We aim to maximise the total return for Unitholders by targeting growth in NOI, distributions and NAV per Unit. To achieve this objective, we execute business and growth strategies that capitalise on our portfolio's embedded organic growth levers, deliver new on-campus developments, undertake value-accretive acquisitions, prudently manage our capital, and balance sheet, and pay distributions to the Unitholders.

Current business environment

Even amidst a highly volatile global macro environment, India continues to attract more and more global companies to set up and grow their offshore captive centres. Morgan Stanley, in its recently published report 'Why This is India's Decade', has highlighted offshoring as one of the key “megatrends” which will continue to fuel India's growth. The dual drivers for this phenomenon are structural, namely India's abundant STEM talent and the cost efficiency offered by India's gateway cities, relative to more expensive and less scalable markets globally. As we have highlighted previously, these global captives continue to pursue premium-quality wellness-focused properties, to attract and retain talent and to grow their presence in India.

CY2022 was a resurgent year for India office with total absorption of around 55 msf, which is closer to pre-pandemic highs. While globally there may be an increased caution around office demand, the longterm fundamentals of India office remain strong. Apart from banks and financial services captives which continue to drive demand, many other major companies from diverse sectors such as global retailers, insurers and healthcare majors are now setting up their India offices. Increased focus on costs and efficiencies by global corporates is likely to further accelerate this India offshoring trend, disproportionately to the benefit of institutional landlords like us. Captives now account for over 55% of our annual rents and led by these captives, the physical occupancy in our properties stood at around 50% in the end of April 2023, vs 20% a year ago.

At Embassy REIT, our conviction in the India office opportunity remains strong as ever, especially for institutionally managed Grade A properties. Our view is corroborated by NASSCOM's recent industry report which outlined that just last year around 100 new captive centres were set up in India and 500 more are planned over the next three years.

On the other hand, the supply of quality office stock continues to consolidate towards fewer and larger institutional quality landlords who are well-funded to invest in sustainable growth. A combination of cost inflation and rising interest rates is likely to increase the replacement value of properties, thereby impacting supply and driving rent growth in the medium-term.

On the regulatory side, the government and regulators have been very supportive of the REIT product, and continue to improve the framework

around their management, operations, financing and taxation. While the industry awaits further progress on SEZ denotification, the recent amendment to the Finance Bill brought in much needed clarity on taxation of 'repayment of capital' component of a REIT's distributions. The resultant clear, stable, and tax-efficient framework enhances the post-tax distribution yields, and we are confident that REITs will continue to attract domestic and foreign capital. The recent launch of a REIT/InvIT index by NSE further helps raise awareness as well as liquidity for our 'total return product'.

ESG also has accelerated in acceptance, as occupiers and investors continue to put considerable emphasis on wellness and sustainability. In that context, companies have increased their focus, benchmarking and investments into being ESG compliant.

The resilience of our business has been clearly demonstrated despite the global macro challenges. During FY2023, we leased 5.1 msf across a record 100 deals, including 2 msf new leases at 17% mark-to-market, and added 44 new occupiers. We activated 2.3 msf new on-campus developments at highly accretive yields and announced an NAV-accretive tuck-in acquisition in North Bengaluru. We generated healthy 11% Net Operating Income ('NOI') growth, exceeding our guidance by 2.3%. Moreover, despite the rising interest rates, we delivered on our distribution guidance with H21.71 Distribution per Unit ('DPU'), marking our 16^th consecutive quarter of 100% payout.

In addition to delivering on our guidance set out in April 2022, we have now completed four full years since listing, two of which have been substantially impacted by the pandemic. In this period, we have delivered over H78 Bn or close to a Bn dollars in distributions and expanded our investor base by around 20 times to over 80k. We leased a total of 11.4 msf, delivered 3.4 msf of new office space and launched 7.9 msf new developments.

Business performance for FY2023 and forward outlook

We recently completed our fourth year since listing, continuing our strong business performance and accelerating our growth investments. During FY2023, we leased 5.1 msf across a record 100 deals, including 2 msf new leases at 17% mark-to-market, and added 44 new occupiers. We activated 2.3 msf new on-campus developments at highly accretive yields and announced an NAV-accretive tuck-in acquisition in North Bengaluru. We generated health; 11% Net Operating Income ('NOI') growth, exceeding our guidance by 2.3%. Moreover, despite the rising interest rates, we delivered on our distribution guidance with H21.71 Distribution per Unit ('DPU'), marking our 16^th consecutive quarter of 100% payout taking our overall distributions since listing to over H78 Bn. On the balance sheet front, we refinanced H53 Bn debt at 101 bps positive spreads, maintained low 28% leverage and a competitive 7.2% debt cost.

On the ESG front, we hosted our flagship 'ESG Occupier Connect' event themed 'In it together, for a better tomorrow' where we collaborated with over 200 of our occupiers on sustainability strategies. In addition, we commissioned the first phase of our 20 MW solar rooftop project and announced plans to explore doubling of our captive renewable solar capacity. Our industry leading ESG programme received several global recognitions during the year from GRESB, USGBC LEED, British Safety Council and the 'WELL at scale' certification from IWBI.

We continue to progress on our FY2025 targets as well as our broader net zero 2040 goal and our ESG leadership remains a key business differentiator and ; driver of premium rents.

