Ladies and gentlemen, good day and welcome to Knowledge Realty Trust Q1 FY 2027 Earnings Conference Call. As a reminder, all participant lines will be in the listen- only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Senthil Kumar, Senior Vice President, Investor Relations, Knowledge Realty Trust. Thank you, and over to you, Mr. Sen.
Thank you. Good evening, everyone joining us today. On behalf of the management team, I would like to extend a warm welcome to all participants of Knowledge Realty Trust Q1 FY 2027 earnings call. Before we proceed, a couple of important disclaimers. I would like to highlight that the management may make certain comments that may constitute forward-looking statements. Please be advised that our actual results may differ materially from these statements. KRT does not guarantee these statements or results and is not obliged to update them at any point of time. Joining me today on the call are Shirish Godbole, our CEO, and Neeraj Toshniwal, our CFO. We will start off with brief remarks on the macro environment, our business and financial performance, and then open the floor to questions. Over to you, Shirish.
Thank you, Senthil, and a very warm welcome to everyone joining us for our quarter one FY 2027 earnings call. We start the new financial year against the backdrop of continued global uncertainty. However, India's office market has once again demonstrated its structural resilience, anchored by GCC expansion and Grade A demand. Office absorption reached 44 million square feet during the first half of calendar year 2026, with GCCs contributing 44% of the demand. Coming to KRT, we enter FY 2027 with strong operating momentum. Revenue and NOI for the quarter grew 15% year-on-year to INR 1,243 crores and INR 1,112 crores respectively. We are also pleased to announce a distribution of INR 1.7 per unit for the quarter, aggregating to INR 752 crores, a strong 5% growth from the previous quarter.
Turning to our operating performance. Occupancy increased to 93%, up from 92% last quarter. This was driven both by front office demand, which contributed over 50% of our gross leasing. We completed new leasing of 0.7 million square feet and renewals of 0.7 million square feet as well, taking total gross leasing for the quarter to 1.4 million square feet. We continue to pivot our portfolio to annual escalations to create a compounding rental growth profile. During the quarter, 93% of our leasing has annual escalations. Our occupier-first strategy has resulted in client stickiness and multifold growth by our existing clientele. We are happy to inform that 58% of our new leasing this quarter came from existing tenant expansions.
Interestingly, these tenants come from varied sectors, a leading semiconductor firm, one of the largest lens makers, the largest travel tech firm, and a large Indian bank. We have highlighted the details in our investor presentation. Given the ongoing market conversations around AI's impact on office demand, I would like to highlight how KRT's portfolio is resilient. We have three strong levers. Our GCC exposure, where occupiers are increasingly taking on higher value, more complex work, our negligible exposure to the traditional IT services model, which is where the disruption is perceived to be the most, and our front office portfolio, which continues to perform strongly. Our front office portfolio in Mumbai represents some of India's finest business addresses occupied by global consulting firms, multinational corporates, as well as headquarters of major Indian conglomerates. Our Mumbai occupancy reached 92%, up 3% from last quarter.
This was primarily driven by our Central Mumbai cluster, which reached 93% occupancy, up 14% since March 2025. Turning to our mark-to-market potential across the portfolio, it is a sizable 25%, and we continue to realize this upside every quarter. For instance, this quarter, we realized an average spread of 35% on new leasing and 29% on renewals. Early terminations in our portfolio presented further repricing opportunities over and above the embedded mark-to-market profile. For instance, in Knowledge City in Hyderabad, we signed 44,000 sq ft with a marquee global financial services occupier at INR 122 per sq ft, where the in-place rent was INR 80. Likewise, in Exora in Bangalore, we signed 85,000 sq ft with a large technology GCC at INR 93 per sq ft, where the outgoing rent was INR 59.
On the ground, our Life at KRT platform continued to bring our campuses to life.
