Afternoon, ladies and gentlemen, and welcome to the Mindspace Business Parks REIT's Earnings Conference Call for the financial results for this quarter ending September 30, 2022. As a reminder, all participant lines will be in a listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this call is being recorded. I now hand the conference over to Mr. Kedar Kulkarni. Thank you, and over to you, Mr. Kulkarni. Good afternoon, everyone, and thank you for joining this second quarter financial year 2023 earnings call of Mindspace Business Parks. At this point, we would like to highlight that the management may make certain statements that may constitute forward-looking statements. Please be advised that our actual results may differ materially from these statements. Mindspace REIT does not guarantee these statements or results and is not obliged to update them at any time. I would now like to welcome our CEO, Vinod Rohira, and our CFO, Preeti Chheda. They will first walk you through the business update and the financial performance during the quarter. We'll then open the call to Q&A. I now hand over the call to Vinod. Over to you, Vinod. Thank you, Kedar. Good afternoon, everyone. Compliments of the festive season. We have delivered another quarter of healthy performance on the back of stable demand for Grade A institutionally managed office assets. The return to office plans of occupiers are gaining increased traction. The average physical occupancy at our park has risen from circa 31% in June 2022 to circa 41% at the end of October 2022. While hybrid work models have been adopted by certain companies, issues like moonlighting, data security, et cetera, are making technology companies relook at their work-from-home strategies. Organizations see the advantages that workspaces offer when it comes to harnessing the power of social connect, collaboration, ideation, peer-to-peer learning, enhanced data security, and the other intangible aspects that enhance productivity and make a strong case for work from office. The pandemic has completely changed the way occupiers perceive their office spaces. Their focus has now shifted from providing just workstations within four walls to providing an environment that lays emphasis on ensuring employee wellness, promoting collaboration, boosting productivity, community, and acting as a tool to nurture and retain talent. Occupiers are looking for spaces that cater to their evolved requirements, and this evolution renders a lot of existing stock unsuitable. Our vacant spaces created opportunities for us to cater to this new shift in demand dynamics with our upgraded asset offerings. The space taken up by IT companies, GCCs and GICs over the last 2.5 years has not yet been commensurate with their record hiring of new employees in that period. With employees gradually returning to the office, there is increased pressure on companies to take up or upgrade to ready office spaces that not just cater to their increased headcounts, but also meet the new age workspace requirements. We have recorded another quarter of healthy leasing with a broad-based recovery in demand from across occupier segments. We leased circa 1.3 million sq ft during the quarter, taking the cumulative leasing for H1 financial year 2023 to circa 2.1 million sq ft. Our committed occupancy, which had risen by 130 basis points quarter-on-quarter in the June quarter, has further jumped by another 130 basis points quarter-on-quarter in the September quarter. The total committed occupancy of our portfolio as of September 30, 2022, stands at 86.9%. As occupiers are returning to their offices after a period of 2 years, they are witnessing a stark difference in the quality and upkeep of the assets in our parks versus others. Our assets have undergone a complete transformation, both on the exterior as well as interiors, with modern facades, more recreational zones, improved navigation, new biophilic installations, IBMS, food courts, lobbies, breakout zones, and more. Occupiers are able to distinctly identify the value added by institutionally managed space providers like us. Our tenants have appreciated the efforts we have put in during the downtime, and it has aided in tenant retention and rent growth. Our long-standing relationship with our tenants and regular park upgrades has helped us lease 62% of the circa 2.1 million sq ft area leased in the first half of the year to our existing tenants. With central banks across the globe raising interest rates and pulling out liquidity from the system, the cost of capital has gone up and the liquidity conditions have tightened. We expect this to limit addition of new supply, which should all go well for Grade A office spaces. This, coupled with inflationary pressures ensuring that the upcoming supply in the market would have to come in at higher rentals, thereby aiding mark-to-market growth in our portfolio. This quarter was also a testimony to our commitment to sustainability. Mindspace REIT received full five stars for its sustainability efforts on the development side and four out of five stars for the standing investment component by GRESB, the Global