a) The recoverable amounts of the investments in subsidiaries have been computed based on value in use of the underlying properties, computed semi-annually in March and September of each financial year. The value in use is determined by iVAS Partners, independent external 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 undertaken by CBRE South Asia Private Limited based on discounted cash flow method. Impairment loss for year ended March 31, 2023 amounts to '1,295.12 million (year ended March 31, 2022: '857.48 million). As at March 31, 2023, an amount of '5,428.17 million (March 31, 2022: '4,133.05 million) has been provided as impairment on investment in subsidiaries namely Quadron Business Park Private Limited, Umbel Properties Private Limited and Embassy Energy Private Limited. The impairment loss arose in these entities mainly due to slower ramp up of hotel room occupancy, slower than anticipated lease up, coupled with the economic conditions that existed during the respective periods.
(b) Pursuant to the National Company Law Tribunal, Mumbai (NCLT), order dated 24 August 2021, Earnest Towers Private Limited (ETPL) had reduced its equity share capital by 30,970,800 fully paid equity shares and details of consideration receivable by REIT from ETPL on such capital reduction are provided below. The said consideration was converted into long-term loan receivable by the Trust from ETPL, carrying interest rate of 12.5% per annum (refer note 26).
(e) Investment in debentures of joint venture entity
1 . 9,500 (March 31, 2022: Nil) unlisted, unrated, secured, redeemable, non-convertible debentures of
Golflinks Software Parks Private Limited with face value of '1,000,000.00 each was issued on 6 April 2022.
2. Interest Rate : 8.15% p.a.
3. Security: The debentures are secured by first ranking exclusive security interest over identified land and building of Embassy Golflinks Business Park.
4. Tenure: Debentures shall be redeemed 7 years from the deemed date of allotment. Early redemption of debentures shall be permitted subject to availability of funds on such date.
Since the Trust continued to hold the same economic interest through equity shareholding in ETPL, both before and after capital reduction, the aforementioned consideration of '1,548.54 million was accounted for as a reduction of carrying amount of the Trust's investment in ETPL.
(c) The Board of Directors of the Manager through a resolution by circulation dated 23 January 2021 approved the Scheme of Arrangement ("the Scheme”) involving EOVPL and VTPL. The Scheme provides for the merger/amalgamation of EOVPL into VTPL (on a going concern basis). The Scheme has been approved by Bengaluru Bench of National Company Law Tribunal (NCLT) on 17 February 2022, The Company has filed the necessary forms with Registrar of Companies (RoC). Upon the Scheme becoming effective, VTPL has become a 100% directly-held SPV of Embassy Office Parks REIT, holding Embassy Tech Village. Since the Trust continues to hold the same economic interest through equity shareholding both before and after the composite scheme of arrangement, the Trust's investments in EOVPL are derecognised and the carrying amount of such investments is recognised as cost of shares issued by VTPL to the Trust upon such merger during the year ended March 31, 2022.
Terms attached to loan to subsidiaries
Security: Unsecured
Interest : 12.50% per annum. The Lender may reset the rate of interest applicable to all or any tranche of the loan amount on: (i) any drawdown date; and (ii) any interest payment date prior to the repayment date, by giving a notice of not less than 5 (five) days to the borrower, provided that pursuant to any such reset, the interest rate shall continue to be not less than 12.50% per annum and not more than 14.00% per annum for any disbursements of the loan amount out of the proceeds of Listing.
Repayment:
(a) Bullet repayment on the date falling at the end of 15 (fifteen) years from the first drawdown date.
(b) Early repayment option (wholly or partially) is available to the borrower (SPV's).
Terms attached to loan to subsidiaries
Security: Unsecured
Interest : 12.50% per annum. The Lender may reset the rate of interest applicable to all or any tranche of the loan amount on: (i) any drawdown date; and (ii) any interest payment date prior to the repayment date, by giving a notice of not less than 5 (five) days to the borrower.
