Embassy Office Parks REIT - Initiating Coverage - Axis Direct

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Embassy Office Parks REIT - Initiating Coverage - Axis Direct
Initiating Coverage

Embassy Office Parks REIT

                          23 DEC 2019
Embassy Office Parks REIT - Initiating Coverage - Axis Direct
23 DEC 2018                Company Report

                                                                                                                                           BUY
                                                                                                                                           Target Price: Rs 495
                                                                                                                                          Current Market Price            : 420
                                                                                                                                          Potential Upside                : 18%
                                                                                                                                          Stock data
                                                                                                                                          No. of share (Cr)               : 77.2
                                                                                                                                          Market cap (Rs.Cr.)             : 33181.6

Embassy Office Parks REIT
                                                                                                                                          52 week high/low                : 462/300
                                                                                                                                          Avg. daily vol. (6mth)          : 551210
                                                                                                                                          Bloomberg code                  : EMBASSY IN
Commercial Real Estate                                                                                                                    Shareholding Pattern            :
                                                                                                                                          Sponsor Group                   : 70%
                                                                                                                                          FII/DII                         : 16%/1%

    REIT way is the right way                                                                                                             Retail                          : 13%

                                                                                                                                          Price performance*
                                                                                                                                          160

                                                                                                                                          120

                                                                                                                                           80

                                                                                                                                           40
                                                                                                                                            Apr-19       Jun-19       Aug-19      Oct-19    Dec-19
                                                                                                                                                     BSE Sensex                Embassy Off.REIT

  Financial Summary                                                                                                                    Key Drivers
                             Revenue                 NOI                  NDCF               EV/EBITDA                          DPS     Metric               FY 19 FY 20E FY 21E FY 22E
  Y/E March                                                                                                       Debt/Equity
                              (Rs Cr)               (Rs Cr)               (Rs Cr)               (x)                             (Rs)
                                                                                                                                       NOI Growth                 -      20%        16%     13%
  2019                        1,877                 1,574                     -                   4.9                  17%      0.0
  2020E                       2,304                 1,890                 1,814                   5.9                  17%      22.5   Occupancy              94%        95%        96%     97%
  2021E                       2,611                 2,193                 2,062                  21.4                  20%      24.5
  2022E                       2,956                 2,483                 2,285                  19.1                  23%      26.7   Rentals (in Rs/psf)    63         67          71      75
  Source: Company, Axis Securities, CMP as on Dec 20, 2019, *Price Performance is normalized to 100 for better comparison

                                            Ankit Suchanti – Manager - Research Analyst |  ankit.suchanti@axissecurities.in |  (+91 22 4267 1778)
Embassy Office Parks REIT - Initiating Coverage - Axis Direct
23 DEC 2018           Company Report

                                                                                                                                             Embassy Office Parks REIT
 REITs offer Stable Debt like Cash Flows with (Equity Like) Growth…                                                                          Sector: Commercial Real Estate

   What are REIT’s?
       REIT’s are an asset class that owns income producing real estates like offices, hotels, warehouses, apartments, shopping centers etc. This
        asset class has been in existence for over four decades in developed countries
       REIT was approved in the Budget of 2014 and SEBI (Real Estate Investment Trust) Regulations, 2014 provides detailed requirements and
        guidelines of listing and operating REIT
       Investing in REIT is like investing in a collective investment scheme (much like mutual fund), where money is pooled from many investors to
        invest in income generating, high-end real estate assets (primarily commercial real estate). The income generated is then distributed to REIT
        holders at regular intervals which is mandated by regulation

   What are the benefits of REIT’s to investors?                                                   Annualized returns by economic cycle (1991-2018)
    REITs, across the globe, have performed at comparable levels to                                 30
     broad equity indices. For ex. REITs have averaged 11.1%, while                                          22.8
     the S&P 500 has averaged 9.8% over the last 28 years. They                                      20                               15.6
     have shown low volatility and recession protection similar to                                                   11.3                                                     11.1
                                                                                                                              10.6                                                   9.8
     defensive equity stocks                                                                         10                                         7.1
    REITs have also shown lower correlation with other asset classes
     like Equity, Debt, Commodities. Thus, providing an excellent
                                                                                                       0
     choice for diversification                                                                                                                        -0.2
    REIT’s provide downside protection during economic downturns
                                                                                                     (10)
     as the underlying cash flow is contractually bound by long term                                                                                             -9.6
     leases thereby ensuring a steady dividend yield at all times.
                                                                                                     (20)
    Overall, REIT’s provide characteristics of both debt and equity.                                                                                                 -17.7
     Equity Characteristics: Short term volatility due to market price                                        Early Cycle      Mid Cycle        Late Cycle       Recession    All Periods
     movement, capital appreciation, growth levers built in lease                                                                       US REITS       S&P 500
     contracts. Debt Characteristics: Stable dividend yields backed by
     cash flows from long term leases (7-9 years) of tenants, high
     correlation to inflation hence providing inflation protection
                                                                                                        REIT’s have shown lower volatility & higher return compared to S&P 500

Sources: The Conference Board, National Bureau of Economic Research (NBER), Thomson Reuters, Cohen & Steers, Betas, NYU Stern, SEBI, Axis Securities

                                                                                                                                                                                        3
23 DEC 2018           Company Report

                                                                                                                    Embassy Office Parks REIT
 Embassy REIT Overview                                                                                              Sector: Commercial Real Estate

      Embassy Office Parks is the owner of premium office portfolio in India that serves as corporate infrastructure to multinational tenants. Company’s
       Portfolio comprises of seven Class A office parks and four city-center office buildings totaling 33 msf (million square feet) of total area. They provide
       strategic amenities, including 2 completed and 2 under-construction hotels totaling 1,096 keys, food courts, childcare and employee transportation
       facilities
      Their Portfolio is strategically located in India’s four key office markets of Bengaluru, Pune, Mumbai and Noida which are amongst the top-performing
       in India and account for 72% of total Grade A office stocks. In the last 5 years these markets have seen one of the highest absorption of premium
       office space in the world beating New York, San Francisco, Shanghai, Central London and Tokyo
      Their Occupancy is at 94.7% with weighted average lease expiry of 7.2 years. They have 165 tenants comprising a mix of blue-chip multinational
       and Indian corporates, such as JP Morgan, DBS, Swiss Re, Google, McKinsey, IBM and L&T Technology Services. Approximately 45% of Gross
       Rentals come from Fortune 500 companies. Nearly, 53% of our Gross Rentals are derived from tenants in technology sector, with the remainder
       coming from various industries including financial services, healthcare and telecommunications. Embassy REIT is backed by strong sponsors; Blackstone
       LLP, the largest alternative investment firm in the world and Embassy Group which is a local expert and has developed 45 msf of real estate in India

Assets                                                                                                                                         Tenant Metrics
                                                                          Locations

