EFC (I) Limited (512008) Earnings Call Transcript & Summary

Ladies and gentlemen, a very good evening, and welcome to the Earnings Conference Call of EFC Limited for Q1 FY '25. We have with us today Mr. Umesh Sahay, Founder and Managing Director of EFC India Limited; and Mr. Nikhil Bhuta, Whole Time Director of EFC India Limited. [Operator Instructions] I would now like to hand over the conference to Mr. Nikhil Bhuta, Whole Time Director, to give this “opening remarks” and discuss further on the Q1 FY '25 performance. Thank you, and over to you, sir.

Thank you, operator. Good afternoon, everyone. I'm Nikhil Bhuta, Director of EFC India Limited. I would like to extend a warm welcome to all of you joining our earnings conference call today. We humbly value your ongoing interest and support in our company. EFC India Limited, as you know, is a real estate as a service company operating through 3 major verticals. One is the managed office business, where we have managing about 2.25 million square feet of assets with 57 sites under management across 7 cities. We have sitting capacity of about 47,000 seats and all as on 30th June 2024. We obviously have 2 other verticals. One is the design and build turnkey contracting verticals. And second is the Ek Design Industies Limited, which is the furniture manufacturing vertical. Through these 3 verticals, we operate as an integrated real estate service providers. In today's call, we'll review our financials and operational performance for Q1 for the financial year, '24, '25. We will also highlight key strategic decisions made by our group and share our future outlook. For Q1, EFC India Limited has achieved impressive financial results with consolidated revenue reaching approximately INR 105.28 crores, an EBITDA of around INR 49.62 crores and a profit after tax of INR 15.77 crores. These results underscore our resilience, strategic focus and the management's unwavering commitment to driving the company's growth. Let us also look at the revenue breakdown, business segment wise, where the rental segment generated approximately INR 66.79 crores, accounting for about 63.44% of our total revenue. In comparison, the design and build turnkey contracting business contributed INR 35.3 crores representing approximately 36.56% of the total revenue. At EFC, we create synergies through our dynamic workspaces managed office operations under the brands such as EFC, which is an enterprise solution, Sprint, which is a business center solutions and Bigbox, which is a new entrant to our bouquet of brands that we operate with. Additionally, we offer exquisite furniture through Ek Design Industries Limited and provide meticulous interior design under Whitehills Interior Limited. Starting from the managed office business sector, we have significantly enhanced our capacity this quarter by increasing the area under leasehold rights by about 3 lakh square feet, adding over 7,000 seats across 7 centers in 4 existing cities where we were already operating. Additionally, we have acquired approximately 80,000 square feet of property at prime location in Pune. This is a freehold property that we have acquired under ownership, which we'll be developing and leasing under our managed office business model. This acquisition has the potential to generate an annual revenue of about INR 14.40 crores. As on 30th June 2025, we are having about 2.25 million square feet of area under management. We have total 57 sites under our management across 7 cities in India with total seating capacity across crossing over 47,000 mark. In Design and Build division, we have secured contract exceeding INR 75 crores during this quarter across various business sectors and are currently negotiating additional contracts by over INR 100 crores. Notably, one of the biggest achievements that we undertook during this first quarter was successfully completing over 100,000 square feet of project for Coforge in just 62 days, demonstrating our efficiency and capability in delivering large-scale projects. In Furniture Manufacturing segment, we have secured regulatory approvals to establish an expansive manufacturing facility on over 3 acres in Phursungi, Haveli Taluka, Pune. This state-of-the-art plant boasts cutting-edge machinery and high-tech QC led and is strategically subdivided into 5 dedicated manufacturing shop floors. The facility includes a modern customer experience center supported by an efficient support infrastructure for seamless operation and management. Our workforce at the manufacturing facility of over 200 people will drive the plants operation during the following quarter of this financial year and going forward. With plant and machinery configured for peak efficiency, production trials are slated to begin during August 2024 with commercial production set to be launched by September 2024. On acquisition front, EFC Limited, a key unlisted subsidiary of our company has strategically acquired 51% stake in Bigbox Venture Private Limited. As a result, Bigbox Venture is now a step-down subsidiary of EFC India Limited. Bigbox venture with its impressive portfolio of over 3,000 seats in Pune is aggressively expanding into NCR region, Ahmedabad and Kolkata, significantly enhancing our overall market presence. Additionally, we have also incorporated a real estate investment trust, REIT, to establish small and medium REIT with substantial corpus of INR 499 crores, which will further strengthen our investment capabilities and market reach. Additionally, during this fast growth journey, we are more conscious about best-in-class governance accordingly. We have conducted an ESG gap audits to identify areas for improvement and appointed a dedicated ESG team to ensure compliances beginning with establishment of the highest level of governance, the G part of the ESG. We are actively implementing initiatives to reduce greenhouse gas emissions by utilizing green power and establishing tools for effective electricity consumption control. With this brief, I thank you all. And I now open the forum for a question-and-answer session. Moderator, please could you take over in this.