Real Estate Sustainability Benchmark. We have been ranked fourth in Asia on development benchmark by GRESB. Further, our seven assets were rated five stars in British Safety Council's health and safety audit. We have also received British Safety Council's prestigious ninth Sword of Honour awards across these seven assets. We continue to be led by our purpose to build a sustainable ecosystem, and it has motivated us to be a sustainability leader in the real estate sector by creating long-term value for stakeholders through an ESG-focused business strategy. We continue to eagerly await the implementation of the DESH Bill by the government. DESH Bill aims to address the issues faced by SEZs, and make SEZs the hub of economic development and employment. The bill proposes to enable coexistence of SEZ and non-SEZ unit in the same park and easing compliances for the SEZ developers and units. We expect timely implementation of the bill to aid the demand for spaces at our SEZ parks and enhance the occupancy at these parks. To update you on the acquisition opportunities, we have received a ROFO notice for acquisition of 100% of the shareholding in the company holding Commerzone Raidurg, with circa 1.8 million sq ft of leasable area fully leased to a single global technology company. During the quarter, we received another notice from the sponsor group for the acquisition of 100% shareholding of the company housing circa 0.16 million sq ft asset in BKC Annexe, Mumbai, fully leased to a marquee global financial institution. We are evaluating this additional asset along with ongoing evaluation of ROFO opportunity and shall be presenting both the opportunities to our Governing Board shortly. I would now like to take you through the specific operational updates for quarter 2 financial year 22. We have leased circa 1.3 million sq ft during the September quarter, of which 0.6 million sq ft was on account of re-leasing, and 0.7 million sq ft was on account of new and vacant area leasing. In the first half of the financial year, we leased circa 2.1 million sq ft. We have recorded average re-leasing spreads of 28% on the 1.3 million sq ft area re-let during the first half of the financial year. Committed occupancy stood at 86.9%, registering an increase of 150 basis points quarter-on-quarter. The committed occupancy has improved by 260 basis points in first half of the current financial year. Our in-place rents have grown by circa 9% year-on-year to INR 63 per sq ft per month. Of the total portfolio area of 31.9 million sq ft, 24.9 million sq ft is completed and contributed to 92% of our portfolio value. 2.4 million sq ft is currently under construction, and we have another 4.6 million sq ft available in the portfolio for future development. We further diversified the tenant base of our portfolio by adding 11 tenants during the quarter. Our revenue from operations for the quarter grew by circa 17.4% year-on-year to INR 4,974 million. We continue to demonstrate steady growth in our net operating income, with NOI for the quarter growing circa 16% year-on-year to INR 4,172 million. Our distributions stood at INR 2,817 million or INR 4.75 per unit, up by circa 3.3% year-on-year. Weighted average cost of our debt stood at circa 7.3% at the end of quarter two financial year 2023. Our portfolio NAV now stands at INR 370.3 per unit, recording an increase of INR 5.4 per unit over March 2022. While we are upbeat about our performance in the first half of financial year 2023, we remain cognizant of the challenging economic conditions playing out globally and the recession forecasted in the US and Europe. This is likely to lead to greater pressure on companies to cut costs in their home countries and increase the share of offshoring, with India being the preferred choice for GCCs and GICs looking for talent and cost optimization opportunities. With this backdrop, I hand the call over to Preeti to take you over the financial updates. Thank you, Vinod. I'm happy to present our financial performance for the second quarter of the financial year 2023. We closed the second quarter with a revenue from operations, excluding works contract services, of INR 5 billion, registering a growth of 17.4% year-on-year. Our net operating income stood at INR 4.2 billion, recording a strong 16% YOY growth and a 3.9% quarter-on-quarter growth. We continue to maintain NOI margin at 80% +. We announced a distribution of approximately INR 2.8 billion, which is INR 4.75 per unit for the quarter. The distribution grew by 3.3% year-on-year. The distribution comprises approximately 92%, which is INR 4.37 per unit of dividend, which is not subject to tax in the hands of unit holders. Approximately 7.6%, which is INR 0.36 per unit of interest, and approximately 0.4% of other income. The gross value of our portfolio as valued by the independent valuer stood at INR 273 billion as at September 30, 2022, which is 3.3% increase over the value as at March 31, 2022. The NAV of our portfolio has risen by INR 5.4 rupees per unit to INR 370.3 per unit for the half year ended September 30, 2022. The valuation also factors in a 25 basis points