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Embassy Office Parks, India's biggest office space company that invests in buildings (REIT), is looking to raise up to USD 400 million from investors. This is because businesses in India are renting office space at record highs. To manage this fundraising effort, Embassy has appointed investment banks Morgan Stanley and India's Kotak Mahindra Bank. They expect to complete the deal by June 2024.
Embassy manages a huge 45 million square feet of office space across four major Indian cities: Pune, Mumbai, Bengaluru, and NCR (National Capital Region). Big companies from around the world and India, like Google, Cisco, and IBM, are all looking to rent space in Embassy buildings. These companies are growing their presence in India, which is expected to be one of the top 3 economies in the world by 2030.
The money Embassy raises will be used for two key purposes. First, they will use it to pay off some of their existing debt. Second, they will use it to buy land in Chennai, a new city for Embassy. This will allow them to rent space to more businesses in a growing market and diversify their geographic footprint.
India's office space business is doing very well, unlike many other countries where offices are empty because people work from home. In 2023 alone, Indian companies rented a record-breaking 61.6 million square feet of office space. The last quarter of the year recorded the highest amount of renting.
There are a few reasons why companies in India still need office space. While some people are working from home sometimes (also known as a hybrid work model), businesses still need physical offices for a few reasons. This includes having space for new employees as companies grow and having big office areas for people working together on projects, especially for tasks that require close collaboration.
Embassy, Asia's biggest office space company that invests in buildings, wants approval from its board in the coming weeks to raise this USD 400 million. The deal is expected to be finished by June 2024, with the help of investment banks Morgan Stanley and India's Kotak Mahindra Bank.
The big demand for office space in India makes this a good investment opportunity. Because of this demand, investors with a lot of money, like foreign asset managers and mutual funds, are expected to be interested in giving Embassy money.
Embassy has a good list of renters with 245 companies in total. Most of these renters are in technology and finance, and many are well-known Fortune 500 companies. Embassy's finances are also healthy. Their profit after taxes went up by 6% to INR 2.3 billion in the December quarter. Their total income also grew by 5.3% to INR 9.8 billion.
Embassy Office Parks' plan to raise money shows a strong demand for office space in India. However, this growth is mainly happening in the office space business. While Embassy is a leader in this area, other parts of India's real estate market, like homes and warehouses, are also seeing more investor interest due to rising demand and property prices.
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