The IPO development by the Knowledge Realty Trust (KRT) is a major occurrence in the Indian real estate industry that allows investors an opportunity to have some stake in the commercial property industry of the nation. KRT has attracted much attention since it is the largest office REIT, based on asset worth, in India. Backed by a joint venture between the Sattva Group and Blackstone, the trust has a portfolio of 30 Grade A office assets in the big cities of Bengaluru, Mumbai and Hyderabad.
The proposed IPO is expected to issue a large amount and will purely involve a new issue of units, and the proceeds will be allocated to debt reduction and general corporate requirements. With this move, the loan-to-value ratio of the REIT will be one of the lowest amongst its peers, making it to prospectively grow in terms of new acquisitions.
Key Strengths and Financials
KRT is a well-diversified landlord with a committed occupancy rate of 91.4 percent and over 450 companies operating on its assets among which there are many multinational companies. Such a variety of mix compounds the risk of concentration exposure and there is no individual tenant contributing to more than 6 percent of its gross rental revenue.
The REIT has an adequate financial condition with a net operating income (NOI) increasing 19 percent to 3,432 crores in the previous financial year. KRT uses its assets in locations which are considered as the irreplaceable micro-markets due to their strength and potential to appreciate their capital. The acquisition strategy in the company is also brand-neutral making it possible to acquire third-party developers enabling it to expand more and more.
The Pros and Cons of Investing in KRT
The advantage of KRT is dividends, since as a REIT one receives regular distributions. The trust has a forecasted distribution per unit (DPU) of 6.20, which is Rupees in the new fiscal year, and this makes the yield quite appealing. This price of the IPO could provide an attractive entry price to the investors since it is offered at a discount of 10% on its net asset value (NAV). But there are risks involved as with any investment.
REIT units may fall in value with the market, and a decline in the commercial real estate markets would affect the returns. The leverage level (it remains high even after the IPO) and the default towards the interest fluctuations should not be ignored, either. Before choosing to invest in the Knowledge Realty Trust IPO, investors are advised to look at their risk appetites and financial objectives.
Also Read: No Changes In RBI REPO Rates, Stays Unchanged At 5.5% In August Policy Meet
