because of a lot of work that goes behind this on location analysis and employee retention and how they want to build this thing.
So, in my experience, it just doesn't matter for us. Given the demand as well across Bengaluru and especially Manyata, we're really not worried about it.
Okay. My question was more of this GCC being bought over by an Indian IT company.
Oh, that way.
Yeah.
Okay. See, at least in our ecosystem, these are high-value engineering and R&D companies that are actually set up in our ecosystem in Manyata. Then Indian companies buying over those ecosystems because I think the trend, if you see, was earlier that these guys were established in Indian IT companies, and then they chose to come out of it simply because of the reasons that I said. Like culture, more productivity, higher value in the value chain of the job itself being executed, and therefore direct control on hiring and global roles actually moving into these ecosystems.
Having said that, we don't believe that those kind of organization and those roles will go if Indian companies are able to buy. This will be in the lower value chain of the job being processed, and therefore, we don't see risk, at least in the immediate or the near future.
Thank you. That is helpful. That's all.
Thank you.
The next question comes from the line of Parvez Qazi with Nuvama Group. Please go ahead.
Hi, good morning. Congrats for a great set of numbers. Two questions from my side. I was looking at Four Seasons. Was the DPU negative this quarter, and what could be the reason behind it? Second, after all the recent tax changes, in future, what could be a reasonable cash tax rate for us? Thank you.
Parvez, I will take the second question first. As I was mentioning for the previous question, you can expect around, let's say, 5% of revenue as the cash tax going forward for the next one or two years. On the first question, Four Seasons, EBITDA is down because of one-time fees that we had paid during this quarter. It is one-time, and if you remove that, then it is still in line with the previous half year.
With regards to the management contract there, you paid some fees there, would that be correct?
Parvez, actually, you know what? You can actually read our financials. It is clearly listed out there, Parvez.
Parvez, also some of these contracts are bilateral. No point giving more details on the call conference.
Sure. Okay. Thank you. All the best.
The next question comes from the line of Vinay Agrawal with Kotak Alternate Asset Managers. Please go ahead.
Hi. Good morning, everyone. My question is, how much is the physical occupancy at the portfolio level? Is the absolute number of employees more than the number of seats?
The physical occupancy you mean to say by area is 90% as we've reported. In terms of seats, typically my sense, I wouldn't be the right guy, but my typical sense is that the number of employees are more than the physical seats because of productivity gains of seats that most of these organization use.
Okay, great.
Do you have any more questions, Vinay?
No. Thanks.
The next question comes from the line of Puneet with HSBC Bank. Please go ahead.
Yeah, thanks for the follow-up. Can you also talk about what are you seeing on the Business Hub part of the business that seems to be filling up a tad slower?
Puneet, we have pre-leased about 200,000 sq ft in Business Hub. While there are two fundamentals to this, Puneet. There is a metro that is getting developed right opposite Business Hub. We believe that we want to be aggressive probably in the next financial year, simply because from a rate perspective, we believe that we will get significant upside once the metro is up and ready. The stations are currently getting built. I think, in the next six months, we should have significant amount of works completed and therefore, more occupier confidence in that metro being up, and therefore we will get better rates.
We are very confident about that location because we already have an anchor in the form of Philips who has taken about half a million sq ft, and then we have already done pre-leasing. The balance is about 1 million sq ft to lease. We do not see that being too much of a problem given the demand that is there in Bengaluru.
Understood. What are the rentals you are experiencing there for your latest last transacted deal?
Puneet, too early to say, but in the ZIP code of, say, INR 75 to about INR 85, INR 90 is that ZIP code, the rentals are getting traded there.
Understood. Lastly, in your financials, the other OpEx seems to have gone up a bit from INR 22.5 crore first quarter to almost INR 50.3 crore. What is driving this number?
Puneet, this is the same thing which we were talking about in the previous question, one time fees that we have provided for.
Okay. Yeah, that's the fee. Okay, understood. The maintenance and other operating income trend also has gone up a bit. Should we attribute that to the hotel or?
Maintenance fees is the CAM fees, which has increased. Also some part is hotel, but largely the CAM fees has increased because of the increase in cost. Everything gets passed on to the tenants with a margin.
Okay. CAM fees has gone up. Understood. That is helpful. Thank you so much.
The next question comes from the line of Sumit Kumar with JM Financial. Please go ahead.
Hi. Good morning. Thanks for the opportunity. My question was on the growth. We have seen an area growth of about 10%. So with the new hotel coming up, I think growth of about 15%-16% was probably on the lower side. So what explained that number? If you could explain and give more granular details.
Sorry, could you just repeat once again, please? You just broke off in between.
I am saying the area has increased by 10% on a YoY basis.
Yeah.
While the growth in revenues is about 15%. So with the new hotel and growth in the hotel business as well as mark-to-market as rental escalations that are usual in business, the growth should have been higher. If you could give some granularity on what happened.
Okay. So basically, what happens is that when there are exits in the portfolio, right? So there are two components. You have a rent-free component, and then the cash actually starts kicking in after the rent-free period is exhausted. Therefore, you are going to see some of these things that will happen because of the high front load of exits that we had.
Okay. So this should normalize and second half should be better. Is that the reading correct?
Yeah. Should be better.
Okay. Thank you. That is all from my side.
Thank you.
Thank you. As there are no further questions, on behalf of Embassy REIT, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.