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

Ladies and gentlemen, good day, and welcome to EFC India Limited Q1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. [ Nidhi Vijaywargia ] from MUFG Intime. Thank you. And over to you, ma'am.

Good morning, everyone. Welcome to the Q1 FY '27 earnings conference call of EFC India Limited. To discuss this quarter's performance, we have from the management, Mr. Umesh Sahay, Chairman and Managing Director; Mr. Nikhil Bhuta, Whole-Time Director; Mr. Uday Vora, Chief Financial Officer; and Mr. Aman Gupta, Company Secretary. Before we proceed with this call, I would like to mention that some of the statements made in today's call may be forward-looking in nature and may involve risks and uncertainties. For more details, kindly refer to the investor presentation and other filings that can be found on the company's website and stock exchanges. With that, I would like to hand over the call to Mr. Umesh Sahay for his opening remarks. Thank you. And over to you, sir.

Thank you, ma'am. Good morning, ladies and gentlemen. Thank you for joining us for the Q1 financial year '27 earnings conference call of EFC India Limited. We are pleased to begin financial '27 on a strong note. Q1 reflects continued momentum across our platform, supported by disciplined execution, enterprise-led demand and the growing relevance of our integrated real estate-as-a-service model. During the quarter, our consolidated revenue from operations stood at approximately INR 283 crores, representing a growth of around 29% year-on-year. Profit after tax stood at approximately INR 71 crores, growing by around 52% year-on-year. These numbers demonstrate the strength of our platform, the benefit of scale and our continued focus on profitable execution. Over the last few years, we have continuously built EFC as a multi-engine workspace platform across 3 core verticals: Leasing, Design & Build and Furniture Manufacturing. These businesses are distinct, but together, they allow us to participate across the complete commercial workspace life cycle from space identification and leasing to design execution, fit-out, furniture and ongoing workspace operation. Our leasing business continued to remain the foundation of the platform. It provides a recurring revenue base, deep enterprise relationships and long-term customer engagement. We operate across 25 cities during the quarter and serve more than 70 clients. Our Design & Build vertical continue to strengthen the ecosystem by allowing us to deliver turnkey commercial interior enterprise, GCC, institutional client and multi-location mandate. The vertical enhanced our relevance to clients because we are not merely providing space, we are helping them create functional, scalable and ready-to-use workspace infrastructure. Our furniture manufacturing business further strengthened our integrated model. It supports quality control, faster execution, better procurement discipline and supply chain reliability as this vertical sales add another important capability to our platform and improve our ability to serve both internal workspace requirement and external institution demand. The industry backdrop remains encouraging. India continues to see a strong demand for Grade A commercial workspace, managed office solution and enterprise-ready infrastructure. The shift towards GCC flexible workspace, enterprise-led office and integrated workspace solution is closely aligned with EFC operating model. What is important is that occupiers today are not looking for the office space. They are looking for speed, flexibility, design quality execution certainly and a single accountable partner. This is where EFC integrated Leasing, Design & Build and Furniture capability create a meaningful and competitive advantage. We remain focused on disciplined growth, improving asset productivity, strengthening enterprise relationships and create sustainable value for all stakeholders. Our approach is not just to expand, but to expand with operating discipline, customer quality and return focus. I would like to thank our shareholders, customers, banking partners, our team members and all shareholders' continued trust and support. With that, I would now like to invite Mr. Nikhil Bhuta, Whole Time Director, to discuss the operational performance and the company in greater detail.

