CapitaLand India Trust’s (CLINT) CY6U manager announced a non-renounceable preferential equity fund raising (EFR) to raise $150.1 million. The new units will be priced at $1.06 and in the ratio of 119-for-1,000 and works out at 12.1% of current unit base.
Separately, on December 29, 2022, CLINT’s manager had announced a private placement to its sponsor CapitaLand Investment of 23.22 million new units at $1.0765 to rase $25 million, completed on May 11 this year. The proceeds were used to partially fund the acquisition of Ascendas IT Park, Pune.
For the upcoming $150.1 million EFR, approximately $56.0 million (which is equivalent to approximately 37.3% of the gross proceeds of the EFR) will be used to part finance the development and construction of Block A of International Tech Park Hyderabad (ITPH – Block A). Around $91.2 million (or 60.8% of the EFR) will be used to part fund the extension aVance A1, HITEC City, Hyderabad and Gardencity, Hebbal, Bangalore.
The development and construction of aVance A1 and Gardencity are ongoing, and comprises forward funding to the developers of the project. In return, CLINT will receive coupon rates of at least 11%, CLINT’s manager says. The remaining monies will be used for fees and expenses.
Part of the reason CLINT has been able to provide unitholders with growing DPU despite the annual 1.5% to 2% decline in the value of the Indian rupee versus the Singapore dollar is the trust’s business model which incorporates Forward Purchase Agreements.
These agreements allow CLINT to secure 6 development projects in Bangalore and Hyderabad, while also allowing unitholders to enjoy an income stream from the coupons during the development period. In addition, yields on these properties tend to be higher than for CLINT to acquire stabilised income-producing assets.
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Both aVance A and Gardencity are expected to complete in 2HCY2024. The manager says these buildings will drive income growth, and “will increase the portfolio size of CLINT by 13% from approximately 19.2 million sq ft to approximately 21.8 million sq ft”.
Meanwhile, the lease contracts of ITPH – Block A have built-in rent escalation clauses that would give rise to incremental rental income, and rental reversions upon the renewal of expiring leases across the existing portfolio.
In addition, both Hyderabad and Bangalore “are currently witnessing rental growth arising from healthy demand from global blue chip tech companies,” the manager says. As part of prime minister Narendra Modi’s Make in India strategy, India is benefiting from global dislocations and friend-shoring.
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The sponsors have provided irrevocable undertakings to subscribe to their pro rata stake in CLINT.
Following CLINT’s announcement (late on the night of June 16), its unit price fell by 4 cents to $1.09. Citi has a buy recommendation with a price target of $1.25 for CLINT. Based on its DPU of 8.19 cents in FY2022, CLINT’s trading yield is 7.5%, slightly higher than India’s 10-year government bond yield of 7.034% yield.
