Mindspace Business Parks REIT (MINDSPACE) Q4 FY23 Earnings Concall Transcript

Mindspace Business Parks REIT (NSE:MINDSPACE) Q4 FY23 Earnings Concall dated May. 05, 2023.

Corporate Participants:

Kedar Kulkarni — Senior Manager, Finance & Investor Relations

Preeti Chheda — Chief Financial Officer

Vinod Rohira — Chief Executive Officer

Analysts:

Puneet Gulati — HSBC — Analyst

Kunal — BofA — Analyst

Arun — Unifi Capital — Analyst

Vivek Agarwal — — Analyst

Satinder Singh Bedi — Eon Investments — Analyst

Shashank Chawla — — Analyst

Kunal Lakhan — CLSA — Analyst

Sameer Baisiwala — Morgan Stanley — Analyst

Presentation:

Operator

Good afternoon, ladies and gentlemen, and welcome to the Mindspace Business Parks REIT’s Earnings Conference Call for Financial Results for the Quarter and Year Ended March 31, 2023. [Operator Instructions]. Please note that this call is being recorded. I now hand the conference over to Mr. Kedar Kulkarni.

Kedar Kulkarni — Senior Manager, Finance & Investor Relations

Thank you. Good afternoon, everyone, and thank you for joining the fourth quarter and financial year 2023 earnings call of Mindspace Business Parks REIT. At this point, we would like to highlight that the management may make certain statements that may constitute forward-looking statements. Please be advised that our actual results may differ materially from these statements. Mindspace Business Parks REIT does not guarantee these statements or results and is not obliged to update them at anytime.

I would now like to welcome our CEO, Vinod Rohira and our CFO, Preeti Chheda. They will first walk you through the business update and the financial performance during the quarter and year. We’ll then open the call for Q&A.

I’ll now hand over the call to Vinod. Over to you Vinod. Thank you, Kedar. I would like to extend a warm welcome to all participants who have joined us on the call today. Financial year ’23 has been the year of returning to normalcy. After innumerable debates on future workspace strategy and several months, years of working from home, a consensus has emerged within the region that office is going to be the mainstay of future work environments, with productivity being much higher at the office. Additionally, financial year ’21 and ’22 witnessed a huge spike in headcounts across the spectrum of tech services, which yet did not translate into increased office footprint. During this period, we expeditiously executed the business strategy of reenergizing our parks and keeping them ready for the renewal preference for experiential workspaces, with the highest standards of health, energy efficiency, wellness, ease of navigation and safety. We were able to carry out this complex task seamlessly during the downtime with minimum discomfort to our tenants. Over this period, we have also seen an increase in physical occupancies at our parks. Our parks have seen the physical occupancies, which fell below 10% during the pandemic now rise to circa 56%, with occupiers now formally working on returning to their offices. Further, organizations today desire to provide best-in class work environments to their employees that they would look-forward to visit every day and there is a prominent shift in demand towards quality CREDE assets managed by institutional asset managers. We achieved gross leasing of over 4 million square feet during the financial year ’22-’23. We started the year with a committed occupancy of 84.3%, which has risen by 470 basis-points during the financial year to end at circa 89%. The committed occupancy at our parks Pune, BKC and Malad are near 100%. Our parks in Madhapur and Porur have also seen the committed occupancy rise close to 95%. Healthy demand for our upgraded offerings at these locations has encouraged us to bring forward the timelines of future development in Pune, and also undertake redevelopment of existing buildings at our mines space Madhapur parks to create long-term value to our stakeholders. Delaying the implementation of SEZ policy reforms has kept the demand for SEZ spaces muted. Representations from industry associations have been made to the government to effect the policy overall at the earliest. These reforms would not only bring back the demand for these office spaces, additionally helping generate tax revenues and employment by increased occupancy. As per ITC reports, calendar year 2022 was the second-best year ever in terms of all-India office leasing. While several markets across the globe are yet to come close to pre COVID levels, the Indian office market has bounced back with the COVID induced slump — from the COVID induced slump. The vast availability of STEM talent in India, strong IT industry, offshoring capabilities, growth of BFSI industry and overall growth of the country has made India among the most promising markets for cutting-edge technology support services at a very attractive cost base. GCC’s and GICs looking for a reduction in costs and higher productivity along with young talent will continue to push forward the hiring process in the near-future. This will result in a need for expansion and consolidation. With the global recessionary environment forecasted, we expect the demand for office spaces to reactivate once the global economic conditions become more stable. We continue to explore other growth opportunities within the portfolio and gear up to capitalize on third-party acquisition opportunity. On the sponsor side, they are undertaking new developments in several key micro markets of the cities we are present in, which would add to the REIT growth pipeline. We continue to move steadfast in our ESG journey with increased focus on delivering on short-term and long-term targets. Our focus on sustainable operations has resulted in 97.3% of our portfolio being certified with a minimum goal LEED IGBC certification. During the year, we have come out with our Green Financing Framework and Green leasing framework, which would serve as a guide to our financing and leasing plans. We raised our first Green Bond in line with the principles set out in the Green Financing Framework. With this issuance, our collective green financing availed has increased to 19% of our debt outstanding. We are also engaging tenants with our ESG goals and it is critical to embedding our sustainability practices deeper within our operations. I would now like to take you through the specific operational updates for the fourth-quarter. We have leased 0.6 million square feet, of which 0.5 million square feet was on account of new and vacant area leasing and 0.1 million square feet was released at re-leasing spreads of 23.8%. The committed occupancy of the portfolio rose to circa 89%. Same-store occupancy stood at 89.1%. The average rent achieved on this 0.6 million square feet leasing was INR74 rupees per square-foot per month. We have handled the first phase of our datacenter in Airoli West to Princeton Digital Ggroup. Our revenue from operations grew by circa 13.9% year-on-year to circa INR5.4 billion. Our net operating income for the quarter grew by circa 9.2% year-on-year to INR4364 million. Our distributions for the quarter stood at INR2.85 billion or INR4.81 one per unit. We raised the INR5.5 billion through India’s first REIT level green bond issuance. The weighted-average cost of debt stands at circa 7.6%. Our portfolio is now further diversified with over 200 plus tenants compared to 175 plus tenants at the end of financial year ’22. We are proud to announce that Mindspace REIT is great place to work, certified for the second consecutive year. We received well, health and safety certifications for 41 buildings across our portfolio. We won four awards at the 14th Annual Estate Awards 2023 by ET Reality and Franchisee India. Business IT Park of the Year for Gera Commerzone Kharadi. Gera Commerzone Kharadi also won the award for the Most Sustainable Architecture Design. Our Office Building for the Year Award for Building 9, Airoli West. Aand Mindspace REIT won the commercial developer of the year for the Western region. With this backdrop, I hand over the call to Preeti to take you through the financial update.

Preeti Chheda — Chief Financial Officer

Thank you, Vinod. I would now take you through the financial update for the quarter and year ending 31st March 2023. Our revenue from operations for FY23 grew by 16.6% year-on year to approximately INR20.7 billion. Adjusting for one-time compensation received from a tenant in Q3 FY23, the net operating income stood at INR16.9 billion, recording a growth of 13.2 y-o-y.

Coming to the quarterly performance, revenue from operations for Q4 FY23 grew by approximately 13.9% year-on-year to INR5.4 billion. We recorded NOI of INR4.4 billion for Q4, registering a growth of 9.2% worldwide. Our NOI margins continue to be above 80%.

We announced a distribution of approximately INR2.9 billion, that is INR4.81 per unit for the quarter, recording a growth of 4.3% year-on-year. The distribution comprises approximately 91%, which is INR4.37 per unit of dividend, which is not subject to tax in the hands of unit holders. Approximately 8.9%, which is INR0.43 per unit of interest and approximately 0.2%, which is INR0.01 per unit as other income.

This translates to an annualized distribution yield of 6.9% on the issue price. Cumulatively, for the financial year 2023, we distributed INR11.3 billion, which is a INR19.1 per unit. Since our listing in August 2020, we have distributed a cumulative amount of INR27.9 billion, which is INR47.13 per unit. To further our commitment to sustainable business practices, we recently concluded the issuance of India’s first REIT level green bond. We released our inaugural green financing framework under which Mindspace REIT or its asset SPVs may undertake issuance of green debt securities in form of bonds or debentures. The framework is aligned with the Green Bond Principles developed by the International Capital Markets Association.

Using this framework as a guiding principle, we raised INR5.5 billion with a three-year maturity at a fixed coupon of around 8%. Also during the financial year, we raised aggregate INR15.4 billion through bonds across three and five-year tenures. Our aim is to have an optimum mix of fixed and variable-cost loan, spanning across various maturities and maintain a healthy balance between fund-raising from banks and capital markets.

We also expanded our investor base by attracting more insurance and pension funds to invest in Mindspace REIT in securities. We experienced high-interest rate situation in the whole of FY23, which offset the gains we made from the growth in NOI. We are hoping the interest rates to stabilize in FY24.

Our net-debt as on 31st March 2023 was approximately INR50.2 billion. In addition, we have undrawn committed lines of approximately INR13.7 billion from financial institutions. Our LTV continues to remain the lowest amongst our peers at 17.9%. Our robust balance sheet provides us the flexibility to pursue both organic and inorganic growth opportunities. In Q4 FY23, we appointed [Indecipherable] Private Limited as a valuer of Mindspace REIT. We also appointed JLL as the independent consultant to review the methodology and assumptions used by the valuer in valuation of Mindspace REIT portfolio.

Gross asset value of our portfolio as valued by the independent valuers as on 31st March 2023 stood at INR280.2 billion, recording a growth of 2.7% over 30th September 2022. 92.7% of our value comes from completed assets. Our NAV per unit has increased by INR1.6 per unit from INR370.3 per unit as of 30th September 2022 to INR371.9 per unit as on 31st March 2023.

As these instruments are gaining popularity among retail investors, our retail unit holder base grew by over 25,000 units during FY23. We are encouraged by this participation and shall work with industry associations and regulators to increase the awareness of this product among various categories of domestic investors.

We also welcome NSEs initiative of starting REIT and InvIT index. We hope this index would help bringing inflows into REITs and InvITs from active, as well as passive fund and thereby improve the liquidity of these instrument.

We also hope other exchanges support this instruments in similar manner and consider inclusion of these instruments in the mainstream indices.

With this backdrop, I hand the call over to the operator to open the floor for questions. Thank you.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions]. The first question is from the line of Vivek Agarwal — the first question is from the line of Puneet Gulati from HSBC. Please go-ahead.