[Operator Instructions] The first question is from the line of Manav Jain from SP Capital.

So, my first question would be regarding the Furniture segment. So we were going to start production from this year. So could you give some light regarding that segment, and how would be the selling growth? Would it be internally or would it be selling to other people as well?

Yes. Thank you, and welcome. Yes, regarding the Furniture segment, I'd like to update you all that we are just slated to do the commercial trial during this month, I mean, in the next weeks time and the full-fledged production, the commercial activity would start in the month of September, that is the coming month. With regards to the where we'll be selling our products. So yes, obviously, as you know or as you have observed that all our businesses are quite integrated as well as stand-alone SBUs. So they are not dependent on our existing businesses. Yes, but our existing business would become an anchor client to them for sure. So as far as we are concerned, we are looking at right now 2 major segments, residential and commercial sector to focus on manufacturing the product for those sectors. So in the commercial sectors, obviously, chairs and the workstations, et cetera, the residential, you have different types of loose furnitures, which goes in for furnishing the residential premises. So we will be doing both. We will be doing for external clients. We will also be tying up with large distributors, we'll be appointing distributor across. We'll also be attempting to do some sort of white labeling where there is a significant brand presence and significant underlying contract that we can secure. So it would be a wholesome business, and it will be, Manav, that it will be like a stand-alone business on its own. So EFC is concerned, they will become one of its customers, not beyond that.

Okay. Got it. Got it. And what would be the top line that we are -- we would expect was the production starts in September?

So as you could see that this financial year will be operational only for 6 months. And naturally, the first 3 months would be, we would appreciate that those are the months where there'll be more trial and errors because you are operating those machines for the first time, and you are trying to take the maximum benefit on the efficiency. So I mean, we still believe that looking at the pipelines, even the EFC has, we should be able to at least achieve more than about INR 50 crores to INR 75 crores easily during this financial year only during the 6 months that we are talking about, which is a very conservative number, to be very honest that is the kind of number I'm just talking that even EFC can handle alone. So forget about if I'm able to kind of get any new businesses, which my sales team, which is already operational and have already targeted meeting a few of the brands for white labeling business and few of the large consumers for -- in some of the consumers in the hotel industry, some of the consumers who are like a large distribution across. So those orders are in the discussions. But on a conservative basis, we should definitely be in a position to achieve anything around INR 50 crores to INR 75 crores of turnover in the financial manufacturing division this year.

Okay. Got it. And regarding the -- we recently added 2 lakh square feet of space at different locations across India. So what would be the space used for, are those seats additions, or they are new centers that could be built in the future?

No, no. These are the centers where we are already -- have already either added the seats or are under development. So what I mean to say is that over about 300,000 square feet have been added during this quarter. And with that, we've been able to develop about 7,000-odd seats across 7 different centers.

Right. Got it. So my last question would be, are we maintaining the guidance for doubling the top line by FY '25?

Yes. I mean we are all geared up to do so. I mean that's the plan, and that has been the overall and how the aggressive some of the actions that the companies are taking. We are completely geared up for that. And I think by end of this quarter, we would be in a much better position to confirm that position. But yes, as of now, we are 100% geared up to achieve that target.

The next question is from the line of Pranav Shrimal from PINC Wealth Advisories.

Congrats, sir, on the great quarter. I just had a couple of questions. Sir, one would be we have almost projected that we're going to add around the new seats, by when will those new seats be operational, the 4000 seats that are under development?

Sorry, I mean your voice was coming. You said how many seats -- when will be operational, you said something I didn't get that.

Yes. there are seats under development of around 4,278, by when willl these seats be operational?

These seats would be already, I mean, some of it must be already operational or will be operational during the second quarter already.

Okay. So majority of them will be operational by the end of Q2?

Yes, yes, yes, yes.

