Embassy Off.REIT — Q4 FY26 earnings call

Call held 27 Apr 2026

Management summary

Embassy REIT reported a stellar FY26, expanding its operational portfolio to 43.5 msf and achieving 90% occupancy with strong leasing spreads. The company successfully refinanced debt at a lower cost and delivered double-digit growth in NOI, DPU, and NAV. While hotel operations faced minor headwinds and construction costs saw temporary increases, the REIT provided positive guidance for FY27, anticipating continued double-digit distribution growth.

Highlights

  • Operational portfolio expanded to 43.5 msf, with record delivery of 3.3 msf of new office buildings.

  • Occupancy increased by 300 bps to 90% (94% by value), leasing 6.4 msf at 17% higher spreads.

  • Successfully raised ₹11.2k crores of debt, including ₹3,400 crores of 10-year NCDs, reducing in-place debt cost by 65 bps YoY to 7.25%.

  • Delivered double-digit growth across key financial metrics: NOI up 15%, DPU up 10%, and NAV up 16% YoY.

  • Guided to double-digit distributions growth for FY2027.

Concerns

  • Hotel operations in Q4 were slightly impacted by travel slowdown due to current geopolitical situation.

  • Middle East conflict led to temporary firming up of construction costs, though management expects it to be temporary.

  • Lag between NOI and DPU growth expected to continue for a couple of years due to non-cash NOI from new deliveries and increased interest costs on under-construction portfolio.

Key financials

2 periods

Headline

  • Revenue
    ₹4,582 Cr
    YoY +13%
  • NOI
    ₹3,760 Cr
    YoY +15%
  • DPU
    ₹25.28
    YoY +10%
  • NAV per Unit
    ₹491.62
    YoY +16%
  • GAV
    ₹70,540 Cr
    YoY +15%
  • Occupancy
    90%
  • Hotel NOI Growth
    5%
  • Hotel Occupancy
    63%
  • Hotel ADR Growth
    8%
  • Total Returns
    22%
  • Price Appreciation
    15%

Q4

  • Solar NOI Growth
    49%

What they filed

Q1 FY27: revenue up 17.1%, net profit up 25.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue997 1,022 1,086 1,060 1,124 +13%1,193 +17%1,205 +11%1,241 +17%
EBITDA628 763 310 821 868 +38%917 +20%903 +191%959 +17%
Net profit1,530 158 -243 155 232 −85%381 +141%-430 −77%195 +26%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Order book

high confidence

Total value

6.4 msf

as of 2026-03-31 quantified

Inflow this quarter

0.9 msf

Composition

Mix 3 others
  • New Leasing 4 msf 62.5%
  • Renewals 1.5 msf 23.4%
  • Pre-leases 0.9 msf 14.1%

Share of order book by other, derived from disclosed amounts

Pipeline

other

Total office development pipeline of 6.2 msf, with 2.9 msf scheduled for delivery over next 2 years, 60% pre-leased.

The company achieved robust leasing performance in FY26, driven by new leases and strong pre-leasing activity, especially from GCCs, leading to increased portfolio occupancy.

Source: Prepared remarks

Capital allocation

high confidence
  • Capex ₹3,500 Cr
    • Total capital outlay for 6.2 msf of office development projects ₹3,500 Cr
    With a total capital outlay of ₹3.5k crores, we expect the total 6.2 msf projects to add around ₹610 crores in stabilized NOI by FY2030.
  • Debt Net ₹21,000 Cr Cost 7.2% · Maturity: 45 months (for fixed rate debt book)
    • New borrowing Raised through second 10-year NCD at 7.49% fixed coupon. ₹1,400 Cr
    • New borrowing Total 10-year NCDs raised this year, doubling fixed rate debt book duration to 45 months. ₹3,400 Cr
    • Rate reset Reduced in-place debt cost by 65 bps YoY.
    • Tenure extension Doubled duration of fixed rate debt book to 45 months.
    • Other Moved 60% of debt book to fixed rates.
    Our net debt book now totals ₹21k crores, implying a 30% leverage ratio at 7.25% in-place cost. Through our active debt management, we have successfully reduced our in-place debt cost by 65 bps this year and moved 60% of our debt book to fixed rates, thereby limiting our exposure to market volatilities.
  • Dividend ₹6.5/share (interim) Payout ratio 100%
    We have declared distributions of ₹616 crores or ₹6.50 per unit for the quarter, representing a 100% payout ratio.
  • M&A Pinehurst Acquisition · Closed · Consideration ₹[object Object] (undisclosed)

    Consolidating ownership in Embassy GolfLinks.