Through sports, wellness, and cultural programs across the portfolio, it was a busy quarter with a corporate sports league, an International Yoga Day celebrations at Sattva Global City in Bangalore, an indoor sports league at Kosmo One in Chennai, and a pickle and paddleball tournament in One World Center in Mumbai. This continued investment in hospitality-led service and tenant experience remains a deliberate driver of retention and over time, pricing power. As we look ahead, our embedded growth levers remain firmly in place. Contracted growth from escalations, embedded growth from occupancy ramp-up, delivery of under-construction assets, and sizable mark-to-market potential. We also remain active in evaluating third-party acquisition opportunities that are accretive and aligned with our portfolio strategy. We continue to see growing recognition from the analyst community, and as we approach our first anniversary as a listed REIT, we remain confident in our multi-year growth story.
With that, I will now hand over to Neeraj to walk you through the financial performance in more detail.
Thank you, Shirish, and good evening, everyone. KRT delivered strong and consistent financial performance during the first quarter of FY 2027. Revenue grew 15% year-on-year to INR 1,243 crores, and NOI also grew 15% year-on-year to INR 1,112 crores. NDCF for the quarter was INR 752 crores, translating to DPU of INR 1.7 per unit. 84% of the distribution for the quarter is tax-exempt or tax-deferred in the hands of unitholders. On the balance sheet front, we continue to optimize our financing profile. During the quarter, we raised INR 500 crores through commercial paper and INR 600 crores through non-convertible debentures at a blended rate of 7.2%.
From our listing less than a year ago, where we had 0% fixed rate debt, we have now reached 30%. We will actively monitor the interest rate environment and calibrate our financing activities in line with market opportunities. With a strong balance sheet, low leverage, and healthy operating cash flows, KRT remains very well-positioned to pursue future growth opportunities while continuing to deliver stable and predictable distributions. With that, I'll now hand the call back to the moderator to open the floor for questions.
Thank you. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on a touch-tone 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. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first person comes on the line of Girish Choudhary with Avendus Spark. Please go ahead. Mr. Choudhary , please go ahead.
Yeah. Hi. Congratulations on the strong quarter, and thanks for the opportunity. A few questions. Firstly, if you could talk about the occupancy rates. The committed occupancy is 93%, but if you could just give us some details around what the actual occupancy, and when can we see the gap between the committed and the actual occupancy to sort of play out in the coming quarters?
Yeah. Senthil. Anything else, do you have Girish?
Yeah. Second is on the DPU trajectory. This quarter we had close to INR 1.7 per unit, which is 5% sequential growth. So if you could also give us the quarterly trajectory from here on, and what would be the drivers? Third one on the Bangalore portfolio, where we are seeing the occupancy is below the portfolio average. Especially if you could comment on the Exora where we are seeing decline in occupancies revenue. So what's the outlook there? These are my questions.
Great. Thanks, Girish. Senthil here. On the economic occupancy front, at the end of the quarter, we were 87%, and as of current date, we are 88%. So the gap with committed occupancy is about 5%. You're right, there is a gap which is little higher than normal. The gap is primarily due to two large clients. One is a Fortune 500 company in Knowledge Park in Hyderabad. This is an occupier which occupies almost 1 million square foot with us . But his condition for taking the space was to allow him to stagger take-up. So he's being taken in phases further. So his economic occupancy has also increased, but he still has about 200,000 sq ft for which the rents will start over the next two quarters, Q2 and Q3. That is one reason. Second is another education client in Global City.
Again, he today occupies about 600,000 sq ft-700,000 sq ft, which was actually about 100,000 sq ft two years ago. So large ramp-up. With these educational institutions usually they also need us to declare a building fully to them and they want to use it fully, but the take-up of students is usually a staggered take-up, right. So there also we are committed to the space and the rentals are gradually coming. In that case also, in the Q3 and Q4 of this year, we will have another 1% brick from that and another 0.5%-1% brick from the Hyderabad one.
With that, we will get to about 3% delta by the Q4 of this year. That will be the normalcy, right. In terms of the DPU trajectory question, obviously we don't make any guidance, Girish you know that, but I would say that given the IPO is less than a year old, we have the RHP and the documents available there to see the numbers, and we will pretty much be on track with those numbers.
That is on the DPU trajectory. You had a question on the Bangalore portfolio, right.
Yes.