                                                                                             Noida
     33msf   Largest REIT in Asia                                                                                                 165      Blue Chip MNC’s

      11     Best-in-Class Properties                                                                                             45%      Rent from Fortune 500

             Premium Hotel Room
     1096                                                  Mumbai                                                                 53%      Rent From Tech. Services
             Keys

  100Mw Solar Power                                                                                                               94.7%    Occupancy
                                                                                              Bengaluru
                                                                 Pune

Sources: Company, Axis Securities

                                                                                                                                                                4
23 DEC 2018      Company Report

                                                                                                           Embassy Office Parks REIT
 Investment Rationale                                                                                      Sector: Commercial Real Estate

  Embassy Office Parks REIT, is the owner of premium office portfolio in India that serves as corporate infrastructure to multinational tenants.
  It is the largest REIT in Asia and the first REIT to get listed in India. Its primary source of revenue is through long term rental contracts from
  world class tenants which makes the cash flows for the company quite stable. Embassy REIT’s business has multiple growth levers
  (discussed in detail in later sections) that is supported by a strong services sector and a growing, tech-savvy, low cost human capital.
  Embassy REITs operational execution is one of the best amongst REIT’s the world over due to its highly experienced management team that
  has global experience in property management. Embassy REIT is backed by strong sponsors; Blackstone LLP, the largest alternative
  investment firm in the world and Embassy Group which is a local expert and has developed 45 msf of real estate in India. Additionally,
  REIT as an asset class has shown comparable returns to broad equity markets (and low correlations) with downside protection during
  recession making it an attractive investment class

             We expect revenues/earnings to grow at CAGR of 16% / 41.5% respectively over FY19-22E driven by

      Present in Key                                                                                                                Highly
       office markets                                            Marquee, Sticky                     Strong
                                      Significant and             Tenant profile                Financials with                  Experienced
      with proxy play                                                                                                            Management
             on                       multiple Growth             implies stable                    superior
                                           Levers                long term cash                   operational                     backed by
        high growth                                                                                                              world Class
        technology,                                                   flows                        efficiency
                                                                                                                                   Sponsors
      services sector

                        We initiate coverage with “BUY” rating and a target price of Rs 495, implies a 18% upside
Source: Company, Axis Securities

                                                                                                                                                5
23 DEC 2018                                             Company Report

                                                                                                                                                 Embassy Office Parks REIT
 Macro Drivers: Attractive Commercial Real Estate Market                                                                                         Sector: Commercial Real Estate

 Indian Commercial Real Estate has one of the lowest rents globally       Lower rents make it favorable to set up offices for MNC’s in India
                                                                          12000                                                                                                                                                                  300000
      Indian markets charge 1/5h to 1/7th of the rent charged in
       other major office markets, making it extremely attractive for      8000                                                                                                                                                                  200000

       global players to set up offices here                               4000                                                                                                                                                                  100000

      The Capital values are also very low (1/5th of global values),           0                                                                                                                                                                0

                                                                                                                  NCR

                                                                                                                                               Munich

                                                                                                                                                                                                                      Tokyo
                                                                                                                                                        San Fransisco
                                                                                      Bengaluru

                                                                                                           Pune

                                                                                                                                      Sydney

                                                                                                                                                                                                                                        London
                                                                                                  Mumbai

                                                                                                                        Los Angeles

                                                                                                                                                                        New York

                                                                                                                                                                                                          Hong Kong

                                                                                                                                                                                                                              Beijing
                                                                                                                                                                                   Shanghai

                                                                                                                                                                                              Singapore
       which makes investment in office real estate very cost effective
      India also has abundant English speaking talent at 1/10th the
       cost of a developed country employee which provides the fuel
                                                                                                            Rs psf/year                                 Avergae Capital Values (Rs psf)
       to drive the services industry

 Higher Capitalization rates implies superior operating margins
                                                                          High Cap rates, as compared globally, makes it an attractive business
         India                                              8%                     High Capitalization Rates or operating income yield vis-a-vis
     Australia                                     5%
                                                                                    estate values for Grade A offices is 1.75 – 5.75% higher than
           US                                 5%
                                                                                    other major markets
           UK                                 4%
                                                                                   High cap rates coupled with low capital values gives superior
        China                                 4%
                                                                                    return opportunities for investors in commercial real estate in
     Germany                                 4%
        Japan
                                                                                    India
                                        3%
 Hong Kong                              3%
 Singapore                              3%

                 0%                2%    4%         6%   8%         10%
Source: Company, Axis Securities

                                                                                                                                                                                                                                                     6
23 DEC 2018                                             Company Report

                                                                                                                                                         Embassy Office Parks REIT
 Macro Drivers: Present in Key Office Markets of India                                                                                                   Sector: Commercial Real Estate

 Embassy REIT Markets have been leading office absorption                           Office stock absorption of select global commercial hubs- India Leading
        Favorable rental profiles, high cap rates and favorable                     60                                                                                                                                                                       50%
         demographics has led to the highest absorption of Grade A                   40
                                                                                                                                                                                                                                                              25%
         office stocks in last five years as compared to major Grade A               20
         office markets in the world                                                  0                                                                                                                                                                       0%

                                                                                                                                             Mumbai…
        Embassy REIT is present in four key office markets of India (i.e.

                                                                                                             Tokyo

                                                                                                                                                                                                         Munich
                                                                                          Bengaluru

                                                                                                                                                                             San Fransisco

                                                                                                                                                                                                                                          London
                                                                                                      Pune

                                                                                                                     Delhi NCR

                                                                                                                                                       Beijing

                                                                                                                                                                                                                   Sydney
                                                                                                                                                                                             Hong Kong

                                                                                                                                                                                                                            Los Angeles

                                                                                                                                                                                                                                                   New York
                                                                                                                                                                 Singapore
                                                                                                                                  Shanghai
         Bengaluru, Pune, Mumbai, NCR) which cover nearly 3/4th of
         the total Grade A office market in India
        Last 5 year average absorption as % of total stock stood at
         35% for Embassy REIT Markets as compared to only 12% for
         rest of the major global markets Additionally, office absorption                                                        Cumulative Absorption in msf (2013-2018)
         in Bengaluru alone is higher than combined absorption of                                                                Last 5 years' absorption as a % total stock
         Shanghai, Beijing and Hong Kong

Strong Demand-Supply Fundamentals favor a growing rental                            Embassy REIT properties have a superior demand outlook as
market                                                                              compared to its markets
  40                                                                          25%
                                                                                         Embassy REIT’s markets have witnessed strong absorption with
                                                                              20%
  30
                                                                                          limited supply. The average absorption as percentage of supply
                                                                              15%
  20                                                                                      stood at 99.7%
                                                                              10%
  10
                                                                                         Consequently, vacancy has decline steadily by 540 bps from
                                                                              5%
                                                                                          CY2014 to CY2019
     0                                                                        0%
           2014        2015        2016    2017      2018    2019E   2020E               This trend is likely to continue and will keep demand for Grade

