1
Please refer to important disclosures at the end of this report
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1
Mindspace Business Parks REIT owns a quality office portfolio located in four key
office markets of India. Its portfolio has total leasable area of 29.5 msf and is one
of the largest Grade-A office portfolios in India. Portfolio comprises 23.0 msf of
completed Area, 2.8 msf of under construction area and 3.7 msf of future
development area, as of March 31, 2020.
Positives: (1) Promoters and company have proven track record in real estate &
retail space with listed companies like Chalet Hotels and Shoppers Stop; (2) 80% of
leasable area attributable to Mumbai and Hyderabad, which are the key markets
for India; (3) 85% of rent comes from Global and MNC companies, which are
sticky in nature; (4) Exposure only to commercial office space which is the least
impacted segment in real estate due to Covid-19 outbreak; (5) Healthy collections
at 97.5% of revenues for March, April & May provides comfort.
Investment concerns: (1) Slowdown in demand for commercial space; (2) Increase
in Work From Home (WFH) can lead to higher vacancy in key market geographies,
adversely impacting rental income in the near term; (3) Renegotiation of existing
contracts at lower rates could impact rental income.
Outlook & Valuation: Current dividend yield works out to ~3.5% for Mindspace
REIT (M-REIT), which is projected to increase to 7.5% in FY22E. Though
uncertainties due to Covid-19 related issues pose risks to earnings in the near term,
we believe that in the long run there will be a steady increase in earnings. Most of
the earnings will be paid out in the form of dividends, which is tax exempt for all
categories of investors. Post the IPO, there will also be a debt reduction of ~
₹3,000cr for the company, which will bring down debt to equity ratio from 2.95x at
the end of FY20 to below 1.0x, which is a key positive.
Given the current uncertainties due to Covid-19 the listing gains may be limited.
We believe that in the long run M-REIT will offer similar or better post tax yields as
compared to fixed income. Steady and growing dividend stream along with capital
appreciation of underlying asset makes it an attractive investment opportunity in the
long run. We recommend ‘Subscribe’ to the issue from a long term investment
perspective.
Key Financials
Y/E March (` Cr)
FY18
FY19
FY20
Total Revenue from Operation
1502.2
1679.7
2026.2
% chg
5.0
11.8
20.6
EBIDTA
1024.9
1261.4
1371.8
EBITDA (%)
68%
75%
68%
Profit before tax
351.8
607.3
751.8
PBT (%)
23%
36%
37%
Net Profit
159.9
471.7
512.5
% chg
-30.9
195.0
8.6
Source: Company, Angel Research
SUBSCRIBE
Issue Open: July 27, 2020
Issue Close: July 29, 2020
Minimum Bid Amount
`54800*-55000**
Ins titutional Inves tor
75% of is s ue
Retail
25% of is s ue
Promoters 65%
Others 35%
Fres h is s ue:
`1000 Cr
Is s ue Details
Offer for Sale: `3500 Cr
P os t Is s ue S hareholding P attern
Is s ue size (amt):
`4500 Cr
Price Band:
`274-275
Post-is s ue implied mkt. cap: `18000 Cr
Promoters holding Pre-Is s ue: 85%
Promoters holding Pos t-Is s ue: 65%
*Calculated on lower price band
** Calculated on upper price band
Book Building
Lot Siz e: 200 units and in multiple
thereafter
Mindspace Business Parks REIT
REIT Note | Real-Estate
July 24, 2020
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About REITs
Real Estate Investment Trusts (REITs) are companies that own or finance income-
producing real estate in a range of property sectors. REITs provide all investors the
chance to own valuable real estate, present the opportunity to access dividend-
based income (Rental) and total returns (Capital Appreciation). The stockholders of
a REIT earn a share of the income produced through real estate investment –
without actually having to go out and buy, manage or finance property. REITs must
pay out at least 90% of their net distributable cash flows. REITs must own more
than 80% of the value of its assets in completed and rent generating properties.
REITs Structure
Source: Company, Angel Research,RHP
Mindspace REIT background
Mindspace Reit was settled on November 18, 2019 at Mumbai, Maharashtra,
India as a contributory determinate irrevocable trust under the provisions of the
Indian Trusts Act, 1882, pursuant to a trust deed dated November 18, 2019.