The Bangalore portfolio is sitting at about 87% occupancy, 13% vacancy, which is about 2 million square feet, and 1 million of that is from Outer Ring Road , and then 1 million is other reasons, right. On the 1 million square feet Outer Ring Road , as you know, that's one of the best markets in the country, and we are confident of getting that back up. In terms of breakdown within Outer Ring Road , you mentioned Exora actually, so there are two assets largely. One is Cessna and then one is Exora. In Cessna, we have about 400,000 sq ft, which is the only vacant area there, which we have just applied for demarcation. There we have good demand coming in from our existing tenants as well as new clients. So that we will be filling up quite soon.
In Exora, you are right, there was a big dip of about 15% in occupancy in the last quarter. That was due to a client called Juniper. They got acquired by HPE globally in the last week. That led to a dip. We got that occupancy back up. That is today from 78% last quarter, we are at 82% in Exora. There the interesting thing is Juniper being one of the earlier anchor tenants, they exited at an INR 60 rental. We have got like INR 95 today. There is a huge repricing opportunity which is not even in the MTM. That is also another factor. In Outer Ring Road , we are obviously good. Second 1 million square feet, of which about 800,000 square feet is in Global City.
In Global City again, during this quarter, 300,000 sq ft demarcation is done. We got the approval. There I would like to say GB2K was 81% occupancy. Of which if you see the non-SEZ occupancy, it was 93%. The SEZ occupancy was 75%. The weighted average was lower, but now that we have demarcated this 300,000 sq ft, which is almost 7% of GB2K, we are getting good traction from both existing clients as well as newer clients as you know, some are leasing now. We have good traction there. Overall, Bangalore with these improvements in the Outer Ring Road as well as the GB2K portfolio, we should see a ramp-up in the next two, three quarters.
Great.
Is that okay for you, Girish?
Thank you so much, Senthil, for the detailed answers, and wish you all the best.
Thank you.
Thank you.
Thank you. A reminder to all the participants that you must press star and one to ask questions. Next question comes on the line of Murtuza Arsiwalla with Kotak, please go ahead.
Yes. Hi. Just questioning on some of the under-construction assets, 1.2 million square feet. How much of that has been pre-leased currently? While you already spoke about Exora and one of the assets, I mean, you've done a great job with the overall assets, but One BKC has been from drop. Any visibility on ramp-up of occupancy at One BKC?
Murtuza, is it? It is, right?
Yeah.
The under-construction assets, we are in the market right now and while we cannot put a number on it right now, there is a number of active dialogues and discussions going on with tenants. We expect those assets to come online before the end of this fiscal. As this quarter progresses and going into next quarter, we will have more updates for you on exactly how much is being leased up. But they are in good markets, strong assets. We expect positive momentum and lease-up of those assets, Murtuza. In One BKC, a similar story, right? I mean, I think the market is strong. It is obviously a very good asset. We had one tenant, unfortunately, that sort of moved on, and that is where we have had the vacancy. The good news is that their tenants—I mean, that rent was at INR 320, right?
As you know, the market is much, much higher than that. As and when we lease up, we will get to a much higher number in terms of their new rent. Again, various dialogues in play, small as well as large tenant discussions underway. As things progress, which will happen this particular quarter, I think we will keep you apprised, Murtuza. I think that is—
Sure.
I mean, short answer.
All right. Thank you so much.
Thank you. A reminder to all the participants that you must press star and one to ask a question. Next question comes from the line of Mohit Agrawal with IIFL. Please go ahead.
Yeah, thanks for the opportunity. My first question is on the macro outlook. We have talked about the AI impact and the discussions around that. But in the near term, because of the geopolitical situation, has anything been impacted in the short run in terms of the closures or any delays or anything? Do you see that impacting any of your markets in general, the GCC demand or IT services demand in the first quarter maybe, or in the second quarter?
Yes. Let me take that. This is Shirish. The short answer to your question is that there has been minimal, if any, impact or negative thing, right? If anything, arguably, the demand is strong, flat, stronger. Not only from a GCC and a tech standpoint, but if you look at our front office leasing this particular quarter, I think it answers your question, right? We have had a strong performance also in the front office and our Mumbai portfolio has moved up from 89% to 92%. So 1.4 million square feet leased in the first quarter, right? If you just sort of look at our last year's numbers where we had 3.5 million square feet across the year, we have had 40% leasing done in the first quarter. So obviously the momentum is good.