                    Supply (msf)          Absorption (msf)      Vacancy (%)
                                                                                          A office space on a strong footing across REIT markets

Source: Company, Axis Securities

                                                                                                                                                                                                                                                              7
23 DEC 2018         Company Report

                                                                                                                              Embassy Office Parks REIT
 Macro Drivers: Superior growth of services sector                                                                            Sector: Commercial Real Estate

      Embassy REIT’s tenant profile is dominated by services sector (contributing to 90% of gross rentals) with technology sector contributing nearly
       53% to Gross Rentals. Hence, services sector growth becomes an important proxy parameter for Embassy REITs rental growth
      The services sector is the key driver of the Indian economy with contribution of 54% to FY19 GVA (Gross Value Added). Led by technology
       and financial services, it has grown by 7.5% in FY19 contributing to 60% of GVA growth. While Technology sector alone has grown by
       8.3% in FY19. Below Info graphics present factors that will keep driving demand of services sector

 Factors that give a significant advantage to services sector in India                        Additional Expected Office Demand (in msf) from services sector
                                                                                              (2019-22E)
                                    Services sector is driven by human capital and India      300
       Large and                     has the largest talent pool in the world with with 35%                                                                       2
        growing,                     of population in the age bracket of 15-34 years           250
                                                                                                                                                    16
         English                    India has been leading new generation technology
        Speaking                     businesses with 8K+ digital solution providers
                                                                                               200                                  52
       talent pool                   employing ~ 5mn employees (i.e. ~75% of the
                                     global digital talent base.)
                                                                                               150
                                                                                                                     81

                                                                                               100
                                    Due to lower salary levels and more affordable real
                                     estate, India-based technology services are
      Competitive                    approximately 7 times cheaper compared to the US-          50      102
        Cost                         based technology services
      Advantage                     India’s cost competitiveness has amounted to more           0
                                     than US$ 200 bn in cost savings for clients in the              Technology   Financial    Media and Ent      Telecom     Pharma R&D
                                     past 5 years                                                                 Services                     Network and IT
                                                                                                                                                  vendors

Source: Company, Axis Securities

                                                                                                                                                                      8
23 DEC 2018      Company Report

                                                                                         Embassy Office Parks REIT
 Multiple Growth Factors                                                                 Sector: Commercial Real Estate

                                                                                               Building new properties
                           Rental Growth
                                                                                                   on vacant areas

Re-leasing of expired                                                                                       RoFO assets:
contracts at mark to                                                                                    First right to sale of
     market rate                                                                                       assets by its sponsors

                                                                                                     Hospitality and
    Lease up of vacant space
                                                                                                other Value added services

                                           Embassy REIT has multiple sources of growth
Source: Company, Axis Securities

                                                                                                                           9
23 DEC 2018        Company Report

                                                                                                                 Embassy Office Parks REIT
 Rental Growth ensures revenue growth in all market situations…                                                  Sector: Commercial Real Estate

      Embassy REIT assets have a built in contractual escalation of 10-15% with its clients every 3-5 year
      Embassy REIT focuses on quality assets and best-in-class service and has been able to achieve 270 bps higher rental in FY19 as compared
       to market rents
      The superior quality of its tenant amenities has also enabled them to achieve an average occupancy of 94% consistently
       over FY16-19
      Management expects, contractual rent escalations to contribute ~36% of the total increase in revenue from operations over FY20E-21E.
      In H1FY20, contractual escalations have contributed to 37% of revenue growth (YoY basis) and will be one of the most consistent sources of
       revenue growth every year

 Superior rental growth of Embassy REIT portfolio vis-à-vis markets                 Consistently higher committed occupancy for REIT portfolio
 135

 130
                                                                                    100%
                                                                                                               Occupancy
                                                                                      95%
 125
                                                                  +270 bps            90%                                                 +950 bps
 120
                                                                                      85%
 115

 110                                                                                  80%

 105                                                                                  75%

 100                                                                                  70%
            FY2014         FY2015       FY2016   FY2017       FY2018       FY2019           CY2014    CY2015    CY2016     CY2017       CY2018   Q12019

                          Market Rent        Embassy REIT Portfolio Rent                                    Embassy REIT       Market
Source: Company, Axis Securities

                                                                                                                                                      10
23 DEC 2018        Company Report

                                                                                                                        Embassy Office Parks REIT
 Re-leasing at Mark to Market provides ~30% upside                                                                      Sector: Commercial Real Estate

      Due to long dated contracts, typically of more than 7 years, there is an inherent mark to market (MTM) opportunity on expiry of contracts
      This would give a revenue boost to Embassy REIT as and when leases come up for expiry and are re-leased at then prevailing market rates
      Embassy REIT have re-leased 3.1 msf area at an average spread of ~42% above in place rents from FY2016 to FY2019
      5.2 msf area is expected to expire between FY20E to FY23E, with an average re-leasing spread of 30% above in place rents giving a
       ~10% contribution in revenue growth from re-leasing

          Embassy achieved ~42% average re-leasing                            Leasing-up at market rents on lease            20% of Gross Rent expires between
    spread between FY16-19, indicating the managements                        expiry could provide 30% upside to             FY20E–23E, which should contribute
 ability to lease-up at market or higher rents on lease expiry                revenue as per current rental trends           to ~10% revenue growth in 4 years
                                                                                                                      9%                                 8.50%
                             60.70%                                                                                               Gross Rent Expiring
                                                                             100                                      8%
                                                                                                    Rs 86
                                                                             80                                       7%
                                                                                            Rs 66
                                                                                                                      6%
                                                                             60                                                                 4.90%
                                             35.30%         34.90%                                                    5%
       26.60%                                                                40                                       4%     3.50%     3.30%
                                                                       8.5   20
                                                                                     49                               3%
                                                                                                                      2%
                                                                              0
                                                                                                                      1%
                                                                                                                      0%
                                                                                    In-Place Rent   Market Rent              FY2020E FY2021E FY2022E FY2023E
        FY2016               FY2017          FY2018         FY2019

   Year                               FY16    FY17    FY18      FY19               Year             FY20E            FY21E            FY22E             FY23E

   Area Re-leased (in msf)            0.3     1.1     0.5       1.2          MTM upside              50%             16%               65%              49%

Source: Company, Axis Securities

                                                                                                                                                              11
23 DEC 2018       Company Report

                                                                                                              Embassy Office Parks REIT
 De-risked New Leases minimizes vacancy risks…                                                                Sector: Commercial Real Estate

 Embassy REIT’s new properties have shown de-risked development with high pre-leasing trend
        Embassy REIT has a vacant space of about 8 msf, which it has plans to build and lease up in the coming years

        Embassy management focuses on de-risked brownfield expansion on existing land by pre-leasing properties ahead of development. For
         example Embassy Oxygen, which completed in Nov’ 18, was 92% pre leased.

