Embassy Office Parks REIT Ltd. (NSE: EMBASSY) Q3 2025 Earnings Call dated Jan. 30, 2025
Corporate Participants:
Sakshi Garg — Head of Investor Relations
Ritwik Bhattacharjee — Chief Executive Officer
Abhishek Agrawal — Chief Financial Officer
Amit Shetty — Chief Operating Officer
Analysts:
Puneet Gulati — Analyst
Satindar Singh — Analyst
Pritesh Sheth — Analyst
Abhinav Sinha — Analyst
Kunal Lakhan — Analyst
Dhiraj Dave — Analyst
Vishal Parikh — Analyst
Presentation:
Operator
Good morning, everyone. A very warm welcome to all for Embassy REIT’s Third Quarter FY 2025 Earnings Conference Call. Currently, all participants are in a listen-only mode. All speakers will address your questions during the question-and-answer session at the end. As a reminder, this conference call is being recorded. I would now like to introduce your host for today’s conference, Ms Sakshi Garg, Head of Investor Relations for Embassy REIT. Ma’am, you may begin.
Sakshi Garg — Head of Investor Relations
Thank you,. Welcome all to the Third Quarter FY 2025 Earnings call for. REIT released its financial results for the quarter and nine months ended, 31, 2022 yesterday. As-is our standard practice, we have placed our financial statements, earnings presentation discussing our performance and a supplemental financial and operating data books in the Investors section of our website at www.embassyofficeparks.com. As always, we would like to inform you that management may make certain comments on this call that one could deem forward-looking statements.
Please be advised that the REIT’s actual results may differ from these statements. Embassy REIT does not guarantee these statements or results and is not obliged to update them at any time. Specifically, any financial guidance and pro-forma information that may provide on this call are management estimates based on certain assumptions and have not been subjected to any audit review or examination procedures. You’re cautioned not to place undue reliance on such information and there can be no assurance that we’ll be able to achieve the same.
Joining me today are Ritik, our CEO; Abhishek Agarwal, our CFO; and Amish Shetti, our COO. We start-off with brief remarks on and financial performance and then open the floor to questions. Over to you.
Ritwik Bhattacharjee — Chief Executive Officer
Thank you. Sakshi. Good morning, everyone, and thank you for joining us this morning. Our business remains in fantastic shape, in large part due to the robust leasing environment in India that’s driven by GCCs and in particular, in Bangalore. We delivered our highest-ever quarterly revenues, NOI and total distributions and we are on-track to meet our leasing guidance and financials for the year. I’ve rejoined MC REIT as the CEO to ensure that the REIT continues to deliver value to all our tenants, our 100,000 plus unit holders and all our debt holders. We’re deeply grateful for all your support.
I also thank Arvind for his immense contributions to the REIT over the years and to the exemplary team at the REIT for all their hard work that’s always reflected in the way we run our business. So let’s run-through the operating details. We leased a total of 1.1 million square feet at 11% rental spreads. This includes approximately 700,000 square feet of new leasing and 400,000 of renewals. We leased approximately 70% of this area to GCCs, primarily from the technology, financial services and engineering and manufacturing sectors. We leased approximately 16% to multiple co-working operators, which is a segment that continues to benefit from enterprise demand for Flex spaces.
We closed the quarter with a portfolio occupancy of 87% by area and 90% by value. I do want to highlight that excluding quarter-on, where demand in — that’s in Puna where demand remains muted, we’ve already reached occupancy levels of 89% by area and 91% by value. With a strong pipeline of approximately 2 million square feet, we remain on-track to achieve our annual leasing guidance of 6.5 million square feet and a year-end occupancy guidance of 88% by area and 92% by valued.
On SEZ, we’ve converted 1.1 million square feet of SEZ area across Bangalore, Noida and Pune in Q3. Our total denotified and demarketed area now stands at 6.4 million square feet since we started the process, of which 74% is already leased. Around 400,000 square feet is under conversion and we’re confident completing this in Q4. On the development side, we handed over a 600,000 square-foot office star to a global banking major and Embassy tech village in Bangalore. We will deliver the remaining three towers that total 1.4 million square feet by the end of this financial year. Our development pipeline now totals 7.4 million square feet.