Mindspace REIT was registered with SEBI on December 10, 2019, at Mumbai as a
REIT pursuant to the REIT Regulations having registration number IN/REIT/19-
20/0003. Mindspace REIT has been settled by the Sponsors for an initial sum of
₹10,000. CTL and ACL are the sponsors of Mindspace REIT. K Raheja Corp (KRC)
Investment Managers LLP (held by Mr. Ravi C. Raheja and Mr. Neel C. Raheja, as
the partners) has been appointed as the Manager for Mindspace REIT, and Axis
Trustee Services Limited has been appointed as the Trustee to Mindspace REIT.
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Key Office Markets
Mindspace owns a quality office portfolio located in 4 key office markets of India.
The Portfolio has total leasable area of 29.5 msf and is one of the largest Grade-A
office portfolios in India. Its portfolio comprises 23.0 msf of completed area, 2.8
msf of under construction area and 3.6 msf of future development area, as of
March 31, 2020. Further, 4 key office markets are Mumbai, Pune, Hyderabad and
Chennai. Notably, Mindspace has portfolio of 5 integrated business parks and 5
independent offices.
Key Highlights of Mindspace Business Parks REIT
Mumbai Portfolio spread across 4 properties with completed area of 9 msf,
under construction area of 1 msf and further development area of 2.1 msf.
Hyderabad portfolio spread across 2 properties with completed area of 10.3
msf, under construction area of .3 mfs and further development area of .4
msf.
Mumbai portfolio has total area of 12.1 msf (41%), Hyderabad portfolio has
total area of 11.5 msf (39%), Pune portfolio has total area of 5 msf (17%) and
Chennai portfolio has total area of .8 msf (3%).
85% of gross rental comes from foreign MNC companies like Accenture,
Qualcomm, Barclays, JP Morgan, Amazon, UBS, etc.
Portfolio assets well diversified across 172 tenants and no tenant dependency
of more than 7.7% with committed occupancy of 92% as of March 2020.
Average collection for March, April and May are at 97.5% and management
expects to collect 1-1.5% more in June month, which is better than other real
estate companies.
Mindspace’s current in-place rent is at `51.8 psf vs. market rent of `63.5 psf,
which gives 22.6% MTM opportunity in near future.
Mindspace has stable cash flow with contracted escalations of 10-15% every
three years with typical average contract period (WALE) of 5.8 years.
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Exhibit 1: Mindspace Geography-wise Property Break-up
Source: Company, Angel Research, RHP
Distribution of income mechanism to Unit holders:
92% will be distributed in form of dividend, which is tax free in the hands of
unit holders.
8% will be distributed in form of interest, which is taxable in the hands of unit
holders.
Business Update: Covid-19
Mindspace did not face any major disruptions in its operations from
COVID-19, and has been able to collect 97.5% of revenue in the month of
March, April and May.
Since April 01, 2020, REIT has leased 0.7 msf of area (of which 40.5%
was leased to its existing tenants and 59.5% was leased to new tenants).
The company derives 99.4% of its gross contracted rentals from leasing of
office premises, and it has not seen a significant decline in the rent
receipts.
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Issue Details
Mindspace Business Parks is raising `1,000cr through fresh issue & Offer For Sale
of `3,500cr, price band of `274-275.
Exhibit 2: Pre & Post Shareholding
No of shares
(Pre-issue)
%
(Post-issue)
%
Promoter
52,53,85,000
85
42,54,54,545
65
Other
9,27,15,000
15
22,90,90,909
35
Total
61,81,00,000
100
65,45,45,454
100
Source: Company, RHP
Objects of the offer
`900cr for repayment/pre-payment of debt out of new issue of `1,000cr.
Offer for sale from promoter and Blackstone of `3,500cr.
Key Management Personnel
Mr. Deepak Ghaisas is the independent member of the Governing Board of the
Manager. He holds a bachelor’s degree in commerce from the University of
Bombay. He is a qualified chartered accountant, cost accountant and company
secretary. Deepak is director on the board of directors of Gencoval Strategic
Services Private Limited.
Ms. Manisha Girotra is an independent member of the Governing Board of the
Manager. She holds a bachelor’s degree in economics from St. Stephen’s College,
Delhi and a master’s degree in economics from Delhi School of Economics where
she was awarded the Hira Lal Bhargava gold medal for academic excellence. She
is currently the chief executive officer of Moelis and Company in India. She was
previously associated with UBS Securities India Private Limited as the Chief
Executive Officer and Country Head.