Thank you. Thank you so much, Umesh, sir. Good morning to all investors, analysts and stakeholders, and a warm welcome to the Q1 FY '27 earnings conference call of EFC (I) Limited. Q1 FY '27 has been a strong operational quarter for the company. The performance reflects the progress we have made in building a scalable, integrated and enterprise-focused workspace platform. Our 3 core businesses, Leasing, Design & Build and Furniture Manufacturing continue to perform in a coordinated manner. Together, these businesses allow EFC to offer complete workplace solutions to clients while creating operating synergies, cross-selling opportunities and deeper customer relationships. Starting with the Leasing business. This vertical continues to be the cornerstone of our platform. During the quarter, Leasing revenue stood at approximately INR 154 crores, growing around 26% year-on-year. Segment results from the Leasing business stood at approximately INR 64 crores of profitability that reflects the stability of the annuity model, the strength of our enterprise relationships and the benefits of scalable across our managed workspace portfolio. Our managed workspace platform now spans 25 cities with total seat capacity of more than 84,000 seats, billed seats of more than 68,000 seats. We have also additional inventory and capacities under development, which supports future revenue visibility without making any revenue commitment. The scale of these platforms gives us operating leverage, deeper customer access and stronger enterprise engagement. Enterprise demand continues to remain healthy. We are seeing traction from GCCs, multinational companies, BFSI institutions, technology companies, consulting firms, enterprise outsourcing businesses and other institutional clients. This client increasingly prefers flexible, scalable, high-quality and professionally managed workspaces. Our ability to provide consistent delivery across multiple cities is becoming an important differentiator. A key strength of our Leasing portfolio is the quality of customer relationships. Enterprise clients contribute meaningfully to our revenues, and the average enterprise client tenure remains very healthy. This supports revenue stability and helps us build long-term visibility in the business. Moving to the Design & Build vertical. The business continued to contribute strongly during the quarter. The revenue from this segment stood at approximately INR 100 crores, growing year-on-year. Segment results stood at approximately INR 34 crores of profitability. The business continues to benefit from turnkey mandates, repeat relationships, multiple locational projects and demand from enterprise clients. Our current Design & Build order book stood at approximately more than INR 228 crores. This gives us healthy executional visibility. The strength of this business comes from our ability to combine design, project management, execution, construction-related activity and MEP capabilities for the deliveries. We continue to see opportunities across commercial space developments, GCC facilities, institutional assignments, retail and enterprise infrastructure. The Design & Build vertical also plays a strategic role within the group. It supports our Leasing business by accelerating fit-out completion and helping us monetize spaces faster. It also opens the opportunity with the clients who may not initially come to us for leasing but require turnkey workplace execution. Coming to the furniture manufacturing business. Ek Design continues to scale as an important part of the integrated platform. During the quarter, Furniture revenue stood at approximately INR 29 crores, growing more than 120% year-on-year. This vertical strengthened EFC's backward integration strategy. It improves our control over quality, delivery time line and product availability. The business currently has more than 2,200 SKUs and has delivered more than 75,000 units across categories. The order book for the furniture business is approximately INR 53 crores plus, which reflects growing institutional acceptance of the platform. The Furniture business is still in a scale-up phase. As volume increases, the focus remains on improving capacity utilization, product mix, executional efficiency and institutional customer relationships. We are building this business for long-term strategic value, not just as a standalone manufacturing vertical, but as an important enabler of the broader EFC ecosystem. One of the biggest advantages of our model is that we participate across multiple stages of workplace value chain. A client may engage with us for managed offices, for Design & Build or Furniture or a combination of all of these solutions. This increases wallet share, improves client stickiness and strengthens our position as a single accountable partner. Overall, Q1 FY '27 has demonstrated that our platform is scaling well. The Leasing business remains stable and recurring. The Design & Build business has a healthy order book, and the Furniture business is gaining operating scale. The business pipeline across our verticals remains encouraging, and the market opportunity continues to support integrated workplace solution providers like EFC. We remain focused on execution quality, discipline expansion, customer retention, asset productivity and sustainable value creation. I would like to thank all our investors, stakeholders for their continued trust and support in EFC (I) Limited. With that, I would now like to hand over the call to Mr. Uday Vora, our Chief Financial Officer, who will take you through the financial performance of the company. Thank you so much. And over to you, Uday.