Key highlights

Business Highlights

•    Leased 5.1 msf across 100 deals at 16% spreads, surpassing annual leasing guidance of 5 msf

•    Added 44 new high-growth occupiers across sectors like insurance, healthcare, retail, renewables, cloud, and cybersecurity and increased occupier base to over 230 marquee corporates

•    Awarded global recognition for portfolio by leading ESG benchmarking and certification agencies - GRESB, USGBC LEED, British Safety Council and WELL/ IWBI

Financial Highlights

•    Grew Net Operating Income by 11% YoY to H27,663 Mn

•    Delivered distributions of H20,579 Mn or H21.71 per unit, marking the 16^th consecutive quarter of 100% payout

•    Refinanced H53 Bn debt at 101 bps positive spreads, maintained best-in-class balance sheet with low 28% leverage, attractive 7.2% debt cost and AAA/Stable credit ratings

Growth Highlights

•    Delivered 3.4 msf of new office space and launched 7.9 msf new developments new development in Bengaluru at attractive yields, including first-of-its-kind 1.2 msf redevelopment project at Embassy Manyata

•    Acquired 1.4 msf Embassy Business Hub, a campus-style business park in North Bengaluru, for H3,348 Mn. NOI and NAV accretive deal with attractive 8.1% financing

'    • Accelerated active development to 7.9 msf,

expected to deliver stabilized yields on committed capital investment of H40 Bn

Outlook for FY2024

•    The global macro-environment is facing recessionary headwinds, driven by hardening interest rates across geographies as Central banks try to rein-in inflation. Hence, after a couple of years of continued hiring which resulted in growing their headcounts by 40-100% in many cases, corporates have responded by focusing on costs and efficiency. Depending on the kind of business model, some have reduced headcounts in tranches, while others have resorted to corporate housekeeping for all cost-heads. However, the digitalisation agenda for corporates continues to occupy centre stage in boardrooms across the world, and especially in the developed economies which are facing growth headwinds. In such an environment, India's cost advantage for both talent and real-estate get accentuated. The

j secular trend of global corporates offshoring more functions to India is expected to continue, and a global supply-chain realignment is also supportive of India's move up in the world's value-chain.

•    Attrition has reduced sharply as bargaining-power shifts from employees to corporates, and COVID concerns have tapered off substantially and economic engines are normalising. While hybrid working is here to stay, IPC reports (CBRE, 2023 India Market Outlook) suggest <8% of employees are working fully remotely. Back-to-office momentum continues to build as corporate leaders have expressed the importance of physical offices in inculcating culture, driving collaboration and learning, and improving efficiency and data security. This is expected to re-establish the link between hiring and leasing and provide significant headway for growth from historical hiring over the COVID period slowly heading back to the office.

•    Unlike global markets which are facing headwinds due to global uncertainty, India's office market demand remains robust from a structural standpoint even though there might be a nearterm slowdown in deal signings due to heightened caution in capex decision-making by global corporates. IPCs expect corporates to resume decision-making in the second half of FY2024. Flight-to-quality trends will continue to intensify, and ESG-compliant spaces will continue to see

Factors affecting our financial condition and results of operations

Our financial performance and results of operations are affected by several factors. The important ones in our view are listed here:

Commercial real estate market: We depend on the performance of the commercial real estate market in the cities where our office parks and commercial offices are located. The commercial real estate market in these cities, in turn, depends upon various factors such as economic and other market conditions, demographic trends, employment levels, availability of financing, prevailing interest rates, competition, bargaining power of occupiers, operating costs, government regulations and policies, and market sentiment.

Our office parks and office buildings are in the key markets of Bengaluru, Mumbai, Pune and Noida. Within these cities, our business significantly depends on the performance of the submarkets where our portfolio assets are located. Most of these micro-markets have historically exhibited strong market dynamics with robust absorption and balanced infusion of new office supply resulting in rent stability/growth and low vacancy on an average, even during the tough periods of the pandemic.

Our portfolio assets are strategically located within their respective markets, which allows us to attract, retain and grow key occupiers within our office parks and commercial office buildings.

Industry of occupiers: Our business also depends on the performance of the industry sectors of our occupiers. Sectors such as technology, banking, financial services, insurance, engineering, and manufacturing drive commercial leasing activity in India. Additionally, new sectors such as healthcare. retail, research and analytics and consulting have also emerged as key drivers of office real estate demand, as domestic and multinational companies in these sectors have been increasingly expanding or settingup operations in India.

Our tenant base is highly diverse with technology sector clients contributing to 38% our gross rentals followed by financial services at 20% as of March 31, 2023. We believe that the domination of technology and banking and financial services sector as key occupiers of space in India's commercial office segment will continue to significantly influence the results of our operations.

_s We derive 82% of Gross Annualised Rental

Obligations from multinational corporation as at March 31, 2023.

The global and other factors impacting businesses of these types of corporations may affect their ability to service contracted lease agreements.

The global and other factors impacting businesses of these types of corporations may affect their ability to service contracted lease agreements.

respect to our investment properties. These costs are depreciated based on the straight-line method over their estimated useful lives. When construction is completed, borrowing costs are charged to our statement of profit and loss as finance costs, causing an increase in expenses.