Okay. So the revenue will start coming in from Q3, around 6 months?

Absolutely, absolutely.

Got it. And second, sir, we have recently acquired the property in Pune. I just wanted to figure out, is that also going to be one of the office spaces?

Yes, absolutely. That's the idea. Just that the instead of landlord I'll be my own landlord, and we'll be operating only the managed office business from there, which is our core business. So the property acquisition is just that the -- right now, what we do is that strategically, if we are able to get a property at a price where practically I'm just replacing my rental with the EMI, then it kind of helps me to build assets alongside rather than keep paying to the landlord and then completely remain at their mercy at the end of the 5th year. So that's the strategy which we are using. And depending upon the amount of exposure that our balance sheet permits, we'll definitely kind of taken kind of an LRD structure on our balance sheet and acquire these assets, but eventually use it only for our managed office operation.

Okay. So was this property acquired through the REIT or was this done through EFC alone?

So like I said, that EFC acquisition would depend entirely upon the debt equity ratio that we, as an organization, are comfortable with and obviously the standard that one is to follow. So we'll not be acquiring all the property under EFC. With regards to the property acquisition and the REIT is concerned, the idea behind the using REIT as a structure is, it's a win-win proposition for both the investors in the REIT, the unitholders in the REIT, and for us, because what happens is the investors in the REIT would be able to generate a yield, which is better than a standard leasing rate when it comes to the yield generation from managed office operations, correct? So let's say, if you are just taking a property and leasing out to one customer, your standard lease rentals are around 7%, maybe maximum. While if you consider it under a managed office operation, this can substantially be increased because after paying the rent to the landlord, I'm still making my money. Okay. So as an EFC, I will be making my money in terms of the operation fee that I will be charging to the REIT and the investor in the REIT will also be making more money than otherwise they would have invested in a commercial property for the rental yield. So under REIT we are trying to acquire assets by raising capital under REIT, we will also be obviously sponsoring the, we are the sponsor to the REIT. So, we will be putting our own money also, and we will invite contribution from other potential investors. And we will operate this some of the properties under this structure, and we'll be managing them, so we'll be virtually controlling the operation of those properties also.

Got it. Got it, sir. And yes, just one last question. On the design build space, we have received contracts worth INR 75 crores. So that's including Coforge or excluding Coforge?

So Coforge contract was received last quarter. This quarter, the Coforge execution had taken place. This INR 75 crores is excluding Coforge contract.

And the realization will happen within this year? Or will there be some overlap?

Sorry, can you repeat again? Sorry.

The INR 75 crores, will that be realized within this FY or that -- will there be some overlap?

No, no, no. This is -- it will get realized this quarter. But generally, what happens as you would appreciate that each contract, once you -- the entire cycle of you really getting the contract, getting the documentation in place and then the mobilization and the execution, the cycle generally spread over 2 quarters, depending upon the timing at which you are able to secure the contract. So let's say, if I have secured a contract worth INR 75 crore in first quarter, obviously, some of them have been concluded in the first quarter and the rest of them would get concluded in the second quarter.

Got it. Got it. And just one last final question. From which city are we seeing the maximum demand coming from? Or is it still spread across evenly?

You're talking on the DNB division, or in the managed office business?

Managed office. Managed office.

Managed office, I mean, as you probably know the sector, then about 9 cities in the country are the prominent cities, which is the standard NCR region, or on the southern side, you have Bangalore, Hyderabad, Chennai. On the Western side, you have obviously Gujarat, Ahmedabad, and then in the Maharashtra, you have Bombay, Pune. And on the Eastern, you have Kolkata. So these are obviously the major cities. Some of the 2-tier cities are also coming up well, primarily because of certain specific developments happening on those cities and some specific types of customers getting -- occupying those areas in those cities, like cities like Indore, cities like Coimbatore, cities like Chandigarh, they are all really coming up well. But as of now, looking at our overall portfolio and our overall presence, we still believe that for at least the foreseeable future we'll remain focused in these 9 cities, while, like I said, the cities like Ahmedabad, we never wanted to go alone, but our clients took us there. So tomorrow, our clients may took us to some other 2-tier cities. So we are open to that proposition depending upon the viability. But in terms of focus, our focus will remain on these 9 cities.

[Operator Instructions] The next question is from the line of Rahul Batlani from Reco Capital.

Great set of numbers. First question, the acquisition which we've done with Bigbox, how much will this contribute to our revenues and numbers?