Puneet Gulati — HSBC — Analyst

Yeah, thank you so much for the opportunity. My first question is with respect to the GAV and NAV numbers. So GAV growth has been impressive at 6.2 but NAV is only about 2% up on a full-year basis. It’s largely attributable to debt. How should we read this NAV growth number?

Preeti Chheda — Chief Financial Officer

So, hi, Puneet, Preeti here. The GAV has grown by approximately 2.7% over September and the NAV growth is 1.6 per unit. So essentially, it’s been approximately INR2 rupees growth. I’m not too sure what exactly.

Puneet Gulati — HSBC — Analyst

So, NAV growth has been slower than the GAV growth, right. I mean, should that be the case because then GAV would ideally grow in line with how market rentals or your contractual escalations would move, while NAV would largely be a function of where the net-debt is?

Preeti Chheda — Chief Financial Officer

Yeah, so, generally what happens is whenever — as you keep adding assets in terms of completions, your NAV also grows up, but your GAV also grows up only by a similar amount. So the impact on NAV is higher than the impact on the GAV. So even if — I am just saying as an example, if you had your completed portfolio, which would have grown by X amount, to that we add capex, which we are incurring, because that is also adding value to your GAV. But the similar amount because it’s debt-funded, gets added to your NAV. Therefore, you see GAV increase higher than the NAV.

Puneet Gulati — HSBC — Analyst

Right. Okay, understood. My second is, the average market rentals that you report seems to have fallen on a quarter-on-quarter basis. How should we read that? And what are the market rental trends that you are experiencing.

Vinod Rohira — Chief Executive Officer

Market rents have not fallen quarter-on-quarter. Market rents remained stable for each of the markets that we’re in. We are seeing demand not getting disrupted because of rents.

Puneet Gulati — HSBC — Analyst

And are you seeing an improvement in the rental environment or not yet.

Vinod Rohira — Chief Executive Officer

Certain micro-markets, depending on at what asset cycle you are seeing actually forming up rents.

Puneet Gulati — HSBC — Analyst

Okay, okay, that’s all from my side. Thank you so much.

Operator

Thank you. The next question is from the line of Jathin from BofA. Please go ahead.

Kunal — BofA — Analyst

This is Kunal instead of Jathin. Again, two questions. One, can you talk about the revisions with the expiry schedule for fiscal ’24. I mean what part of your customer-base is coming from and what could have been the reasons here? And then, Vinod, keeping in mind that you also commented that there is the outlook of recession that needs to be incorporated into the leasing plan, how would you think of the occupancy levels from here during the course of the coming year?

Vinod Rohira — Chief Executive Officer

So essentially, churning is part and parcel of most of these companies that you are seeing. The larger the portfolio across of India, you will have most of those large occupiers, recalibrating from time-to-time. And this happens every two, three, four years, not just in a COVID or pre-COVID environment. We are seeing this over the last 10, 15 years. So this is all part and parcel of their strategy to churn.

And most of these spaces that have come out a mixture of that. While we see them as a great — if you ask me mark-to-market opportunity because these were — these spaces were actually at older rentals. And we didn’t have adequate supply in those markets. Leaving aside whatever might happen to the SEG footprint, which we will figure out the denotification and take that forward. But otherwise, these become opportunities to release at mark-to-market.

Kunal — BofA — Analyst

Is there a category that these tenants might belong to, like either IT services or BFSI? Is there any categorization like that or for that matter, are you seeing that the SEZ spaces might be seeing higher exits versus non-SEZ.

Vinod Rohira — Chief Executive Officer

No, no it’s a mix of everything. It’s not that people are walking away from the SEZ because they don’t like SEZ or whatever. It’s more about what committed contracts they had taken or what footprint of jobs they were doing, for which if the demand probably has shifted, then those headcounts will move towards other headcounts that are needed for the other growth aspects, which is the churn that is taking place right now. It’s not specific to SEZ or non-SEZ.

Kunal — BofA — Analyst

Thanks. And if you could give us any color around how to think about either the occupancy trend from here are or the [Technical Issues] million expiries that you [Technical Issues]. What could we expect in terms of the renewal Percentage? Would it be a similar 75%, what we’ve seen in fiscal 2023 or some difference.

Vinod Rohira — Chief Executive Officer

I think we’ve got used to this now. So you will see exits as part of the portfolio coming in and going out. As long as you get your assets in the right quadrant, you are building them right, you’re keeping them right and your attracting top talent to come there and you have assets where the infrastructure in the larger play is in place, you are seeing actual shift of demand. We’ve seen that I mean, literally, we had a million square feet unaccounted for, not calculated for, exits that took place for us in the last financial year. Within the same quarters, we were able to release back because our assets were a far more attractive to the new occupier who just moved in within the same quarter. So you didn’t even probably see the blip, but to us, it was a very exciting time when we had sudden churn take place and we had clients take the space back. And it actually worked out well, because they liked the asset, they liked the location, they preferred it to other options that they had and we were able to release.

So we see that more in that light than anything else, honestly.

Kunal — BofA — Analyst

Yeah, thank you.

Operator

The next question is from the line of Arun from Unifi Capital. Please go ahead.

Arun — Unifi Capital — Analyst

Hello sir. What kind of NOI growth are we envisioning for FY24?

Preeti Chheda — Chief Financial Officer

Hi, Arun. I can’t lay a specific number, but all I can tell is that we believe in which has happened in FY23. The rent will — from that leasing will come in FY24. So you should directionally see a growth in NOI, but I won’t be able to quantify the percentage increase. And we have some area, which has got completed. So, rent from that also will keep adding to your NOI.

Arun — Unifi Capital — Analyst

Okay and regarding the — you all would have heard about Cognizant’s commentary yesterday that they would be vacating around 11 million square feet of office space. So, how do we — what impact this have for Mindspace?

Vinod Rohira — Chief Executive Officer

We have not heard or see any impact so far. And I don’t think we will see that impact in the short-term, coming future. I mean these are all headline news that keep — many headlines in the last 36 months. But it’s part and parcel of business for us.

Arun — Unifi Capital — Analyst

Okay. And just wanted to check on the footfall. It is now at 47%, right?

Vinod Rohira — Chief Executive Officer

56%.

Arun — Unifi Capital — Analyst

56%. Okay, that’s helpful. Yeah, that’s it from my side.

Operator

Thank you. The next question is from the line of Vivek Agarwal, Individual Investor. Please go-ahead.

Vivek Agarwal — — Analyst

Hi, my questions are as follows. Why is there such a big difference between actual occupancy and committed occupancy which has been there for quite some time now. That was the first question. And why has there been a fall in like-for-like occupancy. If we remove the area that has been [Indecipherable], which has got added to the portfolio area, then the like-for-like occupancy, if I’m not wrong, has fallen. Just wanted to ask regarding these two things.

Vinod Rohira — Chief Executive Officer

Okay, so first part of the question really is, because we continue to keep adding new supply into the portfolio. And that portfolio when the under-construction supply gets completed, you sign the LOIs and then it translates to lease and then the rent starts over a period of time, that’s why you’re seeing the difference between actual and committed occupancies. And that lag will continue because you’re going on infusing new supply. So that lag will continue to remain. These are all committed spaces, but still they don’t get converted to a lease. Those are the things that we will keep seeing and the other thing that also happened is, like I mentioned earlier, if a tenant vacated, it shows vacancy and then by the time we got the next tenant in the same quarter and he starts the rent, till that covered occupancy gets replaced, you’re seeing that gap.

Vivek Agarwal — — Analyst

Understood. And the fall in the like-to-like occupancy sir. If I remove the pay lease area, then, if I’m not wrong, the occupancy has come down to somewhere around 82% or give or take 0.5%. [Speech Overlap].

Vinod Rohira — Chief Executive Officer

It was exactly the same — it was exactly the same logic. Full occupancy was 82.7%. It moved to 83.4. It’s because Amazon left and then we signed HighRadius immediately. And till that gap remains, you’re seeing that difference which got refilled back in.

Vivek Agarwal — — Analyst

Understood. Sir, two more questions. The tax advantage that we have for distribution, do we have a sense for how long that is going to last, because then that actual component will increase at some point in time.

Preeti Chheda — Chief Financial Officer

So, hi. I’m not sure of what tax advantage you are talking about.

Vivek Agarwal — — Analyst

Distribution being tax-free significantly 90%.

Preeti Chheda — Chief Financial Officer

Yeah, so today our composition of distribution is essentially dividend, which of course is tax-exempt in the hands of the unit holders and a small portion is interest. Now, going forward, as I’ve said in the past, it all depends on the capital structure, how that shapes up. And also, when we start acquiring new assets, how much does that new asset bring in, in terms of debt. So, to the extent our capital structure changes, the competition of the distribution could undergo change.

Vivek Agarwal — — Analyst

Do we have any sense like the where how [Indecipherable] headed in the next couple of years, three years, five years.

Preeti Chheda — Chief Financial Officer

Near term- I won’t be able to comment on such a long-term, but at least in the immediate future, we expect this to continue as it is, and thereafter, depending on how the capital structure emerges, the competition could change.

Vivek Agarwal — — Analyst

Thank you. And the last question, why was there a fall in the area of under construction in Airoli East?

Vinod Rohira — Chief Executive Officer

So while we continue to have the potential to build up to two million-odd square feet in that park, the financial modeling was done around 800,000 odd. So we’ve just kept it to that for the sake of simplicity. The potential continues to be there. As and when we see the opportunity, we will build.

Vivek Agarwal — — Analyst

Thank you, so much. Thank you, Ma’am.

Operator

Thank you. The next question is from the line of Satinder Singh Bedi from Eon Investments. Please go-ahead.

Satinder Singh Bedi — Eon Investments — Analyst

Thank you for the opportunity. So I got a couple of questions for Vinod and there are a couple for Preeti. So, Vinod, out of the 25.8 million completed area, what is the breakup of SEZ and non-SEZ and what is the occupancy that we have for these respective buckets?

Vinod Rohira — Chief Executive Officer

So it’s in the range of 55-45 there abouts. From an occupancy point-of-view, we are 95% leased on the non non-SEZ space and 88% odd in the SEZ space.

Satinder Singh Bedi — Eon Investments — Analyst

Okay, so 55% for SEZ you are saying.

Vinod Rohira — Chief Executive Officer

55% for non-SEZ, 45 for SEZ.