increase in WACC assumed by the independent valuer in view of decrease in policy rate by the Reserve Bank of India. Similar to previous quarter, NDCF for the quarter ended September 30, 2022, includes INR 445 million of distribution of part of Pocharam land sale proceeds to unit holders. Out of the total proceeds of INR 1.2 billion, we have distributed INR 900 million so far. On the funding side, our leverage on the portfolio on a consolidated basis continued to remain low at approximately 16.8%. Our net debt as of September 30, 2022 was approximately INR 46.5 billion. We have undrawn committed lines of approximately INR 2.1 billion from financial institutions. Our low leverage provides us enough headroom for development within the portfolio as well as inorganic growth opportunities. During the quarter, we raised NCD of INR 5 billion at a coupon of 7.9% per annum for refinancing of our existing variable cost borrowings. The NCD issuance saw participation from long-term capital providers such as insurance companies as well as pension funds. With this NCD raise, around 41.6% of our debt is now at fixed cost. Our borrowing cost moved up to approximately 7.3% as at September 30, 2022, a 40 basis increase since June 2022 due to rise in policy rates by central bank. REITs continue to gain traction amongst retail and institutional investors. Our investor base expanded by over 10,000 unitholders in the quarter ended September 30, 2022, largely driven by the addition of retail unitholders. Liquidity of these instruments is crucial, and we expect positive regulatory reforms on this front to help enhance liquidity. With this, I request the operator to now open the floor for Q&A. Thank you. 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. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Adhidev Chattopadhyay with ICICI Securities. Please go ahead. Good evening, everyone. Thank you for the opportunity. The first question is now that we have substantially leased a lot of the area expiring this year. For second half, where do we see the overall portfolio occupancy heading? Any numbers you would like to share? And especially in the Gigaplex Airoli East asset, where do you see that gap between the actual occupancy and the targeted occupancy, the gap which is the largest, I think, among assets. When do you think the rentals will start going in from there? That is the first question. Hi, Adhidev. So essentially, to answer your question, we've seen a steady demand continue for the 50,000-100,000 sq ft occupiers across our parks. Gigaplex is a combination of SEZ and non-SEZ, is significantly leased out in the non-SEZ footprint. Whatever remains, we are very confident of having that fully leased out before the end of the year. The SEZ portion, which we were expecting to have released by DESH sometime around September, it's still not happened. We are waiting for that to come out from the SEZ framework to allow for leasing to the other occupiers outside of the SEZ. That will give us a fillip for demand. We are seeing demand in that area, but unfortunately currently we can't lease it. We're very hopeful that the legislation will correct itself in the next couple of months, and then we can bring that supply in slowly. Sir, just the other question. There's a gap in the committed occupancy. When do we see the rentals going in from the space you have leased as a non-SEZ space, which you mentioned. When do you see the rentals starting in the area? These rentals will start between 2, 3 and 4 months at the most. Okay. By the end of March, this should all be up and running. Yes, sure. Absolutely. Sir, second question. I know we don't give guidance, but just looking for some distribution and the outlook, and rising interest rates, could you give us some directionally hint at whether distributions may be higher in this second half of the year? Adhidev, hi. Preeti here. We will refrain from giving any guidance, but we are hoping, as Vinod mentioned, that some of these leases which have happened should start generating rent and therefore we should see an upside on the NOI. Of course, we have interest costs also, which is going up. We've already seen 40 basis points increase in the interest costs. We expect that the gains which we get from NOI to largely offset the interest costs. Beyond this, I don't think I'll be able to give a number. Sure. I think just a follow-up to the first question. On the overall portfolio occupancy, we are almost at 87%. By end of March, any targets or any guidance you'd like to share for the overall portfolio? Where do you see it ending? We will continue to focus our energies towards the occupancies rising as we're in the charge earlier and mentioned earlier. We're hoping that trajectory continues to be there. If we get the release of some of the SEZ spaces to be marketed, it'll help us in the future quarters coming. Sure. That's pretty clear. Thank you and all the best. Thank you. If you would like to ask a question, please press star and one on your touchtone telephone. Our next question is from the line of Shashank Savla with Somerset Capital. Please proceed with your question. Hi