So when we acquired Bigbox, the Bigbox was already doing around INR 2 crores a month of top line. So that was the kind of top line they were already adding on a monthly basis. That's with about 2,800, 2,900 seats. Since our acquisition, they have already kind of added about 2,000 more seats because if this is a -- this is a company which does a lot of business where they search a client first and then do the business back to back by identifying a property. So that gives a lot of stability in terms of the cash flow that they will be able to generate and the occupancy level that they'll be able to provide. So I think that's really going to help us going forward. And they do operate right now under small-sized area. I mean when I say small size mean 10,000, 15,000, 20,000 square feet of space that they take it on lease and then accordingly, they further sublease to the potential customers on managed office business. But the overall philosophy, the cultures are all matching and aligning with our group, and we are really expecting -- and I mean, just to give you an idea, the total contracted remaining contract value of this contracts that they have with 3,000 seats is roughly around [ INR 86 ] crores. So I mean I'm just saying at the time of acquisition only they had a contract -- remaining contract value of more than [ INR 86,000 crores]. And with the new additions, it will certainly keep adding to our top line and the bottom line as well.

Sir, and just to follow up to the same. What are the seat expansion targets you set for Bigbox and EFC together?

So we allow Bigbox to operate independently and it's...

Okay. Okay. That really helps. Just a second question and a final one. So where are we on the REIT progress?

Yes. So we have already filed the application. There's a couple of round of... [Technical Difficulty]

Hello, sir.

I think we lost you sir.

Management, we are unable to hear you. Ladies and gentlemen, we have lost the management line connection. Please stay connected while we reconnect them. Thank you. Ladies and gentlemen, thank you for patiently holding. We have the management line back on the call.

Extremely sorry for this interruption, but please, can we carry on? So I was explaining about the status on the REIT. So as I said, that the REIT application has been already filed with the SEBI, a round of discussion has already happened with the regulators, and they are really happy with the fact that we are the only one who is not from the fractional ownership platform, and they're really excited to kind of extend their all support, and we are expecting that probably by end of this month, or beginning of September, we should get an approval for the registration of our REIT.

All right. So just to quickly follow up on the same. Has there been any finalization on the yield, which will be offered?

You mean to say in terms of the properties that we have identified?

No. In terms of the REIT, like what sort of returns can investors expect from REIT?

Yes. So I mean, in terms of returns, yes, it will be -- we have not really prepared the offer document, which is under preparation right now. But I think in about -- by end of this quarter, we should be ready with all those numbers. And it would certainly significantly differentiating than a standard lease product, which is what generally the main REITs are working at. So it will certainly be better than them. But in terms of exact numbers, mean I'll be able to tell you by the time the documents are completely ready.

The next question is from the line of Rishabh Gang from Sancheti Family Office.

Sir. Am I audible?

Yes. Please Rishabh.

I want to understand like more on the 5-year vision, right, on the kind of business you would want to build across your different segments and possibly some kind of numbers relevant to each segment, like how big you would like to make them. And I would want to know which new geography you would like to enter in the future. And any more adjacencies or segments that you plan to enter into or think about that they are interesting?

In terms of overall outlook going forward, Rishabh, we are looking at about and keep adding about 30,000 to 40,000 seats on a year-on-year basis for next, I would like to right now say at least for 3 years, that's the plan that management has already kind of put in place internally. And the way the managed office business and the flex office market is growing and the overall economy is also supporting the same. We are fairly confident that for next coming 3 years, we'll be able to really keep adding the seats, I mean, you would appreciate that adding seats is not a big challenge. The challenge is in terms of whether there is a demand sufficiently available. And we are very confident that for the coming 3 years, that would be the scenario that we'll be able to easily absorb more than 30,000, 40,000 seats that we'll be able to kind of put in place. And with the policy that we have that we generally price our product at a reasonable level, anything between around INR 6,500 to INR 8,000, depending upon the area, locations, et cetera. That's the broad target with regards to the managed office business. With regards to the DNB division and the furniture market, as far as the DNB division is concerned, we are very upbeat because if you would appreciate there are hardly any pan-India players and organized players who have a capability to carry out such large contracts across India, single-handedly. And the way the growth is happening, the kind of response that we are getting from large customers, we're very, very confident that with the economy also supporting the real estate sector on the commercial leasing business side, we should be in a position to really achieve or rather keep doubling our targets year-on-year than what we have achieved last year, which is a very conservative and realistic estimates that we can make, looking at the kind of orders that we have in hand and the orders in pipeline. With regards to the furniture manufacturing business, we are very confident that by end of '26, we should be crossing around INR 250 crores to INR 300 crores top line. That is what is expected from that business and that unit that we have really set up right now. So by FY '26, we should be in a position to cross INR 300 crore plus of business on the furniture manufacturing side. In terms of geographical expansion, as I mentioned earlier, that we'll -- our focus for the next couple of years could remain the 9 cities. Having said so, we are clearly aware about the new markets getting developed, new Tier 2 cities getting developed, and we'll be closely watching them and we'll definitely support our existing clients if they want to really move to those region and kind of asking us to kind of help them set up the infrastructure there. But in terms of our own direct focus would definitely remain around this 9 cities going forward in the coming 3 years' time. I hope I've kind of covered up all your questions in this.

