CapitaLand India Trust looks to new markets as it pursues higher yields

[SINGAPORE] CapitaLand India Trust (Clint) will divest one-third of its data centre portfolio to its sponsor CapitaLand Investment, which is launching a new fund in India. 

In an interview with The Business Times, Gauri Shankar Nagabhushanam, the chief executive officer of Clint’s manager, said that four data centres in Bengaluru, Chennai, Hyderabad and Navi Mumbai will become the seed assets for the fund.

“The divestment is part of Clint’s portfolio reconstitution strategy, which will increase its financial flexibility to pursue higher-yielding opportunities,” he added. “The limited partners are conducting their due diligence and in due course, we are hopeful that the diligence will (be completed), and the transaction will go through.” 

The divestment is targeted for completion in the fourth quarter of 2025. 

Revenue contributions from Tower 1 of the Navi Mumbai data centre have started, and the development of the other data centres is under way. 

Nagabhushanam noted: “We want to crystallise the value creation because this data centre business is a new asset class which even globally not many people understand.”

He added: “If you look at our net asset value (NAV), data centres really uplifted our NAV in the second half, but the markets did not react because they were wondering (if) it’s an uplift. Is it real value? Is it book value?

“For us to be able to crystallise that value, the best way is to bring somebody and show that here is the NAV that we have created. And here is somebody who is ready to pay the same value for the asset.” 

Clint’s NAV stood at S$1.29 as at Jun 30. As at Friday (Aug 15), it was trading at S$1.18, an 8.5 per cent discount to its NAV.  

“At the end of the day, we are a business trust,” explained Nagabhushanam. “Now our focus is on dividend distribution. So we felt our exposure to construction was getting a bit high, so we wanted to divest some of… the data centre business.” 

For the six months ended Jun 30, Clint posted a net property income of S$113.6 million, 10 per cent higher than for the same period a year earlier. Income available for distribution rose 10 per cent year on year, to S$59.6 million.

Clint entered the data centre business around 2021, when there were many uncertainties surrounding the return to office during the Covid-19 pandemic, Nagabhushanam said. 

As office footfall declined, the business trust decided there was a need to diversify, he added. “The most risk-adjusted asset class was data centres. If people are not going to work physically, they are going to go digital. So we got into development.” 

At that point in time, there were not many data centres in India; even now, the country has data capacity for only one megawatt per million people, versus 20 megawatts per million people in Singapore. 

Nagabhushanam said that Clint is paying close attention to the development of artificial intelligence, which would determine how its portfolio shapes up. 

For the first half of 2025, Clint’s committed portfolio occupancy stood at 90 per cent. 

The business trust maintained a 9 per cent positive rental reversion across its assets. 

Nagabhushanam noted: “We are able to have fantastic reversions even in our older assets because of the active asset-enhancement schemes that we undertake for all of our assets. We want all of our assets to be up to grade, even if they were constructed maybe (a) couple of decades ago.”

International Tech Park Bangalore, which turns 31 this year, recently underwent a significant asset-enhancement initiative involving the installation of solar control window films, to give the buildings a fresh new look and achieve energy savings.

The installation of solar films, along with other initiatives, resulted in total energy savings of nearly 10 per cent. 

As at Jun 30, Clint’s portfolio includes 10 IT business parks, three industrial facilities, one logistics park and four data centre developments in India across Bengaluru, Chennai, Hyderabad, Mumbai and Pune. 

Over the next three years, Clint’s committed pipeline should increase from about 23 million square feet (sq ft) to 33 million sq ft, Nagabhushanam said. This includes existing assets in its portfolio, forward purchase, as well as data centre and IT building developments. 

While Bengaluru is India’s best-performing business park market, the second-strongest market in India over the last three to four years has become Hyderabad as the city has enhanced its infrastructure, he pointed out. 

The National Capital Region, which includes New Delhi, is another strong market which Clint hopes to enter at some point, Nagabhushanam said. The region is known for its established base of tech firms and sizeable skilled workforce.

When asked about the impact of the tariff situation on Clint, the chief executive replied: “India’s exposure to goods exported is very minuscule. The tariffs are not really going to move the needle for India in terms of how its economy is going to perform (as) the service sector is entirely out of the tariff regime.”

India’s key exports are its software and services; tariffs are not expected to have a material impact on the country, he said.

On Jul 30, US President Donald Trump announced that imports from India will be raised to 50 per cent for its purchases of oil from Russia. The new rate is expected to take effect on Aug 27. 

Nagabhushanam noted how India’s resilience in the face of tariff uncertainty is also reflected in how, for the first half of 2025, it had a record absorption of business park space. This was mostly driven by demand from global capability centres (GCCs), he explained. “Indian offices traditionally used to be IT service companies, banking, financial services and insurance companies… Now, today you have global corporates coming in, in huge numbers.” 

He added: “When new companies and global corporates want to set up shop in India, (they) are able to recruit people in bulk who (are) technically qualified, speak English and who are very active in terms of their learning capabilities.” 

By 2030, GCCs in India are expected to employ close to 2.8 million people and generate close to US$110 billion in business, Nagabhushanam said. “If you (assume) 2.8 million people, the ratio we use is about 1 is to 100. So you’re talking about 280 million sq ft of absorption that is required to house these 2.8 million people (who) are expected to be employed by GCCs.” 

Clint is well-positioned to meet this leasing demand with its on-the-ground leasing teams. “These are supported by a national leasing team headquartered in Bengaluru, which leverages its network to broaden our reach of multinational companies and for cross-selling opportunities across multiple asset classes, including commercial, industrial, and data centres,” he said. “This integrated approach creates a strong leasing network that enables Clint to maintain among the highest occupancy rates among our peers.”

Nagabhushanam also noted that CapitaLand Investment’s “established presence in India, proprietary deal origination capabilities and access to market intelligence” gives Clint a “distinct competitive advantage”.

“We are also able to leverage the extensive international network of CapitaLand Investment’s marketing team in Singapore, which has strong connections with decision-makers of MNCs based in Singapore.” 

He added: “We are able to cater to the tenants at all… levels, which is very unique. No other developer in India has those capabilities, which is why we are differentiated and which is why we have always consistently had the highest occupancies among our peers in India.”

Noting how Clint’s share price is closer to S$1.10 as at late July, compared to S$1 in June, Nagabhushanam said that the markets are “recognising the potential that is there in Clint, and hopefully this trend continues”.

“If you believe in the India economic growth (story) of an average of about 7 per cent, Clint is a very active vehicle (through) which you can… participate in the growth that’s happening in India.”