While there is noise and talk of delays and impact, et cetera, on the ground, the performance remains strong. You have seen some of the brokerage houses coming out with numbers which also point to that. This particular performance, right in the middle of some of the talk of the war and AI, et cetera, could not have been stronger in our minds. We are quite confident that the market outlook remains good. Yes, there will be some tenant here and there who might think about signing a little later or earlier, right? But if you just step back, the demand in a real estate decision is not like a short-term decision. Typically, it is a very long-term decision, right? That intent and the decision to stay, I think, in India and grow in India has continued to be there.
Whether it goes a week here or there, sort of obviously depends from tenant to tenant. But as the performance that we have shown in the first quarter, I think is indicative of what is happening in the market, right? That obviously there are enough tenants making that call, making that decision, and actually signing leases, whether it is renewals or new. I think that answers the question. The numbers answer the question.
Sure. Just to summarize, I think you are saying even if there is an impact, it is a transient impact and probably things will come back. You have mentioned about the Mumbai portfolio. I just had one clarification. You have significant expiries coming in this year as per your presentation. When are those expiries going to be there and are there any discussions? You have already reached 93%, 94% from the occupancy. Are there any discussions, pre-leasing discussions or anything, that you are already having and any update on that? By the end of the year, the Mumbai Lower Parel assets, where do you see the occupancy levels stabilizing?
Yeah. Mohit, Senthil here. On the expiry front, yes, we have a couple of large active discussions. I think One BKC, we have a very large discussion going on, pretty much handshake done. That is about almost like 15%, 20% of our portfolio. With that, we really will not have any expiries for the next two to three years. In fact, surprisingly, over 90% of our portfolio will be locked into, because what we have deliberately and strategically done is to have renewals completed, probably, hopefully longer lock-ins and stuff. That way it is intact on this front. We are locked in. Lower Parel is very similar. One more large contract that we are talking to. Again, there also it is pretty much done, a large consulting company, right? With that there too, expiry should be taken care of.
And again, from a lock-in perspective, interestingly similar story. As you know, Mumbai still is a five-year sort of lease, right? Of which almost three and a half years is locked in. That way, the strategy of having regular escalations, renewals and annual escalations has helped us to sort of secure these contracts. Mohit, the thing I would add is the momentum continues to be there. When we look at the first quarter and the performance there in Mumbai, and then going into the second quarter, the momentum stays strong. Our Lower Parel performance, I think is going to be very good. I see several percentage points pick up further from where we are right now in Lower Parel by the end of this fiscal, right?
So we don't want to put a number on it, but we're doing well and I think it will grow further, which is very positive, I guess, when you look at it. And just to add, Mohit, I think the only other thing at a portfolio level, if you see what is left back in expiry is about 1.1 million square feet in the next nine months , right? Out of which we have already renewed about 40% of that, right? So only the remaining 60% for the next nine months. So that is also sort of comfortable for this year.
Okay, that's great. And these escalations you are seeing are all annual, right? Incrementally, you're doing all annual escalations.
Yes. 93% of the leases signed last quarter were annual escalations.
Sure. Great. That's all from my side. All the best.
Thank you. Thank you.
Thank you. A reminder to all the participants that you may press star and one to ask a question. Next question comes from the line of Pritesh Sheth with Axis Capital. Please go ahead.
Yeah, thanks for the opportunity and congrats on a good leasing performance. In terms of the new leases that you signed in One World, One Unity, our Lower Parel assets, just trying to get a sense of the rentals that we are clocking there, and how much away they are in terms of the market rentals that we have reported. Second, also on the Mindtree renewal that we did in Global City this quarter, if you can highlight the rentals or the spread there in terms of what we have achieved there. So that's my first question, yeah.
Thanks Pritesh. On Mindtree, we will take that up first. Mindtree was at INR 45 before, and we have renewed it at INR 59, so that was a 30% spread. That was about 400,000 sq ft . Coming back to Lower Parel, Lower Parel rentals, again, vary across assets as you know. It ranges from INR 220- INR 256. We have done above market in all these three assets, but it is marginally above market, not significantly above market. Just to give you some color, last year our marginal rentals in Central Mumbai portfolio were INR 232. The marginal rentals, the new rentals being signed. This first quarter, the average rent there was INR 246. That gives you an indication. INR 246 for Lower Parel average.