Cost of financing: Our finance costs primarily comprise interest expense on our non-convertible debentures and borrowings from banks and financial institutions. Our ability to obtain financing, as well as the cost of such financing, affects our business. Though we believe we can obtain funding at competitive interest rates as evidenced basis the fund raising done by us during FY23, the cost of financing is material for us, as we require significant capital to develop our projects and the expected increase in interest rates might affect our distributable surplus.

Government regulations and policies including taxes and duties: The real estate sector in India is highly regulated and there are several laws and regulations that apply to our business. Regulations applicable to our business include those related to land acquisition, funding sources, the ratio of built-up area to land area, land usage, the suitability of building sites, road access, necessary community facilities, open spaces or green cover, water supply, sewage disposal systems, electricity supply, environmental clearances, and size of the project.

We also keep abreast of the evolving SEBI REIT regulations which oversee the setup, operations and governance of REITs in India. We strive to maintain compliance with these regulations and incur various costs in the process, including fees to consultants, property tax and other taxes and duties.

In addition, some of our portfolio assets are located on land notified as part of SEZs. The leasing traction for these SEZ areas has been impacted by the uncertainty around amendments to the SEZ rules or introduction of the proposed DESH bill as a separate framework, an issue affecting the whole industry.

An enabling regulatory framework around, among

other things, denotification and flexibility of usage of existing SEZs is expected to boost demand for such spaces and further drive leasing traction.

Competition: We operate in competitive markets for the acquisition, ownership, and leasing of commercial real estate. We compete for occupiers with numerous real estate owners and operators who own properties like our own in these markets. Among the factors influencing leasing competition are location, rental rates, building quality and levels of services provided to occupiers.

Competition from other developers in India may adversely affect our ability to sell or lease our projects, and continued development by other market participants could result in saturation of the real estate market, which could adversely impact our revenues from commercial operations.

Increasing competition could result in price and supply volatility which could materially and adversely affect our operations and cause our business to suffer.

Future acquisitions: We intend to selectively acquire commercial real estate assets that meet our investment criteria, from either the Sponsors or third parties. Each new acquisition that we complete may materially affect our overall results of operations and financial position. In addition, our acquisition strategy may require a significant amount of working capital and long-term funding. Our ability to acquire properties will depend on our ability to secure financing on commercially viable terms, which will in part be affected by the prevailing interest rates or the price of our units at the time of acquisition.

Operating and maintenance expenses: Our

operating and maintenance expenses primarily consist of repair and maintenance (of buildings, common areas, machinery, and others), power and fuel expenses. property management fees and expenses related to housekeeping and security services. Factors which impact our ability to control these operating expenses include (but are not limited to) asset occupancy levels, fuel prices, general cost inflation, periodic renovation, refurbishment, and other costs related to re-leasing.

For the portfolio assets we provide Common Area Maintenance (CAM) services to our occupiers. We derive income from these maintenance services that include a margin on the expenses incurred for providing such services.

Cost increases because of any of the foregoing may adversely affect our profitability, margins, and cash flows. Circumstances such as a decline in market rent or pre-term lease cancellation may cause revenue to decrease, although the expenses of owning and operating a property may not decline in line with the decrease in revenue. While certain expenses may vary with occupancy, operating and maintenance expenses such as those relating to general maintenance, housekeeping and security

services may not decline even if a property is not fully occupied.

Basis of preparation of consolidated financial statements

The Consolidated Financial Statements of the Group comprises the Consolidated Balance Sheet and the Consolidated Statement of Net Assets at fair value as at March 31, 2023, the Consolidated Statement of Profit and Loss including other comprehensive income, the Consolidated Statement of Cash Flow, the Consolidated Statement of Changes in Unitholders' Equity, the Statement of Net Distributable Cashflows of Embassy REIT and each of the REIT assets, the Consolidated Statement of Total Returns at fair value and a summary of significant accounting policies and other explanatory information for the year ended March 31, 2023. The Consolidated Financial Statements were approved for issue in accordance with resolution passed by the Board of Directors of the Manager on behalf of the Embassy REIT on April 27, 2023.

The Consolidated Financial Statements have been prepared in accordance with the requirements of the Securities and Exchange Board of India (SEBI) (Real Estate Investment Trusts) Regulations, 2014 as amended from time to time including any guidelines and circulars issued thereunder read with SEBI Circular No. CIR/IMD/DF/146/2016 dated December 29, 2016 (REIT regulations); Indian Accounting Standards as defined in Rule 2(1)(a) of the Companies (Indian Accounting Standards) Rules, 2015 and other accounting principles generally accepted in India, to the extent not inconsistent with the REIT regulations. The Consolidated Financial Statements have been prepared using uniform accounting policies for like transactions and other events in similar circumstances.

The Ministry of Corporate Affairs has notified Companies (Indian Accounting Standard) Amendment Rules 2022 dated March 23, 2022 to majorly amend the following Ind AS which are effective from April 1, 2022:

i.    Reference to the Conceptual Framework -Amendments to Ind AS 103

ii.    Property, Plant and Equipment: Proceeds before Intended Use - Amendments to Ind AS 16

iii.    Onerous Contracts - Costs of Fulfilling a Contract - Amendments to Ind AS 37

These amendments had no impact on the financial statements of the Group.

