Ladies and gentlemen. Good day and welcome to Knowledge Realty Trust Q3 and FY 2026 Earning Conference Call. As a reminder, all participant lines will be in 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 touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Senthil Kumar, Head of Investor Relations, Knowledge Realty Trust. Thank you, and over to you, Mr. Senthil.
Good afternoon to everyone joining us today. On behalf of the management team, I'd like to welcome all participants for the KRT's Q3 FY 2026 earnings call. Before we proceed, a couple of important disclaimers. I'd 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, KRT CEO, Quaiser Parvez, our COO, and Neeraj Toshniwal, our CFO. We will start off with brief remarks on our business, macro environment, and financial performance, and then open the floor to questions. Over to you, Shirish.
Thank you, Senthil, and a very warm welcome to everyone. I will begin with a brief introduction about KRT for the participants who may be joining us for the first time. KRT got listed in August 2025, and we are the largest REIT in India by market cap at over INR 50,000 crore with a high-quality 46 million square foot portfolio. We are also the most geographically diversified of the REIT, with over 95% of our value comprised in the three core markets of Mumbai, Hyderabad, and Bangalore. I'm happy to inform you that we were included in the FTSE EPRA Nareit Global REIT index in December 2025, reflecting growing global recognition. Encouragingly, we continue to see broadening participation across investor segments, with our unitholder base doubling since listing.
Since our listing in August 2025, our unit price has gone up over 20% as a result of strong operating performance and macro tailwinds. We also made our maiden distribution of INR 1.56 per unit in the previous quarter. The broader macro environment remains supported with India's real GDP growth hitting a six-quarter high of 8.2% in the second quarter of FY 2026, interest rate environment being favorable, and office markets scaling new highs every year. Against this backdrop, KRT is well-positioned to benefit across. [inaudible] here, Chief Executive Officer of KRT. I'm going to just briefly go back a little bit in my initial introduction. The broader macro environment remains supported with India's real GDP growth hitting a six-quarter high of 8.2% in the second quarter of FY 2026, interest rate environment being favorable, and office markets scaling new highs every year.
So that's supported. Against this backdrop, KRT is well-positioned to benefit across operating, financial, and capital market dimensions. I am pleased to report our quarter three FY 2026 results today. Revenue grew 21% year-on-year, while NOI increased 19% year-over-year to INR 10,407 million in the third quarter of FY 2026. I'm very happy to announce that in line with our projections, distributions for quarter three stand at INR 695.3 crore, translating into a DPU of INR 1.57, reflecting the strength and predictability of our business. With a low LTV of 18%, we remain well-positioned to pursue disciplined inorganic growth. Overall, we enter the final quarter of FY 2026 with strong operating momentum, a resilient balance sheet, and visible growth levers. With that, I will now hand over to Quaiser Parvez, my partner, for an update on our business performance.
Hello, everybody, and thank you, Shirish. Good evening, everyone. Before I get into our performance, a quick word on the market backdrop. India's office market closed calendar year 2025 with a record 82 million square foot of absorption, with GCCs contributing close to 40% of the demand. This reinforces that India's office story today is structural and not cyclical. Vacancy in our core markets is stabilizing, new supply is becoming more selective, and high-quality assets continue to see strong tenant interest. Against this backdrop, our portfolio remains very well-positioned, concentrated in the strongest markets with long lease tenures and high-quality occupiers. Now let me walk you through our operating performance for the quarter. Portfolio occupancy remains stable at 92%, and we carry a healthy leasing pipeline of about 1 million square foot, which gives us good visibility to drive further occupancy movement.
During Q3, we completed 0.6 million square foot of gross leasing, taking cumulative leasing for the first nine months of FY 2026 to 2.4 million square foot, driven by GCCs and front-office occupiers. We achieved an average spread of 25% year to date, reflecting continued pricing power across our core assets. Importantly, leasing quality continues to remain strong. Expansions by existing occupiers contributed more than half of our year-to-date leasing, which is a strong indicator of occupier satisfaction and relationship. We continue to see tangible mark-to-market realization across key assets. At One BKC, we renewed 70,000 sq ft with a global technology company at record rentals of INR 430, achieving a 17% re-leasing spread.
At One International Center in Lower Parel, we re-leased to a leading global consulting firm at INR 222, achieving a 19% spread. Our portfolio has an embedded 22% mark-to-market potential, supported by a well-paced lease expiry profile.