Satinder Singh Bedi — Eon Investments — Analyst

Okay, 55% for non-SEZ. And I’m assuming that the incremental development is mostly non-SEZ?

Vinod Rohira — Chief Executive Officer

Yes, they’re all non-SEZ.

Satinder Singh Bedi — Eon Investments — Analyst

And opportunity that you see in terms of being able to denotify a complete building. Do we have any such in the portfolio that helps us increase non-SEZ without waiting for the changes in the DESH Bill.

Vinod Rohira — Chief Executive Officer

Yes, absolutely. So, fortunately for us, between 4 million and 5 million square feet are small buildings, each of 300,00, 350,000 odd square feet in our portfolio. So we are going on denotifying building by building wherever we see the opportunity to offer it and bring it into the spectrum of non-SEZ supply. So we’re continuing to do that while we wait for DESH and other amendments to come through to the SEZ Act.

Satinder Singh Bedi — Eon Investments — Analyst

Okay, and what is the percentage of kind of tenants in terms of CREDE that come into GCC category and what is IT services and within, IT services, what percentage is typically Indian IT?

Vinod Rohira — Chief Executive Officer

So essentially 20 to 80 will be GCC, GIC equivalent. The Indian companies on our footprint who are servicing global clients will be in the range of about 10% odd.

Satinder Singh Bedi — Eon Investments — Analyst

Okay, okay, fine. And on this, there is tenant improvement in free rent. So, do we give out the tenant improvement allowance and digital investment or is it paid for by the client. So just wanted to understand the clients.

Vinod Rohira — Chief Executive Officer

We have not yet offered any tenant improvements to any client. If we do, we do long amortization of fit-outs for clients that we believe have stable revenues and stable rent credit and we amortize that along in addition to the rent with lock-ins, etc.

Satinder Singh Bedi — Eon Investments — Analyst

Okay, fine thank you. Preeti, you’ve said the average cost of borrowing at year end is 7.6%. So assuming, obviously, some of these come up for renewal and some of it is anyway floating. Assuming nothing changes from now, so the refer base at the present level of 660, how does our interest-rate move ceteris paribus through the year? So what is the incremental impact of interest?

Preeti Chheda — Chief Financial Officer

Yeah, if we do not see any further increase in the repo rate and it remains where it is, then from the levels which we are seeing in March 23, we expect another 20 odd bps increase in the year come, because some transmission of interest-rate action not happened, which we expect to happen now because they were reset, which has spread out longer. I would say 20 bps is something which you would see from now.

Satinder Singh Bedi — Eon Investments — Analyst

It’s also to see the NCD because that I assume that will be — that will need a quantum jump because we got INR200 crores of NCDs also coming up for renewal this year?

Preeti Chheda — Chief Financial Officer

Yeah, but INR200 crores is very small in the overall debt profile, just about INR200 crores on INR5,000 crores. So, that INR200 crores is not going to move the needle. Essentially, this increase will come from the [Indecipherable] option.

Satinder Singh Bedi — Eon Investments — Analyst

And what percentage of this INR6,400 crores is towards capex — deployed towards capex and hence capitalized?

Preeti Chheda — Chief Financial Officer

So essentially, most of the case — most of the debt, which has been raised, of course, this is a historical debt which comes in and then you have been adding capex debt to this. So, like for example, in FY23, we have about INR700 crores, INR800 crores of debt, which we have added because of capex. So, I would say that essentially the incremental debt, which will keep coming every year will be largely attributable to the capex spend.

Satinder Singh Bedi — Eon Investments — Analyst

But what portion of the INR5,400 is capex-linked?

Preeti Chheda — Chief Financial Officer

Essentially, there is nothing like capex, because all the debt which we’ve taken us is in form of LRD or NCD at the REIT level. So we have not taken any construction finances. That is what you’re asking? All of this is LRD debt or NCD.

Satinder Singh Bedi — Eon Investments — Analyst

[Technical Issues] point of view of understanding this impact of this loan on the bottom line, on the distribution in terms of interest outflow. Hence, part of it goes towards a debt capitalized. So I just wanted to understand what is the interest cost that will impact the distributions in this year? That was objective.

Preeti Chheda — Chief Financial Officer

Yeah, yeah, so the interest cost — whatever we are going to incur going-forward, I mean, in this current year, will obviously all be on account of capex. So that will get capitalized and approximately, I would say, close to around INR50 crore odd interest is something which we expect to get capitalized.

Satinder Singh Bedi — Eon Investments — Analyst

Okay, I’ll probably kick it off. Okay, thank you. I got some more questions. I’ll come later. Thank you very much.

Preeti Chheda — Chief Financial Officer

Thank you.

Operator

Thank you. The next question is from the line of Shashank Chawla from [Indecipherable]. Please go ahead.

Shashank Chawla — — Analyst

Hi there, thanks for the opportunity. So my first question is on the vacant space. So can you give an idea how much of that is SEZ and non-SEZ. And then in terms of your plan to convert some of the space into non-SEZ, where are we in that process?

Vinod Rohira — Chief Executive Officer

Sure, so we had about close to 800,000, 900,000 of vacancy in the non-SEZ and about 1.6 million odd in the SEZ. Out of that, one building of 400,000 square feet is on verge of denotification, which we will get through in the coming quarter, which will get released for non-SEZ leasing. And then, the rest, we will keep following up in the pipeline.

Shashank Chawla — — Analyst

Great. And so there is no progress on the DESH bill or when it might be implemented?

Vinod Rohira — Chief Executive Officer

We don’t have visibility on when it will come. I mean lot of representations made, lot of interactions going on. When it comes is really anyone’s guess. But, we have to kind of wait for that. But our plan B of denotifying is already in place.

Shashank Chawla — — Analyst

Right. Okay and if I remember correctly like this was a couple of quarters back when you had mentioned by the end of FY23, you might see the occupancy above 90%, so we are shy of that. So what’s your expectation of how occupancy is trending in the future? Would it necessarily have to sort of wait for the DESH bill before we can actually see occupancy move up meaningfully?

Vinod Rohira — Chief Executive Officer

You don’t necessarily have to wait for DESH. We certainly have to get the denotification process sorted out so that we can see a movement towards getting that vacancy occupied. So it will be a process that we will follow and while the churn will give us opportunity to release at higher mark-to-market opportunities.

Shashank Chawla — — Analyst

Right, okay. And just on the Chennai region, so I remember in the previous call, you mentioned that from committed to actual occupancies, say like two to four months on average, but in Chennai, we’ve seem like committed occupancy was at 60% in the second-quarter, 90% in the third, and 90% in the fourth, whereas the aactual occupancy hasn’t moved up from 33%.

Vinod Rohira — Chief Executive Officer

So client street outs are actually going on as we speak and they should be operational within this coming quarter, followed by the next quarter. Because they have taking space in tranches, now it’s 97% let.

Shashank Chawla — — Analyst

Okay fine. And the other thing was, just there were some exceptional INR1.4 billion for this year. I just wanted to check what that amount is. And I’m guessing this is a non-cash or it doesn’t have any impact on any of the cash flows. But if you can throw some light on that?

Preeti Chheda — Chief Financial Officer

Yeah, so that will be the write-off of the building, which has gone under redevelopment. So under the Indian Accounting Standards, you need to write-off the amount because the building is getting demolished. So it’s just write fund is the noncash item.

Shashank Chawla — — Analyst

And how was this value in the gross asset value out of NAV like? Was it valued at the higher amount?

Preeti Chheda — Chief Financial Officer

Yeah, yeah, so obviously. That’s the reason we are doing the redevelopment. So what happens is that the NDCF of the revised and in the new redeveloped asset is what is considered in the GAV.

Shashank Chawla — — Analyst

Right. Okay, okay, fine. Yeah, thanks a lot.

Operator

Thank you. The next question is from the line of Kunal Lakhan from CLSA. Please go ahead.

Kunal Lakhan — CLSA — Analyst

Hi, hi, good evening, Vinod and Preeti. Vinod, I know you addressed this question earlier, but just again, like trying to pick your grain on this — the whole Cognizant commentary, right, in terms of 11 million square feet is a very stark number, even on all India portfolio, right, say 600 million square feet, 650 million square feet is like 2%. And that is just one occupier, right. What I’m trying to understand is like, you know, have we been having these discussions or have we been getting these indications from these IT services guys on these lines of like of, they adopting this tier-two city strategy or like a hybrid being a very large part of their model and essentially going-forward. And could this be a trend going ahead, which may get adopted by other IT players. I just wanted to understand your thoughts on this.

Vinod Rohira — Chief Executive Officer

No. These are motherhood statements. I don’t know if you remember some time ago, TCS said 90% will be work-from-home. Then they flipped, said 90% will be work from office. So, these are all, I mean, these are news articles which are giving you information about companies who are looking at, surrendering back space or they are looking at reducing headcount, but these are a process of 12 to 18 months. Some of it is already implemented and done with in the last one year. And this is a constant churn with multiple companies.

You may have seen Amazon in the last one year gave up between 2 million square feet and 3 million square feet, 4 million square feet. Accenture gave up 3 million square feet, 4 million square feet. All of these are part and parcel of their business strategies. And when the business bounces back, they come back and take spaces in 0.5 million square feet and 1 million square feet, really quickly.

So we’ve seen that happen on and off across the last couple of decades of being in this field. So we don’t really get caught up by all of this. We see what our asset is like? What is the mark-to-market opportunity? Where can we place that asset, if at all anything like that happens within our portfolio?

Right now, we don’t have any such indication, but we are always ready because our portfolio is right up there and there are customers who are looking for space to take up. And we’re happy to leased. So, it’s part and parcel of business.

Kunal Lakhan — CLSA — Analyst

Sure, sure fair enough. Just on those lines only, like what is the profile of the customers who are actually kind of looking to take up more space? And then, just a related question on that is, if you can also like give some color on your discussions with let’s say GCC’s and say non-GCC’s or largely IT services companies look, how are they thinking about on the office expansion plan?

Vinod Rohira — Chief Executive Officer

Sure, so the third party service providers are taking a lot of space right now because in some way, there is a capex freeze with the larger GCCs, GICs for incremental investments for the short-term. At the same time, they want headcount. So we are seeing a lot of the third-party service providers, especially in the tech and in financial services sector, getting additional demand for seats to service.