This will cost us approximately INR3,800 crores and result in incremental stabilized NOI of approximately INR800 crores, which implies a 19% yield on cost. Leasing demand in Bangalore remains robust. The calendar year 2024 clocked the highest-ever gross absorption of 74 million square feet and net absorption of around 45 million square feet. GCCs are driving the strength, coupled with robust demand from Flex operators. We see further momentum through CY 2025 and with our pipeline, strong relationships with leading GCCs and the leasing community, we remain ideally positioned to benefit from these leasing tailwinds across our portfolio.
I will now hand it over to Abhishek to present our financial updates.
Abhishek Agrawal — Chief Financial Officer
Thank you,, and good morning, everyone. Let me take you through the financial highlights for Q3. We grew both our revenue from operations and net operating income by 9% year-on-year to a record INR1,022 crores and a record INR829 crores respectively. The increase was mainly driven by new lease-up at high releasing spreads, contracted rent escalations and new buildings delivered and acquired during the period. Our hotel segment NOI grew by 16% year-on-year due to an occupancy uptick of around 400 basis-points to 59% as well as an ADR growth of 13%. We declared distributions of INR559 crores or INR5.9 per unit for the quarter, representing a 13% increase year-on-year.
This increase was driven by an uptick in our NOI as well as positive working capital changes, which was partially offset by an increase in our interest costs. During the quarter, we successfully raised INR1,000 crores of coupon bearing bonds at 7.73% to repay certain existing higher-cost debt and saved around 70 basis-points in annual interest. Post this refinance, our net-debt book totals over INR19,000 crores, implying a 32% leverage ratio and a 7.93% average in-place interest-rate. 51% of our total debt book is at floating rates, positioning us well to take advantage of any rate cuts in the future.
Lastly, on our forward financial outlook, we remain on-track to achieve our financial FY ’25 guidance. We continue to expect our NOI to be in the range of INR3 to INR15 to INR3,345 crores and our distributions to be in the range of INR22.4 to INR23.1 per unit. At midpoint, this guidance implies 10% year-on-year growth in NOI and 7% growth in DPU. While we will provide detailed guidance for FY ’26 during the next quarterly call, I want to highlight that we are confident of delivering an even stronger performance during the next year. This is in-line with our earlier commentary regarding Embassy REIT being on an exponential multi-year growth cycle.
We look-forward to sharing more with you at the end of this financial year. With this, let’s move to Q&A, please.
Questions and Answers:
Operator
Thank you. Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use their handsets while asking a question. We would also request participant to restrict their questions to two per participant. If you have a follow-up questions, please rejoin the queue. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Puneet from HSBC. Please go-ahead.
Puneet Gulati
Yeah, good morning and thank you so much and congratulations on decent uptick in DPU. My first question is, while NOI growth looks strong, we are seeing some bit of weakness coming on the solar side. Even the PLFs have been lower, while you talked about tariff being lower last-time. But PLS continued to be lower. Can you comment a bit on what’s happening there?
Abhishek Agrawal
Yeah. So Punit, this is Abhishek. So on the solar, as we had — during our guidance in the first-quarter, we had mentioned that this year the total revenue will be lower from solar because the tariffs had gone down. What we also saw that because this is a seasonal business during the quarter three, there was unseasonal range also and because of which the production was lower, the generation of the units was also lower, which actually doubled up the decrease, but that will become flattened going-forward.
Puneet Gulati
Yeah, it’s a sharply lower 20% down to 14.4% roughly in PLF terms. So just wondering what — so it’s just or —
Abhishek Agrawal
Is this just because of unseasonal rains and also the tariff job, both of these taken together?
Ritwik Bhattacharjee
Yeah, it’s a bit of a and it’s an unfortunate thing, but we can’t get around it right now, right? I mean, it’s just the way it is. Hopefully, there is sort of an uptick as we head into next year.
Puneet Gulati
Yeah, yeah. Okay. Second is on the working capital side, some bit of the support came from the working capital as well. If you can talk a bit about what are the elements there, possibly deposits, I mean, how much of deposits would have contributed? Some color would be good.
Abhishek Agrawal
Yeah. So Punit, there were a couple of reasons because of which working capital went up. One is what we had done is during this current year, we paid the property tax between Q1 and Q2. But during the last year, we had paid property tax in Q3 also. So that was one big mover. Second is, as you rightly said, security deposit, we received security deposit for all the leasing that we had done in Q1 of this year and Q4 of last year. So those two are the big components which — because of which the property — the working capital actually increased.
Puneet Gulati
How much would that deposit be roughly if you can?
