CREDIT rating agency Fitch assigned CapitaLand India Trust (Clint) a first-time long-term issuer default rating of “BBB-” on Sunday (Jul 7) amid a stable outlook.
The rating came on the back of Clint’s “high-quality” portfolio of Grade A offices located in five top-tier cities in India, said Fitch.
It noted that these properties have higher occupancy rates than the India office market average, as they are located in established demand centres for information technology outsourcing services and global capability centres such as Chennai and Bangalore.
Therefore, amid strong demand for IT outsourcing services, Fitch said it expects Clint’s India portfolio to sustain high occupancy rates and positive rental reversions.
The credit rating agency estimates that Clint’s portfolio will have an occupancy rate of around 90 to 92 per cent, driven by mature existing assets in the mid- to high-90s range, while partly leased new properties are commissioned.
It also expects base rental income from Clint’s existing assets to rise to S$213 million in 2024 and S$226 million in 2025, from S$179 million in 2023.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Meanwhile, Fitch also noted that higher occupancy rates and positive rental reversions will offset the trust’s rising exposure to asset developments and acquisitions.
It projects Clint’s capital expenditure (capex) to amount to S$515 million in the next three years as it develops its Navi Mumbai and Hyderabad data centres, and its MTB6 building in International Tech Park Bangalore.
Given the high capex and forward purchase commitments in 2024 and 2025, Fitch also expects the trust’s earnings before interest, tax, depreciation and amortisation (Ebitda) net leverage to peak at 8.5 times in 2025 before dropping to seven times.
It noted that Clint’s leverage will improve to below its estimates if the trust raises equity to partially fund its capex, subject to market risk.
“Our expected peak Ebitda net leverage is above the level for Clint’s current rating, but we acknowledge that it has a number of levers and leverage could be lower than our forecast,” said Fitch.
In the company’s view, such levers include Clint’s record of managing development risks, as well as strong credit- and equity-market access that has allowed it to maintain a gearing of below 40 per cent.
Units of Clint were trading 2 per cent or S$0.02 lower at S$1 as at 9.07 am on Monday.