There were certain amendments to standards and interpretations which are applicable for the first time for the year ended March 31, 2023, but either the same are not relevant or do not have an impact on the consolidated financial statements of the Group.

Further, the Ministry of Corporate Affairs has notified Companies (Indian Accounting Standard) Amendment Rules 2023 dated March 31, 2023 to amend the

Information about assumptions and estimation uncertainties that have a significant risk resulting in a material adjustment during the year ended March 31, 2023 is included in the following notes:

i. Fair valuation and disclosures and impairment of non-financial assets being investment properties and property plant and equipment:

The fair value of investment properties and property, plant and equipment are reviewed regularly by management with reference to independent property valuations and market conditions existing at half yearly basis. The independent valuers are independent appraisers with a recognised and relevant professional qualification and with recent experience in the location and category of the investment properties being valued. Judgement is also applied in determining the extent and frequency of independent appraisals.

ii.    Useful lives of Investment Property and Property, Plant and Equipment

iii.    Valuation of financial instruments

iv.    Recognition of deferred tax asset on carried forward losses and recognition of minimum alternate tax credit: The availability of future taxable profit against which tax losses carried forward can be used. Further, significant judgements are involved in determining the provision for income taxes, including recognition of minimum alternate tax credit, in SPVs entitled for tax deduction under Section 80IAB of the Income Tax Act, 1961, wherein the tax deduction is dependent upon necessary details available for exempt and non-exempt income.

Analysis of consolidated statement of profit and loss

Our revenue from operations comprises the following sources:

Facility rentals

Revenue from facility rentals comprises the base rental from our properties, car parking income, fit-out rentals and other rentals as below:

•    Base rentals: Base rentals comprises rental income earned from the leasing of our assets.

•    Car parking income: Car parking income comprises revenue earned from the operations of parking facilities located at our properties; and

•    Fit-out rentals: For some of our occupiers, we provide customised alterations and enhancements as per the occupiers' requirements (as opposed to warm shell premises that contain only minimally furnished interiors). For such properties, we recover the value of the fit-outs provided through fit-out rentals, to the extent such

leases are classified as operating lease as per accounting requirements.

•    Facility rentals for the portfolio increased by H1,635.68 Mn or 7% from H22,162.32 Mn in FY22 to ?23,798.00 Mn in FY23. A summary of movement is captured in the below table:

Facility rentals increased primarily due to:

•    Contracted revenue: Contracted lease escalation on 97 lease contracts.

•    Lease up, vacancy and MTM: Lease up across Embassy Manyata, Embassy Tech village, Embassy Galaxy and renewals spread across all the parks worth of H1,338.92 Mn off set by reduction in facility rentals to the extent of H1,439.23 Mn due to Occupier exits during the year, resulting in net decrease in revenue by H100.31 million

Income from finance lease

•    Income from finance leases comprise income from fit-out rentals where such leases are classified as finance leases. Leases are classified as finance leases when substantially all the risks and rewards of ownership transfer to the lessee

•    Income from finance lease increased from H183.83 Mn in FY22 to H217.58 Mn in FY23 due to new fit-out rental contracts with occupiers.

Revenue from room rentals and sale of food and beverages

•    Revenue from room rentals and sale of food and beverages comprises revenue generated from our operating hotels viz. Hilton at Embassy Golflinks, Hilton Garden Inn (HGI) and Hilton Inn (HI) at Embassy Manyata and Four Seasons at Embassy One.

•    During the year, the hospitality segment witnessed significant improvement in business as compared with FY22 due to launch of new hotels (HGI and HI at Embassy Manyata) and resumption of domestic travel resulting in an increase of revenue from room rentals by H1,520.45 Mn or a significant increase of 527% from H288.37 Mn in FY22 to H1,808.82 Mn in FY23.

•    The segment also witnessed corresponding increase in sale of food and beverages by H1,142.32 Mn or 405%, from H281.99 Mn in FY22 to H1,424.31 Mn in FY23.

Maintenance services

Income from maintenance services consists of the revenue received from our occupiers for the Common Area Maintenance (CAM) services provided across our commercial office portfolio. Income from maintenance services is generally a function of our maintenance expenses at the portfolio assets, with a change in maintenance expenses resulting in a corresponding change in maintenance service income, along with the impact of lease up/exits at our properties.

Income from maintenance services for the portfolio decreased marginally by H34.63 Mn or 0.78 % from H4,429.19 Mn in FY22 to H4,394.56 Mn in FY23, primarily due to occupier exits.

Income from generation of renewable energy

The 100 MW solar park at Embassy Energy is located at Bellary district of Karnataka and helps reduce an estimated 200 Mn kgs of carbon footprint by providing green energy to our occupiers. The solar generation from the segment increased by 8 Mn units to 185 Mn units (FY22: 177 Mn), a marginal increase of 4% from the FY22 levels. This has led to an increase in revenue by H107.12 Mn from H1,504.98 Mn in FY22 to H1,612.10 Mn in FY23.

Other operating income

Other operating income primarily includes revenue from ancillary operating departments at our Hospitality segment as well as the rental compensation receivable from Embassy Property Developments Private Limited (EPDPL) in relation to M3 Block A. Other operating income increased by H164.69 Mn or 21% from H775.37 Mn in FY22 to H940.06 Mn in FY23 primarily due to increase in hospitality operations during the current year.