Abhishek Agrawal
You can say deposit, the total increase is around — from Q3 this year to Q3 last year-around INR60 crores and the impact of property tax taxes almost the balance here.
Puneet Gulati
Okay, understood. And thirdly, if you can also talk about your Chennai splendid, which is also going to commission by June ’25, what is the status of leasing there?
Ritwik Bhattacharjee
Yeah, let me let me take that. I think Chennai for us was always sort of a strategic kind of growth market we wanted to enter. It obviously took a long-time to have this deal come to fruition. The pipeline what is pretty robust. I think we’re definitely looking at sort of close to sort of three or four — three or four major players sort of GCC-driven who are looking at the building. So I think the onus is really right now on building out sort of a pre-lease in the area of possibly 500,000 square feet, right?
So one of those should probably — we were hoping that we could probably get some of that in Q3. Some of the discussions have obviously slipped into Q4. So hopefully by the end of this financial year, we’ll have a positive update on that. But yeah, look, there is demand. There is — the blocks are online — coming online. We’re not going to stop on the development front. I think there’s just too much happening in the Indian leasing market for us to sort of slow-down on development. So I think Chennai is no exception to that. And I think one of those conversations will definitely pay-off.
It’s financial services, it’s telco, there’s some co-working, a bunch of people are pretty interested in it.
Puneet Gulati
So half of it should be leased-out before it’s ready. That’s how much —
Ritwik Bhattacharjee
We are on it for that.
Puneet Gulati
Okay. And there was also an interesting comment of 388,000 being renewed at higher than market rates. Can you comment upon how high versus the market and specifically call-out what those assets are.
Ritwik Bhattacharjee
Give us one second. Let me just get that.
Puneet Gulati
Yeah. Yeah. And also just Abhishek on the lower other income, some thoughts there would be useful. That’s all from my side, yeah.
Abhishek Agrawal
Puneet, I’ll take the other income point. So what actually happened is during the previous quarters, we had received around income tax of INR20 crores because unaccounted in the book.
Puneet Gulati
Sorry, your voice is shriding, Abhishek.
Abhishek Agrawal
Yeah, sure. Now is this better now?
Puneet Gulati
Yes, better. Yes.
Abhishek Agrawal
So on the other income side, what had happened is one, during the previous quarter, we had received certain income tax refunds, which were unaccounted in the books. So it came in as an other income. Also there were certain scrap share income. And the third component, which was a big component was the interest which we were receiving from M3. You will recall that in, we had one M3 project. So we were receiving interest on that.
Now that the project is delivered, the interest is gone.
Ritwik Bhattacharjee
Yeah. And on the renewals, let me just say that, look, it is 388 and at 8% higher effectively across six deals, I’d say the biggest one that we saw was a Swiss reinsurer in Golf Links that was sort of has been a big part of the portfolio. We also had Google Up in FIFC which went out and sort of renewed 150,000 square feet. And beyond that, you’ve got a couple of others. You’ve got effectively IBM and as well.
So I don’t want to go down completely name by name, but if you just get a sense of some of the big guys, including a VC firm, firm Express stars, there’s clearly sort of people who are looking to sort of keep sort of the marquee spaces and continue to sort of be — have us as landlords.
Puneet Gulati
Yeah. And basically willing to pay higher rents than what is available in the market. That’s what —
Ritwik Bhattacharjee
Yeah. Look, I think I mean it’s the age-old story, right? I mean at this point in time, there is a scarcity of like high-quality kind of spaces. So where you want to go and if you’ve been here, we’ve been part of — this is sort of the strategic part of the relationship building, right? You don’t — you try and sort of keep your marquee tenants, you make sure you get them what they want and at some point they will sort of keep paying the rents that are higher than the market.
You have to understand, Pruit, I mean, these are not — these are not expensive sort of propositions for the company — the caliber of the companies we’re talking about, right? So it’s —
Abhishek Agrawal
And Ritek, probably just to add, you know, Puneet, the entire absorption in the country today stood at about 49 million square feet on-net absorption and the net supply that came into the market was about 45 million. Thereby, we’re seeing that rental rates are getting pushed not side in key micro markets and some of these marquee assets that we control, we are seeing a great demand and thereby, you know, know almost nil vacancy and hence some of these renewals are getting renewed at higher than market price.
Puneet Gulati
Understood. That’s very helpful. Thank you so much and all the best.
Abhishek Agrawal
Thank you.
Ritwik Bhattacharjee
Thanks very much.
