Nirlon Limited (500307) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '25 Conference Call of Nirlon Limited. [Operator Instructions] I now hand the conference over to Ms. Purvangi Jain from Valorem Advisors. Thank you, and over to you, ma'am.

Good afternoon, everyone. My name is Purvangi Jain from Valorem Advisors. We represent the Investor Relations for Nirlon Limited. On behalf of the company, I would like to thank you all for participating in the company's earnings call for the first quarter of the financial year 2025. Before we begin, let me mention a short cautionary statement. Some of the statements made in today's earnings call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made by and information currently available to the management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's earnings call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. Now let me introduce you to the management participating with us in today's earnings call and hand it over to them for their opening remarks. We have with us Mr. Rahul V. Sagar, Chief Executive Officer and Executive Director; Mr. Kunal V. Sagar, Director, Nirlon Management Services Private Limited; Mr. Manish B. Parikh, Chief Financial Officer and VP, Finance; Mr. Jasmin K. Bhavsar, Company Secretary, Vice President, Legal and Compliance Officer; and Mr. Ashish Bharadia, VP, Business Development and Investor Relations, Nirlon Management Services Private Limited. Without any further delay, I request Mr. Kunal Sagar to start with his opening remarks followed by financial and operational highlights of the company. Thank you, and over to you, sir.

Thank you, Purvangi. Good afternoon, everyone. It's a pleasure to welcome you to our earnings conference call for the first quarter of the financial year 2025. Let us first take you through the financial performance of the company for the first quarter. During the quarter under review, the company reported a total income of INR 158 crores, which grew by approximately 6.6% year-on-year, grew by 2.3% quarter-on-quarter. EBITDA is approximately INR 122 crores, representing a year-on-year growth of about 4% and a quarterly decline of about 1%. EBITDA margins are approximately 77%. Profit after tax for the quarter stood at approximately INR 50 crores, which remains stable year-on-year, declined by about 3% quarter-on-quarter with PAT margin being 31.54%. On the operational front, the average occupancy rate for the company as a whole, that is Nirlon Knowledge Park and Nirlon House combined was stable at 99.8% for the first quarter, and NKP remained 100% occupied. As per the long-standing plan, Morgan Stanley has given notices at the end of July and in August 2024 to vacate approximately 13,000 square feet in Q3 2025 and approximately 122,000 square feet in quarter 4 '25 -- financial year '25 at NKP, respectively. The company has seen consistent interest for relicensing the space currently occupied by Morgan Stanley. As regard to the rate of income tax, it is relevant to note that the tax rate applicable from the current year, that is financial year '24-'25 to 34.94% as against 29.12% earlier under the old regime as the company's turnover has exceeded INR 400 crores in financial year '22-'23. That is 2 years prior to the present financial year. As discussed during previous calls, given the max credit available to the company, the incremental costs are continuing in the old tax regime in financial year '24-'25 is estimated to be negligible. The Board will continue to review this issue on a regular basis. With reference to the potential restructuring or other possible value accretive measures, discussions and consultations with concerned parties continue. The effort is to ensure that any potential options in this context are carefully considered and evaluated from all aspects so as to be genuinely value accretive to all shareholders. The company understands the importance of this aspect for investors and shareholders. We will ensure that we communicate any decisions taken in this regard. With this, we conclude our opening remarks and open the floor to questions.

[Operator Instructions] First question is from the line of [ Dilip Jain ], an individual investor.

Yes. Am I audible, sir?

Yes, you are. Please go ahead.

Okay. As per your media report dated August 6, 2024, IDFC leased about 1.6 lakh square foot in Oberoi Commerz, that is a commercial tower located in our vicinity in Goregaon East and the leasing rates were surprising...

Sorry to interrupt, Mr. Jain. The line for the management is disconnected. Please stay connected while we reconnect them to the call. Ladies and gentlemen, thank you for patiently holding. We have the management line reconnected. Mr. Jain, you can go ahead with your question.

Am I audible now?

Yes.

Yes, you are.

Okay. Sir, as per the media report dated August 6, 2024, IDFC leased about 1.6 lakh square foot in a commercial tower in our vicinity that is Oberoi Commerz and Oberoi Garden City and the leasing rate was very surprising. It was about INR 233 per square foot per month. Whereas we have been leasing last year at about INR 160 per square foot per month. With the leasing rate moving significantly upwards as seen in this case with a delta is about 40% and the commercial leasing market displaying strong resilience. Don't our assets deserve a fair value revaluation? As I remember, as per Page 138 of the annual report of '22-'23, the fair value of our investment properties was about INR 4,400 crores. I believe the square foot rates -- the carpet area square foot rates have significantly gone up. So will we go for a fair value remeasurement while we publish this year's annual report? That is my question.