This allows us to actualize rental upside in a calibrated and a sustainable manner over the next several years without taking concentration risk. Also, our existing focus on rent escalation profile has resulted in over 90% of our year-to-date leasing being on annual basis compared to the standard three-year escalation. This strategy results in greater visibility and steady compounding rent growth across the portfolio. With sustained leading momentum and strong spreads, we delivered 19% year-on-year NOI growth this quarter. Alongside leasing, we continue to invest in improving asset quality and tenant experience. We believe these investments not only directly support tenant retention and improve pricing power, but also help the long-term asset value and are closely aligned to our sustainability and wellness initiatives.
To summarize, we continue to see strong leasing momentum and high tenant stickiness, deep pricing power and strong escalation profile, a very visible MTM-led growth ahead, and an operating performance that supports stable and predictable distributions. With that, I will now hand over to Neeraj to walk you through the financial performance in more detail.
Thank you, Quaiser. KRT delivered a strong financial performance during the quarter. Revenue for Q3 FY 2026 stood at INR 11,787 million, representing a year-on-year growth of 21%, while NOI increased 19% year-on-year to INR 10,407 million. We are also pleased to announce that the board has approved a distribution of INR 1.57 per unit. That is NDCF of INR 6,953 million for Q3 FY 2026. 92% of the distribution for Q3 FY 2026 is tax-exempt or tax-deferred in the hands of unitholders. We expect this figure to normalize around 86%-91% for the full year FY 2026. During the quarter, our higher floating- rate debt composition and repayment of higher- cost borrowings resulted in a 19- basis-points reduction in our average cost of debt from 7.44% to 7.25%. We will continue to monitor the interest rate environment to further optimize our financing cost.
With its premier portfolio, geographical diversification, embedded growth visibility, and disciplined capital allocation approach, KRT remains well-positioned to deliver sustainable growth for its unitholders. With that, I will now hand the call back to the moderator to open the floor for questions.
Thank you so much, sir. Ladies and gentlemen, we will begin with 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. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question comes from the line of Nilesh Doshi from Prospero Finvest Limited. Please go ahead.
Hello, am I audible, sir?
Yes, you are.
Thanks for the opportunity. Sir, congratulations on the good set of numbers. But sir, why the distribution does not increase compared to the September quarter in spite of the there is a reduction in the cost of borrowing from 8.6% in the March quarter to 7.4% in the September quarter. And what is the broad guidelines for future distributions, sir?
Right. Thank you for the question. So what has happened in terms of borrowings is, yes, we have some savings, but if you see, majority of the rate reductions have come in the fag end of the year. For example, there was a rate cut in December. After the lag of transmission, the full year effects are waving in Q4. So let's say there are some savings, but there's always some minus and plus. So overall, we will meet our NDCF projections for FY 2026.
Will the company maintain or will the REIT maintain the current distribution or it will be increased?
We have given projections in the offer document. We will meet the projections even as per the projection. We will meet those projections. In effect, overall for FY 2027, there will be an increase. FY 2026, whatever is in the projection will be the same.
Okay, sir. Next question, what is the difference between the committed occupancy and actual occupancy? If the committed occupancy takes time to convert into the actual occupancy, then what is the time gap between the committed occupancy and actual occupancy so the revenue can be generated from the committed occupancy? What is the general time lag and how much is the actual occupancy and what is the committed occupancy, sir?
I will take that question. My name is Quaiser Parvez, Nilesh.
Thank you, sir.
The difference between committed occupancy and actual occupancy is essentially the occupancy of the rent-generating occupancy versus the number of people who are actually paying the rent. Traditionally, the difference between committed occupancy or actual/economic occupancy is roughly about 3%-4%. In our particular case, our difference as of March was 9-percentage-point difference, which has narrowed down to a 6-percentage-point difference today. Our committed occupancy today is 92% and our actual/economic occupancy is about 86%. As we look forward, we think the 6-percentage-point difference will narrow down to a 3-4-percentage-point difference in probably next two to three quarters.
Okay. Sir, are the REITs required to— the sponsor of the REIT required to reduce their stake to below 75% to maintain the listing or the REIT is out of that purview?
There is a 3-year timeframe for doing that, Nileshji. We still have time to do that.
Okay. Thank you, sir. That is all from my side. Thank you.
Thank you.
Thank you. Our next question comes from the line of Pritesh Sheth from Axis Capital. Please, go ahead.
Yeah, hi. Good afternoon, and thanks for the opportunity. First on— firstly the comment, I think you mentioned about FY 2027 distributions being higher than our projections. What could be the reason for that? Obviously, interest rate is one, but are you also doing better in terms of leasing as well as rentals? So if you can highlight on that. Yeah.