Operator
Thank you. Ladies and gentlemen, if you wish to ask a question please press star and 1. Once again a reminder, ladies and gentlemen, if you wish to ask a question, please press star and one. The next question comes from the line of Satindar Singh from Eon Limited. Please go-ahead.
Satindar Singh
Yes, good morning. Thanks and welcome back,. Rithik, my first question is regarding the new leasing and the pre-lease. Yeah. And so this quarter has been relatively softer compared to the quarters before. So anything to read in this or should one see this just as a one-off and 4Q should be again firing?
Ritwik Bhattacharjee
Yeah. Okay. So, nice to hear from you and thank you for the wishes. I just want to be very clear to the market, right? This is not a soft quarter for us. We had conversations that just have slipped into Q4 and we feel that none of the trends that we are seeing is that this is still a GCC market as evidenced in the leasing that we’ve done. It’s effectively a very much a non-SEZ market, which is most of the leasing that we’ve done. And overall, there’s just been a tremendous amount of sort of momentum that’s just going to be pushed into Q4.
We have — we — from a quarter ago, we upped our leasing guidance from 5.4% to 6.5 and we’re pretty confident we’re going to get that. So no, there’s nothing to read into this at all. I think the one big delta that kind of has played a little bit of a role in the numbers looking the way they are is that last year at this time, we did three major pre-leases that clearly sort of gave us a pretty big boost to the leasing number. But I think the pre-lease pipeline for us continues to be extremely solid, extremely robust.
So look, it’s difficult managing a business and reporting it every quarter, particularly when you’re looking at long-dated leases, just a lot of things need to kind of get done. Sometimes it’s just the numbers come out the way they are, but it doesn’t belie the momentum that we have in the business or anything else that imperils the way we run it or just the outlook. Look, I mean the way I think about sort of this year, it’s going to be a great year for Indian leasing again, right?
The office market is doing extremely well and we will continue to sort of see that come into our portfolio as well. At some point, this is why we’re doing the development. This is why eventually we’ll be on the lookout for growth. So no, there’s nothing to read into it at all. And I think everybody should take comfort from the fact that we are actually very stable and doing very well.
Satindar Singh
Thanks and that’s very good to hear. About the SEZD notification, so any outlook on that where we stand and what is the road ahead for the quarter?
Ritwik Bhattacharjee
Okay., if you see, we’ve denotified about 7.4 million square feet and we are on-track to denotify the 0.4 million square feet, right? And we’ve leased a significant part of whatever we’ve denotified and at very-high spreads. So the process has become simpler. We know the process having denotified about 7 odd million square feet, you know and as and when we see that there is space that gets churned out, we’ll denotify, the market is robust. We’re very confident about our leasing engine.
So in all-in all, it’s a very positive story for us because we’re getting the upside as well.
Satindar Singh
Yes. So anything more in pipeline for offering for denotification?
Ritwik Bhattacharjee
So I say that again,, we couldn’t.
Satindar Singh
Any more pipeline that we plan to offer to the government for denotification?
Ritwik Bhattacharjee
Yeah, about 0.4 million square feet is in the works for denotification.
Satindar Singh
Okay. Okay. Okay, sir. Thanks. Okay. And any — on data centers, are we looking at that as an opportunity in one of our parks or any view around that given that DCs seem to be the flavor of the time with robot deals and probably ties in well with what we do.
Ritwik Bhattacharjee
So data center is no certain not on the agenda right now. We have looked at sort of the feasibility of them, but I think our assets are kind of located where I think there’d be — you know, the economics of running one or building one for us right now just don’t make sense. I think we’ll stick to our bread-and-butter of office. And over-time, we could — we always continue to evaluate shifts in the market and the cost of actually building and operating different asset classes.
But I think it’s not on our radar right now and something that we won’t focus on.
Satindar Singh
Okay. That’s clear. Okay. And on quarter one, kind of your views on how do we handle the that asset given that we are about 39%? And also there is a renewal coming up in this quarter, okay. So any view on that, okay? Are we likely to renew it? And about the property plans on this asset broadly, okay?
Ritwik Bhattacharjee
Yeah. We’ve gone back-and-forth. I think we’ve been pretty transparent the market on and we’ve obviously got an IT services tenant there that for all intents and purposes will probably be an exit. Look, transparently, I think that’s an asset that we’ve been looking to effectively monetize in some way, shape or form if there was sort of something to do there. It’s clearly been sort of a kind of market where taken — we’ve continued to evaluate alternatives. There are two options, right?