Thank you, Nikhil, sir. Good morning, everyone, and welcome to the quarter 1 FY '27 earnings conference call of EFC India Limited. I will now take you through the consolidated financial performance of the company for the quarter ended June 30, 2026. We have started FY '27 on a strong note with a healthy growth in revenue and profitability on a year-on-year basis. The performance during the quarter was supported by continued demand across our core verticals, disciplined execution and the operating benefits of our integrated platform. Revenue from operations for quarter 1 FY '27 stood at INR 282.88 crores as compared to INR 219.62 crores in Q1 FY '26, representing a year-on-year growth of approximately 29%. EBITDA for the quarter stood at approximately INR 122.96 crores as compared to INR 102.16 crores in Q1 FY '26, representing growth of around 20% year-on-year. EBITDA margin for the quarter stood at approximately 43.5%. Profit before tax stood at INR 101.34 crores as compared to INR 66.06 crores in Q1 FY '26, reflecting a growth of approximately 53% year-on-year, while profit after tax stood at INR 70.85 crores as compared to INR 46.67 crores in Q1 FY '26, representing growth of approximately 52% year-on-year. Profit after tax margin improved to approximately 25.1% in Q1 FY '27 as compared to approximately 21.3% in Q1 FY '26. This reflects operating discipline, scale benefits and strength of the business mix. From a segment perspective, the Leasing business remained the largest contributor to revenue. Leasing revenue stood at INR 153.91 crores during Q1 FY '27 as compared to INR 122.18 crores in Q1 FY '26, growing approximately 26% year-on-year. Segment result from Leasing stood at INR 64.33 crores. The Design & Build business reported a revenue of INR 100.39 crores during the quarter as compared to INR 84.69 crores in Q1 FY '26. The segment results stood at INR 33.84 crores. The business continues to be supported by execution of turnkey and enterprise-led projects. The Furniture business reported revenue of INR 28.57 crores during Q1 FY '27 as compared to INR 12.75 crores in Q1 FY '26, reflecting strong year-on-year growth of approximately 124%. Segment results stood at INR 2.10 crores. This vertical continues to scale and remains strategically important to our backward integration and execution control model. Other income for the quarter stood at INR 11.42 crores. Finance cost for the quarter stood at INR 10.35 crores, lower than the previous quarter and broadly controlled relative to the scale of the business. Depreciation and amortization stood at INR 22.69 crores. On the balance sheet side, the company continues to support growth across Leasing, Design & Build and Furniture while maintaining focus on financial discipline. Our operating model involves both recurring revenue assets and execution-led businesses and we continued to evaluate capital allocation with a focus on return asset productivity and long-term value creation. While the overall financial performance for Q1 FY '27 has been strong, we remain focused on improving operating efficiency, working capital discipline, client collections, execution cycles and asset utilization across the platform. To summarize, Q1 FY '27 reflects a strong start to the year. Revenue grew 29% year-on-year, EBITDA grew 20% year-on-year and PAT grew 52% year-on-year. The Leasing platform continues to provide stable recurring base, the Design & Build businesses has healthy execution visibility and the Furniture business is scaling as an important strategic vertical within the ecosystem. We believe the company is well positioned to benefit from the continuing shift towards enterprise managed workspaces, turnkey execution, integrated workspace solution and institutional demand. We will continue to focus on disciplined growth, efficient execution, stronger customer relationship and sustainable value creation. With this, I conclude my remarks. I would like to thank all our shareholders, lenders, partners and stakeholders for their continued trust and support. I now request the moderator to open the floor for the question-and-answer session. Thank you.

[Operator Instructions] The first question is from the line of [ Akash from Fedge Limited ]

Umesh sir, Nikhil sir, Uday sir, many, many congratulations on excellent results this time again. I have 2 questions. I'll break it down in 2 parts. Firstly, the D&B order book is at INR 228 crores and Furniture order book is at INR 53 crores. How much of this is going to be for third-party? And how much of this is going to be for internal capacity?

