OVERVIEW
Objectives
Our capital management objectives include to:
•
employ the appropriate strategy
to manage currency risk;
•
diversify our funding sources;
•
maintain a healthy balance sheet by
keeping gearing at a sensible level; and
•
ensure sufficient liquidity to meet
our business requirements.
Currency risk
The Trust is exposed to foreign currency risk as
a result of having operations in two countries.
Whilst the distribution to Unitholders is made in
Singapore Dollar (reporting currency), the Trust’s
income is earned in Indian Rupee (functional
currency). Please see the section on income
hedging strategy for detailed explanation of
the measures employed to lower the exposure
of distributable income to currency risk.
The currency exposure as a result of borrowing in
Singapore Dollar to fund developments and/or
acquisitions in India is managed through currency
swaps. In addition, the Trust’s policy is to hedge
at least 50% of its borrowings to Indian Rupee.
As at 31 March 2016, 7% of the Trust’s asset value
was exposed to currency risk
6
as a result of our
Singapore Dollar borrowings. We will periodically
review the policy, and make adjustments if changes
in prevailing market conditions warrant it.
To address the short term operating
requirements for currencies other than Indian
Rupee, the Trust will buy or sell the foreign
currency at the prevailing spot rate.
1. Funding strategy
Our strategy is to diversify funding sources from
financial institutions and capital markets to reduce
the Trust’s reliance on any single source of fund. The
Trust has established a S$500 million Medium Term
Note (“MTN”) programme and its principal bankers
include DBS Bank, Citibank, Mizuho Bank, HSBC
and Standard Chartered Bank. As at 31 March 2016,
the Trust has total effective borrowings
7
of S$352.6
million, comprising S$157.4 million of MTN notes,
S$187.2 million of bilateral loans and S$8.0 million of
deferred consideration.
Our approach to equity raising is predicated
on maintaining a strong balance sheet by
keeping the Trust’s gearing ratio at a sensible
level. We will carefully consider the impact
on a-iTrust’s DPU and net asset value before
making any decision on raising equity.
We lower the Trust’s borrowing cost by having a mix
of Indian Rupee and Singapore Dollar borrowings.
As at 31 March 2016, 73% of the Trust’s effective
borrowings were denominated in Indian Rupee with
the remaining 27% in Singapore Dollar. The weighted
average interest cost of Singapore Dollar and Indian
Rupee borrowings were 3.7% and 8.2% respectively
as at 31 March 2016. a-iTrust’s overall weighted
average cost of debt was 6.9% as at 31 March 2016.
We do not borrow Indian Rupee loans onshore
in India as it cost less to hedge Singapore Dollar
borrowings to Indian Rupee-denominated
borrowings using cross-currency swaps.
1
Ratio of effective borrowings to the value of Trust properties.
2
Earnings before interest expenses, tax, depreciation & amortisation (excluding gains/losses from foreign exchange translation and mark-to-market
revaluation from settlement of loans). Earnings include interest income.
3
In FY14/15, the available debt headroom was based on approved gearing limit of 40%.
4
Available debt headroom is based on approved gearing limit of 45% in accordance with the Trust Deed. The Trust is in the process of realigning the
financial covenants of certain bilateral loan facilities with gearing limit of 40%.
5
Excludes deferred income tax liabilities on capital gains due to fair value revaluation of investment properties.
6
Value-at-risk is calculated by multiplying (i) the percentage of Singapore Dollar effective borrowings with (ii) gearing ratio 27% X 26% = 7%.
7
Calculated by adding/(deducting) derivative financial instruments liabilities/(assets) to/from gross borrowings, including deferred consideration.
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ASCENDAS india trust ANNUAL REPORT
2015/2016
Ove r v i ew
what af f ect s us
what we do
our p e r formance