Mr Ravi C. Raheja is the group president of KRC group. He holds a bachelor’s
degree in commerce from the University of Mumbai and a master’s degree in
business administration from the London Business School. With over 23 years of
work experience across real estate, retail and hospitality industry, he plays a key
role in guiding the finance, corporate strategy and planning teams across divisions
of the KRC group.
Mr. Neel C. Raheja is the group president of KRC group. He holds a bachelor’s
degree in law and a master’s degree in commerce from the University of Mumbai.
He has also completed the Owner/President Management Program from Harvard
Business School. He has been instrumental in the diversification of the KRC group’s
business from real estate development to retail and hospitality for the last two
decades. He has also played a key role in the organization’s presence in retail
brands namely Shoppers Stop, Inorbit Mall and Crossword.
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Consolidated Income Statement
Y/E March (` Cr)
FY18
FY19
FY20
Total Revenue from Operation
1,502.2
1,679.7
2,026.2
% chg
5.0
11.8
20.6
Total Expenditure
477.3
418.3
654.4
Cost of work contract services
-
-
214.0
Change in material sold
0.8
0.4
0.3
Cost of Power purchased
55.0
61.7
68.3
Employee Benefit Expense
3.9
4.4
6.8
Other Expenses
417.6
351.8
365.0
EBITDA
1,024.9
1,261.4
1,371.8
% chg
-
23.1
8.8
(% of Total Revenue)
68.2
75.1
67.7
Depreciation& Amortisation
205.4
219.6
114.6
EBIT
819.5
1,041.8
1,257.2
% chg
-
27.1
20.7
(% of Total Revenue)
54.6
62.0
62.0
Interest & other Charges
468.8
446.2
511.4
Profit before regulated activities and tax
350.7
595.6
745.8
Regulated income
-1.9
7
1.4
Regulated income for earlier year
3.0
4.7
4.6
Profit before tax
351.8
607.3
751.8
Tax
190.8
123.9
237.9
PAT (reported)
159.9
471.7
512.5
% chg
-
195.0
8.6
(% of Total Revenue)
10.6
28.1
25.3
Source: Company,
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Consolidates Balance Sheet
Y/E March (` Cr)
FY18
FY19
FY20
SOURCES OF FUNDS
Capital
50.0
50.0
50.0
Other equity
1,125.0
1,581.0
1,992.8
Non controlling interest
99.9
133.6
166.3
Total Equity
1,357.3
1,847.0
2,291.5
Total Loans
5,801.8
5,937.2
7,011.0
Total Non Current Liabilities
184.7
152.1
279.7
Total Liabilities
7,343.8
7,936.3
9,582.2
APPLICATION OF FUNDS
Net Block
126.3
121.8
145.3
Investment property
3941.1
4024.4
5671
Investment property under construction
1402.6
1905.9
1772.4
Capital Work-in-Progress
0.2
0.2
0.2
Current Assets
2,472.9
2,626.2
3,101.6
Inventories
2.1
3.3
5.2
Investments
2,112.9
2,100.0
2,176.3
Sundry Debtors
36.8
30.1
36.2
Cash &Bank Balance
44.6
63.0
256.1
Other Assets
276.5
429.8
627.8
Current liabilities
1,130.0
1,207.4
1,640.2
Net Current Assets
1,342.9
1,418.8
1,461.4
Other Non Current Asset
528.7
463.2
529.9
Total Assets
7343.8
7936.3
9582.2
Source: Company,
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Consolidated Cash Flow Statement
Y/E March (`Cr)
FY18
FY19
FY20
Profit before tax
351.8
607.3
751.8
Depreciation
205.6
219.7
114.6
Change in Working Capital
21.6
56.3
(122.7)
Interest Expense
468.8
446.2
511.4
Direct Tax Paid
(127.0)
(151.7)
(171.9)
Others
(161.8)
(243.3)
(256.6)
Cash Flow from Operations
759.0
934.5
826.6
(Inc.)/ Dec. in Fixed Assets
(489.4)
(771.3)
(1,388.1)
Investment in JV
(4.3)
12.9
(76.3)
Others
67.0
172.4
109.3
Cash Flow from Investing
(426.7)
(586.0)
(1,355.1)
Interest paid
(518.2)
(543.4)
(629.7)
Borrowings
141.1
247.4
1,163.7
Loan from related parties
(28.4)
(3.4)
-
Dividend paid on equity shares
(59.6)
(25.7)
(59.7)
Issue of Share capital
4.6
-
-
Share Premium received
(27.3)
(31.0)
(1.7)
Cash Flow from Financing
(487.8)
(356.1)
472.6
Inc./(Dec.) in Cash
(155.5)
(7.6)
(55.9)
Opening Cash balances
52.0
(103.5)
(111.9)
Closing Cash balances
(103.5)
(111.9)
(66.1)
Source: Company,
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Key Ratios
Y/E March
FY18
FY19
FY20
Valuation Ratio (x)
P/E (on FDEPS)
114.6
35.5
35.8
P/CEPS
32.9
24.3
21.7
P/BV
12.5
9.2
7.4
EV/Sales
15.1
13.6
11.7
EV/EBITDA
22.2
18.1
17.3
Per Share Data (Rs)
EPS
2.4
7.7
7.7
Cash EPS
8.4
11.3
12.7
Book Value
22.0
29.9
37.1
DPS
0.96
0.42
0.97
Returns (%)
Angel ROIC (Pre tax)
16.4%
18.5%
18.3%
ROE
11.8%
25.5%
22.4%
ROCE
11.4%
13.4%
13.5%
Source: Company
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Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com
DISCLAIMER
Angel Broking Limited (hereinafter referred to as “Angel”) is a registered Member of National Stock Exchange of India Limited,