there. Thanks for the call. I have a couple of questions. The first is, if you look at the rental growth and the NOI growth, that's been trending at around 15% levels in the past couple of quarters. Whereas the distribution has grown by 3% year-on-year. Is there a way to have a higher distribution growth or I'm just trying to understand how does that flow, revenue growth into the distribution. Would you be utilizing a lot of the increased revenues towards construction of under-construction projects or would there be a higher distribution flow over time? Hi, Shashank. Essentially, you know, if you look at our NDCF treatment also, most of the CapEx is funded out of our debt. We're really not using our operating cash flows to fund the CapEx, and this is what will continue even going forward. As regards to your question of, you know, the regular distribution has not been commensurate with the NOI growth. We have other leakages also which happen from NOI. That will be the interest costs, fees, et cetera. Therefore, you'll not always have direct correlation as you see, you know, between the NOI growth as well as the distribution. But having said that, we do whatever FFO we have, you know, we utilize that for distribution. We're not actually going to touch the FFO to distribute, I mean, to fund the CapEx. Right. On the debt, if I recall, like you mentioned that around 40% of that is fixed right now. Is the balance portion hedged in any way or what is the duration of the fix? Is it for three years, five years? Shashank, the fixed cost is with a mixed duration. It was generally three years. The last bond which we've done is 5 years. On average we'll have about anywhere between 18, the minimum. The earliest that we'll have is about close to 18 months. That will be three years, five years, depending on where exactly we've drawn. Of course variable cost is 60%. Most of our variable cost, we've been able to lock that for, you know, another year. We have in the resets for a year. Not everything, but I would say a substantial part. To that extent we may be insulated, but obviously some which is not having locked-in reset, there we will see some increase in the cost. Okay. Do you see still a significant increase in your average cost of debt, like 7.3% versus your latest you mentioned, was raised at 7.9%? We are at about 7.3%. I would expect, you know, given the way the interest rates have risen and the way banks have hiked them, I would expect another 30-40 basis points in the years to come. Okay. On the leasing. Is there any target for the full year which you are targeting, like you've got INR 2 million in the first half? We continue to target as much as we can lease. Like I mentioned, in the non-SEZ we're continuing to see demand. We are quite confident of making significant progress in the leasing of the non-SEZ. For SEZ, we're just waiting for unlocking that real estate. The minute that comes, we'll bring it into Main Street and start leasing it. Okay. The new projects which you're considering, are all of that ROFO or is that a third party project as well? There are two parts. The one within the REIT is completely the REIT's assets which are under construction. There is a speculative 1 million sq ft getting built in Pune, which will be ready in 24-28 months from today. There's another 1.3 million which is redevelopment Hyderabad, which will be ready in between 20 and 23 months from today. There are two ROFO opportunities which we are right now looking at, one being in Hyderabad, which is fully leased, 1.8 odd million. The other one is a fully leased asset in the BKC Annexe area, which is 1.65 sq ft. Was Chennai also a ROFO asset? That was not part of ROFO. That's an asset which the sponsor has offered. Great. Okay. Just to answer at the time of IPO, we had identified three ROFO assets. As you know, there are other assets also available with the sponsor for us to buy, and this is one of them. Going forward also, we have other assets besides the ROFO, which will be available to the REIT to buy. Thank you. Thank you. Our next question is from the line of Mohit Agrawal with IIFL. Please proceed with your question. T hanks. My first question is, of your total vacancy, I see 3.5 million sq ft. How much could be in the SEZ and how much could be in non-SEZ? Hi, Mohit. We have about 1.8 odd in SEZ and 1.2 odd in non-SEZ. You're saying essentially, the 1.2 million sq ft, you think that by the end of the year could be fully leased out? We are focused on leasing that 1.2 million. We should be significantly there. Okay. The 0.4 million sq ft that is getting expired in the second half, what is the visibility there in terms of renewal or re-lease? There's about 300,000-odd sq ft more to go, of expiries. We already have visibility of 200,000 out of that. 200,000. Okay. Y ou mentioned in the initial remarks that in the last line that you need to be cognizant about the risks that are happening globally. Just wanted to get your thought on have you seen a change with respect to, let's say the RFPs. Has there been a change in smaller RFPs or larger RFPs? Anything on the demand front that you've seen changing