    Implies a forward NOI yield of ~7.9%, aligning with strategy of disciplined, accretive growth.

    We completed the acquisition of Pinehurst, a fully leased 0.3 msf office building, aimed at consolidating our ownership in Embassy GolfLinks. The transaction valued at ₹852 crores implies a forward NOI yield of ~7.9%, aligning with our strategy of disciplined, accretive growth.
  • M&A Two strata-owned blocks in Embassy Manyata Divestment · Closed · Consideration ₹[object Object] (undisclosed)

    First-ever capital recycling.

    We also completed our first-ever capital recycling, wherein we divested 376k sf of two strata-owned blocks in Embassy Manyata for a total consideration of ₹530 crores.
  • M&A 12.6 msf potential acquisition opportunities Acquisition · Announced · Consideration ₹[object Object] (undisclosed)
    Currently, we are evaluating a pipeline of 12.6 msf of potential acquisition opportunities from Embassy group and third parties.
  • M&A Hotel assets Divestment · Announced · Consideration ₹[object Object] (undisclosed)

    Primarily aimed at reducing leverage and funding new acquisitions, as office business is more profitable.

    Moving on to your second question on the divestment of hotel assets, we would like to divest. Currently, the plan is still in the workings. The idea is that if we are able to get good valuation- the fact is that our peer sets are getting good valuation of about 18x EBITDA. So, if we get the good valuation once we will run the RFP process, and then if we find sense in the valuation, then we will go ahead on the divestment. The divestment is primarily aimed at reducing our leverage as well as funding for our new acquisitions, given the fact that the office business is meaningfully more in terms of profitability, we feel that this capital can be better deployed in the office business as well as de-lever our existing debt as well.
  • M&A Embassy Zenith Acquisition · Pending regulatory · Consideration ₹[object Object] (undisclosed)

    A portion of that asset is already generating rent and a portion of that will generate rent towards the end of the year.

    So, in relation to Embassy Zenith, we are actually working on the diligence. There is a little bit of work that the Sponsor Group also has to do in terms of the structure. So given that, once it is all fully baked in, we will come back to the market, and we will appraise the market. Having said that, a portion of that asset is already generating rent and a portion of that will generate rent towards the end of the year.

Guidance & targets

Occupancy

  • Portfolio Occupancy by Area Occupancy · FY2027 · High confidence 92-93%
    We expect to close the financial year with a portfolio occupancy of 92-93% by area.

    — Abhishek Agrawal

Profitability

  • NOI Profitability · FY2027 · High confidence ₹4,150 to ₹4,350 crores
    We expect our FY2027 NOI to be in the range of ₹4,150 to ₹4,350 crores

    — Abhishek Agrawal

  • NOI Growth Profitability · FY2027 · High confidence 13%
    At mid-point, this guidance implies a year-on-year NOI growth of 13%

    — Abhishek Agrawal

Dividend

  • DPU Dividend · FY2027 · High confidence ₹27.00 to ₹28.60 per unit
    and our DPU to be in the range of ₹27.00 to ₹28.60 per unit.

    — Abhishek Agrawal

  • DPU Growth Dividend · FY2027 · High confidence 10%
    and a DPU growth of 10%, continuing our double-digit growth performance of last year.

    — Abhishek Agrawal

Acquisition

  • Acquisition Pipeline Conversion Acquisition · 4-5 years · Medium confidence 10-12 msf
    But having said that, we anticipate that this acquisition of about 10-12 msf should be done in 4- 5 years' time frame.

    — Amit Shetty

Market Outlook

  • Projected Absorption Market Outlook · FY2027 · Medium confidence 84-85 msf
    The projected absorption for FY27 is approximately around 84-85 msf.

    — Amit Shetty

  • Market Supply Market Outlook · next 2 years · Medium confidence 65-68 msf
    And the year after is also about the same. Again, the supply that comes into the market is in the range of 65-68 msf for the next 2 years.

    — Amit Shetty

Cost

  • Interest Cost Increase Cost · next year · Medium confidence 11% to 13%
    What I would say is that we are expecting that our interest cost will increase by somewhere around 11% to 13% in the next year and which will also contribute to this gap between the increase in NOI and increase in DPU.