Yes. Actually, one more question was there. Like any more adjacency like a segment that you are planning to enter into which are related to your business, where in the -- or maybe what you find interesting at the moment?

As of now, we are genuinely speaking, really focused on opportunities on hand. And I mean, we believe that this segment already, we have kind of covered all the aspects of our core business at the managed office or the office leasing business. So as of now, there is nothing that is on plan or nothing on card. We are in business and it's a dynamic environment, right? So opportunities may throw up, and we may consider them. But as of now, there is no such plan please.

I also wanted to understand more on the inorganic growth, like when we have acquired one company right now. So what is our view? Like would we be acquiring more such similar kind of businesses across India and how do we evaluate these businesses? Like any parameter linked to acquisition cost per seat or how do you evaluate buy or build or buy decision for such business?

No, very great questions. I mean, yes, inorganic growth is necessary for any organization like us who are growing well right now and we've been able to generate sufficient internal accrual. So yes, inorganic growth will be on card, and we will be looking at such opportunities where we could acquire and step in and place some strategic role, while expanding our strength. So in terms of when we get into acquiring such potential companies, we definitely would like to give them a situation of an exit. We would definitely like to associate with them to do, how do we really associate in a level that we can really help them to grow further. And how do we really associate so that we are in a position to fuel their growth plan as well. So it has to become a win-win situation. If I go into a pure vanilla acquisition deal, then my cash outflow and my acquisition cost would become too high and that might not be a viable proposition considering the current situation in the market, the industry is doing very good. And if I try to make a deal right now to acquire a business completely, which is doing fabulously well, and it is also growing at a very good pace, then the acquisition cost is going to go very high. But I have to look for such opportunities like Bigbox who are at a reasonable scale and now looking at growing further. And that growth could be fueled by the kind of overall infrastructure that we've got. So we've got what do we really have to offer. We have to offer the DNB division, which is fully functional, fully capable of handling any kind of contracts that has to be executed in a very limited period of time. Secondly, we have our own furniture manufacturing business. So that kind of offers them a very customized and timely basis and price-sensitive products to them. So that takes a win-win proposition to them to us, and that's how we try to acquire such companies, not by going into pure-play acquisition model because that becomes you end up paying certain multiples or certain number of sales multiples or EBITDA multiples and that probably for our -- doesn't work in our mindset. We are looking at a situation where we do strategic acquisition with some growth fueling exercise that we can do for the target companies.

If time is enough, I would like to ask 1 more question. Like for the properties that we are trying to own and then run it as a space. So what is the kind of IRR or return on investment do you expect to make post, like what is your leverage returns on that? Like what is the benchmark that beyond this, you would like to do this?

So I mean, to be very honest, when we acquire a property, we would obviously like to have acquire it at, like I said, at lowest possible cost because I don't want to get into an acquisition where the difference between my EMI and difference -- and my payment to -- and the rental around that is more than 1% or so. The arbitrage can't be more than that because the moment I get into a higher arbitrage, then that acquisition is not efficient for me. So what you're looking at is below 7% kind of yield kind of a property that I would like to identify and acquire and kind of size that we are looking at and the opportunities are there in the market, all the past acquisitions that we have done are all on the similar lines around the philosophy.

All right. For the furniture that we have like the backward integration, has any other player also done that. And what are the kind of entry barrier, right? Like for another office space to actually also backward integrate to furniture, like what are your views on that, just broad views?