Property-wise revenue from operations

We have provided a property-wise/ asset-wise break up of our revenue from operations for FY23 vis-avis FY22.

Interest income

Interest income includes interest on (i) debentures, (ii) fixed deposits with banks, (iii) security deposits, (iv) other statutory deposits, (v) income-tax refunds and (vi) others. Interest income increased by H223.56 Mn or 25% from H899.81 Mn for FY22 to H1,123.37 Mn for FY 23.

The increase in interest income is majorly on account of interest on investment in debentures. During the current year, the Group had invested in debentures of its investment entity, Embassy Golflinks, for acquisition of certain real estate and CAM business at Embassy Golflinks Business Park with a view to consolidate Embassy Golflinks' existing holdings.

Our expenses comprises the following:

Cost of materials consumed

Cost of materials consumed includes direct material cost of our four operating hotels, i.e. Hilton at Embassy Golflinks, HGI and HI at Embassy Manyata and the Four Seasons at Embassy One ('Hospitality operations') primarily towards the provision of food and beverage services to the guests at these hotels.

Cost of materials consumed increased by H305.69 Mn or 362% from H84.53 Mn for FY22 to H390.22 Mn for FY23 in line with increase in revenue from hospitality operations. The average occupancy for the year was 62% (FY22: 29%), 50% (FY22: 23%) and 36% (FY22: 23%) at Hilton Hotel at Embassy Golflinks, HGI and HI at Embassy Manyata and Four Seasons Hotel at Embassy One, respectively.

Employee benefits expense

Employee benefits expense primarily includes salaries and wages, contribution to provident and other funds and staff welfare expenses in relation to our Hospitality operations. Improvement in hospitality operations and launch of new hotels (HGI and HI at Embassy Manyata) led to an increase in the

manpower cost by H361.49 Mn or 158% from H228.59 Mn for FY22 to H590.08 Mn for FY23.

Operating and maintenance expenses

Operating and maintenance expenses include power and fuel expenses and operating consumables in relation to our Common Area Maintenance operations.

Operating and maintenance expenses increased by H382.58 Mn or 65% from H585.64 Mn for FY22 to H968.22 Mn for FY23 majorly due to increase in consumables and power and fuel cost mainly on account of improvement in hospitality segment operations and increase in footfall at our office parks.

Repairs and maintenance

Repairs and maintenance expense include repairs towards common area maintenance, buildings, machinery, and others.

There is an increase in expenses by H370.44 Mn i.e. 14% from H2,657.67 Mn for FY22 to H3,028.11 Mn for FY23 primarily due to increase in business activities in parks, increased operations in our Hospitality segment and operating cost of new blocks.

Insurance

Insurance expenses increased by H30.85 Mn or 21% from H149.49 Mn for FY22 to H180.34 Mn for FY23. The increase is mainly due to insurance charge on the newly delivered hotels at Embassy Manyata and office blocks.

Investment management fees

This includes the property management fees and REIT management fees.

Property management fees: This represents the fee: earned by the Manager to the REIT pursuant to the investment management agreement.

The Manager earns property management fees computed at 3% per annum of facility rentals collected by the relevant property with respect to operations, maintenance, administration, and management of the Holdco or the SPVs, as applicable. The fees have been determined to meet the ongoing costs of the Manager to undertake the services provided to the Embassy REIT and REIT assets. Property management fees marginally increased by H25.25 Mn or 4% from H670.17 Mn for

Other expenses

Other expenses mainly include the following:

FY22 to H695.42 Mn for FY23 in line with increase in revenue from facility rentals.

REIT management fees: This represents fees earned by the Manager to the REIT pursuant to the investment management agreement between the REIT and Manager. REIT management fees is computed at 1% of the REIT distributions. The fees have been determined for undertaking management of the REIT and its investments. REIT management fees for FY23 amounts to H239.47 Mn vis-a-vis H254.46 Mn for FY22, which is in line with the distributions for respective years.

Legal and professional fees

Legal and professional fees represent amounts paid to consultants for their services in relation to legal and compliance advisory, accounting and taxation advisory and internal audit. Legal and professional fees have increased by H116.27 Mn or 28% from H408.46 Mn for FY22 to H524.73 Mn for FY23 due to non-recurring expenses incurred towards consulting and advisory services.

We capitalise our finance costs in relation to our under-construction properties. When construction is completed, the finance cost is charged to our statement of profit and loss, causing an increase in our finance costs.

The increase in finance cost is mainly on account of:

•    increase in interest expense due to our new deliveries namely HGI and HI Hotel, ETV Block 9 and Hudson and Ganges block;

•    increase in interest rates. Our average interest rates had increased from 6.72% to 7.21%;

•    increase in borrowings for financing acquisition o' certain real estate and CAM business at Embassy Golflinks and base build and other infrastructure developments at other parks.

Depreciation and amortisation expense

Depreciation and amortisation expense increased by H3,319.53 Mn or 42% from H7,964.63 Mn for FY22 to H11,284.16 Mn for FY23 primarily due to full year impact of depreciation of HGI and HI Hotel at Embassy Manyata, ETV Block 9 and Hudson and

vis-a-vis H28.98 Mn for FY22, mainly due to increase in Hospitality operations during current year.