One is either you sell it for a price that’s agreeable to us or two you wait for the market to come back. So worsely enough, I think there is actually demand that we’re seeing that’s beginning to sort of come up in Puna in, which has clearly sort of lagged sort of the other Eastern side of the market. But at this point in time, I’m not sort of shy to admit that it’s been a bit of a challenge in Quadron, but we continue to evaluate alternatives there.
Satindar Singh
Okay. Okay. And on the hotels at ETV, I was just looking at the supplementary data sheet and the GAV movement over this quarter has not happened. So is there word going on? What are our plans around the hotels given that our other hotels are doing very well and they integrate into our proposition very strongly, okay. So just to be on that.
Ritwik Bhattacharjee
Sorry, sir, it’s a little hard to hear you on that question. Can I suggest you come back-in the queue and we answer that you completely cut out there.
Satindar Singh
Yeah, that’s fine. That’s fine. Thank you.
Ritwik Bhattacharjee
Yeah. Thanks.
Operator
Thank you. We take the next question from the line of Pritesh Sheth from Axis Capital. Please go-ahead.
Pritesh Sheth
Yeah, hi, good morning and thanks for taking my question. Firstly, on other assets in Pune and Noida, what’s the leasing outlook there like those are seeing some kind of leasing every quarter. So by when can we reach 90% plus kind of or close to 90% kind of occupancy in those assets?
And second question is on the hotels. While we are making some very healthy EBITDA margins, but occupancy is still probably lagging the market a bit. So what’s — what’s the strategy to drive further occupancy there? Those are the two questions. Thank you.
Abhishek Agrawal
So let me take the first question. See, from a Noida market perspective, one of our asset is almost at 100% occupancy, right? We are working very closely on the oxygen like we’ve mentioned in our early earnings disclosure as well. We’ve got a very robust pipeline on the asset as well with some three large transactions that we are talking and hope to get that materialized soon.
Coming back to Pune, like we’ve always maintained that quarter one has been a little bit of an issue for us. However, again, with the uptick in the leasing momentum in the country, we’re seeing some conversations that we’ve actually started picking-up. But ETZ for us continues to pick the demand and we are very comfortable on the other two assets, that’s and ETZ.
Ritwik Bhattacharjee
Yeah. And look on the hotels, I think there are a couple of things to consider, right? One is, when you say this lagging the market, these are not — these aren’t weekend hotels. At the end-of-the day, when you think about sort of these are business hotels, which to sort of the quality of F&B, does sort of drive a fair amount of non-business traffic and particularly if you look at sort of what the Hiltons have done. So I think the base-case of the Hiltons occupancy, where we would like to actually see that is sort of obviously touching sort of the 70 plus mark, which is historically at the run-rate that we’ve gone at.
The one that I think has required a little bit of surgery, if you will, is the four seasons because I think there has obviously been a little bit of pressure on that. But even there, we’re actually seeing a fair turnaround. I mean, if you look at the recent results, it’s at 50% and we continue to be very focused on driving this higher. So the plan is we’ve got a new and a very efficient management team in-place. And I think we’re constantly looking at ways to sort of increase occupancy.
This is obviously a very buoyant hotel market and we are well aware of sort of some of the tailwinds in that across leisure, across business. And I think we’re seeing that. I think the business has gone up. We’ve done 22% EBITDA growth year-on-year as well. So we are seeing that. I think we just have to be persistent and keep plugging away to drive both occupancy as well as sort of all the ancillary revenue that comes from everything from conferences and F&B and so on and so forth.
Pritesh Sheth
Got it. That’s really helpful. Thanks for answering my questions. All the best.
Ritwik Bhattacharjee
Sure. Thanks. Thanks.
Operator
Thank you. The next question comes from the line of Avinav Sinha from Jefferies India. Please go-ahead.
Abhinav Sinha
Hi. And, congrats on your elevation to your role and good quarter to start with. On the — on the occupancy front for the company, see, we have seen some exits which were untimely in the past, but the — how are the trends now and how do you see this unfolding in FY ’26, ’27?