        Approximately, 2.3 msf is at various stages of development (see chart below) and is expected to complete by FY22E. Of this 1.4 msf of office
         development is tracking two quarters ahead of schedule due to strong demand from tenants.

        Pre-leasing trends in the upcoming (1.4 msf space) have also shown strong traction with c23% already pre-leased.

        Further, development work has already started in Embassy Manyata (1 msf) and Embassy Techzone (0.9 msf) ahead of schedule.

Development history; schedule – Tracking ahead of plan                          Filling up of vacant office space is near term priority for Embassy
         1.6                                                                         Embassy REIT’s 5% vacancy is concentrated in three properties,
                                                 1.4 msf
         1.4                                  development                             namely Embassy Techzone in Pune (~13% vacancy), Embassy
         1.2                               tracking ahead of                          Oxygen in Noida (~15% vacancy) and FIFC in Mumbai (~22%
                                                schedule
          1                                                                           vacancy).
 (msf)

         0.8
                1.4
         0.6              1.3                                                        The high vacancy is because these buildings are either
         0.4                        0.9                         0.8   0.9             constructed recently (Embassy Oxygen) or there is a transitory
                                                        0.6
         0.2                                  0.5                                     vacancy due to upgrades and repositioning
          0
               FY2014 FY2016 FY2018 FY2019 FY2020E FY2021E FY2022E                   This is expected to be leased up in the next year and a half and
                                                                                      would provide ~ Rs 110 cr of revenue increase in FY19-21.
                            Manyata       Oxygen     Techzone

Sources: Company, Axis Securities

                                                                                                                                                  12
23 DEC 2018              Company Report

                                                                                                                          Embassy Office Parks REIT
    Significant Greenfield Expansion scope and focus on Value Added Services…                                             Sector: Commercial Real Estate

ROFO assets give long term growth visibility with 43 msf area identified for expansion
       Embassy REIT has a Right of First Offer (ROFO) on assets owned by Embassy Sponsors. This gives them opportunity to expand to new markets
        and diversify geographically
       They have identified 4 such properties in Chennai (1) and Bengaluru (3) totaling an area of 43 msf
       In Q2FY20, Embassy REIT received a ROFO notice for Embassy TechVillage in Bengaluru. This consists of 6.2 msf of completed area which
        already has tenants in place and has 2.5 msf of under construction area
       If the ROFO asset proves to be yield accretive (current yield ~5.6%) for REIT unit holders, management will go ahead and acquire the property.
        Management discussed that they have a lower cost of equity v/s cost of debt and will find the optimum mix to invest in this property
       We estimate that this acquisition, if materializes, could add to 20-25% to its NOI. We believe such regular acquisition of assets through ROFO
        opportunities will keep boosting the unit price of stock. We have not accounted for ROFO acquisition impact in our estimates

Focus on Value Added Services and Best-in-Class facilities
         Embassy REIT focuses on superior tenant experience through
          value added services
         Two revenue generating VAS sources are 1) Hotels 2) Solar
          Power
         Hilton at Embassy Golflinks (with 72% occupancy) and Four
          Seasons at Embassy One (completed May 2019) together
          have 477 keys
         Embassy REIT plans to add 619 keys more to its portfolio for
          business executives comfortable stay in FY22E
         Add-on services and others contributed 26% to revenue growth
          in H1FY20, on a YoY basis                                               Hilton at Embassy Golflinks, 247 Keys, Five           Solar Plant with 100 MW capacity serving
                                                                                  star property with 72% average occupancy                         Bengaluru properties
Sources: Company, Axis Securities

                                                                                                                                                                           13
23 DEC 2018     Company Report

                                                                                                             Embassy Office Parks REIT
 Global Tenant profile with long term “stickiness”                                                           Sector: Commercial Real Estate

                                                                                         Sector Mix Gross Rentals (%) and Top tenants
   Embassy REIT’s cash flows are backed by marquee tenant base
   that have stayed with Embassy REIT for long periods of time. Some
                                                                                                    Others
   key highlights of the tenant profile are:                                                        10%
                                                                                              Telecom
       165 multinational tenants of the highest quality                                        5%
                                                                                                                                         Technology
                                                                                      Healthcare                                            53%
       45% Rental from Fortune 500 Companies                                            6%

       Top 10 Companies contribute 43% to Gross Revenues.                           Retail
                                                                                      7%
       Achieved same store rental CAGR of ~7% in 2016-2019
                                                                                Research,
                                                                               Consulting &
       Tenant Retention rate of 78% implies that most tenants want to
                                                                                Analytics
                                                                                   8%
        continue with Embassy REIT.
                                                                               Financial
       A weighted average lease expiry of 7.2 years for the portfolio         Services
                                                                                 11%
        implies stability of revenue for the foreseeable future

       Since      tenants      typically   undertake   significant   Tenant

        Improvement capex at their own expense in India, often

        equivalent to 4-7 years of rent, they have significantly higher

        “stickiness” due to high moving costs.

Sources: Company, Axis Securities

                                                                                                                                                14
23 DEC 2018     Company Report

                                                                                                       Embassy Office Parks REIT
 A notch above competitors across Asia…                                                                Sector: Commercial Real Estate

      A comparison with REIT’s in the Asian markets clearly shows that Embassy REIT has higher dividend yield of 6-7% v/s other REIT’s yield
       around or below 5% mark.
      Another important differentiator is the significant revenue growth outlook for Embassy REIT as compared to its peers. CAGR Growth for
       Embassy REIT in FY19-22E is expected to be 16.3% with long term growth pegged at above 10% whereas for other REITs it is around 5%.
      Embassy REIT’s NOI margin profile of 85% is one of the best among REITs globally and nearly 10% higher than Ascendas India Trust which
       also operates in Indian office space.
      Debt to TEV (Total Equity Value) of Embassy REIT at ~11% (leverage ratio) is the lowest among global REITs, with averages ranging from
       18% for US based REITs to 37% in European REITs. This also gives significant headroom to raise capital for growth.