Repayment: Bullet repayment and to be payable within 364 days from the date of disbursement. Early repayment option (wholly or partially) is available to the borrower (SPV's).
for each financial year. Accordingly, a portion of the Unitholders' funds contains a contractual obligation of the Trust to pay to its Unitholders cash distributions. The Unitholders funds could have been classified as compound financial instrument which contain both equity and liability components in accordance with Ind AS 32 - Financial Instruments: Presentation. However, in accordance with SEBI Circulars (No. CIR/IMD/ DF/146/2016 dated 29 December 2016 and No. CIR/IMD/DF/141/2016 dated 26 December 2016) issued under the REIT Regulations, the Unitholders funds have been classified as equity in order to comply with the mandatory requirements of Section H of Annexure A to the SEBI Circular dated 26 December 2016 dealing with the minimum disclosures for key financial statements. Consistent with Unitholders' funds being classified as equity, the distributions to Unitholders is presented in Statement of Changes in Unitholders' Equity and not as finance costs. In line with the above, the dividend payable to unitholders is recognised as liability when the same is approved by the Manager.
(c) The Trust has not allotted any fully paid-up units by way of bonus units nor has it bought back any class of units from the date of incorporation till the balance sheet date. Further, the Trust had issued an aggregate of 613,332,143 Units at '300.00 each and 111,335,400 Units at a price of '331.00 each for consideration other than cash during the period of five years immediately preceding the balance sheet date.
(a) Terms/rights attached to Units
The Trust has only one class of Units. Each Unit represents an undivided beneficial interest in the Trust. Each holder of Units is entitled to one vote per unit. The Unitholders have the right to receive at least 90% of the Net Distributable Cash Flows of the Trust at least once in every six months in each financial year in accordance with the REIT Regulations. The Board of Directors of the Manager approves distributions to Unitholders. The distribution will be in proportion to the number of Units held by the Unitholders. The Trust declares and pays distributions in Indian '.
Under the provisions of the REIT Regulations, Embassy Office Parks REIT is required to distribute to Unitholders not less than ninety percent of the net distributable cash flows of Embassy Office Parks REIT
Retained earnings
The cumulative gain or loss arising from the operations which is retained and accumulated under the heading of retained earnings. At the end of the year, the profit after tax is transferred from the statement of profit and loss to the retained earnings account.
constructed buildings and related parcels identified as Block 2, Block 3, Food court, Block 6, Block I, Block 11 and Block 5, having an aggregate leasable area of 2,00,674 square meters and forming part of the development known as Embassy TechZone together with portion of land admeasuring 96,630 square meters on which the aforesaid buildings are constructed out of the aggregate area of land measuring 67.45 acres equivalent to 2,72,979 sq. mtrs.
2. A sole and exclusive first ranking pledge created by the Embassy REIT over the shareholding in the SPV's namely IENMPL and EPTPL together known as "secured SPVs" along with shareholder loans given to these SPVs
3. A sole and exclusive first ranking charge by way of hypothecation created by Embassy REIT over identified bank accounts and receivables.
4. A sole and exclusive first ranking charge by way of hypothecation created by EPTPL over identified bank accounts and receivables.
5. A corporate guarantee issued by each of EPTPL and IENMPL.
Notes
A. 15,000 (March 31, 2022 : 15,000) Embassy REIT Series II NCD 2020, face value of '1,000,000
each
In September 2020, the Trust issued 7,500 listed, AAA rated, secured, redeemable and nonconvertible Embassy REIT Series II NCD 2020 (Tranche A), debentures having face value of '1 million each amounting to '7,500.00 million with a coupon rate of 7.25% p.a. payable quarterly. In October 2020, the Trust further issued 7,500 such debentures (Tranche B), with an coupon rate of 6.70% p.a. payable quarterly and with same terms and conditions as Tranche A.
The Tranche A and Tranche B NCD described above were listed on the Bombay Stock Exchange on 17 September 2020 and November 5, 2020 respectively.
Security terms:
The NCD's are secured against each of the following in favour of the Security Trustee (holding for the benefit of the Debenture Trustee and ranking pari passu inter se the Debenture Holders):
1. A sole and exclusive first ranking charge by way of mortgage created by EPTPL on the
Redemption terms:
1. Interest is payable on the last day of each financial quarter in a year until the Scheduled Redemption Date
2. These debentures will be redeemed on the expiry of 37 months from the date of allotment for the debentures at par on 9 October 2023.
3. I n case of downgrading of credit rating , the coupon rate shall increase by 0.25% - 1.25% over and above the applicable coupon rate calculated from the date of change of rating. In case of any subsequent upgrading of credit rating, the IRR shall restore/decrease by
0.25% - 1.00% over and above the coupon rate calculated from the date of change of rating.