Other direct and indirect expenses

Other direct and indirect expenses majorly include management fees paid by hotels and travel and conveyance. Other direct and indirect expenses increased by H230.99 Mn or 152% from H152.42 Mn for FY22 to H383.41 Mn for FY23 due to increase in the hotel operations during the year.

Earnings before finance costs, depreciation, amortisation and tax (EBITDA)

Our EBITDA for FY23 was H26,884.99 Mn, an increase of H2,634.82 Mn or 11%, compared to H24,250.17 Mn for FY22 primarily driven by the increase in Revenue from Operations, partially offset by increased hotel operating expenses corresponding to the ramp-up in our hotel business. The EBITDA margins stood at 79% and continue to be best-in-class.

Ganges block at Embassy TechZone and accelerated depreciation of D1 and D2 blocks at Embassy Manyata on account of redevelopment project undertaken to transform two of the earliest buildings comprising 400k sf leasable area with over 170% mark-to-market opportunity.

Profit before share of profit of equity accounted investee and tax

As a result of the foregoing, we recorded ?5,840.20 Mn as profit before share of profit of equity accounted investee and tax for FY23 vis-a vis ?8,000.26 Mn in FY22, a decrease of H2,160.06 Mn or 27%.

Share of profit after tax of equity accounted investee

The share of profit after tax in Embassy Golflinks, our investment entity, an equity accounted investee, for FY23 was H777.50 Mn as compared with H962.14 Mn for FY22. The decrease of H184.64 Mn or 19% in the share of profit from Embassy Golflinks is primarily due to higher finance cost, depreciation and tax expense in FY23.

Profit before tax

As a result of the foregoing, we recorded a profit before tax of H6,617.70 Mn for FY23, as compared to a profit before tax of H8,962.40 Mn for FY22, an increase of H2,344.70 Mn or 26%.

Total tax expenses increased by H1,479.57 Mn from H78.55 Mn for FY22 to H1,558.12 Mn for FY23.

Current tax expense has decreased by H142.34 Mn or 9% from H1,670.00 Mn for FY22 to H1,527.66 Mn for FY 23 mainly on account of tax shield on D1 and D2 block's accelerated depreciation.

Deferred tax has increased by H1,621.91 Mn or 102% from H1,591.45 Mn credit during FY22 to H30.46 Mn charge for FY23. The movement is primarily due to benefit obtained from the collapse of ETV structure in FY 22 whereby deferred tax assets were created on unabsorbed depreciation and business losses as the realisation of such tax assets had become reasonably certain.

Profit for the year

As a result of the foregoing, our profit for FY23 was H5,059.58 Mn as compared with H8,883.85 Mn for FY22, a decrease of H3,824.27 Mn or 43%.

Non-GAAP Measures

Net Operating Income ('NOI')

Based on the 'management approach' as specified in Ind AS 108, our Chief Operating Decision Maker (CODM) evaluates our performance and allocates resources based on an analysis of various performance indicators by operating segments.

We use NOI internally as a performance measure and believe it provides useful information to investors regarding our financial condition and results of operations because it offers a direct measure of the operating results of our business segments. However, NOI does not have a standardised meaning, nor is it a recognised measure under Ind AS or International Financial Reporting Standards ('IFRS') and may

not be comparable with measures with similar names presented by other companies/ real estate investment trusts. NOI should not be considered by itself or as a substitute for comparable measures under Ind AS or IFRS or other measures of operating performance, liquidity or ability to pay dividends. We define NOI for each of our segments as follows:

a)    Commercial offices segment

NOI for commercial offices is defined as revenue from operations [which includes (i) facility rentals, (ii) maintenance services income,

(iii) income from finance lease, and (iv) other operating income for commercial offices] less direct operating expenses [which include (i) operating and maintenance expenses, including common area maintenance expenses (ii) property taxes, (iii) rent, and (iv) insurance].

b)    Hospitality segment

NOI for hospitality segment is defined as revenue from operations [which includes (i) room rentals (ii) sale of food and beverages (iii) other operating income from hospitality] less direct operating expenses [which include (i) cost of materials consumed (ii) employee benefits expenses (iii) operating and maintenance expenses, excluding property management fees, and (iv) other expenses].

c)    Other segment

NOI for other segments is defined as revenue from operations (which includes income from generation of renewable energy) less direct operating expenses [which includes (i) operating and maintenance expenses and (ii) other expenses].

Certain income (such as interest, dividend, and other income) and certain expenses (such as other expenses, excluding direct operating expenses, depreciation, amortisation,

NOI margins

Our NOI margin for FY23 was 81% as compared with 84% for FY22, primarily due to to increase in share of hospitality segment in segment mix which have lower margins. NOI margin for commercial offices segment has remained same at 86% for FY23 and FY22. Our hospitality segment reported a positive NOI of 1,150.94 vis-a-vis negative NOI of H135.47 Mn for FY22 due to ramp up of the sector post the impact of the COVID-19 pandemic. Our NOI margin from other segment is in line for both years.