So with regards to whether anybody else has done that to our best of our knowledge, we are not really sure that anybody has done that. And we are basically -- we are one of the few -- I mean the only one that did like that. So we are operating as data as a service provider. And this integrated solutions, I doubt that anybody else is providing, number one. Number two, with regards to the overall furniture business is concerned, we are -- we'll be able to expand into all the different categories that we are focusing on. And any other follow-up questions you had on the financial business?

Yes, I just want to understand like how hard is it for another player to actually start doing this backward integration for furniture, right? Some qualitative insights on that?

Yes, it is difficult. I mean, it's not an exercise that one can just simply think of and just have access to capital, so then you can just simply put it and you are able to manage it because you could understand that, that's how the manufacturing sector and the service sectors are different. But fortunately, we've got a team of people. We've got experienced management. Our promoters have also historic experience of doing the -- having understand the manufacturing sector. So it is not easy for sure. You've got to have the right blend of team and obviously, that the right type of opportunities is on card available which enables you to kind of get into this expansion into the furniture manufacturing.

The next question is from the line of Darshan Jhaveri from Crown Capital.

Firstly, congratulations on a great set of results, sir. So just like one clarification, if I heard it correctly, we are trying to double our top line by FY '25. Is that -- did I hear that correctly, sir?

Yes. I mean that's the endeavor, and that is a target that we have kept it for ourselves.

That's great. So that's great to hear, sir. So just 2 questions. One, like now when we add furniture to our this, so what kind of EBITDA margins we would be getting in that business? And what would be like a blended EBITDA for like when we do all 3 combined or any good margin differential in all 3 businesses, what would that be?

So in the furniture vertical, the EBITDA margins are typically around 40%. Obviously, it will take about 6 months for us to achieve that efficiency. But as a standard thumb rule, as I said, in the furniture industry is about 40% and that's what our costings are also looking at the kind of market price that we can understand based on the preliminary feasibility that we have carried out. With regards to the blended margin is concerned, I mean on a managed office business, we do about an EBITDA of about 30% on a site level. And on the DNB division, we do an EBITDA of about 15% to 17% or rather a little more about 17% to 19% on an EBITDA level or 14% to 15% on a PAT level. So on a blended level, it will still remain around 30% on an EBITDA. These are the EBITDA, I'm talking on an Indian GAAP accounting standards, not as per the reported, which is Ind AS where the EBITDAs are generally higher. So -- but if you look at on the business side, on the cash flow level, the cash flow level EBITDA blended would be around 30%.

Okay. So what would be the differential between reported and Indian GAAP, sir? Or maybe could you just talk about PAT numbers because that would be much, much easier than sir?

So that's what I said, and I'm kind of telling you about a number that is something which would be subject to tax, which is 30% EBITDA by top line. Reported EBITDA, I mean reported numbers, like I said, it's a little different situation because of the way the Ind AS accounting standard operates, we have to consider the different creation of the right of use of assets, et cetera, and then amortizing them so that the rent expenses are rather than debited to the before EBITDA, it gets debited post-EBITDA and hence, EBITDA level increases, but the PAT level decreases.

Okay. Okay. Got sir. And sir, just like now we are talking about a 3-year plan where we're adding so many around 30,000 seats at a year and everything. So what would be our vision for the next 3 years overall basis like our revenue growth? Because we are talking about very strong numbers even in furniture manufacturing as well as our DNB division. So could be like in the next 3 years, what would be our internal target to reach in terms of revenue?

So as I've explained, internally, we are looking at adding around 30,000 to 35,000 seats at a rate of, let's say, about INR 7,000 to INR 7,500 on an average basis on the managed office business. Over the 3 years' time, we should be in a position from around INR 50 crores to INR 75 crores to INR 300 crores of turnover that we'll be able to achieve under the furniture manufacturing business. And on the DNB division, we are absolutely confident that from the INR 100 crore, INR 100 plus crores, that is INR 113 crores that we achieved in FY '24, we should easily be able to double it year-on-year because the way the responses and the contracts that we are securing and the businesses are getting generated, we are absolutely confident. So I think you can appreciate this is the broad guideline that I can provide. And this is the kind of numbers that we are really targeting at.

That’s great to hear, that's very great to hear. So that's very great. Sir, just like one last final question. Like so like just maybe it's a 2-part question. So just like with such a great opportunity for growth, will there be very intense competitiveness with other players coming in? And what kind of risks that you could see in our market, sir?