And those players have taken a lot of space in the last couple of quarters and we continue to see that trend going-forward. Then there are some large tech companies who are doing cutting edge tech for 5G and related equipment where they have labs and technology within India for their global practices. We have seen them grow significantly and continue to ask for more space. So there are green shoots of demand coming out of all of these spaces. And they are looking for space and they are growing. Obviously, the large RFPs are not there. Those large RFPs will probably not be there for the next two-three, four quarters. But you will continue to see demand for 50,000 square-foot, 100,000 square-foot, and 150,000 square-foot on a constant basis. and that is really exciting because that’s where the churn gets used. When it’s 1 million square feet, 2 million square feet, generally conversations around build-to-suit. They don’t generally fall into the bucket of speculative commercial leasing space. So the smaller demand is really attractive because we have space to offer. and that is really exciting because that’s where the churn gets used. When it’s 1 million square feet, 2 million square feet, generally conversations around build-to-suit. They don’t generally fall into the bucket of speculative commercial leasing space. So the smaller demand is really attractive because we have space to offer.

Kunal Lakhan — CLSA — Analyst

Sure, sure. And just lastly one data point. What would be the percentage of occupied by IT services companies excluding the GCC?

Vinod Rohira — Chief Executive Officer

You are saying, third-party services?

Kunal Lakhan — CLSA — Analyst

Yeah.

Vinod Rohira — Chief Executive Officer

Yeah. So I mean, there are different segments, you can call as third-party. Essentially what we would kind of put it on a pie-chart, you will see technology and process is almost at 46%. Financial services would be about 18%, 19%. You will have telecom and media at about 8%, 9%. You have engineering and manufacturing-related tech at 7.5%. We have healthcare and pharma at 5.5%, e-commerce at about 2%, professional services are about 6%. So all of these combinations are working through now in this, if you factor for third-party. I mean let’s look at, for example, third-party services being done by L&T, TCS, Wipro, Infosys, they would probably the non-GCC areas in that sense for third-party, including some of the global players would be about 50% odd and GCC would be 50% odd.

Kunal Lakhan — CLSA — Analyst

Got it, got it. Thanks so much and all the best.

Operator

Thank you. The next question is from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead.

Sameer Baisiwala — Morgan Stanley — Analyst

Hi, thank you and good evening everyone. First question is on the ROFO asset. It looks like the Raidurg project is kind of shared, it’s fully completed, fully leased. So, what’s — why has sponsor decided not to go ahead with it?

Vinod Rohira — Chief Executive Officer

So I don’t think. We’ve just deferred that. We were just waiting for stable full occupancy of Qualcomm to take place and for them to exercise their option for the space etc. So, I think this will be very much on the offering in the coming quarters. We are very keen to take this in the REIT. It’s an absolute triple A-grade asset.

Preeti Chheda — Chief Financial Officer

Right, Sameer, we will just weight. You know as we had said that will also wait for the markets to improve a little before we get that asset. But for sure, we are very keen to take this. [Speech Overlap]. There is no question of it being shared.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay, I’m a little confused just because until last Q3, it was under very active evaluation and now that it’s fully leased and completed, now we are kind of you know taking some time off. So.

Preeti Chheda — Chief Financial Officer

It means more to do with markets just improving a little for us to get that asset into the portfolio, but.

Vinod Rohira — Chief Executive Officer

We are very keen to get it.

Preeti Chheda — Chief Financial Officer

We are very keen to take it in.

Vinod Rohira — Chief Executive Officer

In fact, there are some more assets in the row for which have now got completed and we will start looking at those as well to be infused at a relevant time.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay, got it. The second question is on the NDCF for fiscal 2024. So, Preeti, I mean, if you can just help us on two things, a, the pluses and minuses. I understand NOI would grow and just some marginal uptick in interest. So how does this play out into NDCF or are there any more fact pluses and minus, who you need to keep in mind.

And second is, in fiscal 2023, you got the benefit of INR120 crores from Pocharam proceeds. So how do you plan to make up for that in fiscal 2024.

Preeti Chheda — Chief Financial Officer

Yeah. So, Sameer, if we don’t have too many surprises in the years to come and obviously, we are hoping the NOI to see a healthy growth. But some of that NOI obviously will be eaten up by the increase in the interest cost, both on account of the additional capex effect or NDCF, but because there has been an increase in interest cost versus last year, so to that extent, cost will go up and then our second is also because of the interest rate.

And secondly, we are hoping that in the year to come, we would not be having any income support. We should be able to manage with the operating cash flows. So to that extent, to answer the second part of your question, we may not really need to have another Pocharam kind of proceeds. So that’s broadly how I look at NDCF for the next year.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay, understood, excellent. Preeti, you are going to kind of unwind the income support. And just final question, Vinod, how do you see 89% committed occupancy over next 12 months?

Vinod Rohira — Chief Executive Officer

So the way I see it, that actually in the non-SEZ,we have hardly any space left. So I was wishing we would have got more supply really quickly, which we are preponing construction. So I’m hoping whatever churn comes, if it comes, we are able to reuse it back quickly. Some churn may come and we are actually waiting for that because we have no real supply in the non-SEZ. At the same time, our focus is really to push the SEZ denotification for wherever we have independent buildings, which we can do notify so that we can bring in that vacancy into use and get that to occupancy. That’s the only thing that’s kind of dragging us right now. Otherwise, we are seeing demand in those micro markets.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay, sir. I guess, out of 1.6 million square feet SEZ, 0.4 million square feet goes out, so gets denotified. So, 1.2 million square feet on a total base of 25 million square feet. So roughly about kind of mid 90s is where you can potentially move.

Vinod Rohira — Chief Executive Officer

[Technical Issues] Puna, we have 100% already let fully and that’s why we are trying to bring the under-construction building much more earlier. In Hyderabad, Madhapur, we are almost 95.5% let. I’m hoping there’s some churn there because the rents for the old occupiers are really low. And this has become a grade A asset in Hyderabad for us. So, whatever churn comes, we will be able to mark-to-market it really well.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay, great. Thank you so much.

Operator

Thank you. The next question is from the line of Satinder Singh Bedi from Eon Investments. Please go-ahead.

Satinder Singh Bedi — Eon Investments — Analyst

Yes, thank you for the followup. Vinod, how do we measure the physical occupancy source because this sounds slightly nebulous. So when you say 56%, how do you define this?

Vinod Rohira — Chief Executive Officer

So there are different measures because there is no straight-line metrics. We count cumulatively headcount per week of the people that came into work. In certain offices, it is three days a week. In some offices, it’s every alternate day, but cumulatively, let’s say, for example, we have 11 million square feet in a park, so on a thumb rule basis, one in hundred, we should have 1.1 lakh people. If there is 56,000 people coming in and out every week, cumulatively — not cumulative, on a daily basis, then that’s our occupancy.

Satinder Singh Bedi — Eon Investments — Analyst

Okay, okay, fine. I think that seems reasonably scientific. Okay. Second, Sameer asked the question earlier. I don’t know, we are talking of the same-asset. So this could The Square Avenue 98B BKC ANNEX. So this was one of the assets being considered for acquisition earlier and this presentation does a mention it. So any update on this, please?

Vinod Rohira — Chief Executive Officer

Sorry, we were all able to share you right. The words were little.

Satinder Singh Bedi — Eon Investments — Analyst

I don’t know if Sameer’s question was for the same-asset. So there was this mention of the The Square Avenue 98B BKC ANNEX being mentioned as one of the assets being considered for acquisition. This time, it has not been included. So any rethink on this.

Vinod Rohira — Chief Executive Officer

So we we’re bundling it together, which is why we waited on it. The same [Technical Issues]assets will also to the portfolio.

Preeti Chheda — Chief Financial Officer

Okay, okay, okay, fine. Preeti, just for housekeeping, what is the value of unit capital that is left. I understand most of the payouts at this stage are in the form of dividend and the balance is interest, so no capital is getting paid out. But what is the total value of unit capital in the REIT. So the total value of unit Capital, [Technical Issues] obviously is INR16,800 crores was what came in. So that was unit capital, but obviously you will see adjustments to that. I think that may not be too relevant in terms of measuring, especially if you’re looking at the distribution.

Satinder Singh Bedi — Eon Investments — Analyst

Okay, okay, okay, yeah, so, so, how should one look at the future capital structure, which now that okay there is clarity on this part that the repatriation of capital is tax free till it winds down to 0. So how does one look at the future capital structure planning when looking at future acquisitions, because this becomes a tool for an efficient return of capital.

Preeti Chheda — Chief Financial Officer

Yeah, you’re right. The much awaited clarity on this fees [Indecipherable]. We are thankful to the government for clarifying it. So as of today, we are not doing any of that. But as I said earlier in the call that, in future, it depends upon the capital structure. If there is need arising, for which we need to do a similar structure, we will do. And now, of course, it’s pretty efficient from a tax perspective also with this amendment. So it all depend how our capital structure emerges in the years to come, our acquisitions. When the acquisitions happen, with what debt profile do those acquisitions come in. And, you know, what kind of efficiencies, which we can bring into the capital structure. So, I think it will be a combination of various things, but as I said in the immediate future, we see that a maximum payout will continue to be by the off dividend itself because we are entities, which are generating good amount of distribution through dividend.

Satinder Singh Bedi — Eon Investments — Analyst

Okay, okay. One final on the NDCF, so have INR235 crores of capex during this quarter and we had INR20 crores of positive working capital flow also. But we drawn down INR261 crores okay off net financing. So I hope some of this drawdown is not going to — not going towards supporting the distributions because actually the capex was INR235 crores and we had INR20 crores of support from working capital this year, this quarter. So against the INR215 crores, we’ve drawn down INR261 crores.

I understand we retained about INR9 crores at the SPV level, okay — at the REITs level because we paid out lesser than what we got from the SPVs, but still that’s about INR28 crores of gap.

Preeti Chheda — Chief Financial Officer

Yeah, so what happens is that, generally, working capital is a number which keeps changing quarter-on-quarter. And therefore, you will see some quarters that our working capital is high, some quarters that our working capital in low. So to that extent, wherever we have little bit of shortfall, that’s why you will see this net-debt gearing up because that’s the interim — I would say the interim NDCF that we are bridging. And as I’ve said Sameer also that in the year to come, we are hopeful that we should not have going forward. But we will of course have to see there are no further surprises in the years to come.

I mean, we should have very minimal or nothing of this. Of course, there will continue to be quarter-on-quarter working capital adjustments, which will come because that’s again something which depends on how the cash flows move over every quarter. But overall in the year, we should not expect much of this.