4. The issuer shall have the option of redeeming all or part of the debentures on a pro-rata basis at any time on a specified call option date (between March 2023 to September 2023) by delivering a Call Option Notice to the debenture holders prior to the relevant call option date, subject to certain agreed minimum aggregate nominal value of debentures being redeemed.
5. These debentures are due for maturity on 09 October 2023, hence have been disclosed under short term borrowings as at March 31, 2023 (refer note 13).
6. The Trust has maintained security cover of 2.5 times as at March 31, 2023, which is higher than the limit of 2 times stipulated in the debenture trust deed dated 8 September 2020.
B. 26,000 (March 31, 2022: 26,000) Embassy REIT Series III NCD 2021, face value of '1,000,000 each
I n January 2021, the Trust issued 26,000 listed, AAA rated, secured, redeemable, transferable and non-convertible Embassy REIT Series III NCD 2021 debentures having face value of '1 million each amounting to '26,000.00 million with a coupon rate of 6.40% p.a. payable quarterly.
The debentures described above were listed on the Bombay Stock Exchange on 19 January 2021.
Security terms
The NCD's are secured against each of the following in favour of the Security Trustee (holding for the benefit of the Debenture Trustee and ranking pari passu inter se the Debenture Holders):
1. A first ranking charge by way of mortgage created by VTPL on the constructed buildings
and related parcels identified as Block 1A, Block 2 and Block 7B, having an aggregate leasable area of 3,43,772 square meters and forming part of the development known as Embassy TechVillage together with portion of land admeasuring 101,859 square meters on which the aforesaid buildings are constructed.
2. A first ranking charge by way of mortgage created by QBPPL on the constructed buildings and related parcels identified as Block IT 1 and Block IT 2, having an aggregate leasable area of 42,163 square meters and forming part of the development known as Embassy Qubix together with portion of land admeasuring 23,028 square meters on which the aforesaid buildings are constructed.
3. A first ranking pari passu pledge created by the Embassy REIT, and MPPL over their shareholding in the SPV's namely VTPL and EEPL together known as "Secured SPVs".
4. A sole and exclusive first ranking charge by way of hypothecation created by Embassy REIT over identified bank accounts and receivables.
5. A sole and exclusive first ranking charge by way of hypothecation created by VTPL over identified bank accounts and receivables and by QBPPL over identified receivables.
6. A corporate guarantee issued by each of VTPL, EEPL and QBPPL.
Redemption terms:
1. Interest is payable on the last day of each financial quarter in a year until the Scheduled Redemption Date.
2. These debentures will be redeemed on the expiry of 37 months from the Date of Allotment for the Debentures at par on February 15, 2024.
3. I n case of downgrading of credit rating, the coupon rate shall increase by 0.25% - 1.00% over and above the applicable coupon rate calculated from the date of change of rating. In case of any subsequent upgrading of credit rating, the coupon rate shall restore/decrease by 0.25% - 1.00% over and above the coupon rate calculated from the date of change of rating.
4. The issuer shall have the option of redeeming all or part of the debentures on a pro-rata basis at any time on a specified call option date (between July 2023 to January 2024) by delivering a Call Option Notice to the
debenture holders prior to the relevant call option date, subject to certain agreed minimum aggregate nominal value of debentures being redeemed.
5. These debentures are due for maturity on February 15, 2024, hence have been disclosed under short term borrowings as at March 31, 2023 (refer note 13).
6. The Trust has maintained security cover of 2.37 times as at March 31, 2023, which is higher than the limit of 2 times stipulated in the debenture trust deed dated 13 January 2021.
C. 3,000 (March 31, 2022: 3,000) Embassy REIT Series IV, Non-Convertible debentures (NCD) 2021, face value of '1,000,000 each
I n September 2021, the Trust issued 3,000 listed, AAA rated, secured, redeemable, transferable and non-convertible Embassy REIT Series IV NCD 2021 debentures having face value of '1 million each amounting to '3,000.00 million with a coupon rate of 6.80% p.a. payable quarterly.
The debentures described above were listed on the Bombay Stock Exchange on 9 September 2021.
Security terms
The NCD's are secured against each of the following in favour of the Security Trustee (holding for the benefit of the Debenture Trustee and ranking pari passu inter se the Debenture Holders):
1. A first ranking charge by way of mortgage created by SIPL on the constructed, under-construction buildings, erections, constructions of every description and related parcels identified as Block 9, admeasuring 1.1 million square feet and forming part of the development known as Embassy TechVillage.