Embassy REIT’s comparison on key metrics with Asian Peers

                                                                       Revenues
                                                          Total Area                  NOI Margin      CAGR Growth    Div Yield %
 REIT Name                                     Country                 (in mn $)                                                   EV/EBITDA
                                                             (msf)                    (FY2020E))      % (FY19-22E)    (FY20E)
                                                                        (FY20E)                                                     (FY20E)

 Ascendas India Trust                         Singapore     18.2         702              75%              3.5          5.59            15.89

 Capitaland                                   Singapore      3.9         298              71%              1.9          4.57            19.90

 Champion REIT                                Hong Kong      2.9         417              84%               5           4.41            18.57

 Keppel REIT                                  Singapore      3.7         126              65%              2.4          4.60            74.33

 Embassy Office Parks REIT                      India        33          314              85%             16.3           6.5            19.1

 Suntec REIT                                  Singapore      3.9         277              80%              1.5          5.04            35.50

Source: Consensus, Reuters, Axis Securities

                                                                                                                                           15
23 DEC 2018              Company Report

                                                                                                                           Embassy Office Parks REIT
Highly experienced Management and Board                                                                                    Sector: Commercial Real Estate

    Michael Holland                 Vikaash Khdloya               Bhhavesh Kamdar         Sachin Shah                  Anuj Puri                       Dr. Punita Kumar Sinha
    CEO                             Deputy CEO / COO              President, Leasing      CIO                          Independent                     Independent Board
                                                                                                                       Board Member                    Member

  20+ Years Experience              11+ Years Experience       26+ Years Experience      17+Years Experience           30+Years Experience            30 +Years Experience
   Former          Country          Former                    Former         Deputy    Key       person      of     Group         Chairman        Portfolio   manager,
     Manager            and           MD,Blackstone Real         General Manager –         Samsara            Fund       and        founder   of        Oppenheimer Asset
     Managing       Director          Estate                     Leasing           and     Advisors          Private     ANAROCK                        Management
     of JLL India                    Former      VP      at     Marketing                 Limited                      Board      member     of      CFA charter holder,
   Former      CEO       of          PiramalFund                (Commercial)       at    Former       VP       of      Jagran          Prakash        and served on the
     Assetz         Property          Management                 Larsen & Toubro           Acquisitions          at      Limited,         Music         Board of Governors
                                      (erstwhile IndiaREIT)                                Starwood Capital              Broadcast       Limited,       for CFA Institute
                                                                                                                         ANAROCK
                                                                                                                         Investment advisor

Sources: Company, Axis Securities

                                                                                                                                                                        16
23 DEC 2018         Company Report

                                                                                                        Embassy Office Parks REIT
        Strong Sponsors: Perfect combination of global and Local Expertise                              Sector: Commercial Real Estate

   Extensive expertise with                                                                                             One of the world’s
    area developed across                   54+ msf                                             $153.6 bn                 largest    real    estate
    south western India, Serbia,                                                                  (AUM)                   investors in Real Estate
    Eastern     Europe      and                                                                                           across equity and debt.
    Malaysia.

                                                                                                                         The team consists of
   Experience of end to end                                                                527                           over 527 real estate
    commercial       development
    right        from        land
                                                     25+ Years           EMBASSY       professionals,                     professionals
                                                                                         11 offices                       in 11 offices around the
    identification to building the                                      OFFICE PARKS                                      globe which manage the
    property to marketing and
    selling the property                                                                                                  best and biggest real
                                                                                                                          estate projects

   Holds an extensive land
    bank of 1,000+ acres
    across the country ensuring              1000 +                                         50 mn sqft                   Largest owner of Class A
    supply of land will not be a                                                                                          office space in India,
    hindrance.
                                              acres                                                                       with a portfolio spanning
.                                                                                                                         across key office markets
                                                                                                                          and IT hubs.

      Source: Company, Embassy Group, Blackstone LLP, Axis Securities

                                                                                                                                              17
23 DEC 2018          Company Report

                                                                                                       Embassy Office Parks REIT
 Assets Profile, Metrics - Bengaluru                                                                   Sector: Commercial Real Estate

                            Embassy Manyata- 14.2 msf
                                                                          Rs 16,800 Cr                     52%                    ~60%
                                                                          Gross Asset Value        GAV of total portfolio   Of Total Gross Rentals

                                                                               17.2 msf              68 Rs/psf pm                    42%
                                                                               Total Area               In place rent           MTM upside

                                                                                97.1%                  8.2 years                 ~10.3%
          Embassy One - 0.3 msf               Embassy Golflinks-2.7 msf
                                                                               Occupancy                  WALE                  Last five year
                                                                                                                                Rental CAGR

                                                                          Market Outlook and Growth Drivers (FY19-22E)

                                                                               Leader in office absorption globally
                                                                               Healthy hiring and abundant availability of talent
                                                                               Improved connectivity with rapidly developing metro
                                                                               Competitive and quality office with limited supply

Sources: Company, Axis Securities

                                                                                                                                             18
23 DEC 2018        Company Report

                                                                                                        Embassy Office Parks REIT
 Assets Profile, Metrics - Mumbai                                                                       Sector: Commercial Real Estate

                                   FIFC - 0.4 msf
                                                                            Rs 5,076 Cr                   16%                     ~18%

                                                                           Gross Asset Value      GAV of total portfolio         of Total
                                                                                                                               Gross Rentals

                                                                                 2 msf              165 Rs/psf pm                   5%

                                                                              Total Area               In place rent           MTM upside

        Express towers - 0.5 msf                    Embassy 247 -1.2 msf
                                                                              90.5%                    4.6 years                 ~ -1.3%
                                                                              Occupancy                   WALE                 Last five year
                                                                                                                               Rental CAGR

                                                                             Market Outlook and Growth Drivers (FY19-22E)

                                                                                Global financial and legal services hub
                                                                                9% vacancy in REIT markets implies ample opportunity
                                                                                Limited supply with re-kindling of demand in sub-markets
                                                                                Improved connectivity with developing metro

Sources: SEBI, Company, Axis Securities

                                                                                                                                            19
23 DEC 2018       Company Report

                                                                                      Embassy Office Parks REIT
 Assets Profile, Metrics - Pune                                                       Sector: Commercial Real Estate

                          Embassy Quadron- 1.9 msf
                                                         Rs 4,590 Cr                      14%                      ~14%

                                                        Gross Asset Value               GAV of                 Of Total
                                                                                     total portfolio         Gross Rentals

                                                              8.8 msf               42 Rs/psf pm
                                                                                                                   15%
                           Embassy Techzone - 5.5 msf      Total Area                 In place rent          MTM upside

                                                           92.1%                      5.8 years                ~ 7.5%

                                                           Occupancy                     WALE               Last five year
                                                                                                            Rental CAGR

                              Embassy Qubix-1.5 msf
                                                          Market Outlook and Growth Drivers (FY19-22E)

                                                              Hub of SEZ’s around Pune provide for high office demand
                                                              Abundant availability of technically savvy talent
                                                              Rapid infrastructure development and seamless connectivity
                                                              Low property prices with ample space to grow

Sources: Company, Axis Securities

                                                                                                                          20
23 DEC 2018       Company Report

                                                                                Embassy Office Parks REIT
 Assets Profile, Metrics – Delhi NCR                                            Sector: Commercial Real Estate

                       Embassy Oxygen - 3.3 msf

                                                    Rs 2,957 Cr                     9%                      ~8%
                                                          Gross                   GAV of                Of Total
                                                        Asset Value            total portfolio        Gross Rentals

                                                    4.6 msf                  40 Rs/psf pm                28.6 %
                                                     Total Area                                        MTM upside
                                                                                In place rent