Satinder Singh Bedi — Eon Investments — Analyst

Okay, thank you. Thank you very much. Thank you, Preeti. Thank you, Vinod.

Vinod Rohira — Chief Executive Officer

Thank you.

Preeti Chheda — Chief Financial Officer

Thank you.

Operator

As there are no further questions, on behalf of Mindspace Business Parks REIT, that concludes this conference. [Operator Closing Remarks].

Prepared Remarks:

Operator

Good afternoon, ladies and gentlemen, and welcome to the Mindspace Business Parks REIT’s Earnings Conference Call for Financial Results for the Quarter and Year Ended March 31, 2023. [Operator Instructions]. Please note that this call is being recorded. I now hand the conference over to Mr. Kedar Kulkarni.

Kedar Kulkarni — Senior Manager, Finance & Investor Relations

Thank you. Good afternoon, everyone, and thank you for joining the fourth quarter and financial year 2023 earnings call of Mindspace Business Parks REIT. At this point, we would like to highlight that the management may make certain statements that may constitute forward-looking statements. Please be advised that our actual results may differ materially from these statements. Mindspace Business Parks REIT does not guarantee these statements or results and is not obliged to update them at anytime.

I would now like to welcome our CEO, Vinod Rohira and our CFO, Preeti Chheda. They will first walk you through the business update and the financial performance during the quarter and year. We’ll then open the call for Q&A.

I’ll now hand over the call to Vinod. Over to you Vinod. Thank you, Kedar. I would like to extend a warm welcome to all participants who have joined us on the call today. Financial year ’23 has been the year of returning to normalcy. After innumerable debates on future workspace strategy and several months, years of working from home, a consensus has emerged within the region that office is going to be the mainstay of future work environments, with productivity being much higher at the office. Additionally, financial year ’21 and ’22 witnessed a huge spike in headcounts across the spectrum of tech services, which yet did not translate into increased office footprint. During this period, we expeditiously executed the business strategy of reenergizing our parks and keeping them ready for the renewal preference for experiential workspaces, with the highest standards of health, energy efficiency, wellness, ease of navigation and safety. We were able to carry out this complex task seamlessly during the downtime with minimum discomfort to our tenants. Over this period, we have also seen an increase in physical occupancies at our parks. Our parks have seen the physical occupancies, which fell below 10% during the pandemic now rise to circa 56%, with occupiers now formally working on returning to their offices. Further, organizations today desire to provide best-in class work environments to their employees that they would look-forward to visit every day and there is a prominent shift in demand towards quality CREDE assets managed by institutional asset managers. We achieved gross leasing of over 4 million square feet during the financial year ’22-’23. We started the year with a committed occupancy of 84.3%, which has risen by 470 basis-points during the financial year to end at circa 89%. The committed occupancy at our parks Pune, BKC and Malad are near 100%. Our parks in Madhapur and Porur have also seen the committed occupancy rise close to 95%. Healthy demand for our upgraded offerings at these locations has encouraged us to bring forward the timelines of future development in Pune, and also undertake redevelopment of existing buildings at our mines space Madhapur parks to create long-term value to our stakeholders. Delaying the implementation of SEZ policy reforms has kept the demand for SEZ spaces muted. Representations from industry associations have been made to the government to effect the policy overall at the earliest. These reforms would not only bring back the demand for these office spaces, additionally helping generate tax revenues and employment by increased occupancy. As per ITC reports, calendar year 2022 was the second-best year ever in terms of all-India office leasing. While several markets across the globe are yet to come close to pre COVID levels, the Indian office market has bounced back with the COVID induced slump — from the COVID induced slump. The vast availability of STEM talent in India, strong IT industry, offshoring capabilities, growth of BFSI industry and overall growth of the country has made India among the most promising markets for cutting-edge technology support services at a very attractive cost base. GCC’s and GICs looking for a reduction in costs and higher productivity along with young talent will continue to push forward the hiring process in the near-future. This will result in a need for expansion and consolidation. With the global recessionary environment forecasted, we expect the demand for office spaces to reactivate once the global economic conditions become more stable. We continue to explore other growth opportunities within the portfolio and gear up to capitalize on third-party acquisition opportunity. On the sponsor side, they are undertaking new developments in several key micro markets of the cities we are present in, which would add to the REIT growth pipeline. We continue to move steadfast in our ESG journey with increased focus on delivering on short-term and long-term targets. Our focus on sustainable operations has resulted in 97.3% of our portfolio being certified with a minimum goal LEED IGBC certification. During the year, we have come out with our Green Financing Framework and Green leasing framework, which would serve as a guide to our financing and leasing plans. We raised our first Green Bond in line with the principles set out in the Green Financing Framework. With this issuance, our collective green financing availed has increased to 19% of our debt outstanding. We are also engaging tenants with our ESG goals and it is critical to embedding our sustainability practices deeper within our operations. I would now like to take you through the specific operational updates for the fourth-quarter. We have leased 0.6 million square feet, of which 0.5 million square feet was on account of new and vacant area leasing and 0.1 million square feet was released at re-leasing spreads of 23.8%. The committed occupancy of the portfolio rose to circa 89%. Same-store occupancy stood at 89.1%. The average rent achieved on this 0.6 million square feet leasing was INR74 rupees per square-foot per month. We have handled the first phase of our datacenter in Airoli West to Princeton Digital Ggroup. Our revenue from operations grew by circa 13.9% year-on-year to circa INR5.4 billion. Our net operating income for the quarter grew by circa 9.2% year-on-year to INR4364 million. Our distributions for the quarter stood at INR2.85 billion or INR4.81 one per unit. We raised the INR5.5 billion through India’s first REIT level green bond issuance. The weighted-average cost of debt stands at circa 7.6%. Our portfolio is now further diversified with over 200 plus tenants compared to 175 plus tenants at the end of financial year ’22. We are proud to announce that Mindspace REIT is great place to work, certified for the second consecutive year. We received well, health and safety certifications for 41 buildings across our portfolio. We won four awards at the 14th Annual Estate Awards 2023 by ET Reality and Franchisee India. Business IT Park of the Year for Gera Commerzone Kharadi. Gera Commerzone Kharadi also won the award for the Most Sustainable Architecture Design. Our Office Building for the Year Award for Building 9, Airoli West. Aand Mindspace REIT won the commercial developer of the year for the Western region. With this backdrop, I hand over the call to Preeti to take you through the financial update.

Preeti Chheda — Chief Financial Officer

Thank you, Vinod. I would now take you through the financial update for the quarter and year ending 31st March 2023. Our revenue from operations for FY23 grew by 16.6% year-on year to approximately INR20.7 billion. Adjusting for one-time compensation received from a tenant in Q3 FY23, the net operating income stood at INR16.9 billion, recording a growth of 13.2 y-o-y.

Coming to the quarterly performance, revenue from operations for Q4 FY23 grew by approximately 13.9% year-on-year to INR5.4 billion. We recorded NOI of INR4.4 billion for Q4, registering a growth of 9.2% worldwide. Our NOI margins continue to be above 80%.

We announced a distribution of approximately INR2.9 billion, that is INR4.81 per unit for the quarter, recording a growth of 4.3% year-on-year. The distribution comprises approximately 91%, which is INR4.37 per unit of dividend, which is not subject to tax in the hands of unit holders. Approximately 8.9%, which is INR0.43 per unit of interest and approximately 0.2%, which is INR0.01 per unit as other income.

This translates to an annualized distribution yield of 6.9% on the issue price. Cumulatively, for the financial year 2023, we distributed INR11.3 billion, which is a INR19.1 per unit. Since our listing in August 2020, we have distributed a cumulative amount of INR27.9 billion, which is INR47.13 per unit. To further our commitment to sustainable business practices, we recently concluded the issuance of India’s first REIT level green bond. We released our inaugural green financing framework under which Mindspace REIT or its asset SPVs may undertake issuance of green debt securities in form of bonds or debentures. The framework is aligned with the Green Bond Principles developed by the International Capital Markets Association.

Using this framework as a guiding principle, we raised INR5.5 billion with a three-year maturity at a fixed coupon of around 8%. Also during the financial year, we raised aggregate INR15.4 billion through bonds across three and five-year tenures. Our aim is to have an optimum mix of fixed and variable-cost loan, spanning across various maturities and maintain a healthy balance between fund-raising from banks and capital markets.

We also expanded our investor base by attracting more insurance and pension funds to invest in Mindspace REIT in securities. We experienced high-interest rate situation in the whole of FY23, which offset the gains we made from the growth in NOI. We are hoping the interest rates to stabilize in FY24.

Our net-debt as on 31st March 2023 was approximately INR50.2 billion. In addition, we have undrawn committed lines of approximately INR13.7 billion from financial institutions. Our LTV continues to remain the lowest amongst our peers at 17.9%. Our robust balance sheet provides us the flexibility to pursue both organic and inorganic growth opportunities. In Q4 FY23, we appointed [Indecipherable] Private Limited as a valuer of Mindspace REIT. We also appointed JLL as the independent consultant to review the methodology and assumptions used by the valuer in valuation of Mindspace REIT portfolio.

Gross asset value of our portfolio as valued by the independent valuers as on 31st March 2023 stood at INR280.2 billion, recording a growth of 2.7% over 30th September 2022. 92.7% of our value comes from completed assets. Our NAV per unit has increased by INR1.6 per unit from INR370.3 per unit as of 30th September 2022 to INR371.9 per unit as on 31st March 2023.

As these instruments are gaining popularity among retail investors, our retail unit holder base grew by over 25,000 units during FY23. We are encouraged by this participation and shall work with industry associations and regulators to increase the awareness of this product among various categories of domestic investors.

We also welcome NSEs initiative of starting REIT and InvIT index. We hope this index would help bringing inflows into REITs and InvITs from active, as well as passive fund and thereby improve the liquidity of these instrument.

We also hope other exchanges support this instruments in similar manner and consider inclusion of these instruments in the mainstream indices.

With this backdrop, I hand the call over to the operator to open the floor for questions. Thank you.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions]. The first question is from the line of Vivek Agarwal — the first question is from the line of Puneet Gulati from HSBC. Please go-ahead.

Puneet Gulati — HSBC — Analyst

Yeah, thank you so much for the opportunity. My first question is with respect to the GAV and NAV numbers. So GAV growth has been impressive at 6.2 but NAV is only about 2% up on a full-year basis. It’s largely attributable to debt. How should we read this NAV growth number?

