Knowledge Realty Trust REIT
IPO Size: Rs. 4,800 cr. Rs. 1,200 cr raised from strategic investors making Net Issue Size as Rs. 3,600 cr
- Entirely Fresh Issue, to repay Rs. 4,640 cr debt, of Rs.19,800 cr debt
Price band: Rs. 95-100 per unit (not share)
- 75% allocation of net issue to institutional investors and 25% for HNI and retail
Post Money M cap: Rs. 44,344 cr
IPO Date: Tue 5th Aug to Thu 7th Aug 2025, Listing Mon 18th Aug 2025
Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.
India’s Largest Office REIT
Knowledge Realty Trust (KRT REIT), sponsored by India’s Sattva Developers and Blackstone PE, comprises 37 million square feet (msf) of completed area, with 91% occupancy across Mumbai, Bengaluru and Hyderabad. It also has 1.2 msf Under Construction area and 8 msf future development area. KRT REIT’s gross asset value is at Rs. 62,000 cr, with debt of Rs. 19,815 cr, as of 31.3.25.
Total Fund raise of Rs. 6,200 cr
Including Rs. 1,400 cr pre-IPO funds raised from UHNIs and domestic family office, the total fund raise is at Rs.6,200 cr. Of this, Rs. 1,200 cr was raised from strategic investors and Rs. 1,620 cr from anchor investors. Thus, Rs. 1,980 cr is pending (1,080 cr from institutions and Rs. 900 cr from retail and HNI).
REIT is More Debt-like
REIT is a preferred option over buying physical property. As a financial instrument, it falls in between debt and equity, as returns are not guaranteed (like debt), not as high (as equity), but more regular. Thus, REITs can be allocated only from one’s debt portfolio and not from equity allocation.
Post-Tax Yield higher than Bank Fixed Deposit
KRT plans to distribute 100% of projected net distributable cash flow (NDCF) quarterly. Based on FY26E NDCF of Rs. 2,750 cr, distribution per unit (DPU) is at Rs. 6.20, on 443.44 cr units. Quarterly pay-out makes FY26E yield at 6.3%.
DPU comprises dividend, interest on loan and loan repayment. Mix of these, as indicated in the offer document, is 70-75%:16-22%:8-17%. Interest on loan, taxable in unitholder’s hands, will be atleast 16% of DPU. Thus, post-tax return for FY26E is at 6.0%, assuming income of Rs. 1 cr+ for individual tax payer. If income is higher, this effective yield will lower and vice versa, due to varying surcharge on income tax.
For FY27E, DPU is projected at Rs. 7, implying 7.22% yield and a post-tax return of about 6.8%. This is higher than ~6.40% fixed deposit interest rate for 1-3 years, from leading banks like SBI, HDFC and ICICI, which is a pre-tax return.
Capital Appreciation
Besides quarterly payouts, REIT unit holders (not shareholders) can earn capital gains on sale of units, due to change in value of assets held by the REIT. This has historically been 3%-5% for commercial assets over the long term. Holding period for capital gains on REITs has been reduced to 1 year, bringing on par with listed equity. Also, REITs perform well in the declining interest rate scenario, which is currently the case in India. So, no risk of decline in price of REIT in short to medium term.
Peer Comparison:
At Rs. 100 per unit, issue is made at 10% discount to NAV of Rs. 111, as of 31.3.25. The 4 listed REITs are ruling at lower discounts:
- Embassy REIT, sponsored by Blackstone, has m cap of Rs. 36,400 cr, ruling at 6% yield and 9% discount to NAV
- Mindspace, with Rs. 25,500 cr m cap, has 5.5% yield and is at 3% discount to NAV
- Brookfield’s m cap of Rs. 19,400 cr implies a 5% discount to NAV with 6% yield.
- Nexus Select’s m cap of Rs. 22,200 cr is at 4% discount to NAV with 6% yield.
Thus, KRT’s expected yield and discount to NAV are attractive in relation to peers.