2. A first ranking pari passu pledge created by the Embassy REIT over its shareholding in SIPL; known as the "Secured SPV".
3. A first ranking pari passu charge by way of hypothecation created by Embassy REIT over identified receivables from SIPL
4. A first ranking pari passu charge by way of hypothecation created by SIPL over all current and future movable assets, including identified bank accounts and receivables.
5. A corporate guarantee issued by SIPL. Redemption terms:
1. Interest is payable on the last day of each financial quarter in a year until the Scheduled Redemption Date
2. These debentures will be redeemed on the expiry of 60 months from the Date of Allotment for the Debentures at par on September 7, 2026.
3. I n case of downgrading of credit rating , the coupon rate shall increase by 0.25% - 1.00% over and above the applicable coupon rate calculated from the date of change of rating. In case of any subsequent upgrading of credit rating, the coupon rate shall restore/decrease by 0.25% - 1.00% over and above the coupon rate calculated from the date of change of rating.
4. The issuer shall have the option of redeeming all or part of the debentures on a pro-rata basis at any time on a specified call option date (between March 2026 to August 2026) by delivering a Call Option Notice to the debenture holders prior to the relevant call option date, subject to certain agreed minimum aggregate nominal value of debentures being redeemed.
5. The Trust has maintained security cover of 5.21 times as at March 31, 2023, which is higher than the limit of 2 times stipulated in the debenture trust deed dated September 3, 2021.
D. 20,000 (March 31, 2022: 20,000) Embassy REIT Series V - Series A, Non-Convertible debentures (NCD) 2021, face value of '1,000,000 each
I n October 2021, the Trust issued 20,000 listed, AAA rated, secured, redeemable, transferable and non-convertible Embassy REIT Series V NCD 2021 (Series A) debentures having face value of '1 million each amounting to '20,000.00 million with a coupon rate of 6.25% p.a. payable quarterly.
The debentures described above were listed on the Bombay Stock Exchange on 20 October 2021.
Security term
The NCD's are secured against each of the following in favour of the Security Trustee (holding for the benefit of the Debenture Trustee and ranking pari passu inter se the Debenture Holders):
1. A first ranking pari passu charge by way of mortgage created by MPPL on the constructed buildings and related parcels identified as Palm (Block F3), Mahogany (Block F2), Mulberry (Block G1), Ebony (Block G2), G Bridge (G1 & G2), Teak (Block G3), Cypress (Block D4), Beech (Block E1) and Mfar - Green Phase 4, having an aggregate leasable area of 40,16,856 sq ft and land admeasuring 30.856 acres, forming part of
the development known as Embassy Manyata Promoters Business Park.
2. A first ranking pari passu pledge created by Embassy REIT over its shareholding in MPPL; known as “Secured SPV”.
3. A first ranking pari passu charge by way of hypothecation created by Embassy REIT over the identified receivables from MPPL.
4. A first ranking pari passu charge by way of hypothecation created by MPPL including identified bank accounts and receivables.
5. A corporate guarantee issued by MPPL. Redemption terms
1. Interest is payable on the last day of each financial quarter in a year until the scheduled redemption date.
2. These debentures will be redeemed on the expiry of 36 months from date of allotment at par on October 18,2024.
3. I n case of downgrading of credit rating, the coupon rate shall increase by 0.25% - 1.00% over and above the applicable coupon rate calculated from the date of change of rating. In case of any subsequent upgrading of credit rating, the coupon rate shall restore/decrease by 0.25% - 1.00% over and above the coupon rate calculated from the date of change of rating.
4. The issuer shall have the option of redeeming all or part of the Series V (Series A) debentures on a pro-rata basis at any time on a specified call option date (between April 2024 to July 2024) by delivering a Call Option Notice to the debenture holders prior to the relevant call option date, subject to certain agreed minimum aggregate nominal value of debentures being redeemed."
5. The Trust has maintained security cover of 2.49 times as at March 31, 2023, which is higher than the limit of 2 times stipulated in the debenture trust deed dated October 18,2021.
E. 11,000 (March 31, 2022: 11,000) Embassy REIT Series V - Series B, Non-Convertible debentures (NCD) 2021, face value of '1,000,000 each
In October 2021, the Trust issued 11,000 listed, AAA rated, secured, redeemable, transferable and non-convertible Embassy REIT Series V NCD 2021 (Series B) debentures having face value of '1 million each amounting to '11,000.00 million with a coupon rate of 7.05% p.a. payable quarterly.