Preeti Chheda — Chief Financial Officer

So, hi, Puneet, Preeti here. The GAV has grown by approximately 2.7% over September and the NAV growth is 1.6 per unit. So essentially, it’s been approximately INR2 rupees growth. I’m not too sure what exactly.

Puneet Gulati — HSBC — Analyst

So, NAV growth has been slower than the GAV growth, right. I mean, should that be the case because then GAV would ideally grow in line with how market rentals or your contractual escalations would move, while NAV would largely be a function of where the net-debt is?

Preeti Chheda — Chief Financial Officer

Yeah, so, generally what happens is whenever — as you keep adding assets in terms of completions, your NAV also grows up, but your GAV also grows up only by a similar amount. So the impact on NAV is higher than the impact on the GAV. So even if — I am just saying as an example, if you had your completed portfolio, which would have grown by X amount, to that we add capex, which we are incurring, because that is also adding value to your GAV. But the similar amount because it’s debt-funded, gets added to your NAV. Therefore, you see GAV increase higher than the NAV.

Puneet Gulati — HSBC — Analyst

Right. Okay, understood. My second is, the average market rentals that you report seems to have fallen on a quarter-on-quarter basis. How should we read that? And what are the market rental trends that you are experiencing.

Vinod Rohira — Chief Executive Officer

Market rents have not fallen quarter-on-quarter. Market rents remained stable for each of the markets that we’re in. We are seeing demand not getting disrupted because of rents.

Puneet Gulati — HSBC — Analyst

And are you seeing an improvement in the rental environment or not yet.

Vinod Rohira — Chief Executive Officer

Certain micro-markets, depending on at what asset cycle you are seeing actually forming up rents.

Puneet Gulati — HSBC — Analyst

Okay, okay, that’s all from my side. Thank you so much.

Operator

Thank you. The next question is from the line of Jathin from BofA. Please go ahead.

Kunal — BofA — Analyst

This is Kunal instead of Jathin. Again, two questions. One, can you talk about the revisions with the expiry schedule for fiscal ’24. I mean what part of your customer-base is coming from and what could have been the reasons here? And then, Vinod, keeping in mind that you also commented that there is the outlook of recession that needs to be incorporated into the leasing plan, how would you think of the occupancy levels from here during the course of the coming year?

Vinod Rohira — Chief Executive Officer

So essentially, churning is part and parcel of most of these companies that you are seeing. The larger the portfolio across of India, you will have most of those large occupiers, recalibrating from time-to-time. And this happens every two, three, four years, not just in a COVID or pre-COVID environment. We are seeing this over the last 10, 15 years. So this is all part and parcel of their strategy to churn.

And most of these spaces that have come out a mixture of that. While we see them as a great — if you ask me mark-to-market opportunity because these were — these spaces were actually at older rentals. And we didn’t have adequate supply in those markets. Leaving aside whatever might happen to the SEG footprint, which we will figure out the denotification and take that forward. But otherwise, these become opportunities to release at mark-to-market.

Kunal — BofA — Analyst

Is there a category that these tenants might belong to, like either IT services or BFSI? Is there any categorization like that or for that matter, are you seeing that the SEZ spaces might be seeing higher exits versus non-SEZ.

Vinod Rohira — Chief Executive Officer

No, no it’s a mix of everything. It’s not that people are walking away from the SEZ because they don’t like SEZ or whatever. It’s more about what committed contracts they had taken or what footprint of jobs they were doing, for which if the demand probably has shifted, then those headcounts will move towards other headcounts that are needed for the other growth aspects, which is the churn that is taking place right now. It’s not specific to SEZ or non-SEZ.

Kunal — BofA — Analyst

Thanks. And if you could give us any color around how to think about either the occupancy trend from here are or the [Technical Issues] million expiries that you [Technical Issues]. What could we expect in terms of the renewal Percentage? Would it be a similar 75%, what we’ve seen in fiscal 2023 or some difference.

Vinod Rohira — Chief Executive Officer

I think we’ve got used to this now. So you will see exits as part of the portfolio coming in and going out. As long as you get your assets in the right quadrant, you are building them right, you’re keeping them right and your attracting top talent to come there and you have assets where the infrastructure in the larger play is in place, you are seeing actual shift of demand. We’ve seen that I mean, literally, we had a million square feet unaccounted for, not calculated for, exits that took place for us in the last financial year. Within the same quarters, we were able to release back because our assets were a far more attractive to the new occupier who just moved in within the same quarter. So you didn’t even probably see the blip, but to us, it was a very exciting time when we had sudden churn take place and we had clients take the space back. And it actually worked out well, because they liked the asset, they liked the location, they preferred it to other options that they had and we were able to release.

So we see that more in that light than anything else, honestly.

Kunal — BofA — Analyst

Yeah, thank you.

Operator

The next question is from the line of Arun from Unifi Capital. Please go ahead.

Arun — Unifi Capital — Analyst

Hello sir. What kind of NOI growth are we envisioning for FY24?

Preeti Chheda — Chief Financial Officer

Hi, Arun. I can’t lay a specific number, but all I can tell is that we believe in which has happened in FY23. The rent will — from that leasing will come in FY24. So you should directionally see a growth in NOI, but I won’t be able to quantify the percentage increase. And we have some area, which has got completed. So, rent from that also will keep adding to your NOI.

Arun — Unifi Capital — Analyst

Okay and regarding the — you all would have heard about Cognizant’s commentary yesterday that they would be vacating around 11 million square feet of office space. So, how do we — what impact this have for Mindspace?

Vinod Rohira — Chief Executive Officer

We have not heard or see any impact so far. And I don’t think we will see that impact in the short-term, coming future. I mean these are all headline news that keep — many headlines in the last 36 months. But it’s part and parcel of business for us.

Arun — Unifi Capital — Analyst

Okay. And just wanted to check on the footfall. It is now at 47%, right?

Vinod Rohira — Chief Executive Officer

56%.

Arun — Unifi Capital — Analyst

56%. Okay, that’s helpful. Yeah, that’s it from my side.

Operator

Thank you. The next question is from the line of Vivek Agarwal, Individual Investor. Please go-ahead.

Vivek Agarwal — — Analyst

Hi, my questions are as follows. Why is there such a big difference between actual occupancy and committed occupancy which has been there for quite some time now. That was the first question. And why has there been a fall in like-for-like occupancy. If we remove the area that has been [Indecipherable], which has got added to the portfolio area, then the like-for-like occupancy, if I’m not wrong, has fallen. Just wanted to ask regarding these two things.

Vinod Rohira — Chief Executive Officer

Okay, so first part of the question really is, because we continue to keep adding new supply into the portfolio. And that portfolio when the under-construction supply gets completed, you sign the LOIs and then it translates to lease and then the rent starts over a period of time, that’s why you’re seeing the difference between actual and committed occupancies. And that lag will continue because you’re going on infusing new supply. So that lag will continue to remain. These are all committed spaces, but still they don’t get converted to a lease. Those are the things that we will keep seeing and the other thing that also happened is, like I mentioned earlier, if a tenant vacated, it shows vacancy and then by the time we got the next tenant in the same quarter and he starts the rent, till that covered occupancy gets replaced, you’re seeing that gap.

Vivek Agarwal — — Analyst

Understood. And the fall in the like-to-like occupancy sir. If I remove the pay lease area, then, if I’m not wrong, the occupancy has come down to somewhere around 82% or give or take 0.5%. [Speech Overlap].

Vinod Rohira — Chief Executive Officer

It was exactly the same — it was exactly the same logic. Full occupancy was 82.7%. It moved to 83.4. It’s because Amazon left and then we signed HighRadius immediately. And till that gap remains, you’re seeing that difference which got refilled back in.

Vivek Agarwal — — Analyst

Understood. Sir, two more questions. The tax advantage that we have for distribution, do we have a sense for how long that is going to last, because then that actual component will increase at some point in time.

Preeti Chheda — Chief Financial Officer

So, hi. I’m not sure of what tax advantage you are talking about.

Vivek Agarwal — — Analyst

Distribution being tax-free significantly 90%.

Preeti Chheda — Chief Financial Officer

Yeah, so today our composition of distribution is essentially dividend, which of course is tax-exempt in the hands of the unit holders and a small portion is interest. Now, going forward, as I’ve said in the past, it all depends on the capital structure, how that shapes up. And also, when we start acquiring new assets, how much does that new asset bring in, in terms of debt. So, to the extent our capital structure changes, the competition of the distribution could undergo change.

Vivek Agarwal — — Analyst

Do we have any sense like the where how [Indecipherable] headed in the next couple of years, three years, five years.

Preeti Chheda — Chief Financial Officer

Near term- I won’t be able to comment on such a long-term, but at least in the immediate future, we expect this to continue as it is, and thereafter, depending on how the capital structure emerges, the competition could change.

Vivek Agarwal — — Analyst

Thank you. And the last question, why was there a fall in the area of under construction in Airoli East?

Vinod Rohira — Chief Executive Officer

So while we continue to have the potential to build up to two million-odd square feet in that park, the financial modeling was done around 800,000 odd. So we’ve just kept it to that for the sake of simplicity. The potential continues to be there. As and when we see the opportunity, we will build.

Vivek Agarwal — — Analyst

Thank you, so much. Thank you, Ma’am.

Operator

Thank you. The next question is from the line of Satinder Singh Bedi from Eon Investments. Please go-ahead.

Satinder Singh Bedi — Eon Investments — Analyst

Thank you for the opportunity. So I got a couple of questions for Vinod and there are a couple for Preeti. So, Vinod, out of the 25.8 million completed area, what is the breakup of SEZ and non-SEZ and what is the occupancy that we have for these respective buckets?

Vinod Rohira — Chief Executive Officer

So it’s in the range of 55-45 there abouts. From an occupancy point-of-view, we are 95% leased on the non non-SEZ space and 88% odd in the SEZ space.

Satinder Singh Bedi — Eon Investments — Analyst

Okay, so 55% for SEZ you are saying.

Vinod Rohira — Chief Executive Officer

55% for non-SEZ, 45 for SEZ.

Satinder Singh Bedi — Eon Investments — Analyst

Okay, 55% for non-SEZ. And I’m assuming that the incremental development is mostly non-SEZ?

Vinod Rohira — Chief Executive Officer

Yes, they’re all non-SEZ.

Satinder Singh Bedi — Eon Investments — Analyst

And opportunity that you see in terms of being able to denotify a complete building. Do we have any such in the portfolio that helps us increase non-SEZ without waiting for the changes in the DESH Bill.