in the last one, two months? The larger RFPs which were in the range of between 800,000 and 2 million sq ft have paused for a bit. They will come back, I think, end of first quarter next year. The smaller spaces, the demand continues to be there because customers who need immediate space for their immediate needs are in fact coming forward and are only looking at Grade A. So we've seen a rise in the inquiries of 50,000 and 100,000 sq ft. Including immediate contiguous growth of clients that are existing in our parks. If you see, I mentioned also 62% of the area we leased was to our existing customers within our parks for immediate growth. Okay, understood. On the physical occupancy, is there a progress there? What is the current physical occupancy and where do you see it, towards the end of the year? From 31% in June to 41% in September. We see that rising. I think, it should be in the mid-40%- 50%s by March. Okay. Last one from me. ROFO on the Hyderabad asset is getting extended. Any reason why it has got extended? Could you explain that? H i. The reason to extend was because in September we got another notice for the BKC Annexe asset. We had almost completed our evaluation of the Hyderabad asset, but because we wanted to take both the assets to the Governing Board together, that's the reason we had to extend the ROFO notice period for the other one. Okay, thanks a lot. It was just only to make sure that both the assets are presented to the Board together. Okay, understood. Thank you. Our next question is from the line of Jatin with BofA. Please proceed with your question. Sure. Thanks. This is Kunal from BofA. I just wanted to come back to the discussion on the SEZ part of it. Assuming that you know the policies do get cleared in the budget session, what would the timelines you know look like after that, given that you would already be sitting on a pipeline of demand and therefore the moment you have clarity on the sign ups should start very soon after that? Or would you expect the pipeline to build after this clarity? And then I have a follow-up. Hi. While we would love to have pipeline ready, customers want clarity in terms of when they can actually start to fit out and start to occupy. Having said that, the way I see it is, while this policy is significantly moving forward, what might happen in the increments, they may allow partial notification of units within a combined building where there is SEZ and there is some vacancy which you can unlock. They will open up rupee billing. These two things we are, I think, more confident that it will come sooner. The minute that comes and that starts percolating down to customers, we will be able to excite their interest for the SEZ footprint. This cumulatively will take some time, should take between three and four months to de-notify, is my view. In any case, the traction begins the minute the announcements start to happen. Understand. Just follow up on the physical occupancy part. You know, your assessment is this goes towards the 50% mark towards the end of the year. Has the movement essentially been restricted only on the IT services side of the equation, or have you seen certain tenants play out, maybe other parts of the tenants not taking it up as fast or certain policies sort of restricting that? When you're looking at 41%, you're looking at the entire weighted average of everything. If I give you within a park, the smaller spaces are between 80%-90% occupied, and the GCCs are between 25%-30% occupied. It becomes weighted average 40%. The BFSI and financial services, they're 80%-90% occupied. The domestic business footprint is 90% occupied. The pure tech footprint is marginally occupied, slowly rising. Certain cities are seeing a larger number, certain are seeing them crawling back. I just gave you a broad highlight to what the occupancies are, but we're seeing them inch towards coming back to office. They will still work in a hybrid format, but you're still finding them wanting and needing to come back to office. Thank you. Thank you. Our next question is from the line of Adhidev Chattopadhyay with ICICI Securities. Please proceed with your question. t hanks again for the follow-up. This is more of a question on the Hyderabad market overall. What we're seeing is that Gachibowli now vacancies are almost up to 40% as the numbers given by the JLL, and there is even more space coming up in Gachibowli, so the vacancies may touch probably up to 50% by March of next year. While in Madhapur the vacancies are still holding on, they've not gone up much. What is the behavior you're seeing from tenants in terms of what sort of rentals they are prepared to pay and in terms of the space pickup, and what quality of buildings are coming up in Gachibowli versus what is there in Madhapur? Just a broader picture you can give us. Thank you. You must break that vacancy out into Grade A and the rest of the vacancy. You will not see Grade A vacancy at all. In fact, Grade A vacancy is in very high demand. Every customer that's coming forward is first looking at Grade A. We are seeing very reasonable, strong interest in upgraded assets of ours