Got it. I think that is very clear. Second, in terms of growth, beyond FY 2028 now, we are heavily touching upon occupancy. We have a couple of under construction assets coming up this year, which will contribute to growth next year. But any color you can provide on the ROFO assets which can be offered and will contribute to growth beyond FY 2028. The third-party acquisitions as well, what sort of expectations, et cetera, there are on market. Because now there is a very tight competition with these wealth platforms also coming to buy these yielding assets, right? So cap rates have gone pretty low. On that backdrop, how should we think about third-party acquisition as a growth opportunity for us?
Number one, first of all, let us not forget, even within the portfolio, there is a main opportunity, right? Like you said, yes, 93% will go up to 94%, 95% this year, next year, and you are looking at 2028 and beyond. So there is embedded growth with the fact that we have escalations, the fact that we are 25% below market. So the existing portfolio will continue to churn out growth. Some growth. That is one. Two, we have a 1.4 million square foot development that we have already commenced in Bangalore at Global City, which will get delivered in 2029. So, we are already looking at some growth coming from there, 1.4 million square feet under development. We have four assets which are ROFO assets, but those are sort of around 2029 and thereabout, which we will expect them as well.
There are 6 million square feet through four ROFO assets, two in Bangalore, one in Chennai, one in Pune, coming from Sattva. Then finally, although it is not quite a ROFO, but you may recall that we were having this asset called Image Tower, which is a 1.6 million square foot asset in HITEC City, Hyderabad. Great location as you are aware, great market, and that is completing construction next year. It had to be taken out of the portfolio at the last minute, as you may recall. Once it gets delivered, that will be offered to the REIT as well in 2027. So that is a nice addition to the portfolio. On top of that, sort of going to your acquisitions question, you are absolutely right. There are wealth advisors and others out there with funds.
As a manager of India's largest REITs, with sort of Class A assets, Class A locations, we're going to be choosy, right? We're going to do the right thing. We have tremendous firepower. As you know, our leverage is very low. It's not a question of not having dry powder, but you got to find the right assets at the right price. If it doesn't come immediately, you've got to be a little patient and look, 2028, 2029 is a long way away. We are quite confident that before that, we will have several acquisition opportunities come our way. We're very much in the market. As we look at the next 12- 24 months, definitely expect acquisitions from us.
Therefore, when you combine the ROFO/Image Tower, the acquisitions, some of the development, then the embedded growth within, I think it's a strong sort of growth potential going forward.
Sure. Thanks for that detailed answer. Helpful and pretty clear. Thank you. All the best.
Thank you.
Thank you. A reminder to all the participants that you must press star and one for questions. Next question comes on the line of Kunal with Bank of America. Please go ahead.
Great, thanks. A couple of questions from me, Shirish. Initially, you gave two examples which seem to indicate that pricing is benefiting not just from the mark-to-market potential, but also seeing an increase on the marginal rates. Any color as to how widespread is this? Is it mainly in micro markets where occupancy levels might be above a particularly high threshold? If you could hazard a guess as to what could be the sort of annual pace of increase on marginal rates over the next couple of years. Then there is one more question after that.
Yeah. As you said, it has been a strong performance, right? The market has been impressive, I think, biased of course, but just been strong. It really varies by location. So it is really hard to put a number per se. You look at and the performance we have had, as I mentioned, the 246 number. Just to give you a sense, that has gone from 183 to 230 last year, to 246 this first quarter. Right? Those are marginal rents on that basis each year, but that is a significant performance over the last two years that is over 30% or thereabout. Now whether that will continue going forward, obviously that is not going to be the case, right? We have had a secular run. So it is hard to predict.
The other thing that is going on, Kunal, is there is a clear sort of move towards Class A properties, right? So what is happening is our portfolio with Class A assets is benefiting from this trend where there might not have been a net absorption into the market, but we have had absorption because people have moved from inferior buildings, maybe inferior locations or B locations, I would say, to sort of A markets and A locations, A assets, right? So that trend is also playing out. As you look forward, we are clearly expecting decent growth. I do not know whether I want to put a number on it and just say whether it is X percent or Y percent sort of going forward. We see continued momentum even this quarter, as we are looking at numbers deals.