So thank you so much, Akash. And yes, we have delivered a strong performance this quarter as well, and we are very confident going forward. With regards to the Design & Build order book and the Furniture order book that you mentioned or what is mentioned by us in the presentation, it largely contributes towards the outside business only. So more than 85% is from the outside business because the majority of the development on the internal work has already been taken care of and largely it is done by the landlords only. So hence, this entire order book that we are talking about is largely, more than about 85%, is from the external business relationships only, Akash.

So my second question is, sir, the interior D&B division revenue has declined from the previous quarter. It was, I think, earlier about INR 120-odd crores, which has come down to about INR 100 crores now. Is this going to be -- is this a business which is seasonal? Or are we expecting some order delays? Or what is it?

Yes. I mean, there is a little slight reduction compared to the last quarter, which is Q4. Typically, you would appreciate that our business in the Design & Build is a project-based business. There's no seasonality, which is kind of affecting this business. But what really matters in this kind of division or vertical is basically the projects that are under execution. Now typically, you start getting your projects in the third and the fourth quarter of financial year, then they get under execution. And obviously, you see a great amount of upside during these 2 quarters, which is quarter 3, quarter 4, and you would have probably observed in our financials in the last financial year as well. But so hence, the best way to probably look at this is if you look at it Q-on-Q, Y-o-Y, then obviously, there is a significant growth Q-on-Q, Y-o-Y. And it is -- and it will continue similarly Q-on-Q every Y-o-Y, every quarter on Y-o-Y basis. And we are very confident that keeping in mind the order book that we already have, which is about more than INR 228 crores and our executional capability that the time line within which we execute, we are very confident of -- we are absolutely on track of achieving the growth target that we have of more than around 50% under the D&B segment on a Y-o-Y basis. So absolutely, there is no seasonality involved. Yes, obviously, the market conditions overall, there has been, as you know that overall disruptions in the supply chain, overall disruptions in the material pricing, et cetera, et cetera. But despite all that, we have kind of continued growing on a Y-o-Y basis, and we believe that we will continue growing this vertical at the kind of targeted growth rate that we have set for ourselves for the current financial year.

The next question is from the line of [ Bharat from Compact Capital ]

Congratulations for this wonderful result. Sir, I have 2 questions. First question, I'd just like to put, I understand your model considers leased centers, owned asset and asset monetization. So how do you look this product mix over the next 3 years? And how investors should value these 3 models differently?

Absolutely. Thank you so much, Bharat. I mean I think it's a very interesting question, and it is very necessity for all our investors to understand that how we are really contributing in creating better returns and overall capital efficiency through this model. What we -- so there is, number one, what we are doing is that we are not getting our leasing business affected anyway. What we are doing through the asset monetization model is we are basically acquiring certain good assets. So we are doing value acquisitions where the assets which are probably, let's say, 10-year-old, which are vacant, we acquire them, we refurbish them, we create value in them. And then we lease it out through our own managed office vertical, which is anyway, that's our kind of legacy business, right, and we understand this thoroughly. So what we are able to do is we are able to monetize such assets, create value in those assets and create a greater amount of IRR revenue through this additional kind of revenue stream in a sense, if I may say so, where my leasing business -- for my leasing business, I myself is the landlord, which otherwise, what would I do, I would have got into a leasehold contract with the landlord, take the property on lease and then I would have operated as a managed office. Here, what I'm doing is I'm acquiring an asset and I am developing them and offering them for a managed office solution and also getting appreciation in the property value because of the grade improvements and because of making this asset the yield generating, the rental yield generating asset and hence, create that appreciation. So this is a fabulous opportunity that our management has offered to the investors where investors apart from the leasing revenue that -- apart from the leasing profitability and all the integrated business model profitability that we generate, we are also able to capture this asset monetization opportunity and which kind of improves our overall profitability, our overall margins, our overall offering to the investors at large. So I hope I've answered this broadly. But I mean, we don't differentiate as an asset class here, like I said, this is just we are kind of in a sense, some of the assets that we are acquiring on our own book to create this appreciation approach in this.

