In a groundbreaking move for the Indian real estate investment trust (REIT) market, Embassy REIT has successfully raised ₹2,000 crore through the issuance of the nation’s first 10-year non-convertible debentures (NCDs). This landmark transaction not only signifies a new era for REITs in India but also reflects the growing maturity and investor confidence in the sector.
A Milestone in India’s REIT Market
This issuance marks the first time an Indian REIT has tapped into a debt instrument with such a long tenor, setting a precedent that could shape the future of capital-raising strategies within the industry. The move underscores the evolving landscape of the Indian REIT ecosystem, which is increasingly aligning with global standards.
Strong Institutional Backing
The 10-year NCD issuance witnessed overwhelming demand, being oversubscribed by 1.4 times. This robust interest came from over 15 top-tier institutional investors, including insurance companies, pension funds, and mutual funds, indicating a strong vote of confidence in Embassy REIT’s creditworthiness and the potential of India’s commercial real estate sector.
“We are delighted to pioneer the first-ever 10-year NCD issuance in India’s REIT market and raise ₹2,000 crore from leading institutions. This transaction optimally staggers our liability profile and enables us to prudently manage future debt maturities,” said Ritwik Bhattacharjee, Chief Executive Officer of Embassy REIT.
Attractive Coupon Structure
The Series XV NCDs have been rated “AAA/Stable” by both CRISIL and CARE, reflecting their credibility and reliability. Priced at an effective coupon of 7.33% over 10 years, the NCDs feature a step-up interest rate—7.25% for the initial five years and 7.45% for the subsequent five years. This structure offers a balanced risk-return profile, appealing to investors seeking long-term, stable investment opportunities. Additionally, the inclusion of a put option at the five-year mark provides investors with added flexibility.
Strategic Debt Management
The proceeds from this NCD issuance are earmarked for refinancing existing debt, which is expected to result in annual interest cost savings of approximately 70 basis points (bps). This strategic move not only enhances Embassy REIT’s financial flexibility but also helps in staggering its liability profile, thereby improving debt sustainability and managing future maturities more effectively.
Setting a Benchmark for the Future
Embassy REIT’s pioneering issuance sets a new benchmark for other REITs in India, showcasing a strategic alignment of capital-raising efforts with the long-term investment objectives of institutional players. Anchored primarily by large life insurers and pension funds, the issuance underscores strong confidence in the long-term potential of India’s commercial real estate sector.
Quick Facts
| Issuer | Embassy REIT |
| Amount Raised | ₹2,000 crore |
| Tenor | 10 years |
| Interest Rate | 7.33% effective coupon |
| Oversubscription | 1.4 times |
Q1: What makes this NCD issuance by Embassy REIT significant?
This is the first 10-year NCD issuance by a REIT in India, setting a new standard for long-term debt instruments in the market.
Q2: Who were the major investors in this issuance?
The issuance attracted over 15 top-tier institutional investors, including insurance companies, pension funds, and mutual funds.
Q3: What are the financial benefits of this NCD for Embassy REIT?
The proceeds will be used to refinance existing debt, resulting in significant annual interest cost savings and improved debt sustainability.
Q4: How does the step-up interest rate work?
The interest rate is set at 7.25% for the first five years and increases to 7.45% for the next five years, providing a balanced risk-return profile for investors.
Q5: What role did Talwar Thakore & Associates play in the transaction?
Talwar Thakore & Associates acted as legal counsel for the transaction, providing essential legal support and guidance.
In conclusion, Embassy REIT’s successful 10-year NCD issuance marks a significant milestone in India’s real estate sector, demonstrating strong institutional confidence and setting a precedent for future innovations in the REIT and debt capital markets.