Ritwik Bhattacharjee
Yeah, let me start and Amit, maybe you can kind of kick-in. I think look, we saw 700,000 of sort of exits this quarter. It was majority sort of SEZ related and there was legacy tech in Tech Village and you obviously had IT services as well. For the quarter. There’s not sort of that much that we’re looking at for Q4. But you know, there will — there’s always the risk of some unplanned that comes up. We’ve obviously we budget and we make sure that — which is why we spent so much time thinking about sort of early sort of renewals as much as possible. And obviously, these are conversations that take place sort of very, very early-on with our entire leasing team.
I think the outlook for 2025 calendar of FY 2026, I think is definitely fairly good. We don’t really have that many sort of expiries coming up. And I think it’s all sort of in-markets where we have a likelihood or fair amount of likelihood of renewals. There’s clearly sort of the IT services sort of market that probably is just as big as the biggest risk. But the rest of it, we don’t see much expiries or exits coming out from the GCC side or any of sort of the big companies for that matter.
But Amit, if you want to give color on that, that will be helpful.
Amit Shetty
Thanks, Nick. Just as to start, for the nine months ending, you know and the last guidance that we’ve given as well, if you see about 3.6 million square feet was the total expiries that we spoke about, which got moved about 3.9, of which about 300,000 was early renewal and point one was the unplanned exit, right? So — and we’ve been very confident about our business. We’ve actually scrubbed our entire portfolio, so we know through our conversations with all our occupiers, their plans.
And overall from an ITES perspective, our portfolio now stands about 9% and with this, these are all stabilized, you know, portfolio. Again, IBM has been a rather recent renewal in that 9%. Some of the other guys have been rather recent renewals in that portfolio. So forward-looking, we don’t see any side wins or you know, any surprises for us. So having said that, we are in a very comfortable position with 89% — sorry, 88% occupancy by the end-of-the year.
I think we are very comfortable with the entire portfolio.
Ritwik Bhattacharjee
Yeah. So there’s $1.4 million coming up sort of in FY ’26. We’d probably look there will be some likely exits out of that, but we feel-good about sort of managing the rest of it and backfilling what leaves.
Abhinav Sinha
Great. I have two more questions. Let me just list them out in the interest of time. So one is, how do you see the outlook for gearing and in-line with that if you are thinking about some equity raise later down? So that’s one. Secondly, in-line with your initial comments on the properties, seeing now some above-market sort of rentals and I see the occupancy on marquee buildings, it does appear that the CBD CBD part is doing extremely well.
So does it like spread to the non-CBD parts or do you look-forward to maybe adding some CBT assets as you go-ahead.
Ritwik Bhattacharjee
Yeah, okay. Let me just start sort of on the debt side. We’re at 32% leverage right now. And frankly, I’ve said this for literally six years at this point in time. We’re always sort of pushing a boulder uphill when it comes to our leverage and we consider ourselves the best credit in Indian real-estate, right? I mean, if you look at — we have a slide in our deck that basically talks about how our interest costs we effectively used to raise capital at, Call-IT, 300 basis-points to the, that’s half to around 1.5 and we raised like INR17,000 crores of debt and have — just the register we have is just immense.
But having said that, it’s always a bit of a battle, right? I mean the is in this interest-rate environment where you’re constantly raising money at 8%, we always have to be on the lookout to a refi because it’s short-term-ish paper. We’re doing leases for 10 to 15 years and we’re financing paper, Call-IT three to five years and you consider that sort of a victory. It’s a tough, tough business.
So yeah, we keep an eye — we keep an eye out on that. Our debt team does an exemplary job of making sure that we have access to the best refi terms possible. And I think if you look at the 7.73 cost that we did on the 1,000 is always — it’s just an example of how we keep constantly rolling over paper at the best-cost, right? That being said, look, I mean, at the right time, if we can raise some equity, I’m not saying that we’re doing it right now or any of that, so please don’t read into that.
But yeah, having an equity cushion at some point will obviously help, but that’s also dependent on markets, market timings and sort of just the use of proceeds, right? We did try — we do have an enabling resolution right now and we will take a call at the appropriate time. So that’s one.
On the second one, I think you know we were CBD versus non-CBD, I think it’s more of a question that you could sort of ask relative to Mumbai or some of the big sort of commercial office standalone centers. I think it doesn’t necessarily work institutionally for a business park, dominant sort of grade and micro-market sort of quality that markets that we see. So I think we tend to kind of just think about micro markets, right, particularly in cities like Bangalore or whether it’s Chennai or any of these cities.