Vinod Rohira — Chief Executive Officer

Yes, absolutely. So, fortunately for us, between 4 million and 5 million square feet are small buildings, each of 300,00, 350,000 odd square feet in our portfolio. So we are going on denotifying building by building wherever we see the opportunity to offer it and bring it into the spectrum of non-SEZ supply. So we’re continuing to do that while we wait for DESH and other amendments to come through to the SEZ Act.

Satinder Singh Bedi — Eon Investments — Analyst

Okay, and what is the percentage of kind of tenants in terms of CREDE that come into GCC category and what is IT services and within, IT services, what percentage is typically Indian IT?

Vinod Rohira — Chief Executive Officer

So essentially 20 to 80 will be GCC, GIC equivalent. The Indian companies on our footprint who are servicing global clients will be in the range of about 10% odd.

Satinder Singh Bedi — Eon Investments — Analyst

Okay, okay, fine. And on this, there is tenant improvement in free rent. So, do we give out the tenant improvement allowance and digital investment or is it paid for by the client. So just wanted to understand the clients.

Vinod Rohira — Chief Executive Officer

We have not yet offered any tenant improvements to any client. If we do, we do long amortization of fit-outs for clients that we believe have stable revenues and stable rent credit and we amortize that along in addition to the rent with lock-ins, etc.

Satinder Singh Bedi — Eon Investments — Analyst

Okay, fine thank you. Preeti, you’ve said the average cost of borrowing at year end is 7.6%. So assuming, obviously, some of these come up for renewal and some of it is anyway floating. Assuming nothing changes from now, so the refer base at the present level of 660, how does our interest-rate move ceteris paribus through the year? So what is the incremental impact of interest?

Preeti Chheda — Chief Financial Officer

Yeah, if we do not see any further increase in the repo rate and it remains where it is, then from the levels which we are seeing in March 23, we expect another 20 odd bps increase in the year come, because some transmission of interest-rate action not happened, which we expect to happen now because they were reset, which has spread out longer. I would say 20 bps is something which you would see from now.

Satinder Singh Bedi — Eon Investments — Analyst

It’s also to see the NCD because that I assume that will be — that will need a quantum jump because we got INR200 crores of NCDs also coming up for renewal this year?

Preeti Chheda — Chief Financial Officer

Yeah, but INR200 crores is very small in the overall debt profile, just about INR200 crores on INR5,000 crores. So, that INR200 crores is not going to move the needle. Essentially, this increase will come from the [Indecipherable] option.

Satinder Singh Bedi — Eon Investments — Analyst

And what percentage of this INR6,400 crores is towards capex — deployed towards capex and hence capitalized?

Preeti Chheda — Chief Financial Officer

So essentially, most of the case — most of the debt, which has been raised, of course, this is a historical debt which comes in and then you have been adding capex debt to this. So, like for example, in FY23, we have about INR700 crores, INR800 crores of debt, which we have added because of capex. So, I would say that essentially the incremental debt, which will keep coming every year will be largely attributable to the capex spend.

Satinder Singh Bedi — Eon Investments — Analyst

But what portion of the INR5,400 is capex-linked?

Preeti Chheda — Chief Financial Officer

Essentially, there is nothing like capex, because all the debt which we’ve taken us is in form of LRD or NCD at the REIT level. So we have not taken any construction finances. That is what you’re asking? All of this is LRD debt or NCD.

Satinder Singh Bedi — Eon Investments — Analyst

[Technical Issues] point of view of understanding this impact of this loan on the bottom line, on the distribution in terms of interest outflow. Hence, part of it goes towards a debt capitalized. So I just wanted to understand what is the interest cost that will impact the distributions in this year? That was objective.

Preeti Chheda — Chief Financial Officer

Yeah, yeah, so the interest cost — whatever we are going to incur going-forward, I mean, in this current year, will obviously all be on account of capex. So that will get capitalized and approximately, I would say, close to around INR50 crore odd interest is something which we expect to get capitalized.

Satinder Singh Bedi — Eon Investments — Analyst

Okay, I’ll probably kick it off. Okay, thank you. I got some more questions. I’ll come later. Thank you very much.

Preeti Chheda — Chief Financial Officer

Thank you.

Operator

Thank you. The next question is from the line of Shashank Chawla from [Indecipherable]. Please go ahead.

Shashank Chawla — — Analyst

Hi there, thanks for the opportunity. So my first question is on the vacant space. So can you give an idea how much of that is SEZ and non-SEZ. And then in terms of your plan to convert some of the space into non-SEZ, where are we in that process?

Vinod Rohira — Chief Executive Officer

Sure, so we had about close to 800,000, 900,000 of vacancy in the non-SEZ and about 1.6 million odd in the SEZ. Out of that, one building of 400,000 square feet is on verge of denotification, which we will get through in the coming quarter, which will get released for non-SEZ leasing. And then, the rest, we will keep following up in the pipeline.

Shashank Chawla — — Analyst

Great. And so there is no progress on the DESH bill or when it might be implemented?

Vinod Rohira — Chief Executive Officer

We don’t have visibility on when it will come. I mean lot of representations made, lot of interactions going on. When it comes is really anyone’s guess. But, we have to kind of wait for that. But our plan B of denotifying is already in place.

Shashank Chawla — — Analyst

Right. Okay and if I remember correctly like this was a couple of quarters back when you had mentioned by the end of FY23, you might see the occupancy above 90%, so we are shy of that. So what’s your expectation of how occupancy is trending in the future? Would it necessarily have to sort of wait for the DESH bill before we can actually see occupancy move up meaningfully?

Vinod Rohira — Chief Executive Officer

You don’t necessarily have to wait for DESH. We certainly have to get the denotification process sorted out so that we can see a movement towards getting that vacancy occupied. So it will be a process that we will follow and while the churn will give us opportunity to release at higher mark-to-market opportunities.

Shashank Chawla — — Analyst

Right, okay. And just on the Chennai region, so I remember in the previous call, you mentioned that from committed to actual occupancies, say like two to four months on average, but in Chennai, we’ve seem like committed occupancy was at 60% in the second-quarter, 90% in the third, and 90% in the fourth, whereas the aactual occupancy hasn’t moved up from 33%.

Vinod Rohira — Chief Executive Officer

So client street outs are actually going on as we speak and they should be operational within this coming quarter, followed by the next quarter. Because they have taking space in tranches, now it’s 97% let.

Shashank Chawla — — Analyst

Okay fine. And the other thing was, just there were some exceptional INR1.4 billion for this year. I just wanted to check what that amount is. And I’m guessing this is a non-cash or it doesn’t have any impact on any of the cash flows. But if you can throw some light on that?

Preeti Chheda — Chief Financial Officer

Yeah, so that will be the write-off of the building, which has gone under redevelopment. So under the Indian Accounting Standards, you need to write-off the amount because the building is getting demolished. So it’s just write fund is the noncash item.

Shashank Chawla — — Analyst

And how was this value in the gross asset value out of NAV like? Was it valued at the higher amount?

Preeti Chheda — Chief Financial Officer

Yeah, yeah, so obviously. That’s the reason we are doing the redevelopment. So what happens is that the NDCF of the revised and in the new redeveloped asset is what is considered in the GAV.

Shashank Chawla — — Analyst

Right. Okay, okay, fine. Yeah, thanks a lot.

Operator

Thank you. The next question is from the line of Kunal Lakhan from CLSA. Please go ahead.

Kunal Lakhan — CLSA — Analyst

Hi, hi, good evening, Vinod and Preeti. Vinod, I know you addressed this question earlier, but just again, like trying to pick your grain on this — the whole Cognizant commentary, right, in terms of 11 million square feet is a very stark number, even on all India portfolio, right, say 600 million square feet, 650 million square feet is like 2%. And that is just one occupier, right. What I’m trying to understand is like, you know, have we been having these discussions or have we been getting these indications from these IT services guys on these lines of like of, they adopting this tier-two city strategy or like a hybrid being a very large part of their model and essentially going-forward. And could this be a trend going ahead, which may get adopted by other IT players. I just wanted to understand your thoughts on this.

Vinod Rohira — Chief Executive Officer

No. These are motherhood statements. I don’t know if you remember some time ago, TCS said 90% will be work-from-home. Then they flipped, said 90% will be work from office. So, these are all, I mean, these are news articles which are giving you information about companies who are looking at, surrendering back space or they are looking at reducing headcount, but these are a process of 12 to 18 months. Some of it is already implemented and done with in the last one year. And this is a constant churn with multiple companies.

You may have seen Amazon in the last one year gave up between 2 million square feet and 3 million square feet, 4 million square feet. Accenture gave up 3 million square feet, 4 million square feet. All of these are part and parcel of their business strategies. And when the business bounces back, they come back and take spaces in 0.5 million square feet and 1 million square feet, really quickly.

So we’ve seen that happen on and off across the last couple of decades of being in this field. So we don’t really get caught up by all of this. We see what our asset is like? What is the mark-to-market opportunity? Where can we place that asset, if at all anything like that happens within our portfolio?

Right now, we don’t have any such indication, but we are always ready because our portfolio is right up there and there are customers who are looking for space to take up. And we’re happy to leased. So, it’s part and parcel of business.

Kunal Lakhan — CLSA — Analyst

Sure, sure fair enough. Just on those lines only, like what is the profile of the customers who are actually kind of looking to take up more space? And then, just a related question on that is, if you can also like give some color on your discussions with let’s say GCC’s and say non-GCC’s or largely IT services companies look, how are they thinking about on the office expansion plan?

Vinod Rohira — Chief Executive Officer

Sure, so the third party service providers are taking a lot of space right now because in some way, there is a capex freeze with the larger GCCs, GICs for incremental investments for the short-term. At the same time, they want headcount. So we are seeing a lot of the third-party service providers, especially in the tech and in financial services sector, getting additional demand for seats to service.

And those players have taken a lot of space in the last couple of quarters and we continue to see that trend going-forward. Then there are some large tech companies who are doing cutting edge tech for 5G and related equipment where they have labs and technology within India for their global practices. We have seen them grow significantly and continue to ask for more space. So there are green shoots of demand coming out of all of these spaces. And they are looking for space and they are growing. Obviously, the large RFPs are not there. Those large RFPs will probably not be there for the next two-three, four quarters. But you will continue to see demand for 50,000 square-foot, 100,000 square-foot, and 150,000 square-foot on a constant basis. and that is really exciting because that’s where the churn gets used. When it’s 1 million square feet, 2 million square feet, generally conversations around build-to-suit. They don’t generally fall into the bucket of speculative commercial leasing space. So the smaller demand is really attractive because we have space to offer. and that is really exciting because that’s where the churn gets used. When it’s 1 million square feet, 2 million square feet, generally conversations around build-to-suit. They don’t generally fall into the bucket of speculative commercial leasing space. So the smaller demand is really attractive because we have space to offer.

