Ascendas India Trust’s Distributions Fall

Ascendas India Trust Business trust Ascendas India Trust (SGX: CY6U) released its second quarter earnings last Friday where it saw its distributions fall.

The trust’s portfolio contains five Information-Technology business parks in India: International Tech Park Bangalore; International Tech Park Chennai; CyberPearl; The V; and aVance Business Hub. The first two business parks are aptly named for their locations in Bangalore and Chennai respectively, while the last three are all located in Hyderabad.

The basic numbers

For the three months ended 30 Sep 2013, AIT’s total property income – think of it as being analogous to a company’s total sales – gained 1% year-on-year to INR1.41b. Net property income dropped 5% to INR802m due to higher utility expenses.

Distributable income had grown 19% to INR544m on the back of higher interest income, realised foreign-exchange gains, and lower borrowing costs. The trust has a policy to distribute at least 90% of its distributable income, and has been retaining 10% of it since April 2012 “to provide greater flexibility in growing the Trust.

It was no different this quarter as distributions to unit-holders accounted for 90% of distributable income and promptly rose 19% to INR490m from a year ago.

But, not all of AIT’s unit-holders could enjoy greater distributions. Turns out, there was a private placement of 139m new units which diluted existing unit-holders’ stakes by almost 20%. This resulted in distributions per unit (DPU) for the second quarter to be flat at INR0.53.

When these Indian rupee figures are converted to our local currency, things look a little worse as a result of a weaker Indian rupee: Distributions only gained 8% year-on-year to S$10m, while DPU actually decreased 8% to 1.10 Singapore cents.

Operational highlights and the balance sheet

The trust’s occupancy rates across its portfolio stands at 97%, with a weighted average lease term of 4.9 years. Roughly 39% of the trust’s leases would be expiring by the end of its next financial year, so the progress of lease-renewals is something investors should keep track of.

So far, the trust is doing a great job in retaining tenants. The retention rate for renewed leases from 1 April 2013 through to 30 Sep 2013 was 95%.

As it is with any investment, financial stability is important and the balance sheet can give us such information. On that front, AIT has made some good forward strides compared to a year ago.

Total debt has decreased from S$249m to S$205m while gearing – the ratio of total debt to total assets – has gone down from 25% to 21%.

What’s next for Ascendas India Trust

Investors can look forward to the expected-completion of the Aviator development within the International Tech Park Bangalore around December. The Aviator is a 601,360 square-feet multi-tenanted office building that has already achieved leasing pre-commitments of a 100%.

In addition, the trust cited research firm Jones Lang Laselle Meghraj’s reports, which stated that rents are expected to remain stable in Hyderabad and Bangalore. Vacancy rates for the trust’s area of operations in Chennai stood at 27.2% and are expected to remain stable, “although there is substantial amount of new space slated for completion.” There’s a possibility of lower rents from the Chennai-properties should new developments start flooding the markets.

One big area of concern for investors would be the weakening Indian rupee. It is a risk that investors in the trust in Singapore have to be aware of. Since 30 June 2007, the Indian currency has weakened by almost half against the Singapore dollar. The exchange rate has declined from around INR26-to-S$1 to approximately 50INR-to-S$1, dragging the trust’s distributions down along with it.

AIT’s manager has been hedging its distributions, but the tide of a weak Indian rupee has swamped the hedging efforts. In addition, the hedging cannot help maintain the distributions in Singapore dollars if it has been declining even in the Indian currency.

And, that’s what AIT’s been going through in the last few years as distributable income has fallen from INR1.73b for the financial year ended (FY) March 2011 to INR1.707b two years later.

Should both trends – the weakening Indian rupee and a decline in Indian-rupee-denominated distributable income – continue, investors might be looking at smaller distributions down the road.

The shrinking distributions for AIT in recent years has probably contributed to the trust’s significant underperformance when compared to the Straits Times Index (SGX: ^STI) and FTSE Straits Times Real Estate Investment Trust Index (SGX: FSTAS8670) – two benchmarks that the trust can be compared against – since the start of 2010. AIT has dropped in price by a third, while the STI and the FTSE ST REIT Index has gained around 10% and 21% respectively.

For AIT to do well for investors over the long-term, it’s very likely that it has to grow its distributions in Singapore-dollar-terms even in the face of a weakening Indian rupee. It’s something investors should take note of.


Ascendas India Trust last closed at S$0.66 last Friday. At that price, the trust’s units are valued at 1.2 times book value, and carry a distribution yield of 6.7% based on its annualised DPU for the six months ended 30 Sep 2013.

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