I mean, we’re struggling, for instance in Hinjawadi a little bit, but you look at sort of the northern corridor in Bangalore and you look at Manyata’s micro-market and it’s absolutely booming. So I think what we always look for is ensuring that we’re always sort of in the right market, I think — and we consider those to be sort of mini little CBDs, right? And within that, we’re always making sure that the supply is non-threatening supply, which is why we spend so much time boosting our assets, redeveloping, refurbishing and just constantly making sure that the supply comes on.
And look, if there’s opportunity for us in these micro — other micro markets to ultimately grow and potentially acquire assets, we will certainly look at it.
Abhinav Sinha
Great guys and all the best to the team.
Ritwik Bhattacharjee
Thank you,.
Operator
Thank you. The next question comes from the line of Kunal Lakan from CLSA. Please go-ahead.
Kunal Lakhan
We had great congratulations on an your elevation. Just one question from my side. So when it comes to GCCs, right, what’s the sense you’re getting in discussion with them considering the US policy-making currently and the philosophy there. Are you seeing any sense of like say, delay in their decision-making or holding up signing-up leases or in terms of like outlook going ahead also, like any color there would be helpful thank you.
Abhishek Agrawal
I just want to give you a little bit of a perspective from a country perspective and then kind of bring it down to the GCC. Last year, we saw net of — sorry, cross absorption of about 74 million square feet, of which about 60 odd percent was driven by GCC demand. India happens to be the second-largest hub for AI talent and also one of the largest pools for data scientists and analytics.
The IT talent has always been a record and Bangalore kind of is pivotal in this talent pool. Having said that, you know, overall, the country has seen robust leasing, again, led by GCC. We don’t see any softening or rather the demand has always been positive. Rather earlier this year, we saw three RFPs that have come out into the market, all led by GCCs.
So from us, it’s been a very positive story and we can — and we foresee in our conversations with the experts in the industry that this trend is going to continue for the next three to five years.
Ritwik Bhattacharjee
Yeah. Let me just add to that. I think, I mean, just step-back and look at sort of the bigger-picture, right? There is across — I mean, look at your business, Kunal, for example, right? I mean, you work-in financial services, the amount of stuff that we talk to asset managers, we talk to you know, brokers, our largest tenant is pretty much the world’s largest bank by capitalization, right? And I think that’s the kind — they continue to expand.
I mean, everybody, if you look at, we’re building out you know a complex in Manyata that’s already sort of pre-leased to a large Australian bank and there’s just people’s appetite just continues to be quite insatiable for sort of space. And of course, there’ll be sort of movement around the quarter and there’s no — at the margin, there might be sort of mild decision-making delays or whatever, but that’s more operational than it actually is on sort of broad-based themes that India is kind of slowing down.
We don’t — we certainly don’t see it on the leasing side. Sure, there can be decisions made on the kind of work you do and what that means in terms of AI and all that. But no, the broad sort of tailwinds are very much intact.
Kunal Lakhan
Sure, sure. I mean, I understand you’ve done great this year, this year in dirty, but just trying to understand like if there is any change in the narrative pre-election and post-election. That’s all. That’s what I was trying to?
Ritwik Bhattacharjee
No, no, we don’t — we haven’t seen that or maybe it’s just too early to call, but we haven’t seen it.
Kunal Lakhan
Sure, sure. Understood. Thanks so much and all the best.
Operator
Thank you. The next question comes from the line of Diraj Dave from Samwad Financial Services. Please go-ahead.
Dhiraj Dave
Yeah, can you hear me?
Ritwik Bhattacharjee
Yes.
Dhiraj Dave
Yeah. Am I — my voice is clear.
Ritwik Bhattacharjee
Yeah. Go-ahead,.
Dhiraj Dave
Yeah. My question would be basically when do we expect to cross INR6.9 rupees which we declared in March 2020, that has been the highest distribution. So when we shall — should we look-forward to next year, kind of guidance given the kind of growth you see in GCC? Well, I know, but what kind of thoughts that line, when we will achieve the peak quarterly distribution, which we achieved, five years back.
Ritwik Bhattacharjee
Yeah, look, you know that’s an interesting question. I think at this point in time, we’ll stay away from sort of commenting on that. I think for the last five years, we’ve really sort of toiled to ensure that net of — through a pandemic, net of — net of sort of high-interest rates and everything, we’ve done a fantastic job giving you the distributions. And now we’re entering the secular kind of growth cycle that we think is certainly going to be beneficial from a DPU perspective, regardless of sort of where interest costs are simply on the fact that it’s top-line and revenue-driven.