                                                        91.3%                     8 years               ~ 10%
                         Embassy Galaxy - 1.4 msf
                                                     Committed                     WALE               Last five year
                                                     occupancy                                        Rental CAGR

                                                    Market Outlook and Growth Drivers (FY19-22E)

                                                        Near the capital of India, with multiple MNC headquarters
                                                        Healthy hiring and abundant availability of talent
                                                        Top class connectivity through roadways and metro
                                                        Competitive and quality office with SEZ benefits

Sources: Company, Axis Securities

                                                                                                                   21
23 DEC 2018     Company Report

                                                                                                                           Embassy Office Parks REIT
 Solid H1FY20 Performance with focus on growth and distribution…                                                           Sector: Commercial Real Estate

17% growth with 99.5% of NDCF payout to unit holders                              Leasing Highlights of H1FY20 – Long contracts at high spreads
                                         H1FY20       H1FY19        % change      New Lease Analysis                                                 H1FY20
Embassy Office Parks REIT
                                         (in Rs cr)   (in Rs cr)      YoY
                                                                                  Total Lease-up Area (msf)                                            1.19
Revenue from Operations                  1055.7        898.6          17%
                                                                                  Area Re-leased (msf)                                                 0.89
Property Tax and Insurance                -35.8        -34.4
                                                                                  Re-leasing Spread (%)                                              66.50%
Direct Operating Expense                  -128.7       -108.6
Net Operating Income                      891.2        755.6          18%         New Leasing to Existing Portfolio Tenants                          75.90%

Other Income                               44.2         84.9                      WALE on new lease-up (years)                                         9.3

Property Management Fees                  -23.4        -16.0                      Renewal Analysis                                                   H1FY20
Indirect operating Expenses               -35.3        -55.5                      Area Renewed (msf)                                                 0.307
EBITDA                                    876.7        769.0          14%
                                                                                  Renewal spread (%)                                                 22.10%
Working Capital Adjustment                110.2        -23.6
Cash Taxes                                -68.2        -100.9                     Key Tenant Additions H1FY20 – Quality on focus
Other Adjustments                         -59.0        -77.2                      Tenant                      Asset                        City           Area (msf)
                                                                                  HCL                         Embassy    Techzone          Pune            0.236
Cash Flow from Operations                 859.7        567.3          52%         NTT Data                    Embassy    Golflinks                         0.205
                                                                                                                                         Bengaluru
NDCF at SPV level after Debt Repayment    805.1                                   Infosys BPM                 Embassy    Techzone          Pune            0.128
Distribution from SPV to REIT             799.8                                   L&T Infotech                Embassy    Techzone          Pune            0.128
                                                                                  Facebook                    Embassy    Golflinks       Bengaluru         0.104
Distribution from Embassy Golflinks        96.0
                                                                                  Google India                FIFC                        Mumbai           0.061
REIT Management Fees                      -10.3                                   Dell                        Embassy    Golflinks       Bengaluru         0.054
Other Inflows at REIT level                -1.3                                   NTT Data                    Embassy    Oxygen           Noida            0.053
                                                                                  Access Healthcare           Embassy    Techzone          Pune            0.044
NDCF at REIT Level                        884.2
                                                                                  The Executive Centre        FIFC                        Mumbai           0.022
                                                                   Payout Ratio   Multiple                    Multiple                    Multiple         0.155
Distribution                              879.7
                                                                     99.5%        Total Area Leased                                                         1.19
Source: Company, Axis Securities

                                                                                                                                                               22
23 DEC 2018                Company Report

                                                                                                                             Embassy Office Parks REIT
 Valuation                                                                                                                   Sector: Commercial Real Estate

  Valuation
      We have used a balance sheet based 10-year DCF valuation and a cap rate based terminal value to allow for cash flow stabilization to
       arrive at a target price of Rs 495. The details of assumptions built-in are as below. Also, ROFO acquisitions can provide considerable upside
       to value of stock not built into the valuations.

Key Assumptions                                                              Growth Drivers
Revenue CAGR Growth Next 3 Years                           16.3%              Metric                                        FY 19           FY 20E           FY 21E          FY 22E

Revenue Growth 3 to 10 Years                                10%              NOI Growth                                         -             20%              16%             13%

WACC                                                       11.3%             Occupancy                                       94%              95%              96%             97%

Capitalization Rate                                        6.5%              Rentals (in Rs/psf)                              63               67               71              75
                                                                             Rental CAGR (FY19-22E) is 5.81% while inflation is expected to remain lower than this level implying rental
                                                                             growth to protect against inflation.

  Key Risks
      Tenant concentration risk: Tenants in the technology and financial services sector amount to ~64% of gross rentals and any adverse impact
       on these sectors will impact Embassy REIT.
      Property Concentration Risk: High revenue concentration remains in one integrated office parks (~41% of revenue from operations from one
       Bengaluru property: Embassy Manyata). Any impact on Embassy Manyata will impact overall performance significantly.
      Inability to lease at market prices: Leasing & rental growth depends on supply-demand conditions in micro-markets, portfolio attractiveness
       and landlord reputation among other factors. Any impact on these, will affect growth adversely.
      Regulatory Changes: Any adverse alterations on taxation of interest and dividends will have an impact on company’s operations and return
       expectations of investors.
Source: Company, Axis Securities

                                                                                                                                                                                     23
23 DEC 2018            Company Report

                                                                                                   Embassy Office Parks REIT
 Financials                                                                                        Sector: Commercial Real Estate

Profit & Loss                                              (Rs Cr)   Balance Sheet                                                    (Rs Cr)
 Y/E March                         FY19    FY20E   FY21E    FY22E    Y/E March                    FY19           FY20E       FY21E     FY22E
 Net sales                         1,877   2,304   2,611    2,956
                                                                     Total assets                 36,695         33,288     33,551    33,724
 Other operating income            154     138     157      177
                                                                       Net Block                  21,084         21,435     21,642    21,732
 Total income                      2,031   2,443   2,768    3,134
                                                                       CWIP                        122            125         128       132

   Cost of goods sold              517     592     621      704        Investments                1,499          1,282       1,419     1,400
   Contribution (%)                72.4%   74.3%   76.2%   76.2%
                                                                       Wkg. cap. (excl cash)      4,961           795         399       335

                                                                       Cash / Bank balance         329            329         329       329
 Operating Profit                  1,514   1,851   2,146    2,430
 PBIDT                             1,514   1,851   2,146    2,430      Other Non Current Assets   8,699          9,322       9,634     9,796
   Depreciation                    356     550     592      611
                                                                     Capital employed             36,695         33,288     33,551    33,724
   Interest & Fin Chg.             706     370     434      507
                                                                       Equity capital             22,904         22,904     22,904    22,904
 E/o income / (Expense)            115     138     157      177
 Pre-tax profit                    567     1,070   1,277    1,490      Reserves                    (9)           (791)      (1,585)   (2,382)