The debentures described above were listed on the Bombay Stock Exchange on 20 October 2021.
Security term
The NCD's are secured against each of the following in favour of the Security Trustee (holding for the benefit of the Debenture Trustee and ranking pari passu inter se the Debenture Holders):
1. A first ranking pari passu charge by way of mortgage created by MPPL on the constructed buildings and related parcels identified as Magnolia (Block B), Pine (Block L5), Mountain Ash (Block H2), Silver Oak (Block E2) and Mfar- Philips Building having an aggregate leasable area of 20,23,051 sq ft and land admeasuring 11.530 acres forming part of the development known as Embassy Manyata Business Park.
2. A first ranking pari passu pledge created by Embassy REIT over its shareholding in MPPL; known as “Secured SPV”.
3. A first ranking pari passu charge by way of hypothecation created by Embassy REIT over the identified receivables from MPPL.
4. A first ranking pari passu charge by way of hypothecation created by MPPL including identified bank accounts and receivables.
5. A corporate guarantee issued by MPPL.
Redemption terms
1. Interest is payable on the last day of each financial quarter in a year until the Scheduled Redemption date.
2. These Debentures will be redeemed on the expiry of 60 months from Date of Allotment at par on October 18,2026.
3. I n case of downgrading of credit rating, the coupon rate shall increase by 0.25% - 1.00% over and above the applicable coupon rate calculated from the date of change of rating. In case of any subsequent upgrading of credit rating, the coupon rate shall restore/decrease by 0.25% - 1.00% over and above the coupon rate calculated from the date of change of rating.
4. The issuer shall have the option of redeeming all or part of the Series V (Series B) debentures on a pro-rata basis at any time on a specified call option date (between April 2026 to July 2026) delivering a Call Option Notice to the debenture holders prior to the relevant call option date, subject to certain
agreed minimum aggregate nominal value of debentures being redeemed.
5. The Trust has maintained security cover of 2.62 times as at March 31, 2023, which is higher than the limit of 2 times stipulated in the debenture trust deed dated October 18,2021.
F. 10,000 (March 31, 2022: Nil) Embassy REIT Series VI - Non-Convertible debentures (NCD) 2022, face value of '1,000,000 each
In April 2022, the Trust issued 10,000 listed, AAA rated, secured, redeemable, transferable and nonconvertible Embassy REIT Series VI NCD 2022 debentures having face value of '1 million each amounting to '10,000.00 million with a coupon rate of 7.35% p.a. payable quarterly.
The debentures described above were listed on the Bombay Stock Exchange on 07 April 2022.
Security term
The NCD's are secured against each of the following in favour of the Security Trustee (holding for the benefit of the Debenture Trustee and ranking pari passu inter se the Debenture Holders):
1. A sole and exclusive first ranking pari passu pledge created by MPPL over the 50% shareholding of GLSP.
2. A sole and exclusive first ranking pari passu pledge created by Embassy REIT over all the debentures issued by GLSP ("GLSP NCDs")
3. A first ranking pari passu charge by way of hypothecation created by Embassy REIT over the identified receivables/ cashflows of GLSP NCDs issued by Gl SP
4. A first ranking pari passu charge by way of hypothecation created by MPPL over the identified receivables from GLSP.
5. A corporate guarantee issued by MPPL.
Redemption terms
1. Interest is payable on the last day of each financial quarter in a year until the Scheduled Redemption date.
2. These Debentures will be redeemed on the expiry of 60 months from Date of Allotment at par on 05 April 2027.
3. I n case of downgrading of credit rating, the coupon rate shall increase by 0.25% - 1.00% over and above the applicable coupon rate calculated from the date of change of rating. In case of any subsequent upgrading of credit rating, the coupon rate shall restore/decrease by 0.25% - 1.00% over and above the coupon rate calculated from the date of change of rating.
4. The issuer shall have the option of redeeming all or part of the Series VI debentures on a pro-rata basis at any time on a specified call option date (September 2026) delivering a Call Option Notice to the debenture holders prior to the relevant call option date, subject to certain agreed minimum aggregate nominal value of debentures being redeemed.