Understood. This is helpful, sir. Sir, my another question is, I understand we take 18 to 20 months for payback for per seat fit-out cost, which is INR 50,000. Could you please give some idea whether INR 50,000 is a standard cost or it's for some selected centers or it is some selected category? Or what is the worst payback period if the cost changes proceeds for fit-outs?

No. I mean it's fairly standard. I mean, we have been doing this business for quite some time now. So obviously, it's fairly established for us. And as you also know that the fit-out cost is, in our case, is usually funded by the landlord. So I mean, it is -- we'd rather say that this is a payback for landlord in that kind of a period. So absolutely, I mean, there is not specific to any centers or anything like that. This is a kind of a standard payback period that one can achieve for the fit-out that is done for our businesses. And we also can achieve for fit-outs where we do for our own properties. Within this period only, we are able to kind of achieve the payback. And this remains fairly constant standard across the centers, across cities, across pan-India.

The next question is from the line of [ Mohan Sharma from Vinayak Capital ]

Congratulations team EFC. Your Furniture revenue has increased 36% quarter-on-quarter, but your segment profit fell around from 75% to around 7%, margin dropped 40% to 7%. What was wrong in the Furniture segment?

There's nothing wrong in the Furniture segment. And in fact, you see what -- how we look at it in this segment right now is this segment is growing continuously. It is kind of stabilizing itself continuously. And if you see year-on-year and quarter-on-quarter, it is improving in terms of the top line. And hence, it is improving its capacity utilization. And you would appreciate that the moment we kind of come to an optimal capacity level, we will be able to kind of demonstrate the margins which are more stabilized, margins which are more measurable. And I think that is the only situation that we are obviously witnessing in this Q-on-Q results that, yes, if you compare it with some of the earlier quarters where if the volumes are low, where maybe the services were for a specific type of projects, the margins are different and these are services for very different type of projects, the margins could be different. But when we operate at an optimal level and which is what we are progressing towards, I think by end of this year, we should be kind of progressing to an optimal capacity utilization. And at that time, we would be able to kind of come to a position to compare our margins more appropriately. So at this point of time, comparing margins at a quarter-on-quarter level would not be appropriate because, like I said, it is still not a full optimized capacity level, and we are in progress to achieve it sooner within this financial year. And I hope this answers your questions.

But I have a follow-up question. So is the Furniture segment structurally low margin? Or was quarter 4 of '26, margins were unusually high? Which quarter reflects the real run rate?

Like I said, we will be able to kind of give you the real run rate once we are at an optimized level, which is, like I said, more than 60%, 70% capacity utilization. So the real run rate would only be established once we are at that level, and that is the time where we will be able to establish the correct profitability standards. And as we have always mentioned that this business is one of those business which is a value-accretive business for us and where our margins are going to be really well because we have a lot of visibility on the businesses, a lot of different kind of business model strategies that we adopted starting from doing OEM business, doing exports business, doing institutional business. doing customized, providing customized solutions. All of this is kind of helping us to kind of expand our margin beautifully well. We expect achieving an EBITDA of more than 25% easily under this vertical. And that is a stabilized margin that one can really look at, and this is what we are looking at achieving once we are at an optimized capacity utilization level, sir.

The next question is from the line of Fenil Brahmbhatt from Choice Institutional Equities.

So first of all, congratulations on a good set of numbers to team EFC. So I have couple of questions. So what was the average occupancy rate and retention rate for the quarter?

Fenil, yes, the average occupancy rate has been 90% plus, as you can see probably in our presentation also. The operational billing capacities and the inventory that is roughly around 90% occupancy that has been worked out if you look at the numbers that is presented in the presentation also.

Okay. And the retention rate was?