Bombay Stock Exchange Limited, Metropolitan Stock Exchange Limited, Multi Commodity Exchange of India Ltd and National
Commodity & Derivatives Exchange Ltd It is also registered as a Depository Participant with CDSL and Portfolio Manager and
Investment Adviser with SEBI. It also has registration with AMFI as a Mutual Fund Distributor. Angel Broking Limited is a registered
entity with SEBI for Research Analyst in terms of SEBI (Research Analyst) Regulations, 2014 vide registration number INH000000164.
Angel or its associates has not been debarred/ suspended by SEBI or any other regulatory authority for accessing /dealing in securities
Market. Angel or its associates/analyst has not received any compensation / managed or co-managed public offering of securities of
the company covered by Analyst during the past twelve months.
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment
decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should
make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the
companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine
the merits and risks of such an investment.
Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's
fundamentals. Investors are advised to refer the Fundamental and Technical Research Reports available on our website to evaluate the
contrary view, if any
The information in this document has been printed on the basis of publicly available information, internal data and other reliable
sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this
document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way
responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report.
Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot
testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document.
While Angel Broking Limited endeavors to update on a reasonable basis the information discussed in this material, there may be
regulatory, compliance, or other reasons that prevent us from doing so.
This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced,
redistributed or passed on, directly or indirectly.
Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in
connection with the use of this information..
Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com
DISCLAIMER
Angel Broking Limited (hereinafter referred to as “Angel”) is a registered Member of National Stock Exchange of India Limited, Bombay
Stock Exchange Limited, Metropolitan Stock Exchange Limited, Multi Commodity Exchange of India Ltd and National Commodity &
Derivatives Exchange Ltd It is also registered as a Depository Participant with CDSL and Portfolio Manager and Investment Adviser with
SEBI. It also has registration with AMFI as a Mutual Fund Distributor. Angel Broking Limited is a registered entity with SEBI for Research
Analyst in terms of SEBI (Research Analyst) Regulations, 2014 vide registration number INH000000164. Angel or its associates has not
been debarred/ suspended by SEBI or any other regulatory authority for accessing /dealing in securities Market. Angel or its
associates/analyst has not received any compensation / managed or co-managed public offering of securities of the company covered
by Analyst during the past twelve months.
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment
decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make
such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies
referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and
risks of such an investment.
Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's
fundamentals. Investors are advised to refer the Fundamental and Technical Research Reports available on our website to evaluate the
contrary view, if any
The information in this document has been printed on the basis of publicly available information, internal data and other reliable
sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this
document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way
responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report.
Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify,
nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While
Angel Broking Limited endeavors to update on a reasonable basis the information discussed in this material, there may be regulatory,
compliance, or other reasons that prevent us from doing so.
This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced,
redistributed or passed on, directly or indirectly.
Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in
connection with the use of this information.