Thank you, Pritesh. Just to clarify, what I meant for the earlier question is, our distribution for FY 2026 was projected around INR 6.2 per unit for the whole year. What I meant is FY 2027 will be higher than that, which was projected at around INR 7.03. That's what I meant. I didn't compare it to the projections and then ask for an increase.
Got it. So with how the business has done in last three quarters, both on the leasing side, rental side, as well as on the interest side, all of that is pretty much in line with how the projections were implying or we are seeing some difference there, either upside or downside?
Hi, Pritesh. This is Quaiser. Just reflecting back on your question from a business standpoint. In the last nine months on the business side, we have leased 2.4 million square foot, out of which 1.6 million square foot is fully in and 0.8 million square foot is renewals. What's even more important is that all of the new leasing has come at about 6% premium to market, and renewals have come at about 26% spread. Essentially, we have seen a great leasing momentum in the market and our assets have been able to leverage that momentum, and we see that momentum carrying through Q4 and in FY 2027 as well. So we remain very optimistic of not just meeting our NDCF guidelines for FY 2026 and also the shoring up the occupancy as we walk into FY 2027.
Sure. And on the interest side, pretty much in line with what you had expected or you're doing better?
Hi, Pritesh. This is Neeraj. Interest side as per projection, we have done better and as Senthil explained, which is the kind of benefit which is growing and maybe in the next quarter we will get the full benefit for the entire quarter.
Got it. Coming up for a couple of more questions. One on the revenue growth. While I think committed occupancy has not changed. Am I audible?
Yes, Pritesh.
Yeah. I was asking, committed occupancy has not changed much between last year and this year, 90%-92%. But as you pointed out, I think we have done well on leasing up the contracted lease. I mean, we have done better in terms of ramping up the contracted leases that we had done in terms of narrowing down the gap between actual and committed occupancy. Is that the prime reason of growth in revenue of 21% year-over-year? Apart from obviously your 5%, 6% of contractual leases. If you can break down the revenue growth for me, that would be helpful.
Yeah. So I think, Pritesh, this is Quaiser. To your point that the occupancy has moved from 90%- 92% and it sort of remains stable. It is a great reflection of not really the demand in the market, but it is just a difference in the timing. We have seen some of the deals over Q3 has moved to Q4, and this is why we think we have a very optimistic and a healthy pipeline for 1 million sqare foot, and most of which will hopefully get converted in Q4. That pipeline will convert in a higher occupancy from 92% by the end of March 2026, where we expect that our occupancy should swell to 93%, which will have its own impact in terms of NOI.
Sure. Just on the 21% revenue growth that we have locked YoY, how would you break it down between contractual plus ramping up of actual occupancy from last year December till now? If you can just put some numbers there.
Pritesh, broadly, as Quaiser was saying , the economic occupancy to committed occupancy delta used to be about 9% last year when we were talking about these revenue numbers. That has shrunk to now 6% gap. Naturally, that is a contributing factor in a big way. And second, like you rightly said, there have been improvements in contractual escalations and mark-to-market rentals. Those are the last three breakups. Yeah.
Got it. Just lastly on the upcoming expiries, certainly in assets like Exora, One BKC in Q4, and just status on upcoming expiries in your Lower Parel assets next year and Sattva Global City. So where are the negotiations, how much we have renewed already, some pointers on that.
Appreciate the question, Pritesh. On the 0.9 million square foot of expiry which is expected in Q4, happy to inform that 42% of that area is already renewed or re-leased. The remaining 0.5 million square foot is under advanced discussion of being re-leased. We believe much of it will happen within the Q4 of this fiscal year or early Q1 FY 2027. In fact, noteworthy here is that all our recent renewals have happened at an average spread of about 28%. So in fact, such expiry has a very natural opportunity for us to actualize higher rental and realize our rent to own opportunities.
Got it. For next year?
For next year, the 1.5 million square foot which is upcoming for expiry, we have tied up about 62% of that.
All right. Okay. That's helpful. Thank you. That's it from my side.
Thank you. Next question comes on the line of Murtuza Arsiwalla from Kotak Securities. Please go ahead.
Yeah. Hi sir, just one question looking at the quarterly sort of occupancy, good to see Lower Parel inching up slowly. But anything to read in the Bangalore assets, we see some of those assets seeing a sequential drop in occupancy. Anything to really read out there? That's one. And second, any update you would like to give on the under-construction assets in terms of commissioning timelines, quantum pre-leased, etcetera?
