Nirlon Limited (500307) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q3 and 9 months FY '25 conference call of Nirlon Limited. [Operator Instructions] Please note that this conference call is being recorded. I now hand the conference over to Ms. Nupur Jainkunia from Valorem Advisors. Thank you, and over to you.

Thank you. Good afternoon, everyone. My name is Nupur Jainkunia from Valorem Advisors. We represent 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 third quarter and 9 months 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 and 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; 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 to start with his opening remarks, followed by financial and operational highlights of the company. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone. It is a pleasure to welcome all of you to our earnings conference call for the third quarter and 9 months of the financial year 2025. Let us first take you through the financial performance of the company. For the third quarter, the company reported a total income of INR 164 crores, which grew by 7% year-on-year. EBITDA was INR 133 crores, representing a 10% growth year-on-year. EBITDA margins were at 81.39%. Profit after tax for the quarter stood at approximately INR 58 crores, which also grew by 12% year-on-year, while PAT margins were 35.57%. For the 9 months ended the financial year 2025, the company reported a total income of approximately INR 484 crores, representing a growth of 7% year-on-year. EBITDA stood at INR 386 crores, an increase of 8% year-on-year and EBITDA margins was 79.74%. Profit after tax was INR 165 crores, an increase of 7% year-on-year, and PAT margins was 33.99%. On the operational front, the average occupancy rate for the company as a whole, that is NKP and Nirlon House combined was at 99.5% for the third quarter of the financial year 2025. And as on 31st December 2024, approximately 15,000 square feet at NKP and 6,200 square feet at Nirlon House was vacant. In other updates, Morgan Stanley has given notices to vacate approximately 449,000 square feet of space with the last notices for about 176,000 square feet received in December 2024. These spaces will largely be vacated in quarter 1 financial year 2025 and quarter 1 of financial year -- sorry, sorry, let me repeat that. These spaces will largely be vacated in quarter 4, 2025 and quarter 1, 2026. Of this, around 230,000 square feet has already been relicensed to BNP Paribas, E&Y, ICICI Prudential and GlobeOp SS&C with discussions going on for the remaining space. Additionally, BNP Paribas has renewed approximately 156,000 square feet at NKP. Further terms have been finalized for relicensing of approximately 60,000 square feet of space coming up for renewal in financial year '25. Lastly, we are glad to inform you that the Board of the company has approved an interim dividend at INR 15 per share for 2024-'25 in the meeting held on 13th February 2025. With this, we conclude our opening remarks and open the floor to questions.

[Operator Instructions] We'll take our first question from the line of [ Dilip Jain ] from Ayush Capital.

I just have 2 questions. My first question is for the first 9 months, we have paid approximately INR 45 crores tax on a PBT of INR 254 crores. This works out to about 17.5%. You had explained in the previous con call that this lower tax outgo is mainly due to accumulated MAT credit, which might get over by the year-end. I request you to give me the figure for 31st December of the balance accumulated MAT credit, which we are going to use for Q4 of this year.

Just a second, please. The MAT credit that was available to the company will get fully utilized by March 2025. Because we are in the old tax regime, we are able to carry forward the MAT and that MAT is getting utilized. So it is utilized on an annual basis. So we can't give you the number for utilization up to December.

Okay. So how much has been assumed to be utilized this year like...

Approx INR 22 crores, INR 23 crores.

INR 22 crores, INR 23 crores. And once this INR 23 crores gets extinguished, there's nothing that's left at the end of this fiscal?

Correct. Yes.

Okay. Okay. So we wouldn't be getting that tax advantage anymore at the end of this fiscal. Am I right?

Yes.

Okay. All right. All right, sir. Okay. And I'll proceed to my second question, if you may permit. As per Page 7 of our investor presentation, Morgan Stanley has given us a notice to vacate 449,000 square foot in Q4 and Q1 of next fiscal. And as Mr. Kunal explained, a hearty congratulations. They have already begun relicensing and have relicensed almost 230,000. So since we have -- my question is since we have already commenced relicensing of the area that will be vacated, what is the average rental rate per square foot per month of the relicensed area? That is one part. And the second part, sir, is strategic. Media reports indicate a huge demand for Grade A commercial spaces in our micro market with vacancies purported to be at an all-time low. So in a rising rental rate scenario, will it be a better alternative to wait to relicense at higher rental rates 6 months or 9 months down the line than to pre-book tenants right away? I would like to know your thoughts on both the parts of the question.

Okay. So the first part of the question with regard to the rates after Morgan -- with regard to the rates that we are getting for license fees for the spaces vacated by Morgan Stanley, we can say that they are fairly positive and showing a higher trend going in the right direction, approximately between 160 to 180 at 80%.

160 to 180 at 80% efficiency?