So in terms of competition, the market is open, yes, marketing is gearing up. People are focusing on this segment. But as you can see, there are a handful of people who have a pan-India presence and who really have established themselves as a managed office players or somebody who is into the operation model. So we -- while this business has no entry barrier, but to get to that efficiency level at which everybody like us is operating, that's not going to be very easy for every new entrant and also to become a significant player that's not an easy task that you can achieve it over next 1, 2 years, okay? So you would appreciate that we have reached to this scale, this size, this efficiency with over 10 years of experience in this business. So it is -- while it is easy to say there is no entry barrier, but to achieve such efficiencies and to enable yourselves to make continuous profitable business, it is a challenge that one has to go through. And then we are really cognizant of the fact that the overall risk, which one can really foresee is the risk related to the overall downturn in the economic because otherwise, if you see the way the real estate sector is growing and way the business sectors are growing in terms of demand for leasing -- office leasing sector is continuously increasing only. And the way that projections are, we are very confident that at least for 3 years that we are talking, there isn't likely any downturn, which is expected. I mean bearing some force majeure event, which nobody can really estimate, we are very confident that we should be able to sail through these 3 years confidently and on a growing trend only.

[Operator Instructions] The next question is from the line of Bhagtej Ojha from Vyom Wealth Advisors.

So congratulations on a good quarter. So my question is, in the last con calls and the management commentary, you have been mentioning that you are having competitive cost advantage when it comes to your company with your peers. So in order to -- because of that, you are getting more advantage. So my question is, are we getting this cost advantage from TCC Concept because our promoters are holding a majority of stake in TCC Concept. So are we getting managed office spaces at a reasonable rent from TCC Concepts. That's what I want to know.

So TCC Concepts is an independent company, which is not -- which is not kind of having any business connections with the EFC India Limited. And there is nothing that we are deriving from them in terms of which adds to my cost competitiveness. What adds to my cost efficiency is the integrated vertical that EFC India Limited has developed under the 3 verticals that it has developed, which is, as you know, my furniture manufacturing, my DNB division, and the managed office. So that is where we really control our costs, we bring our efficiencies and maximize our profitability.

Okay. So I was going through annual reports of TCC Concepts and of FY '23. So there, there were some related party transitions where EFC's NIM was mentioned. And the amount was around INR 2.5 crores or INR 250 crores, if I'm missing any amount, but can you please explain what those transactions were?

I would not -- I mean, it's absolutely fine when there are those transactions are arm's length transactions. And if there is any connection, but that has nothing to do with the business of growth of this company, and I think we'll be able to address those things in the TCC conference call. But right now, as I'm saying that there is no connection from a business side that it is during my growth or enabling me to achieve any efficiency on the cost, et cetera, from that company is concerned.

Okay. And sir, my last question is that TCC is -- last question is for TCC only. So TCC has...

If you don't mind -- I mean we can rather focus on EFC India Limited at this point of time with the lack of time than getting into the other company, please?

Yes, absolutely. But the promoters are the same. So that's the reason I wanted to know a bit about TCC.

It is regarding this particular company. That is why I'm requesting you sir, that if we can focus on this and because of the lack of time, we can focus on EFC India's results, please.

The next question is from the line of Nirmal Murarka from VT Capital.

Hello. Can you hear me?

Yes.

Yes.

Yes. Yes. Sorry. Sorry. My question was regarding the rental income. So it has been flattish Q-on-Q despite the increase of 5,000 seats and build mail seats. So what explains this, if you could please clarify on that?

Yes. So there is an increment in seats during the quarter, obviously. And that's what every quarter we plan to. But generally, as you could appreciate and if you see our last year's trend, the quarter 1 and quarter 2 are the quarters where we do maximum of development and that is where the number of seats are getting built up and they're coming up for occupation. So during the third and the fourth quarter, where you see the maximum occupations in terms of the number of seats, which have come up and developed during these 2 quarters. And then the revenue and the profitability accordingly shoots up. So that is the kind of trend then generally that we follow in our business in this particular managed office business, so if you compare it with the last 4 quarters, you will realize that on a quarter-on-quarter will be increasing. And on an average, if you see every quarter, we'll be adding about 3,000 to 4,000 seats on a billable seats. But in terms of capacity, it will be more, and that's how there will be a little lag between the income and the expenses, which will happen on a quarter-on-quarter basis. But on an average basis, you will achieve -- you'll see that we will have a average profitability across all the quarters is matching up totaling at an average of about 15% to 16% on an annual basis.