EBITDA

We use Earnings Before Finance costs, Depreciation, Amortisation and Tax, excluding share of profit of equity accounted investee (EBITDA) internally as a performance measure. We believe it provides useful information to investors regarding our financial condition and results of operations because it offers a direct measure of the operating results of impairment, and finance cost) are not specifically allocable to segments and accordingly these expenses are adjusted against the total income of the Embassy Office Parks Group.

our business segments. Other companies may use different methodologies for calculating EBITDA and accordingly, our presentation of the same may not be comparable to other companies.

EBITDA does not have a standardised meaning, nor is it a recognised measure under Ind AS and may not be comparable with measures among similar names presented by other companies. EBITDA should not be considered by itself or as a substitute for comparable measures under Ind AS or other measures of operating performance, liquidity or ability to pay dividends. Our EBITDA may not be comparable to the EBITDA or other similarly titled measures of other companies/ REITs as not all companies/ REITs use the same definition of EBITDA or other similarly titled measures. Accordingly, there can be no assurance that our basis for computing this non-GAAP measure is comparable with that of other companies/ REITs.

Net Asset Value (NAV) and Valuation of Portfolio

We use NAV internally as a performance measure and believe it provides useful information to investors regarding our financial condition. The computation of NAV is as prescribed under the REIT regulations.

iVAS Partners, independent external registered property valuers appointed under Regulation 21 of REIT regulations, having appropriately recognised professional qualifications and recent experience in the location and category of the properties being valued in conjunction with value assessment services

This computation takes into account the Gross Asset Value (GAV) as arrived at by our independent external property valuers appointed under Regulation 21 of REIT regulations, along with the recorded book values of other assets as well as all other liabilities recorded in the financial statements to arrive at the NAV. Our Statement of Net Assets at Fair Value as of the dates indicated, at a consolidated level, along with the NAV per unit is set forth here:

undertaken by CBRE South Asia Pvt. Ltd, carried out our property valuation and valued the GAV of our portfolio at H514,141.14 Mn with ~93% of value from core commercial office segment and with over 75% of value from Bengaluru, underpinning Embassy REIT's asset quality as of March 31, 2023.

Valuation Technique and Frequency

The fair value measurement for all the investment properties, investment properties under development, property plant and equipment, intangibles and capital work-in-progress has been categorised as a Level 3 fair value based on the inputs to the valuation technique used and is reviewed regularly by management with reference to independent property valuations and market conditions existing at half yearly basis.

The valuers have followed a Discounted Cash Flow method. The valuation model considers the present value of net cash flows to be generated from the respective properties, taking into account the expected rental growth rate, vacancy period, occupancy rate, average room rent, lease incentive costs and blended tariff rates. The expected net cash flows are discounted using the risk adjusted discount rates. Among other factors, the discount

Cash generated from operating activities

Net cash generated from operating activities for FY23 is H25,655.10 Mn. Profit before share of profit of equity accounted investee and tax of H5,840.20 Mn was adjusted for financing and investing activities as well as other non-cash items and movement in working capital by a net amount of H19,814.90 Mn to arrive at operating cash flow of H25,655.10 Mn. The operating cash flow recorded an increase of 8% visa-vis H23,669.74 Mn for FY22. The increase is in line with growth in net operating income and EBITDA of 11% in FY23.

Net cash flow used in investing activities

We continued our focus on organic growth during the year resulting in a net cash flow used in investing activities of H16,696.43 Mn. This includes H10,920.56 Mn deployed primarily towards under construction blocks which include Block 8 at Embassy TechVillage, M3 Block A and B at Embassy Manyata, Tower 1 at Embassy Oxygen, as well as construction of Hudson and Ganges blocks at Embassy TechZone, capex spends towards various infrastructure and upgrade projects across our Parks including solar projects and the Master Plan Upgrades at multiple assets.

Further, we have acquired a new SPV, ECPL, for a net consideration of H64.66 Mn and invested in debentures of our investment entity for acquisition of certain real estate and CAM business (March 31, 2023: H8,157.82 Mn). This was partially offset by cash inflows due to redemption of treasury surplus which were invested in mutual funds and dividend income received from our investment entity.

Net cash flow used in financing activities

During FY23, we had net cash used in financing activities of H8,689.52 Mn as compared to H15,139.79 Mn in FY22. During FY23, we primarily raised borrowings of H41,686.27 Mn and repaid debt of H20,246.20 Mn; paid H9,862.11 Mn as interest on our borrowing as well as distributed H20,247.13 Mn in the form of distributions to Unitholders resulting in a net cash used in financing activities of H8,689.52 Mn. During FY22, we had net cash flow used in financing activities of H15,139.79 Mn primarily due to repayment of Series I NCD.

Distributions

Under the provisions of the REIT Regulations, Embassy Office Parks REIT is required to distribute to the Unitholders not less than 90% of the Net Distributable Cash Flows (NDCF) of Embassy Office Parks REIT and the current policy of the Manager is to comply with such requirement. The NDCF is calculated in accordance with the REIT Regulations and in the manner provided in the NDCF framework defined by the Manager. The aforesaid NDCF are made available to Embassy Office Parks REIT in the form of (i) interest paid on Shareholder Debt provided by Embassy Office Parks REIT to the SPVs/Holding Company, (ii) Principal repayment of Shareholder Debt, (iii) dividend declared by the SPVs/Holding Company and received by Embassy Office Parks REIT and (iv) Proceeds from sale of any Embassy REIT assets. Since Embassy Office Parks REIT endeavours to quarterly distributions, any shortfall as regards minimum quarterly distribution by the SPVs and Holding Company to Embassy Office Parks REIT, post interest paid on Shareholder Debt, Interim Dividend payments and Principal repayment of Shareholder Debt, would be done by declaring dividend, to the extent permitted under the Companies Act, 2013. Repayment of short-term construction debt given to SPVs, debt repayment of Series I NCD (including redemption premium) which was refinanced through debt, and interest on external debt paid and capitalised to development work in progress to the extent funded by debt, are not considered for the purpose of distributions.