  Tax provision                    201     134     198      246        Pref. Share Capital         0.0            0.0         0.0       0.0
   Associates                       0       0       0         0
                                                                      Current Liabilities         2,512          2,545       2,767     2,826
   Other Comprehensive Income       0.1     0.0     0.0      0.0
                                                                       Borrowings                 7,146          4,234       4,908     5,679
 Adjusted PAT                      291     815     947      1,096
 Reported PAT                      365     936     1,079    1,244      Def tax Liabilities        4,142          4,397       4,557     4,697

Source: Company, Axis Securities

                                                                                                                                         24
23 DEC 2018           Company Report

                                                                                                       Embassy Office Parks REIT
 Financials                                                                                            Sector: Commercial Real Estate

Cash Flow                                                          (Rs Cr)   Ratio Analysis                                               (%)
                                                                             Y/E March                 FY19          FY20E      FY21E    FY22E
 Y/E March                          FY19      FY20E      FY21E     FY22E
                                                                             Revenue Growth             16.5         22.8        13.3    13.2
 Profit before income tax           567       1,070      1,277     1,490

 Depreciation and amortisation                                               OPM                        74.5         75.8        77.5    77.5
                                    356        550        592       611
 expense                                                                       Oper. profit growth      11.3         22.3        16.0    13.2
 Net change in Working                                                         COGS / Net sales         27.6         25.7        23.8    23.8
                                     16        (75)       (82)      (92)
 Capital                                                                     Depreciation / G. block    1.7           2.5        2.6      2.6
 Income taxes paid, net            (186.3)   (133.7)     (197.9)   (245.8)   Effective interest rate    9.4           6.7        10.3    10.2
 Cash flows from operating                                                   EBITDA Margin (%)                       75.8        77.5    77.5
                                   1,239.5   1,512.6     1,737.2   1,962.6
 activities                                                                  Debt/Equity (x)            0.17         0.17        0.20    0.23
                                                                             Interest Coverage (x)      2.1           5.0        4.9      4.8
 Capex                             (462)      (629)      (529)     (429)

 Cash flow from investing                                                    RoE                        2.8           4.2        5.0      5.9
                                    106       (679)      (501)     (250)
 activities
                                                                               Debt / equity (x)        0.17         0.17        0.20    0.23
 Equity Issued/(Bought back)       4,750        0          0         0         Effective tax rate       35.5         12.5        15.5    16.5
 Debt Raised/(Repaid)              (460)     (2,912)      674       771      RoA                        1.6           2.9        3.5      4.0
 Dividends Paid                      0.0     (1,717.8) (1,872.4) (2,040.9)     Payout ratio (Div/NP)    0.0          183.6      173.5    164.1

 Cash flow from financing
                                   3,472.5   (4,999.6) (1,632.2) (1,776.8)
 activities                                                                  EPS (Rs.)                  4.8          12.3        14.1    16.3

 Net increase/ (decrease) in                                                 CEPS (Rs.)                 9.5          19.5        21.9    24.3
                                   4,817.6   (4,166.0)   (396.2)   (64.0)
 cash and cash equivalents                                                   DPS (Rs.)                  0.0          22.5        24.5    26.7
Source: Company, Axis Securities

                                                                                                                                          25
Appendix
23 DEC 2018        Company Report

                                                                                                                        Embassy Office Parks REIT
 Historical Performance of REIT and correlation with Interest Rates…                                                    Sector: Commercial Real Estate

       REIT as an asset class has been in existence for over 5                            One common misnomer that we have come across is that
        decades in the US. So we have looked at US based Equity                             REIT’s rise only in periods of falling interest rates when debt
        REIT returns to understand how REIT’s have performed as                             investments become unattractive and underperform during
        compared to other broad equity markets over long periods of                         periods of rising interest rates. We therefore again looked US
        time.                                                                               REIT returns during rising interest rates.
Returns (%)                                                                           REITs in a Rising Interest Rate Environment
                                             Dow Jones
                 FTSE Nareit                                               Nasdaq
      Period                       S&P 500   Industrials   Russell 2000
                All Equity REITs                                          Composite
                                              Average
   10-Year           13.3           13.44      13.3           12.38         16.3
   15-Year           8.65           9.03       9.57           7.93          9.92
   20-Year          11.74            6.2       7.38           8.02          4.89
   25-Year          11.18           10.15      8.39           9.34         10.28
   30-Year          10.75           9.94       8.11            9.4         10.31

        The above table represents 10-year to 30-year annualized
         returns data for broad based equities and REITS, till Nov 2019
        REITS have outperformed all broad equity markets be it small                      The above table looks at a period of 2004 – 2007 where fed
         cap, large cap or multi-cap in 20-year and above periods and                       funds target rate increased from 1% to 5%.
         have given comparable returns in 10-year and 15-year                              During the same period REIT’s gave a cumulative return of more
         periods                                                                            ~80% while S&P 500 gave a return of ~37%.
        Over very long term investment in REIT’s can be real Wealth                       Other samples also indicate that REIT’s may be volatile to rising
         creators even better than equities!!                                               interest rates but generally rise with rising interests
Source: NAREIT, Axis Securities

                                                                                                                                                         27
23 DEC 2018          Company Report

                                                                                                                                               Embassy Office Parks REIT
 Structure of REIT and role of various players; Taxation                                                                                       Sector: Commercial Real Estate

        The REIT manager sets and
                                                                                                                                                                Taxation
                                                                                                                                                       Tax is charged at the hands
         executes the strategic direction
         of the REIT according to its                     UNIT HOLDERS                          Investors will own                                      of the Unit holders and is
         stated investment strategy. For                                                           Units of REIT                                         a pass through at REIT
         instance, it is responsible for                                                                                                                      and SPV levels
         the acquisition and divestment                   Owns
                                                                         Distributions
         of the REIT’s properties                          Units
                                      Management                                             Acts on
                                          Services
                                                          of REIT
                                                                                           behalf of Unit                                                             SPV
                                                                                             Holders
                                                                     REIT                                            TRUSTEE
              MANAGER                  Management
                                                                                                                                                             Dividend Income – No Tax
                                                                                            Trustee Fees
                                          Fees                                                                                                               Interest Income – No Tax
                 Appoints                                  Owns             Property
                                                          property          Income                            The trustee is responsible
             Property Manager                                                                                                                                Other Income – Taxable
                                                                                                               for holding the assets of the
                                                                                                               REIT on behalf of unit
             PROPERTY                                        PROPERTIES                                        holders                                                REIT
                                                                                                              Other     duties     include
             MANAGER                       Property
                                                                                                               ensuring compliance with
                                          Management
                                           Services                                                            all applicable laws and                       Dividend Income# – No Tax
                                                                          Buy/Sell
                                                                                                               protecting certain rights of
                                                                         Properties
                                                                                                               unit holders                                  Interest Income* – Taxable
         The     property      manager’s
          responsibility includes renting
                                                                                                                                                             Other Income – Exempt
          out the property to achieve the                    SPONSORS
          best tenancy mix and rental
          income, to run marketing events                                                                                                                      Unit Holders
          or    programs      to     attract
          shoppers/tenants       and      to            Sponsor source the properties that
          upkeep the property                            are injected into the initial portfolio of                                                   * Investors have to pay 1) Withholding
                                                         the REIT and may continue to provide                                                         tax @ 5% for foreign investors and 10%
                                                         a pipeline of assets for the REIT                                                            for domestic investors on interest income
                                                        Sponsors typically owns both REIT                                                            2) Tax on income from interests as part of
                                                         and Property manager and have                                                                income tax at applicable marginal tax
                                                         significant stake in REIT                                                                    rates
                                                                                                                                                      # Dividend distribution tax applicable
                                                                                                                                                      above Rs 10L of dividend income
Sources: SEBI, Company, Axis Securities