Actually, sir, I wanted to note on the revenue side, like if we're increasing fees, why is the revenue flat Q-on-Q that was my question.

That's what I'm trying to explain that during the first quarter, the seats and the developments are more there. So all the seats, which are getting developed, they might not get occupied immediately because there is a lag between the development and the occupation, correct? So let's say, if the seats are getting developed, they will come up for occupation, they will start getting built on a particular date, but it will not be built for the entire quarter, you appreciate, because let's say, I'm hypothetically saying that...

Yes, yes. No, my no, I got that. But if you have added 5,000 seats in this quarter, so like have those not yet got occupied or like what is that split if you could?

They are occupied, sir. They are occupied. But like I said, let's say, like I'm saying that most of the seats would get occupied during the month of June. So obviously incremental revenue would come because the earlier months, we'll do the developmental work and it will get occupied during the month of, let's say, in the later half of May and the earlier half of June. So the additions would see on the revenue side would start increasing from June onwards, okay? So the overall quarter impact would not come in that first particular quarter? And generally, the way we work, sir, is that the fourth quarter of any financial year is the year in which we kind of develop and identify potential properties that we want to acquire or acquire on a leasehold terms over the coming financial year. And then we kind of get into acquiring those leasehold rights starting from the last quarter of a particular financial year and beginning of the next financial year. And then accordingly the development cycle happens. And the third and the fourth quarter is the quarter where my revenue start picking up, kicking in more, while on the other hand, because the developments are going on, certain fixed expenses, certain standard of developmental expenses keep getting debited to the P&L. So there will be a revenue mismatch to that extent. There will be -- you see that the revenues are not going -- increasing vis-a-vis the expenses are concerned and so on and so forth. But on an average, once you look at a particular financial year, between the 2 quarters, initial 2 quarters and the later 2 quarters, the average numbers would give an overall sense of the performance of the company.

Okay. And sir, related to this, like your assets and your rental income there is a segment called assets. So like why has it fallen like from INR 9 crores to INR 1 crores like Y-o-Y?

So what we were also very active on is that there were certain transactions that we were contracted where we were just providing the furniture fixture and also the managed office services. Where the space was not something that we were acquiring -- we were taking on the lease from the landlord but only the furniture was provided to a particular customer on the space which they own. And then we provide them the managed office services also. So that is the asset leasing business, what we are talking about. But in that business, what happens is that the controls are limited as we have seen and observed over the period. So we are trying to reduce our operations because there is too much of demand on the space leasing side, and our ability to focus on the asset leasing business is getting limited and obviously, as I explained, the control aspects. So we are kind of reducing those exposures and rather also focusing more and more towards the space rental businesses.

So my final question would be like what would be your guidance on the rental income, like for the full year?

We are fairly confident that for the full year, we'll be crossing around -- I mean, right now, as I said, that we are already at 47,000 seats, by the end of this financial year we will easily be around 65,000 to 70,000 plus kind of seats. And on an average, if you have to ascertain that what would be an average occupied seat during the entire year, if you do an annualized average, we are confident that we should be able to have around 50,000, 55,000 seats on an annualized basis at an average rental of about INR 7,000 per seat kind of a thing. So we are looking at more upwards of INR 350 crores on the top line that we will be able to project for this financial year.

Ladies and gentlemen, due to time constraint, we'll take this as a last question. I now hand the conference over to Mr. Nikhil Bhuta, Whole Time Director of EFC India Limited for closing comments.

First of all, thank you very much for showing so much of pace and interest in our company and coming out in such large capacity to support us and encourage us. So we thank you all for joining today's call. We appreciate your continued support and engagement with EFC India Limitd. As we move forward, we remain committed to driving growth and delivering value to our shareholders and all the participants to the overall ecosystem. Should you have any further questions, please don't hesitate to reach out to us or to our agency. And we wish you a great weekend and a great quarter coming in. I really extremely sorry that we're not able to attend to the calls for each of the participants. But due to the time constraint, we'll have to shorten this call at this point of time and put an end to this call. Thank you so much. Moderator, please.

Thank you, sir. Ladies and gentlemen, on behalf of EFC India Limited, that concludes today's session. If there are any questions that I remain unanswered due to paucity of time we just request you to kindly send us on the same to [email protected]. and also you can connect with Fortuna PR for the same. Thank you for your participation. You may now disconnect your lines. Thank you.