    — Abhishek Agrawal

Market context

  • Distributions Growth Dividend · FY2027 · High confidence double-digit
    And with the continued business momentum, we are delighted to once again guide to double-digit distributions growth for FY2027.

    — Amit Shetty

What to watch in Q1 FY27

Rental accrual from new deliveries

H2 FY27
Current D1/D2 rentals begin later in FY27, Cognizant pre-lease has rent-free period post-June '26, Block 4 rents starting at various stages.
Target Increased rental income from D1/D2, Block 4, and Cognizant.

Why it matters

Accrual of rents from newly delivered and pre-leased assets is crucial for realizing NOI and DPU growth.

On the second question, which is the rental contribution from blocks D1/D2, the rentals will only begin during the latter part of the year. And the Cognizant deal is a pre-lease for the delivery in June'26, and hence, there will be a rent-free period thereafter.

Risks & concerns

  • Construction cost inflation due to Middle East conflict

    medium

    Construction costs have firmed up temporarily, but management believes it's a short-term phenomenon and has contingencies.

    Management acknowledged

  • Rising interest rates impacting debt costs

    medium

    Management expects interest costs to increase by 11-13% next year due to refinancing and variable rate repricing, which will contribute to the NOI-DPU lag.

    Management acknowledged

  • Geopolitical turmoil and AI disruption

    low

    Management acknowledges global uncertainties but notes strong Indian office absorption and GCC demand.

    Management acknowledged

  • Impact of MAT related provisions on cash tax rate

    low

    Changes in MAT provisions could increase cash tax rate after 3-4 years once MAT credit utilization is affected, but no significant impact for the next 2 years.

    Management acknowledged

Q&A highlights

7 direct
NAV growth potential and rental growth capture Direct
So definitely there is a potential going forward because of – one, the 3% to 4% premium to market which we are leasing and second, is that if market rents go up themselves, so that is another 4% to 5%. So, this is the potential available.

Management indicates further NAV upside from current leasing spreads and potential market rent increases, beyond what's already captured.

Asked by Puneet Gulati

Rental accrual timeline for new deliveries (D1/D2, Block 4, Cognizant) Partial
On the second question, which is the rental contribution from blocks D1/D2, the rentals will only begin during the latter part of the year. And the Cognizant deal is a pre-lease for the delivery in June'26, and hence, there will be a rent-free period thereafter.

Clarifies that revenue from significant new deliveries will be back-end loaded in FY27 due to rent-free periods and stabilization.

Asked by Puneet Gulati

Timeline for converting 12.6 msf acquisition pipeline Direct
But having said that, we anticipate that this acquisition of about 10-12 msf should be done in 4- 5 years' time frame.

Provides a long-term timeline for significant inorganic growth, indicating a steady pace rather than immediate large deals.

Asked by Girish Choudhary

Lag between NOI and DPU growth Direct
One is the non-cash NOI that is getting generated because of the deliveries and the lease-up that we do. The second reason is the increase in the interest cost because of all the deliveries... this gap will be there for a couple of years.

Explains the structural reasons for DPU growth lagging NOI, which is critical for understanding shareholder returns and cash flow dynamics.

Asked by Girish Choudhary

Impact of Middle East conflict on construction costs and deal closures Direct
On the second question, about the impact of Middle East conflict, on ground the construction costs have firmed up. But having said that, we always provide for some contingency on the construction cost factoring in these kinds of events. Also, one thing that we have learned from the past is that when the Russia-Ukraine conflict happened, prices actually took off, but then over a period of time, the prices actually subdued. So, we believe that this is a temporary phenomenon.

Addresses a macro concern, indicating temporary cost pressures but no significant long-term impact or disruption to deal activity.

Asked by Abhinav Sinha

Rationale for divesting hotel assets despite new hotel developments Direct
The divestment is primarily aimed at reducing our leverage as well as funding for our new acquisitions, given the fact that the office business is meaningfully more in terms of profitability, we feel that this capital can be better deployed in the office business as well as de-lever our existing debt as well.

Clarifies a strategic shift towards optimizing capital allocation by divesting non-core assets to fund more profitable office acquisitions and reduce debt.