within our park, and that's a differentiator. You will continue to see vacancies in the Grade B assets in each micro market. You will see that in Hyderabad more than anywhere else because there is an overhang of vacancies. A question just on the rentals. Where is the rentals now heading, especially in the Hyderabad for next 2-3 years? Grade A rentals will continue to see their strength because there will be not so much Grade A supply that's coming. That will keep matching demand. You will see disruptive rents being offered in Grade C. No, great. Thank you. Thank you. If you would like to ask a question, please press star one on your touchtone telephone. Our next question is from the line of Rahul Marathe with ICICI Prudential Pension Funds. Please proceed with your question. Congratulations on a good set of numbers. It's more like a query on the DESH Bill. What would be the surplus vacancies that we would have across our micro market? Because it is a a worry that suddenly a lot of office space is hitting the supply on the market. Does it end up disrupting prices? We are actually waiting for SEZ to unlock so that we can bring that for leasing. Not only with us, with the competitors. Like, what I'm saying is suddenly a large part of office space will come to market. I can tell you about my assets, and I'm really excited to unlock them. Okay. Thank you. Our next question is from the line of Poonam Joshi with Nirmal Bang. Please proceed with your question. Thank you for the opportunity. It's a bookkeeping question, wherein in this quarter I see our EBITDA margin has declined sharply from 74.9% - 54.4%. There are some costs associated with this work contract services. Even the taxes has gone up. It would be very helpful if you give some color on this cost as well as why the tax has increased sharply sequentially. Thank you. I see your problem. Hi. This is only because of the work contract, the one-off project. We actually do the construction for the owner, which is a development agreement. That's the reason you are seeing the income from the work contract coming into revenue. Okay. It is one-off in nature, right? It 's one-off. Once we're done with construction of this building, that automatically gets run in. Okay. Given that the physical occupancy. Can I follow up to this? Hello? Sorry. No, what I was saying is on an IRR basis, it hardly moves the needle in the EBITDA. It's just because the whole amount comes as revenue as well as its capital. That's the reason you are seeing this, disruption. U nderstood. Given that the physical occupancy has been improving sequentially, do you see any maintenance, common area maintenance charges going up from here on? They're all as per predictions. We are working in the same direction. Okay, understood. The reason for this sharp increase in taxes by 34.6%? Those are just because of deferred tax adjustments. One, of course, is because of an interpretation of an Ind AS, which we have taken a different view together with the auditors. To that extent, there has been one additional charge which has come in this quarter. Also secondly, because there are one or two assets which enjoy tax holiday. Where a deferred tax charge gets booked, but we don't recognize an asset given it's in a tax holiday period. Unless we have certainty of the cash inflows, as we go along. This should normalize. The second bit should normalize, in course of time. Yes, Ruth. Thank you for answering my questions. T hank you. Thank you. Our next question is from the line of Shashank Savla with Somerset Capital. Please proceed with your question. Hi there. Thanks again. I just want to understand in terms of the rental increases, how much are base rents increasing on the ground, and whether this high interest rate period has an impact on the rentals on the ground? See, the rental is a direct correlation to what is the asset that you prefer when you want to come back to the workspace. The clients are not pressured to give you a pop in the rental if the asset is stacking up from an experiential point of view. We've been saying this time and time again that how you can create wellbeing and wellness at the workplace and create an environment where the customer feels that we are right on top of our stack, whether it's sustainability or experience or the entertainment or housekeeping and services, et cetera, they will pay you the rent. If you're not able to provide those services and that experience, then even at a discounted rent, they won't take your real estate. That's exactly what's happening. The second question was on all the broken assets. For the funding part, are you planning to buy those with debt or by raising or selling units? We have the option of swap of units, which is most likely to be the case. We are still closing the structure, especially since we've got T7 assets also in. Of course, subject to what the Board and the unit holders have to say. If it's a swap, then we don't really need any kind of debt or equity capital. Right. Okay. Thank you. As there are no further questions on behalf of Mindspace Business Parks REIT, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.