5. The Trust has maintained security cover of 3.91 times as at March 31, 2023, which is higher than the limit of 2 times stipulated in the debenture trust deed dated March 31, 2022.
2. Rating agency CRISIL has assigned a rating of “CRISIL AAA/Stable” to Embassy REIT Series II NCD 2020, Embassy REIT Series III NCD 2021, Embassy REIT Series IV NCD 2021, Embassy REIT Series V NCD 2021 and Embassy REIT Series VI NCD 2022.
Formulae for computation of ratios are as follows basis Standalone Financial Statements:-
a) Asset cover ratio *= Total borrowings of the Trust/ Gross asset value of the Subsidiaries and Joint venture of the Trust as computed by independent valuers
b) Debt equity ratio * = Total borrowings of the Trust/ Unitholders' Equity
c) Debt Service Coverage Ratio = Earnings before Finance costs, Depreciation, Amortisation, Impairment Loss and Tax / [Finance cost (net of capitalisation and excluding interest on lease deposit and interest on lease liability) + Principal repayments made during the year to the extent not repaid through debt or equity]
d) Interest Service Coverage Ratio = Earnings before Finance costs, Depreciation, Amortisation, Impairment Loss and Tax / Finance cost (net of capitalisation and excluding interest on lease deposit and interest on lease liability)
e) Net worth = Unit capital + Other equity
* Total borrowings of the Trust = Long-term borrowings + Short-term borrowings Unitholder's Equity = Unit Capital + Other equity
J. Lender 1 [balance as at March 31, 2023, including current maturities of long-term debt: '9,971.02 million
(March 31, 2022: Nil)]
1. Exclusive charge by way of mortgage created on the constructed buildings and related parcels identified as Block IT 3, Block IT 4, Block IT 5 and Block IT 6, having aggregate leasable area of 996,655 sq ft and underlying land situated at Embassy Qubix, Pune.
2. Exclusive charge by way of mortgage created on the constructed buildings and related parcels identified as Tower A, Tower B and Tower C, having aggregate leasable area of 1,186,149 sq ft and underlying land situated at Embassy 247, Mumbai.
3. Exclusive charge by way of hypothecation created by QBPPL and VCPPL over identified bank accounts and receivables.
4. A corporate guarantee issued by each of QBPPL and VCPPL.
24 Earnings Per Unit (EPU)
Basic EPU amounts are calculated by dividing the profit for the year attributable to Unitholders by the weighted average number of units outstanding during the year. Diluted EPU amounts are calculated by dividing the profit attributable to unitholders by the weighted average number of units outstanding during the year plus the weighted average number of units that would be issued on conversion of all the dilutive potential units into unit capital.
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25 Commitments and contingencies a. Contingent liabilities
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Particulars
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As at March 31, 2023
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As at March 31, 2022
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Claims not acknowledged as debt in respect of income tax matters *
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15.66
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-
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* The Trust was assessed u/s. 143(3) of the Income Tax Act, 1961 for the AY 2021-22. Disallowance was made on account of denial of expenses claimed u/s 35D of the Act. Aggrieved by the assessment order, the Trust has also filed an appeal before CIT(A) for the disallowance made under Section 35D of the Act. Further, due to calculation error u/s143(3) order, demand of ?15.66 million was raised. Accordingly, the rectification application was filed u/s 154 of the Act. The Trust has therefore, disclosed ?15.66 million (March 31, 2022: Nil) as contingent liability.
Note:
b. Statement of capital and other commitments
i) There are no capital commitments as at March 31, 2023 and March 31, 2022.
ii) The Trust has committed to provide financial support to some of its subsidiaries to ensure that these entities operate on going concern basis and are able to meet their debts and liabilities as they fall due.
iii) A search under Section 132 of the Income Tax Act was conducted on 1 June 2022 on EOPMSPL, the Trust, and certain SPV's namely VTPL, EOVPL, SIPL, EEPL. During the year, the Trust has received reassessment notice u/s 148 of the Income Tax Act for AY 2019-20. As on the date of the financial statements, the Trust has not received any demand notice.
b) Measurement of fair values
The section explains the judgement and estimates made in determining the fair values of the financial instruments that are:
a) recognised and measured at fair value
b) measured at amortised cost and for which fair values are disclosed in the Standalone financial statements.