Sure, Murtuza. I will break this in two parts. The occupancy in the Mumbai assets have moved by 100 basis points quarter-on-quarter. From 79% in March, it is at 89% today. We feel quite optimistic about the Mumbai occupancy swelling much better in the next quarter. That being said, in Bangalore again, our blended occupancy is 87%. Our ORR-led occupancy is about 89%. This is clearly a reflection of a market where there is a buoyant demand. Particularly on the ORR assets, there is a constrained supply. We believe that next quarter we'll see a huge recovery in our Bangalore occupancy because we have had some of the deals which has pushed through from Q3 to Q4.
As regards our under-construction asset, we are in the final stages of handing over the asset. We believe that in the early part of FY 2027, we should be able to commission it. In regards to the leasing of these under-construction assets, there is a large anchor conversation which is underway. We will be happy to report it probably in the next two quarters, which hopefully will coincide with the onboarding of the asset into the portfolio.
Sure. Thank you so much.
Thank you. Our next question comes from the line of Sumit Kumar from JM Financial Institutional Securities Limited. Please go ahead.
Hi. Good afternoon. Thanks for the opportunity. The first question is on Cessna. If you look at the revenue from ops for nine months as well as for the quarter, there has been a decline. What is the exact reason for that? What should we read into this decline?
Is that the only question or is the second one
No. The second would be on Sattva Global City. For the sake of the repetitive, I think the quarterly occupancy have gone down. There has been some leasing as well, but, I think there is another big expiry in FY 2027 also. So, what is the leading pipeline there and what sort of conversations are happening at Sattva Global?
I will start with the Sattva Global City. Sattva Global City today has a 79% occupancy. The SEZ occupancy is about 83%, and the non-SEZ occupancy is about 91%. That being said, we de-notified about 0.9 million square foot in the Sattva Global City, and we were able to successfully re-lease 0.7 million square foot out of the 0.9 million square foot. As we speak, we have a focused asset management plan where we are strategizing on two lines of thought. One is to de-notify further area within the GVTP Sattva Global City, which will increase the attractiveness of the asset. We are also looking at a development pipeline in terms of actualizing that development pipeline within the Sattva Global City.
Because Sattva Global City, we firmly believe, has critical advantages: advantages of metro connectivity, advantages of being in the sweet spot of pricing of INR 65-INR 70, and moreover, it is appropriately placed for large IT services firms and universities for BTS opportunities. While the take-up in Sattva City would be gradual, but we think it is almost imminent as we sort of walk into FY 2027.
Sure. On the decline in Cessna, any reason for that?
Hi, Sumit. Senthil here.
Yeah.
Sumit, if you see the occupancies, there was a marginal dip from 97% to 95% in Cessna during this quarter. There were a couple of exits that were reason occupancy dipped and hence the NOI dip idea.
Okay. Thank you. I will leave the line with you if I have more questions.
Thank you.
Our next question comes from the line of Nilesh Doshi from Prospero Finvest Limited. Please go ahead.
Thank you once again for providing the opportunity. Sir, what is the NAV? And what discount rate applied to calculate the NAV, sir?
The NAV is INR 118, Nilesh.
The discount rate that we applied is 11.48%.
11.48%. Thank you, sir. Sir, generally, the REIT investors are expecting the average return of 12%- 15% over a period of time, and REIT offers the distribution of 6%- 6.5% as a regular income, and the balance from the capital appreciation. If the appreciation will happen due to the increase in the income of the REIT, or there is a price escalation of the property itself. If there is appreciation due to the price hike of the property, but in the Mumbai area, is there still scope for the further appreciation in the property price? Is the 12%- 15% expectation reasonable or below reasonable?
Yes. In terms of the price appreciation, it is reflective of the business performance. If you look at our business, other than occupancy improvements and other possible cash flows which come from year- on- year, there is contractual escalation on the existing business, right? Naturally, the revenue and the margins will improve year on year even if there is no occupancy improvement, and that is approximately about 5% per year. Without any other effect, you will have improvement of 5% in revenues because of the contractual escalation. That land will be discounted at similar rate, you will have an improvement in the rent. This is what we call as roll forward from year- on- year. That is the return which ideally should reflect in the price performance. Plus, you talked about the 6%- 7% in distribution yield.
Together, the total product return should be in that range that you mentioned, approximately 12%, 13%. Sorry.
Sir, my question is that, can we increase the rent only because there was a renewal of the rent agreement or because of the price of the property itself increased, and we are earning the money out of that property, and the property price itself increased in that area, so we can increase the rent, escalation can happen. But in Mumbai area, do you think really that the BKC or any other area, there is still scope for the price appreciation of the property?