When you add the demand from the tech side and also what's happening in the front office, we feel good. I would hesitate to put an exact number, say, 10%, let's say, rental growth. I do not know whether it is exactly that, but it is definitely seeing momentum and demand is strong.
Also, Kunal, just to add, I think in terms of our projections, we have an expiry schedule. If you see that if market remains at a regular projected 5% escalation on market rent, then we still have about average of 26% spread projected for the next four years. Every year we are about 6%, 7% of rentals expiring. So that gives you the mark-to-market opportunity on an average.
Yeah. If you take a market like HITEC City in Hyderabad, rent has been very strong. So there the numbers are off the charts in terms of what rents we are seeing right now.
Thank you. Frankly, that observation is the state of the question because on one side we keep on sort of worrying about the impact of demand from AI, and that is as per you an increase to marginal rates. This is why I was wanting to see if the demand—
Yeah. You are absolutely right, Kunal, and I think that is the point to take away. While there has been a lot of noise in the markets about the war and AI, et cetera, I think we have come out strong in that first quarter with, I think, positive, strong numbers and that suggests and indicates that the office market in India continues to be resilient in the context of some of the headwinds we have had.
Got that. Great. Just any quick thoughts on where would you want your ideal floating to fixed rate to be like in the next 6-10 months?
So yeah, we have moved towards 30% as Neeraj pointed out. We want to try and take it further up. It really is very, I guess, opportunistic is the word. Would we try and move towards 40%? Obviously, we would. I think at some point, would we try and move even higher? Depending on rates, the answer is also yes, right? So I think we are just going to monitor it as it goes along and as we get pockets of times when Mr. Trump decides that he is going to be light on the whole war situation, rates come in handy we might use that time to try and lock in some rates.
Makes sense. Absolutely. Alright, thank you so much.
Thank you. A reminder to all the participants that you must press star and one to ask a question. Next question comes from the line of Sumit Kumar with JM Financial. Please go ahead.
Hi. Good afternoon. Thanks for the opportunity. My first question is on the distribution mix. Obviously, you've seen the tax- efficient part coming down a bit. Could you please guide us on the steady state numbers as to what part of the distributions would be dividend going forward?
Yeah. Thanks, Sumit. Sumit, so for this quarter, you've seen the numbers. It's over 50%, right? So it's around 54% is dividends, and then the total tax-efficient portion is 84%. So at least for this year, full year basis, we will have approximately 80% as tax-efficient portion, ±1%, and then dividends should continue to be over 50%. Right? The reason it is going down, obviously because like Shirish had mentioned, we are raising debt at the REIT level, right? We almost have INR 5,000 crore of debt at the REIT level. So all that debt actually gets pushed down to the SPVs at higher inter-corporate rates. That means there is higher interest expense for the SPVs, which means the dividend component slightly goes down.
At the same time, there's some saving from tax, but overall, the dividend component goes down and the interest income goes up. That's the reason it will happen over a period of time.
Okay. Just one question more on the tax outgo. The cash tax outgo has increased a bit sequentially. Is there any one-offs or what is the reason that you may like to highlight?
Yeah. Sumit, Neeraj here. In last quarter there were tax refunds, so we have distributed part of the tax refund. Otherwise, normally, the tax is in the range of, let's say, 11% at EBITDA levels or so.
Okay, understood. One last question, if I may, to Shirish.
Yeah.
Sir, where do you see your end FY 2027 occupancy? With the strong pipeline you have, would we see it closer to the steady state number of about 95%? Is that a fair assumption to make?
We are not going to provide official guidance, but the answer obviously is we are already at 93%. And yes, we are moving towards that kind of a target. That is clearly the goal and the momentum is definitely there.
Sumit, just to remind you, this is same-store basis, right? So we have growth on this 93%, and then we are also adding a couple of under-construction assets. So depending upon the staging percentage there, but still like Shirish says, we should be 94%, 95%, is what we are expecting.
Okay. That is all from my side. Very helpful. Thank you and all the best.
Thanks, Sumit.