Approx. So essentially, we can say that the trend is in the right direction at this point in time. It's an increasing trend. And to answer your second question as to whether we should wait, we don't usually want to speculate and take these type of decisions as to waiting for license fees to get higher. We want to basically license as soon as possible to the best possible licensee with the best credit, which will also give us the best credit at the best possible terms. So yes, it's -- that's really what we want to do.

That's nice. However, the market is at an all-time high and that's what we assume it to be because the vacancies are so low. So aren't we losing out on that 20%, 25% extra differential that we might have gotten had we waited a bit longer? I mean I just want to know from a strategic point of view.

We don't really think so.

Okay. Okay. So these are good enough, 160 to 180 at 80% is good enough as per your research.

Yes.

[Operator Instructions] We'll take our next question from the line of Satinder Singh from Eon Investments.

Congratulations for another stable quarter and the quick relicensing. So anything to report on the Nirlon House, any progress on Nirlon House, please?

So there is nothing significant to say in that regard. We are in various discussions. And if there is anything significant to say, we will update you.

[Operator Instructions] Next question is from the line of [ Srinivas Rao Chelasini ], an independent analyst.

Since the MAT credit will be exhausted this year, will we be changing to a new tax regime in the following year?

The company is analyzing that in a lot of detail and...

I'm sorry, sir, can you come closer to the microphone.

The company is analyzing that in a lot of detail and will be in a position to take the decision in the next month or 2 in this regard.

[Operator Instructions] We'll take our next question from the line of [ Daksh Jain ], an individual investor.

Sir, I have just one question. The interest -- the repo rate has been reduced by the government. And has there been any changes in the discussion or our progress towards REIT, sir, because it benefits the REIT sector? Has there been any acceleration towards our progress towards REIT or what -- any new discussion change is happening? Or is it more like positive? And has the progress accelerated, sir?

Let me just understand your question. Are you asking about the interest rate or the REIT? You mentioned 2 things. So it was a little confusing to know exactly what you want.

No, no. The fall in interest is favorable to the REIT industry. So, has there been any acceleration in our process after the change in interest rates towards the REIT -- the direction towards the REIT?

I think the first -- we understand. I think what we like to say is that the progress towards the REIT is something that -- if I may say so, you are assuming that we've been speaking about the REIT. What we want to mention is that we'll be looking at an appropriate restructuring, whether it's in the form of a REIT or something else is something that we've always mentioned that we are in the process of analyzing and looking at every possible structure that might be the most beneficial to the company. So that's just something I would like to -- we'd like to clarify since you definitively mentioned REIT. In that context, the discussions that have been ongoing and the various analysis that has been ongoing are continuing. There's nothing specific different from the last time that we want to say on that. Would that answer your question?

Yes, sir. Yes. Okay. And sir, one more request, sir, as we have been telling for various quarters, can we expect a key person from GIC to sit in the con call and to give a little bit more specific reasoning behind the development on the REIT side or whatever the structure is, sir? Because we have been requesting this for a lot of con calls now.

Noted your point, Mr. Jain. Thank you.

[Operator Instructions] We'll take a follow-up question from the line of Satinder Singh from Eon Investments.

So out of the 449,000 that Morgan Stanley is vacating, about 200,000, we believe has already been relicensed. So what kind of a pipeline do we have for the balance 250,000? And how confident are we that by the time these get vacated in 1Q '26, we should be wrapping up most of these?

Well, we can say that for the balance, approximately 200,000 or [ 220,000 ], the pipeline is very strong and positive. And we will hopefully be concluding in the next few months as well. As I said, we want to do it at the best possible commercial terms to the most appropriate licensees for us as soon as...

Sir, please come closer to the microphone.

Yes. As I said -- as we said earlier, we want to relicense as soon as possible on the best possible commercial terms to the licensee whom we feel is most appropriate for NL or NKP. And we believe we have a very strong pipeline in this regard and we'll be looking to finalize as soon as possible in the next few months.

Okay. And I must use this opportunity to compliment the management. I think you've done a great job in first building the asset out like you built, okay? And then thereafter, maintaining the occupancy. I think it's incredible the level of occupancy that you maintained over the years. So compliments to your management on this, okay. And sir, finally, if I'm to read this correct, one of the responses, so are we saying that will a decision on the tax regime be taken in the next couple of months? Or is the decision on the structure going to get taken in the next couple of months itself?

A decision on the tax regime will be taken in the next couple of months, which will essentially be in '25, '26.

Just to clarify for FY '25, we need to decide by the time of filing the return, which happens in September of '25 and for FY '26, we need to decide by the time of filing the returns for FY '26, which is September of '26. So therefore, for FY '25, as of now, it's been decided to be in the old tax regime. And for FY '26, the time line for the decision is before you file the returns. You can decide at any time till then.

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

Thank you. Thank you all for participating in our earnings call. We hope we were able to answer your questions satisfactorily. If you have any further questions or would like to know more about the company, please reach out to our Investor Relations managers at Valorem. Thank you very much.

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