Sir, I will answer that question. My name is Quaiser Parvez . Our in-place rent, nine months back was INR 90, which was an average of the whole portfolio rent. That in-place rent has moved from INR 90 to INR 95 as against the market rent of INR 118. That difference is really the mark-to-market opportunity. Clearly, we are able to actualize some of the opportunities in the mark-to-market segment. Again, in the 1.6 million square foot of new leasing which we have done, we have done a 6% premium to market, which means we have rented above 6%, 6% more than the market rent. And when the renewals also have happened of re-leasing the vacant spaces, that has come at a 26% spread.
Yes, to your point, we have been able to realize the market rent, and so much so that in some cases, we have been able to get 6%- 7% more than the market rent.
Okay. Thank you, sir. Thank you. That is all from my side . Thank you.
Thank you. Our next question comes from the line of Parvez Qazi from Nuvama Group. Please go ahead.
Hi, good afternoon. Thanks for taking my question. I have two questions. First, on our debt composition. I mean, the fixed portion of the debt currently is over 30-odd percent. I wanted to get your views on, are we looking to maybe lock up more portion at current low rates which are prevailing. The second is your views on the recent MAT amendment and the budget would be great. Thank you.
Sure, Parvez. This is Neeraj. I will take this question. We are watching very closely this interest movement. At the opportune time, we will plan to move a portion of our debt into fixed pockets. The key point is, in our portfolio, 65% is linked to repo, which looks very stable. In FY 2027 also, at least in first half, it looks stable. As I said, at opportune time, we will slip into fixed pockets. Regarding the MAT, we have recently listed, and we do not expect significant impact on our portfolio from not earning forward the MAT credit. Having said that, we are currently in discussion with our tax advisor to assess the details and probably will share the outcome later.
Sure. Thanks and all the best.
Thank you.
Thank you. Our next question comes from the line of [Tanveer], an individual investor. Please go ahead.
Yeah. Hi, sir. Am I audible?
Yes, you are.
Okay. Sir, a quick question is that around organic and inorganic growth. We have several REITs that are acquiring properties and also stepping into the sector of data centers. Also, the budget now has a lot of incentive for data centers. I can see LTV is pretty low around 19% or so. So we have that room. What are your plans on doing any organic or inorganic acquisitions?
We are actively seeking, looking out for acquisitions. We are looking at every opportunity that is out there. We are being disciplined. We are just trying to make sure that we make accretive acquisitions. To that extent, just because an opportunity is out there does not mean that we will just go out and make that acquisition. Also, we just listed in August. Some of the transactions that you have mentioned have been in the works for a while. We kind of got in in August. We have then started looking at acquisitions. It just takes time for opportunities to really get set up and for us to actually execute and execute at reasonable levels. Keeping that in mind, we will let you know if there is acquisition, obviously, down the road.
We are out there, we are looking at the market, and we will come back to you if there is obviously an acquisition that makes sense that we will want to pursue. In terms of data centers, it is obviously an opportunity. It is a very real opportunity. It is a very different asset profile. Given again that we have recently listed, our focus is very much to keep to our core, and our core is institutional office. That is what we are going to sort of focus on, that is what we are going to pursue. As a data center business, over time, we will review. At today's point, there is no intent to acquire something like that.
Okay. Do you have anything in the pipeline right now that you are evaluating in terms of assets?
I'll take that. My name is Quaiser. We have a strong pipeline. There are several assets which we continue evaluating. We are very happy to report that we have 100% coverage in meetings so that we are well aware of what's available in the market. Again, the guardrails of evaluating any asset continues to be fundamentally driven by the fact that it has to be NAV accretive and DPU accretive. More importantly, in terms of what market they are in, what sub-market they operate in, and particularly the quality of the asset. Just touching briefly upon some of the organic growth levers which is available in the portfolio is, number one, the portfolio has an inherent wide margin in terms of the mark-to-market opportunity, which is 20%-22%.
In addition to that, we have 1.2 million square foot of development asset, which will be getting added. More importantly, we also have a ROFO pipeline of 6.7 million square foot, which will crystallize in the next two to three years. Essentially, the way to think about this is that while we look at the market with the corner of eyes very diligently, we also have strong levers of growth available organically within the portfolio.
Okay, great. Thank you so much.
Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press star and one on their touch-tone telephone . Ladies and gentlemen, anyone who wishes to ask a question, please press star and one on their touch-tone telephone.
Moderator, if there are no other questions, we can conclude the call.
Perfect. Thank you so much, sir. Thank you, members of the management team, and thank you to all the participants for joining the Knowledge Realty Trust Q3 FY 2026 earning conference call. If you have any further queries, please reach out to the investor relations team. On behalf of Knowledge Realty Trust, we conclude today's conference call. Thanks for joining us, and you may now disconnect your lines.
Thank you.