                                                                                                                                                                                             28
23 DEC 2018              Company Report

                                                                                                                                                       Embassy Office Parks REIT
Disclaimer                                                                                                                                             Sector: Commercial Real Estate

Disclosures:

The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).

1. Axis Securities Ltd. (ASL) is a SEBI Registered Research Analyst having registration no. INH000000297. ASL, the Research Entity (RE) as defined in the Regulations, is engaged in the business of
  providing Stock broking services, Depository participant services & distribution of various financial products. ASL is a subsidiary company of Axis Bank Ltd. Axis Bank Ltd. is a listed public
  company and one of India’s largest private sector bank and has its various subsidiaries engaged in businesses of Asset management, NBFC, Merchant Banking, Trusteeship, Venture Capital,
  Stock Broking, the details in respect of which are available on www.axisbank.com.
2. ASL is registered with the Securities & Exchange Board of India (SEBI) for its stock broking & Depository participant business activities and with the Association of Mutual Funds of India (AMFI) for
  distribution of financial products and also registered with IRDA as a corporate agent for insurance business activity.
3. ASL has no material adverse disciplinary history as on the date of publication of this report.
4. I/We, Ankit Suchanti, PGDM IIML author/s and the name/s subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect my/our views about the
  subject issuer(s) or securities. I/We (Research Analyst) also certify that no part of my/our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s)
  in this report. I/we or my/our relative or ASL does not have any financial interest in the subject company. Also I/we or my/our relative or ASL or its Associates may have beneficial ownership of
  1% or more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. Since associates of ASL are engaged in various financial service
  businesses, they might have financial interests or beneficial ownership in various companies including the subject company/companies mentioned in this report. I/we or my/our relative or ASL or
  its associate does not have any material conflict of interest. I/we have not served as director / officer, etc. in the subject company in the last 12-month period.
Any holding in stock – No
5. ASL has not received any compensation from the subject company in the past twelve months. ASL has not been engaged in market making activity for the subject company.
6. In the last 12-month period ending on the last day of the month immediately preceding the date of publication of this research report, ASL or any of its associates may have:
            i. Received compensation for investment banking, merchant banking or stock broking services or for any other services from the subject company of this research report and / or;
            ii. Managed or co-managed public offering of the securities from the subject company of this research report and / or;
            iii. Received compensation for products or services other than investment banking, merchant banking or stock broking services from the subject company of this research report;

ASL or any of its associates have not received compensation or other benefits from the subject company of this research report or any other third-party in connection with this report.

Term& Conditions:

This report has been prepared by ASL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may not be altered in
any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ASL. The report is based on the
facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in nature. The information is obtained from publicly available
media or other sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy,
completeness or correctness. All such information and opinions are subject to change without notice. The report is prepared solely for informational purpose and does not constitute an offer document
or solicitation of offer to buy or sell or subscribe for securities or other financial instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this
report at the same time. ASL will not treat recipients as customers by virtue of their receiving this report.

Instead of a company visit, we have done a conference call with the company’s management.

                                                                                                                                                                                                         29
23 DEC 2018                  Company Report

                                                                                                                                                                             Embassy Office Parks REIT
Disclaimer                                                                                                                                                                   Sector: Commercial Real Estate

                                                                                                                  DEFINITION OF RATINGS
                                    Ratings                       Expected absolute returns over 12-18 months
                                    BUY                           More than 10%
                                    HOLD                          Between 10% and -10%
                                    SELL                          Less than -10%
                                    NOT RATED                     We have forward looking estimates for the stock but we refrain from assigning valuation and recommendation
                                    UNDER REVIEW                  We will revisit our recommendation, valuation and estimates on the stock following recent events
                                    NO STANCE                     We do not have any forward looking estimates, valuation or recommendation for the stock

                                                                                                                 Disclaimer:
Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to the recipient’s specific circumstances. The securities and strategies
discussed and opinions expressed, if any, in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific
recipient.
This report may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this report should make such investigations as it deems necessary to arrive at an independent evaluation of
an investment in the securities of companies referred to in this report (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. Certain transactions,
including those involving futures, options and other derivatives as well as non-investment grade securities involve substantial risk and are not suitable for all investors. ASL, its directors, analysts or employees do not take any
responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any action taken on basis of this report, including but not restricted to, fluctuation in the prices of shares and bonds,
changes in the currency rates, diminution in the NAVs, reduction in the dividend or income, etc. Past performance is not necessarily a guide to future performance. Investors are advice necessarily a guide to future performance.
Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements
are not predictions and may be subject to change without notice.
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lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions. Each of these entities functions as a separate, distinct
and independent of each other. The recipient should take this into account before interpreting this document.
ASL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report should be aware that ASL may have a potential conflict of
interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. ASL may have issued other reports
that are inconsistent with and reach different conclusion from the information presented in this report.
Neither this report nor any copy of it may be taken or transmitted into the United State (to U.S. Persons), Canada, or Japan or distributed, directly or indirectly, in the United States or Canada or distributed or redistributed in
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law, regulation or which would subject ASL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of
investors.
The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. The Company reserves the right
to make modifications and alternations to this document as may be required from time to time without any prior notice. The views expressed are those of the analyst(s) and the Company may or may not subscribe to all the views
expressed therein.

                                                                                   Copyright in this document vests with Axis Securities Limited.
Axis Securities Limited, Corporate office: Unit No. 2, Phoenix Market City, 15, LBS Road, Near Kamani Junction, Kurla (west), Mumbai-400070, Tel No. – 022- 40508080 / 022 - 61480808, Regd. off.- Axis House, 8th Floor,
                     Wadia International Centre, Pandurang Budhkar Marg, Worli, Mumbai – 400 025. Compliance Officer: Anand Shaha, Email: compliance.officer@axisdirect.in, Tel No: 022-42671582.

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