To provide an indication about the reliability of the inputs used in determining fair value, the trust has classified its financial instruments into the three levels prescribed under the accounting standard. An explanation of each level is mentioned below:
Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes listed equity instruments, traded bonds and mutual funds that have quoted price. The mutual funds are valued using the closing NAV.
Level 2: The fair value of financial instruments that are not traded in an active market (for example, traded bonds, over-the counter derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3.
Transfers between Level 1, Level 2 and Level 3
There were no transfers between Level 1, Level 2 or Level 3 during the year ended March 31, 2023 and year ended March 31, 2022.
Determination of fair values
Fair values of financial assets and liabilities have been determined for measurement and/ or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
i) The fair value of mutual funds are based on price quotations at reporting date.
ii) The fair values of other current financial assets and financial liabilities are considered to be equivalent to their carrying values.
iii) The fair values of borrowings at fixed rates are considered to be equivalent to present value of the future contracted cashflows discounted at the current market rate.
c) Financial risk management
The Trust has exposure to following risks arising
from financial instruments:
- Credit risk (refer note (b) below)
- Liquidity risk (refer note (c) below)
- Market risk (refer note (d) below)
a. Risk management framework
The Board of Directors of the Manager of the Trust has overall responsibility for the establishment and oversight of the Trust's risk management framework. The Trust's risk management policies are established to identify and analyse the risks faced by the Turst, 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 Trust's activities.
The Board of Directors of the Manager of the Trust, monitors compliance with the Trust's risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Trust. 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.
b. Credit risk
Credit risk is the risk of financial loss to the Trust if a counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Trust's receivables from loans given to its SPV's and cash and cash equivalents. The carrying amount of financial assets represents the maximum credit exposure.
The Trust establishes an allowance account for impairment that represents its estimate of losses in respect of its financial assets. The
main component of this allowance is estimated losses that relate to specific tenants or counterparties. The allowance account is used to provide for impairment losses. Subsequently when the Trust is satisfied that no recovery of such losses is possible, the financial asset is considered irrecoverable and the amount charged to the allowance account is then written off against the carrying amount of the impaired financial asset.
Cash at bank and fixed deposits are placed with financial institutions which are regulated and have low risk.
As at the reporting date, there is no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying value of each financial asset on the Standalone Balance Sheet.
c. Liquidity Risk
Liquidity risk is the risk that the trust will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The trust's approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the trust's reputation.
Management monitors rolling forecasts of the trust's liquidity position and cash and cash equivalents on the basis of expected cash flows. This is generally carried out by the Management of the trust in accordance with practice and limits set by the trust. In addition, the trust's liquidity management policy involves projecting cash flows and considering the level of liquid assets necessary to meet those, monitoring balance sheet liquidity ratios and maintaining debt refinancing plans.
Maturities of financial liabilities
The following are the Trust's remaining contractual maturities of financial liabilities as the reporting date. The contractual cash flows reflect the undiscounted cash flows of financial liabilities based on the earliest date on which the Trust may be required to pay and includes contractual interest payments and excludes the impact of netting agreements. The Trust believes that the working capital is sufficient to meet its current requirements, accordingly no liquidity risk is perceived.
d. Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices which will affect the Trust's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters while optimising the return.
i. Currency risk
The Trust operates only in India and hence does not have any exposure to currency risk.
ii. Interest rate risk
Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Trust is not exposed to any interest rate risk since all its debts are at fixed interest rates.
iii. Price risk
Price risk if the risk of fluctuations in the value of assets and liabilities as a result of changes in market prices of investments. The Trust has no material exposure to equity securities price risk and is not exposed to commodity risk. The Trust's exposure to price risk arises from investments held by the Trust in mutual funds and classified in the balance sheet as fair value through statement of profit or loss. The fair value of these investments is marked to an active market which factors the uncertainties arising out of COVID-19. The financial assets carried at fair value by the Trust are mainly investments in liquid and overnight debt mutual funds and accordingly no material volatility is expected.
28 Capital management
The Trust's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Trust's capital structure mainly constitutes equity in the form of unit capital and debt. The projects of SPV's are initially funded through construction financing arrangements. On completion, these loans are restructured into lease-rental discounting arrangements or debentures. The Trust's capital structure is influenced by the changes in regulatory framework, government policies, available options of financing and the impact of the same on the liquidity position.
33 Segment Reporting
The Trust does not have any Operating segments as at March 31, 2023 and March 31, 2022 and hence, disclosure under Ind AS 108, Operating segments has not been provided in the Standalone financial statements.