Asked by Yashas Gilganchi

WACC compression despite rising interest rates Direct
See what has happened is that the interest rates have been falling during first half of the year, and the valuer decided not to take a knee-jerk reaction when the interest rates were falling, and they did not compress the WACC because they wanted to see that the interest rates have actually gone down. And now that our interest rates are around 7.25% on an average. Even if it goes up without any repo increase because in the last meeting also, there was no increase in the repo while the market interest rates have slightly gone up, their estimation is that the WACC has actually gone down for the whole industry.

Explains the valuation methodology and why WACC compressed despite recent rate firming, providing context for NAV calculations.

Asked by Pritesh Sheth

Leverage trend and potential equity funding for inorganic growth Direct
our thought process is that we don't want to go to a leverage or LTV of 35% and above. Today, we are at 30%. So, we will want to maintain around 30%. And if, let's say, there is an acquisition opportunity, what we will do is, we will see a mix of debt and equity in such a way that the deal is accretive to the unitholders from the day one.

Outlines the company's conservative leverage policy and willingness to use equity for accretive acquisitions, which is key for future growth funding.

Asked by Yashas Gilganchi

3 min read 7 chapters

Detailed narrative

Strong FY26 Performance and Growth Drivers

Embassy REIT reported a stellar FY26, expanding its operational portfolio to 43.5 msf with a record 3.3 msf of new office building deliveries. Occupancy increased by 300 bps to 90% (94% by value), driven by 6.4 msf of leasing at 17% higher spreads. This led to a 15% YoY NOI growth to ₹3,760 crores, 10% DPU growth to ₹25.28 per unit, and 16% NAV growth to ₹491.62 per unit, delivering 22% total returns to investors.

Debt Management and Capital Recycling Initiatives

The REIT successfully raised ₹11.2k crores of debt during the year, including ₹3,400 crores of 10-year NCDs at an attractive 7.49% fixed coupon, reducing its in-place debt cost by 65 bps YoY to 7.25%. Net debt stands at ₹21k crores with a 30% leverage ratio, and 60% of the debt book is now fixed rate. The company also completed the acquisition of Pinehurst (0.3 msf for ₹852 crores) and divested 376k sf for ₹530 crores as part of its first-ever capital recycling.

Development Pipeline and Future NOI Contribution

The total office development pipeline stands at 6.2 msf, with 2.9 msf scheduled for delivery over the next two years, 60% of which is already pre-leased. This pipeline, with a total capital outlay of ₹3.5k crores, is expected to add ₹610 crores in stabilized NOI by FY2030. The re-development potential of E1 block in Embassy Manyata has been revised upwards to 1.4 msf with an expected yield of 22%.

Robust Market Outlook and Leasing Trends

Despite global uncertainties, the Indian office market remains robust, with 20 msf of gross absorption in Q1 FY27, 45% from GCCs. The demand-supply mismatch, with only 8 msf of supply delivered in Q1, is driving down all-India vacancies by 86 bps YoY and increasing rents. Management sees strong RFPs, particularly in Bangalore, and anticipates FY27 absorption of 84-85 msf against 65-68 msf of supply over the next two years.

FY27 Guidance and Distribution Growth

For FY27, Embassy REIT expects portfolio occupancy to reach 92-93% by area. NOI is projected to be between ₹4,150 to ₹4,350 crores, and DPU between ₹27.00 to ₹28.60 per unit. At the mid-point, this guidance implies a 13% YoY NOI growth and 10% YoY DPU growth, continuing its double-digit growth trajectory.

Hotel Operations and Strategic Divestment Consideration

Hotel operations in Q4 were slightly impacted by travel slowdown, though FY26 hotel NOI grew 5% YoY with 63% occupancy and 8% ADR growth. The company is nearing completion of hotels at Embassy TechVillage (Hilton Garden Inn in Jul-26, Hilton in Mar-27) and launched construction of a 116-key 'Spark by Hilton' in Pune (Dec-28). The company is also evaluating divesting existing hotel assets to reduce leverage and fund more profitable office acquisitions.

NAV Valuation and Interest Rate Dynamics

The portfolio GAV grew 15% YoY to ₹70,540 crores, and NAV increased 16% YoY to ₹491.62 per unit, driven by market rent increases, a 25 bps WACC compression, and new deliveries. While interest rates are firming up, management has factored in higher refinancing costs and potential variable rate loan repricing, expecting an 11-13% increase in interest cost next year, which will contribute to the lag between NOI and DPU growth for the next couple of years.

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