Nirlon Limited (500307) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q2 and H1 FY '25 Conference Call of Nirlon Limited. [Operator Instructions] I now hand the conference over to Ms. Nupur Jainkunia from Valorem Advisors. Thank you, and over to you, ma'am.

Thank you. Good afternoon, everyone. My name is Nupur Jainkunia 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 second quarter and first half 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 information currently available to 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. I hand it over to them for 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, VP Finance; 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. It's a pleasure to welcome you to our earnings conference call for the second quarter and first half of the financial year 2025. Let us first take you through a summary of the financial performance of the company. During the quarter under review, the company reported a total income of INR 163 crores, which grew by 8% year-on-year and by approximately 3% quarter-on-quarter. The EBITDA was reported at INR 131 crores, representing an 8% growth year-on-year. EBITDA margins were about 80.55%. Profit after tax for the quarter stood at about INR 57 crores, which also grew by 8% year-on-year, while profit after tax margins reported at 34.77%. In the first half of the financial year 2025, the company reported a total income of approximately INR 320 crores, a growth of 7% year-on-year. EBITDA stood at INR 253 crores, an increase of 6% year-on-year, and EBITDA margins was 78.84%. Profit after tax was INR 106 crores, an increase of 4% year-on-year and representing a PAT margin of [ 33.13%. ] On the operational front, the average occupancy rate for the company as a whole, that is NKP and Nirlon House combined, was stable at 99.8% for the second quarter of the financial year 2025. As on 30th September 2024, approximately 7,600 square feet of area was vacant in Nirlon House and NKP combined. In other updates, the Morgan Stanley have, to date, given notices to vacate approximately 195,000 square feet of the total approximately 449,000 square feet occupied by them. Of this, terms have been agreed for relicensing approximately 139,000 square feet. Additionally, the company continues to see consistent interest for the balance space expected to be vacated by Morgan Stanley. We are also happy to inform you that NKP was ranked second in the GRI India Awards in 2024 in the Sustainable Project of the Year category. With this, we conclude our opening remarks. I'll open the floor to questions.

[Operator Instructions] The first question is from the line of Dilip Jain from Ayush Capital.

Sir, I just had one question. So we have relicensed 139,000 square foot, as you have reported. Congratulations on that. What is the monthly rental rate per square foot at 80% efficiency? Can you please share the number?

Just a quick clarification. We haven't yet licensed the 139,000 square feet. We have just agreed on terms for that 139,000 square feet. And as a result of that, we won't want to specifically comment on what our numbers are for the 139,000 square feet, but the average approximate range at which we are entering now at 80% efficiency is between INR 165 to INR 175 increase per square foot per month with roughly about 3 to 4 months of licensing fees. I'll just check with Rahul for some clarifications offer on that.

No. This is really a -- what it is, it's 139,000 is practically finalized, but not concluded.

Does that answer your question, Dilip?

Yes. So just the terms have been agreed and the tenant has been finalized, but the final papers have not been done yet?

Correct. We have to sign and register a legal license agreements. Those are not yet done.

Okay. Okay. So there is going to be a 3- to 4-month license-free period along with this. That's what you mentioned, right?

Don't connect it to the 139,000. We are telling you the 2 separate points we are making. One is we have agreed on terms of 139,000. Let's not get into the specific terms before we sign license agreements. What we are saying is the general approximate range in which we are...

It's INR 165 to INR 175.

INR 165 to INR 175, with about 3 to 4 months away. And also currently for the notices we have received from -- [indiscernible] from Morgan Stanley for the majority of these notices, we are still in the notice period, it's still ongoing. So it's usually for most of the cases, as you know, it's 6-month notice period. So the notice period is still valid. So to -- Okay. So that you have some background. It's not that the majority of these spaces are vacant. The notice -- the notice period is still valid.

Okay. Okay. And this is again going to come with a 3-year, 15% escalation clause, right?

Those are standard terms, which we are working on. We're working on them to see they're either the same or we try to improve them, but that's the general -- yes, that's our normal trajectory. Those are our normal terms, at least.

All right. So as compared to something like a year or 2 ago, what's the kind of Y-o-Y appreciation or a 2-year application that we are seeing around 10% to 15% or more than that?

We've always been a bit cautious about how we answer that because it depends on what base. In some cases, it may be 15%, 20%. In other cases, it's 5% -- 3% or 5%. It all depends on what base we are escalating from and what the specific circumstances are or what the terms are. So it's -- we prefer not to really say that's it 5% or 10% or 8%. In general, we've seen the trend has been reasonably positive and that continues. I mean the demand is strong and that continues.

[Operator Instructions] We'll take the next question from the line of Samarth Singh from TPF Capital.

Just a question on the Safari retreat ruling. Does that affect us in any way? Have you looked at that? And any possible benefit that the company might get from that?

Yes. So your question is with regard to the Supreme Court ruling on the GST, input credit issue, correct?

Right.

Yes. So I mean, I don't want to get into too many details on the call. But yes, we are well aware of this and whatever steps the company needs to take to ensure that if at all, we are eligible to get this -- to get a benefit of the input credit, I can tell you that we are absolutely aware of this issue, and we have done absolutely what we -- what we would like to do to put us in the best possible position that if at all, import credit is being given on construction activity, we are in a position to avail of this credit to the maximum extent possible. So it's a good question.

So just in terms of this clarity Yes. Post this ruling now, is there still any ambiguity whether we can take benefit of the credit?

The issue it's still playing out in the court, right? So whereas the initial judgment that we have seen has been largely positive and that has been welcomed by most in the industry. We just let it play out because there's a difference between a positive ruling and actually getting refund [indiscernible] getting the refund, so to speak. Yes. We'll just leave it to that and let it play out is the answer. Essentially, we can say that if it is allowed, and permitted by the courts and the judiciary, we are in a position where we would like to avail of this particular input crediting at this refunded as well, subject, of course, to final -- whatever the final ruling is, et cetera, et cetera, and what comes, how it is interpreted as well.

[Operator Instructions] We'll take the next question from the line of [ Namit Meta ], an individual investor. As the current participant is not answering [Operator Instructions]. The next question is from the line of Rajiv Malhotra from HCPL Parts Company.

I thought let me just congratulate you guys to do another outstanding set of results. So as an investor now for many years, the only thing I'm seeing is there's very little we can do in terms of increasing area. But I think it's the restructuring of the company on a -- a win-win situation for everybody was I think what everybody is looking forward to. You don't need to be specifically answering any of this. Thank you for a great job. Thanks.

Thank you, Rajiv. Appreciate it.

[Operator Instructions] Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to Mr. Kunal Sagar from Nirlon Limited for closing comments. Over to you, sir.

Thank you for participating in this earnings call. I hope we were be able to answer some questions. And at the same time, offer some insights into where we are today. If you have any further questions or would like to know more about the company, please do reach out to our Investor Relations manager, [indiscernible]. Thank you.

Thank you, members of the management. On behalf of Nirlon Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.