So I’ll stay away from giving you — I don’t know, I can’t sit here and sort of tell you when that can happen based on the fact that this happened in March 2020, but suffice to say that the 13% year-on-year distribution is any guidance or any sort of sign, we feel very good about the next couple of years actually in terms of sort of the entire leasing outlook and the developments that are coming online. So it’s definitely a growth cycle for us, but I’ll stay away from commenting on exact sort of numbers at this point.
Dhiraj Dave
Well, which you have not answered, but you have answered my question. So thanks a lot for that.
Ritwik Bhattacharjee
I know.
Dhiraj Dave
Yeah, you answered in the sense. Yeah, that’s fine. It’s sufficient. I appreciate your constraint also. My second question is, this time we see that the distribution component, the tax-free component or tax-efficient component is almost 90%. So going-forward, any kind of — next, say, two, three years, what should be the kind of — should we consume this Q3 component being the change of a taxpay — taxable and tax-free or interest and non-interest component or do you see major change kind of in next two years? If you can give some of indication on
Abhishek Agrawal
Abhishek, this is Abhishek. I think it’s very difficult to say about the next couple of years because it depends on what is the profit each of these SPV is making and that determines what will be the dividend and how we are funding it and how the debt is available, whether at the rate level or at the SCV level. But what we can say is you look at the number of this nine months and that will be the — I think that will be the indication of number where we will land at for the full-year this current year.
Yeah. For the next couple of years, we can say whenever we are giving the guidance that time we can discuss.
Dhiraj Dave
Fair enough. Thanks a lot for answering my question and wish you all the best. And I appreciate actually what we said in the difficult time, what kind of delivery you have done. I’m an investor for almost like four, five years and appreciate the team’s effort to serve the investors. Thanks a lot.
Ritwik Bhattacharjee
Thanks, thank you. That means a lot.
Operator
Thank you. The next question comes from the line of Vishal Parik from Kotak Alternate Asset Managers Limited. Please go-ahead.
Vishal Parikh
Hi, good morning, everyone, and welcome back with. Thank you. I wanted to check on the ETV hotels in terms of the construction spend. So the last two years, we’ve spent less than about, I think, think INR100 crores. So 12 months FY ’24 and nine months this year, our spend has been less than INR100 crores. And then we are projecting a balance cost of about INR700 crores plus and with our estimated completion of March ’26. Just wanted to understand, are there — what — how are you all funding it?
And do you think spending INR700 crores is possible or is it like in a hotel, there’ll be a lot of spend even after the completion date.
Abhishek Agrawal
So Vishal, Abhishek. So one is the way we are funding it is through debt because all the construction that we are funding will fund it through debt. Second is on the construction spend. Actually, yes, what you said is right. What will happen in a hotel is that we keep on constructing, but we have certain portions which we will spend even after the construction is complete, which is largely the retention and the unpaid amount. So yes, we will — we will be able to do that.
Vishal Parikh
All right. And just on the debt piece, in a debt schedule, I don’t see any sanction which has balanced limits of — I mean, to the tune of INR700 crores. So is it like we keep — I mean, we keep taking short-term debt and refunding the costs as and when they come or we take a sanction for the project overall?
Ritwik Bhattacharjee
So Vishal, so what we have done is we have estimated what will be our spend quarter-on-quarter. Based on that, we go-ahead to the banks or raise bonds depending on what is the requirement that we have. Have. So we take sanctions based on that. Not necessarily take a sanction for the full project because each and every project will span over a period of two, three years, some four years sometimes. So we take based on the necessity that we have for the next one year.
Vishal Parikh
All right. And can we take that the March ’26 date for completion, so quarter one of FY ’28, ’27, sorry, would be the first year for operations commencement or is there like sort of a delay from commercially operating the hotel per se?
Abhishek Agrawal
So Vishal, what will happen is there are two hotels there, one is the gardening and one is a five-star. So we are expecting both of them the way you said, but then if there is any change, we’ll come back to the market.
Vishal Parikh
Yeah. Sure. Okay. Thank you so much.
Operator
Thank you. Ladies and gentlemen, that was the last question. On behalf of Embassy REIT, that concludes this conference. Thank you.
Ritwik Bhattacharjee
Thanks, everyone.
Abhishek Agrawal
Thanks everyone.
Operator
Thank you for joining us and you may now disconnect your lines.