The Board of Directors of the Manager of Embassy REIT have declared a cumulative distribution of H21 Bn or H21.71 per unit for FY23 which is in-line with our guidance, despite considerable rate hike in the market.

Borrowings

During the year, we refinanced H53 Bn bank debt with a 101 bps lower cost debt. We were able to refinance at attractive terms due to our robust balance sheet and our AAA/Stable rating.

As a result of the above and earlier refinancing,

61% of our total H148 Bn debt now carries a fixed rate with an average maturity of 1.8 years and an additional 39% carries a fixed rate for next 5 months.

We continue to maintain a strong liquidity position of H8 Bn and a low leverage of 28% Net Debt to Gross Asset Value (GAV). Considering our AAA credit rating, additional proforma headroom of H104 Bn and

our ability to raise debt at competitive rates, we are in a strong position to pursue growth through on-campus development and accretive acquisitions.

Capital expenditures and capital investments

Historical capital expenditure

Capital expenditure comprises additions during the year to property, plant and equipment, capital-work-in progress, investment property and investment property under development.

During FY23 we have incurred capital expenditure of H10,920.56 Mn primarily towards construction of 7.9 msf of under construction blocks which include Block 8 at Embassy TechVillage, M3 Block A and B at Embassy Manyata, Tower 1 at Embassy Oxygen, as well as construction of Hudson and Ganges blocks at Embassy TechZone, capex spends towards various infrastructure and upgrade projects across our Parks including solar projects and the Master Plan Upgrades at various assets.

Planned capital expenditure

This table presents the development status and balance costs to be spent for development projects in progress as at March 31, 2023.

Acquisitions

With a strong focus on organic growth, we seek inorganic growth opportunities to further the interests of our investors. Recently, we announced tuck-in acquisition of Embassy Business Hub, a campus-style business park for a total consideration of H3.4 Bn. Situated in high visibility growth corridor of North Bengaluru and its proximity to both the airport and to REIT's flagship Embassy Manyata property, Embassy Business Hub cements the REIT's dominant presence in North Bengaluru, a micromarket that continues to witness an influx of global captives. Of the 1.4 msf acquired, 0.4 msf is nearing completion and 93% pre-committed to Philips, providing stable cash flow visibility, and the balance 1 msf is in early stages of development. Additionally, we secured a Right of First Offer for future phases of this property, totaling 46 acres, which further extends REIT's growth options.

Off-balance sheet arrangements and contingent liabilities

We do not have any material off-balance sheet arrangements. The table below sets forth our contingent liabilities as of March 31, 2023:

Risk Management

We are the owner of a high-quality office portfolio in India that serves as essential corporate infrastructure to multinational tenants and has significant embedded growth prospects. The growth of domestic companies has resulted in robust demand for commercial office space and strong growth across India's major office markets. We are highly dependent on the prevailing economic conditions in India and our results of operations are significantly affected by factors influencing the Indian economy.

Further, the real estate sector in India including REITs is heavily regulated. We are also subject to environmental, health and safety regulations in the ordinary course of our business. These and many other factors might affect our business, results of operations or financial condition. We are committed to maintaining our strong corporate governance standards and have a robust risk management framework in place to address risks that arise from the economic, operational, social and environmental ecosystems that we operate in.

The Board of Directors of the Manager of Embassy Office Parks Group has overall responsibility for the establishment and oversight of the Embassy Office Parks Group's risk management framework. The Embassy Office Parks Group's risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group's activities.

The Board of Directors of the Managers of Embassy Office Parks Group oversees how management monitors compliance with the Group's risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the group. The Audit Committee is assisted in its oversight role by internal audit. Internal audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

Internal financial control systems

Embassy REIT has a strong internal financial control system to manage its operations, financial reporting, and compliance requirements. The Manager has clearly defined roles and responsibilities for all managerial positions. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to the Company's policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information. All business parameters are regularly monitored, and effective steps are taken to control them.

Embassy REIT has appointed one of the Big4 firms to conduct internal audit of its activities. The internal

of effective internal controls using a risk-based approach, external consultant reviews such design and implementation to provide reasonable assurance on the adequacy and effectiveness of the risk management and internal control systems.

The Audit Committee and the Board of Directors periodically reviews the adequacy and effectiveness of internal financial control systems and suggests improvements to further strengthen them. The internal financial control systems are adequate and operating effectively as at March 31, 2023. The effectiveness of the internal control over financial reporting for each of the SPVs as at March 31,

2023 has been attested by the respective statutory auditors of SPVs who expressed an unqualified opinion on the effectiveness of each SPV's internal control over financial reporting as of March 31, 2023.