34 The Trust does not have any unhedged foreign currency exposure as at March 31, 2023 and March 31, 2022.
35 The trust outsources its manpower and technology assistance requirements and does not have any employee on its roles and hence does not incur any employee related benefits/costs.
36 Investment management fees
Pursuant to the Investment management agreement dated 12 June 2017, as amended, the Manager is entitled to fees @ 1% of REIT Distributions which shall be payable either in cash or in Units or a combination of both, at the discretion of the Manager. The fees has been determined for undertaking management of the Trust and its investments. Investment management fees accrued for the year ended March 31, 2023 amounts '239.47 million. There are no changes during the year ended March 31, 2023 in the methodology for computation of fees paid to the Manager.
37 Secondment fees
Pursuant to the Secondment agreement dated 11 March 2019, the Manager is entitled to fees of '0.10 million per month in respect certain employees of the Manager being deployed to the Trust in connection with the operation and management of the assets of the Trust. The fees shall be subject to an escalation of 5% (five per cent) every financial year. Secondment fees for the year ended March 31, 2023 amounts to '1.64 million. There are no changes during the year ended March 31, 2023 in the methodology for computation of secondment fees paid to the Manager.
38 The Board of Directors of the Manager through a resolution by circulation dated 23 January 2021 approved the Scheme of Arrangement ("the Scheme”) involving EOVPL and VTPL. The Scheme provides for the merger/amalgamation of EOVPL into VTPL (on a going concern basis). The Scheme was approved by Bengaluru Bench of National Company Law Tribunal (NCLT) on 17 February 2022, The Company had filed the necessary forms with Registrar of Companies (RoC). Upon the Scheme becoming effective, VTPL had become a 100% directly-held SPV of Embassy Office Parks REIT, holding Embassy Tech Village.
The consideration paid by VTPL to give effect to the Scheme to Embassy REIT is as follows:
- VTPL had issued and allotted 1 fully paid-up ordinary share of face value of '10 each for every 3.72 class A equity shares of face value of '10 each, fully paid-up held in EOVPL.
- VTPL had issued and allotted 1 fully paid-up ordinary share of face value of '10 each for every 3.14 ordinary equity shares of face value of '10 each, fully paid-up held in EOVPL.
39 During the year ended March 31, 2023, The Trust entered into share purchase agreements with JV Holdings Private Limited (JVHPL) and Mr. Jitendra Virwani (together known as sellers) for acquistion of Embassy Hub Business Park. The acquisition was effected on March 31, 2023 (“Acquisition Date”).
The Trust acquired 100% of the equity share capital of ECPL comprising 733,800 fully paid-up equity shares of '10 each from JVHPL (an holding company of EPDPL our co-sponsor) and Mr. Jitendra Virwani.
The price payable for acquisition of equity shares of ECPL is funded entirely through internal accruals of the Trust. The consideration for the aforesaid acquisition, is paid in the form of assumption and repayment of identified assets and liabilities of ECPL.
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The gross purchase consideration
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is as follows:
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Particulars
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Amount (in million)
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Total Purchase Consideration
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64.66
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Less: Other Assets
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(214.81)
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Less: Transaction cost
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(49.59)
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Add: Other Liabilities
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3,547.66
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Gross purchase consideration
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3,347.93
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The Trust has obtained two independent valuation reports as required by the REIT regulations for the above acquisition and the average of the two valuations amounts to '3,506 million. Acquisition consideration is at 4.5% discount to average of two independent valuation reports. No fees or commission is payable to the Sellers in relation to the transaction. All the material conditions and obligations for the transaction have been complied.
40 Distributions
The Board of Directors of the Manager to the Trust, in their meeting held on April 27, 2023, have declared distribution to Unitholders of '5.61 per unit which aggregates to '5,317.68 million for the quarter ended March 31, 2023. The distribution of '5.61 per unit comprises '0.86 per unit in the form of interest payment, '2.81 per unit in the form of dividend and the balance '1.94 per unit in the form of repayment of debt. Along with distribution of '15,261.09 million/ '16.10 per unit for the nine months ended 31 December 2022, the cumulative distribution for the year ended March 31, 2023 aggregates to '20 578 77 million/ '21 71 per unit
The accompanying notes referrred to above are an intergral part of Standalone financial statements. As per our report of even date attached
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