Mr. Jain, to answer -- clarifications to your question of a rate of INR 233 as you mentioned in our understanding, that is the carpet area rate whereas the rate that you have mentioned for the Nirlon properties is a chargeable area rate with an 80% efficiency. So the 2 are not comparable in anyways. So -- and also the second part is, we do not know the exact details of the agreement that has been signed or the agreement that you're referring to in terms of what other terms there may or may not be. So we wouldn't want to comment specifically on that. The only thing that we will mention is that the rate that you mentioned is not a comparable one, because it is a carpet rate as against chargeable area rate at 80% that we have there. The property that you mentioned, their efficiency levels are very different from ours and oftentimes, their overall terms are very different from us. So to keep that in mind. What was your specific question on our fair value? We will again disclose fair value in our annual report that we did last year. What was your query on that?

Sir, the fair value disclose was about INR 4,400 crores for the entire carpet area of about 30 lakhs square foot. So do you believe like we see a very resilient property market. So do you believe the carpet rates have gone up?

In general, for our -- the leasing that we have seen in this last year and in the last quarter as well, the rates have moved up from what we had in earlier years and earlier months, and we've seen good traction across the board as well as the visibility in rate.

Sir, what is the percentage increase that you believe because I live in Bombay and both the residential and the property markets are very resilient. So I mean since you're an expert and you've been doing this for the last 20 years, what do you believe is the actual upward percentage in terms of the rate per square foot of carpet area?

So it will be misleading to mention to you what percentage increases are because their assumption of what the base rate is for people who are renewing and their assumption of many different things...

No, sir. I'm not talking about the leasing rate. I'm just talking about the net asset value of the property.

Again, we have a fair value that we put out. We wouldn't want to really speculate on what is the market value that tends to be very subjective and it will be in a range based on which method we use to conclude that. So we wouldn't want to discuss that in this forum.

Okay. But would we be going for a fair value remeasurement like we do every year, even this year?

Yes. The fair value disclosure will be in our annual report as it is statutorily required to be. But do note, it's not a market value. We had a question on that in the last call as well, which we tried to clarify them and which we can again clarify just now.

The next question is from the line of [ Laksh Jain ], an individual investor.

Hello. Am I audible?

Yes, please proceed.

Sir, just to continue with the question of previous shareholder. Sir, what is our carpet area per square feet for a month, sir?

What is the carpet area per square...

Are you asking us what our approximate current licensing rates are whereas the rate of just north of approximately INR 160 per square foot per month on an 80% efficiency basis with roughly 3 months of entry. That's an approximate estimate.

Yes. Sir, the INR 160 is our carpet area per square feet per month?

No, no, no. That's our chargeable area. The carpet area is [indiscernible] INR 200.

Okay. Carpet is INR 200?

Yes. 200-plus, yes.

[indiscernible]

Correct.

Sorry?

[indiscernible] plus GIC.

Yes, yes. Got it. And -- okay, sir, yes. Sir, my next question, sir. Sir, there has been a decrease in interest cost this quarter. What is the current interest rate we are paying? And are we seeing further reduction in this, sir?

Current rate is 8.54.

8.54. Okay.

This is based on a monthly table. So it fluctuates up and down a bit from that measure.

All right. So the currently [indiscernible] 8.54.

Yes.

Okay. And my next question, sir. What is the status of our Nirlon House, sir, which we are planning to sell? How long will that take time, sir?

That is under discussion with various -- with various regulatory bodies, et cetera, because of the profile of the ownership and the nature of the ownership, which is basically set up and whether the ownership, within Nirlon, there are multiple approvals, et cetera, that are required and once we are in a position to get these, we can keep you further posted, but we are trying and this process is ongoing. But where is the strata-owned buildings like anywhere else in Mumbai, there are additional issues always.

But from we can assume that it is sort of very advanced stage, and this is our first priority at the moment?

No, you should not assume anything. We can just say that it's a priority for the company, and we are working on it, but please don't assume anything.

Okay. All right, sir. Sir, again on the tax rate, sir, we are continuing to place very high taxes, sir, and again, the dividend is taxable in 35%. So I request GIC to accelerate whatever they are planning, whatever they are doing, I just request them to accelerate because the minority shareholders are facing this issue for like a long time now. So we genuinely request GIC to take decisions as quick as possible on this restructuring, sir.

Noted, Mr. Jain. Thank you.

Yes. And one more request we have been asking for various con calls, it's been like many quarters now. We just request the key person from GIC to also sit on the call and give us some clarity, sir. It has been a long asked request, sir?

Noted, Mr. Jain. Thank you.

Kindly request that at least next quarter, we have a key person from GIC.

[Operator Instructions] As there are no further questions from the participants, I would now like hand the conference over to Mr. Kunal Sagar from Nirlon Limited for the closing comments.

Would you like to wait another minute or 2 in case there are any questions, then we can close after that.

Sir, there are no questions as of now.

Nobody in the queue?

No, sir.

All right. That's fine. Thank you all for participating in the con call. If you have any further questions or would like to know anymore, do reach out to us or our Investor Relations Manager at Valorem. Thank you very much for participation.

Thank you. On behalf of Nirlon Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.