Nexus Select Trust has $1 bn debt headroom for acquisitions: CFO Rajesh Deo
July 09, 2026
In an exclusive interview with ETCFO, Nexus Select Trust CFO Rajesh Deo discusses the REIT's acquisition strategy, debt headroom, rental growth outlook, and FY27 priorities.
Mumbai-based real estate investment trust (REIT) Nexus Select Trust has significant room left to leverage debt for its acquisition drive, said Chief Financial Officer Rajesh Deo in an exclusive interview with ETCFO.
On an annual basis the trust eyes two to three malls for acquisition, focussing on under-managed, under-leased, and under-activated malls and rebuilds them. Geographically, metros remain the platform's core focus including Mumbai, Delhi, Chennai, Kolkata, Bangalore, and Hyderabad. Beyond the metros, Nexus is turning to state capitals with a particular interest in East and North East India.
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"As we speak, we already have an immediate pipeline of around 1 million square feet, across two malls at very advanced stages of discussion," said Deo.
The REIT currently operates at a loan-to-value of just 18 to 19%, well below the 49% ceiling permitted under REIT regulations and below the 28 to 30% at which most REITs typically operate, the CFO said.
Moving from 18% to around 30% loan-to-value would free up close to $1 billion, or roughly ₹9,509.77 crore, in debt headroom that the platform could deploy for acquisitions, a lever Deo said makes sense given debt remains cheaper than equity as a source of capital.
The CFO added that the trust already carries a gross debt of about ₹6,200 crore split between REIT-level loans, which are 71%, and SPV-level loans, which are 29%. "As a REIT, there's a trust that owns shares in various SPVs, and the SPVs hold the actual malls. Some loans sit at the REIT level, some at the SPV level," he said.
Deo also spoke about Nexus Select Trust's growth priorities for FY27, rental growth headroom, and how AI is being woven into forecasting and decision-making within the finance function, even as he remains cautious about over-reliance on it.
Edited excerpts:
How do you think India's organised retail real estate market is going to evolve over the next three to five years? What opportunities do you see there?
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If you look at the demographics of India's retail sector, organised retail, the sum of brick-and-mortar plus e-commerce, is only about 18%. The remaining 82% is mom-and-pop stores. That's exactly the opposite of the West, where 85 to 90% is organised.
Over the past few years, consumption, and discretionary spending are growing. And both e-commerce and retail are growing at the expense of unorganised trade, and this will continue as e-commerce pushes further into fashion and electronics, and organised retail expands with private equity coming in to relieve developers.
You grew in double digits in FY26, reaching revenue of around ₹2,500 crore. What are your key financial priorities for FY27 and beyond? What will be the biggest drivers of growth?
For FY27, we expect footfall growth of about 6 to 7%, since you can't grow footfall exponentially within a fixed catchment area. Within that, we expect sales to grow in double digits, around 11 to 12%, which should translate into distribution growth of about 9%. We distributed ₹1,376 crore in FY26.
If you look across all listed Indian companies, only 18 to 22 companies distribute at this scale, names like TCS, Coal India, Indian Oil. REITs are among the few structures mandated by regulation to distribute this way, to give investors a yield.
What is your occupancy at this point, and do you believe there's still meaningful room for rental growth?
The highest rents are commanded by grade-A malls, and all of our 18 to 19 malls fall into that category. Mathematically, our lease structures are built for escalation, a typical vanilla lease, say for a Louis Philippe or Allen Solly store, runs about five years with 15% escalation every three years. That works out to roughly 4.5% compounded annual growth from escalation alone.
On top of that, since we operate 11 million square feet as a platform, around 10% comes up for lease expiry every year. When we renegotiate that space, whether with the existing tenant or a new one, we typically achieve a mark-to-market rental uplift of around 20%, which works out to about 2% on the overall portfolio. Add in our revenue-share model, where brands pay us roughly 7 to 8% of sales above a minimum guarantee, contributing another 1-1.5%. So escalation, mark-to-market, and revenue share together give us about 8% organic rental growth on the existing platform, before you even factor in inorganic growth from acquisitions, which adds another 3 to 5%. Overall, we're looking at 12 to 15% profitability growth, with about 92% of it coming from rentals; the rest comes from our hotel and office assets.
Interest rates remain an important variable for REITs. How do you see the rate environment influencing your funding costs and growth opportunities over the next 12 to 24 months?
Interest rates in India have always run higher than in Western markets, typically between 6.5% and 8%. Whatever happens, indexation tends to keep pace. What's happened in the West is quite different, rates went from 2% to 6%, a threefold increase, which has hit REITs there hard given how leveraged they've historically been.
For us, at the time of listing, we had modelled at an 8.4% interest rate. Since our debt is largely structured as rental discounting loans with 10 to 12 year tenures, but with reset opportunities every six months, we've been able to renegotiate with lenders or refinance with new banks as rates moved down. That's brought our rate down from 8.3% to 7.3%, about a 100 basis point reduction over three years. We're also a AAA-rated REIT, which means our SPVs are AAA-rated too, giving us a lot of leverage in securing funding at competitive pricing.
As CFOs typically do, while keeping one eye on growth, you also keep another on risk. What are the biggest risks you're tracking in the retail real estate sector over the next few years?
The biggest one, from an operating standpoint, is competition risk. If we run a million-square-foot mall in a city and another million-square-foot mall opens nearby, consumers will naturally want to experience the new asset, even if it's further from home. So we need to continuously secure the best tenants, deliver strong experiences through marketing events, activations, and loyalty programmes.
Interest rate risk is the second major one, our entire financial model is built around assumed rates. At listing, we modelled 8.5%; if actual rates had moved up 100 basis points to 9.5%, that would have hit our distribution directly. This is a yield product, so if our yield compresses, say from 6.5% to 5.5%, investors would rather just put money into Government Securities.
The third major risk is safety, security, and fire. We conduct yearly external audits, have strong SOPs across all three areas, and monitor them regularly to avoid any incident affecting the safety of our consumers.
On the tech side, how are you leveraging technology in mall operations and the finance function specifically? Are you piloting generative AI or agentic AI?
We're already using AI for financial forecasting, lease analytics, and portfolio prediction. IT reports into the CFO function, and the CFO role has evolved significantly with digital technologies. Most CFOs today, myself included, are leading digital finance transformation to improve efficiency, strengthen governance, and support decision-making. I think one of the key roles of a modern CFO is leading that digital transformation, though you can't do it without a strong partnership with your CTO.
On the AI side specifically, what's exciting is the ability to combine and analyse operational, consumer, and financial data in real time. But that comes with caveats. AI outputs are only as reliable as the underlying data, poor-quality input gives you false confidence.
Over-dependence on models is also tricky; if you assume nothing can be better than the AI and remove human judgment entirely, you introduce a different kind of bias. And third, governance and ethical risk, as automation increases, questions around transparency, auditability, cybersecurity, and decision accountability become far more important.
Have we reached a stage where companies can delegate tasks to AI and reduce headcount?
Not really. We're actually working with a consultancy to help us understand whether this whole AI gamut can genuinely replace people or not, but we're not there yet. That said, change is happening at the margins. For instance, when I now negotiate with a Big Four firm for due diligence or internal audit work, I'm pushing for a 20% fee reduction because a chunk of their work is now done by AI. These are large global firms with significant AI capability, and they're acknowledging it, which tells you that somewhere between 20 to 30% of their work has already been automated or AI-assisted.