Kunal Lakhan — CLSA — Analyst

Sure, sure. And just lastly one data point. What would be the percentage of occupied by IT services companies excluding the GCC?

Vinod Rohira — Chief Executive Officer

You are saying, third-party services?

Kunal Lakhan — CLSA — Analyst

Yeah.

Vinod Rohira — Chief Executive Officer

Yeah. So I mean, there are different segments, you can call as third-party. Essentially what we would kind of put it on a pie-chart, you will see technology and process is almost at 46%. Financial services would be about 18%, 19%. You will have telecom and media at about 8%, 9%. You have engineering and manufacturing-related tech at 7.5%. We have healthcare and pharma at 5.5%, e-commerce at about 2%, professional services are about 6%. So all of these combinations are working through now in this, if you factor for third-party. I mean let’s look at, for example, third-party services being done by L&T, TCS, Wipro, Infosys, they would probably the non-GCC areas in that sense for third-party, including some of the global players would be about 50% odd and GCC would be 50% odd.

Kunal Lakhan — CLSA — Analyst

Got it, got it. Thanks so much and all the best.

Operator

Thank you. The next question is from the line of Sameer Baisiwala from Morgan Stanley. Please go ahead.

Sameer Baisiwala — Morgan Stanley — Analyst

Hi, thank you and good evening everyone. First question is on the ROFO asset. It looks like the Raidurg project is kind of shared, it’s fully completed, fully leased. So, what’s — why has sponsor decided not to go ahead with it?

Vinod Rohira — Chief Executive Officer

So I don’t think. We’ve just deferred that. We were just waiting for stable full occupancy of Qualcomm to take place and for them to exercise their option for the space etc. So, I think this will be very much on the offering in the coming quarters. We are very keen to take this in the REIT. It’s an absolute triple A-grade asset.

Preeti Chheda — Chief Financial Officer

Right, Sameer, we will just weight. You know as we had said that will also wait for the markets to improve a little before we get that asset. But for sure, we are very keen to take this. [Speech Overlap]. There is no question of it being shared.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay, I’m a little confused just because until last Q3, it was under very active evaluation and now that it’s fully leased and completed, now we are kind of you know taking some time off. So.

Preeti Chheda — Chief Financial Officer

It means more to do with markets just improving a little for us to get that asset into the portfolio, but.

Vinod Rohira — Chief Executive Officer

We are very keen to get it.

Preeti Chheda — Chief Financial Officer

We are very keen to take it in.

Vinod Rohira — Chief Executive Officer

In fact, there are some more assets in the row for which have now got completed and we will start looking at those as well to be infused at a relevant time.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay, got it. The second question is on the NDCF for fiscal 2024. So, Preeti, I mean, if you can just help us on two things, a, the pluses and minuses. I understand NOI would grow and just some marginal uptick in interest. So how does this play out into NDCF or are there any more fact pluses and minus, who you need to keep in mind.

And second is, in fiscal 2023, you got the benefit of INR120 crores from Pocharam proceeds. So how do you plan to make up for that in fiscal 2024.

Preeti Chheda — Chief Financial Officer

Yeah. So, Sameer, if we don’t have too many surprises in the years to come and obviously, we are hoping the NOI to see a healthy growth. But some of that NOI obviously will be eaten up by the increase in the interest cost, both on account of the additional capex effect or NDCF, but because there has been an increase in interest cost versus last year, so to that extent, cost will go up and then our second is also because of the interest rate.

And secondly, we are hoping that in the year to come, we would not be having any income support. We should be able to manage with the operating cash flows. So to that extent, to answer the second part of your question, we may not really need to have another Pocharam kind of proceeds. So that’s broadly how I look at NDCF for the next year.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay, understood, excellent. Preeti, you are going to kind of unwind the income support. And just final question, Vinod, how do you see 89% committed occupancy over next 12 months?

Vinod Rohira — Chief Executive Officer

So the way I see it, that actually in the non-SEZ,we have hardly any space left. So I was wishing we would have got more supply really quickly, which we are preponing construction. So I’m hoping whatever churn comes, if it comes, we are able to reuse it back quickly. Some churn may come and we are actually waiting for that because we have no real supply in the non-SEZ. At the same time, our focus is really to push the SEZ denotification for wherever we have independent buildings, which we can do notify so that we can bring in that vacancy into use and get that to occupancy. That’s the only thing that’s kind of dragging us right now. Otherwise, we are seeing demand in those micro markets.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay, sir. I guess, out of 1.6 million square feet SEZ, 0.4 million square feet goes out, so gets denotified. So, 1.2 million square feet on a total base of 25 million square feet. So roughly about kind of mid 90s is where you can potentially move.

Vinod Rohira — Chief Executive Officer

[Technical Issues] Puna, we have 100% already let fully and that’s why we are trying to bring the under-construction building much more earlier. In Hyderabad, Madhapur, we are almost 95.5% let. I’m hoping there’s some churn there because the rents for the old occupiers are really low. And this has become a grade A asset in Hyderabad for us. So, whatever churn comes, we will be able to mark-to-market it really well.

Sameer Baisiwala — Morgan Stanley — Analyst

Okay, great. Thank you so much.

Operator

Thank you. The next question is from the line of Satinder Singh Bedi from Eon Investments. Please go-ahead.

Satinder Singh Bedi — Eon Investments — Analyst

Yes, thank you for the followup. Vinod, how do we measure the physical occupancy source because this sounds slightly nebulous. So when you say 56%, how do you define this?

Vinod Rohira — Chief Executive Officer

So there are different measures because there is no straight-line metrics. We count cumulatively headcount per week of the people that came into work. In certain offices, it is three days a week. In some offices, it’s every alternate day, but cumulatively, let’s say, for example, we have 11 million square feet in a park, so on a thumb rule basis, one in hundred, we should have 1.1 lakh people. If there is 56,000 people coming in and out every week, cumulatively — not cumulative, on a daily basis, then that’s our occupancy.

Satinder Singh Bedi — Eon Investments — Analyst

Okay, okay, fine. I think that seems reasonably scientific. Okay. Second, Sameer asked the question earlier. I don’t know, we are talking of the same-asset. So this could The Square Avenue 98B BKC ANNEX. So this was one of the assets being considered for acquisition earlier and this presentation does a mention it. So any update on this, please?

Vinod Rohira — Chief Executive Officer

Sorry, we were all able to share you right. The words were little.

Satinder Singh Bedi — Eon Investments — Analyst

I don’t know if Sameer’s question was for the same-asset. So there was this mention of the The Square Avenue 98B BKC ANNEX being mentioned as one of the assets being considered for acquisition. This time, it has not been included. So any rethink on this.

Vinod Rohira — Chief Executive Officer

So we we’re bundling it together, which is why we waited on it. The same [Technical Issues]assets will also to the portfolio.

Preeti Chheda — Chief Financial Officer

Okay, okay, okay, fine. Preeti, just for housekeeping, what is the value of unit capital that is left. I understand most of the payouts at this stage are in the form of dividend and the balance is interest, so no capital is getting paid out. But what is the total value of unit capital in the REIT. So the total value of unit Capital, [Technical Issues] obviously is INR16,800 crores was what came in. So that was unit capital, but obviously you will see adjustments to that. I think that may not be too relevant in terms of measuring, especially if you’re looking at the distribution.

Satinder Singh Bedi — Eon Investments — Analyst

Okay, okay, okay, yeah, so, so, how should one look at the future capital structure, which now that okay there is clarity on this part that the repatriation of capital is tax free till it winds down to 0. So how does one look at the future capital structure planning when looking at future acquisitions, because this becomes a tool for an efficient return of capital.

Preeti Chheda — Chief Financial Officer

Yeah, you’re right. The much awaited clarity on this fees [Indecipherable]. We are thankful to the government for clarifying it. So as of today, we are not doing any of that. But as I said earlier in the call that, in future, it depends upon the capital structure. If there is need arising, for which we need to do a similar structure, we will do. And now, of course, it’s pretty efficient from a tax perspective also with this amendment. So it all depend how our capital structure emerges in the years to come, our acquisitions. When the acquisitions happen, with what debt profile do those acquisitions come in. And, you know, what kind of efficiencies, which we can bring into the capital structure. So, I think it will be a combination of various things, but as I said in the immediate future, we see that a maximum payout will continue to be by the off dividend itself because we are entities, which are generating good amount of distribution through dividend.

Satinder Singh Bedi — Eon Investments — Analyst

Okay, okay. One final on the NDCF, so have INR235 crores of capex during this quarter and we had INR20 crores of positive working capital flow also. But we drawn down INR261 crores okay off net financing. So I hope some of this drawdown is not going to — not going towards supporting the distributions because actually the capex was INR235 crores and we had INR20 crores of support from working capital this year, this quarter. So against the INR215 crores, we’ve drawn down INR261 crores.

I understand we retained about INR9 crores at the SPV level, okay — at the REITs level because we paid out lesser than what we got from the SPVs, but still that’s about INR28 crores of gap.

Preeti Chheda — Chief Financial Officer

Yeah, so what happens is that, generally, working capital is a number which keeps changing quarter-on-quarter. And therefore, you will see some quarters that our working capital is high, some quarters that our working capital in low. So to that extent, wherever we have little bit of shortfall, that’s why you will see this net-debt gearing up because that’s the interim — I would say the interim NDCF that we are bridging. And as I’ve said Sameer also that in the year to come, we are hopeful that we should not have going forward. But we will of course have to see there are no further surprises in the years to come.

I mean, we should have very minimal or nothing of this. Of course, there will continue to be quarter-on-quarter working capital adjustments, which will come because that’s again something which depends on how the cash flows move over every quarter. But overall in the year, we should not expect much of this.

Satinder Singh Bedi — Eon Investments — Analyst

Okay, thank you. Thank you very much. Thank you, Preeti. Thank you, Vinod.

Vinod Rohira — Chief Executive Officer

Thank you.

Preeti Chheda — Chief Financial Officer

Thank you.

Operator

As there are no further questions, on behalf of Mindspace Business Parks REIT, that concludes this conference. [Operator Closing Remarks].