Nirlon Limited (500307) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 and FY '25 Conference Call of Nirlon Limited. [Operator Instructions] Please note that this conference is being recorded. 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 fourth quarter and 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 belief 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. 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 delay, I request Mr. Rahul Sagar to start with his opening remarks. Thank you, and over to you, sir.

Thank you. It is a pleasure to welcome you all to our earnings conference for the fourth quarter and full year, FY 2025. Now let me first take you through the financial performance of the company. For the fourth quarter, the company reported a total income of INR 161 crores, which grew by 4% year-on-year. The EBITDA was reported at INR 126 crores, representing a 2% growth year-on-year. EBITDA margins were about 78.22%. Profit after tax for the quarter stood at around INR 54 crores, which also grew by 5% year-on-year, while PAT margins reported at 33.29%. For the financial year 2025, the company reported a total income of approximately INR 645 crores, a growth of 6% year-on-year. EBITDA stood at INR 512 crores, an increase of 6% year-on-year and EBITDA margins stood at 79.33%. Profit after tax was INR 218 crores, an increase of 6% year-on-year and representing a PAT margin of 33.83%. On the operational front, the average occupancy rate for the company as a whole, comprising NKP and Nirlon House stood at 98.2% for the fourth quarter of the financial year 2025. As of 31st March 2025 approximately 92,000 square feet at NKP and 6,200 square feet at Nirlon House were vacant. Of this vacant area, approximately 76,000 square feet has been licensed by BNP and the balance, approximately 50,000 square feet are under advanced discussions. NTT has renewed approximately 57,000 square feet of the space it occupies at NKP. Of the approximately 316,000 square feet coming up for renewals in '25, '26, we have already finalized terms for relicensing 136,000 square feet and the balance approximately 147,000 square feet is under advanced discussion. After this, we conclude our opening remarks and open the floor to questions. Thank you.

[Operator Instructions] We have our first question from line of on Arun Malhotra from CapGrow Capital Advisors.

I think, this is just 1 standard question, which we keep on asking every quarter. What is the status on the restructuring, which we had proposed? Where are we in the process? Any regulatory clearance are we waiting? What are we waiting for?

Okay. So yes, we have been asked this question before. And basically, we'd like to clearly state that, at this point, we have nothing further to really add. Nothing significant to say, which we can tell you at this point. As and when we do, of course, we will keep you posted. But there's nothing really significant to say.

Yes. Yes, Rahul, that's the most frustrating part because this has been going for last 8, 10, 12 quarters, like 2, 3 years. And every time we hear the same answer that we have nothing to say in that front. Where are we stuck? Why is the management, maybe the GIC, not present on the call and answering this question for the minority shareholders?

Yes. I mean, unfortunately, that's not something I can answer. We can clearly say that as and when we have something significant to say we will, of course.

But that's an operation of the minority shareholders' rights that we do not know what is going to happen to our investment, where are we headed? Why are we paying higher taxes? There's a tax leakage, who is responsible for all this? All these questions need to be answered. At least maybe if you don't want to answer in a call, the GIC management can come out with a memo highlighting what their stand is, especially on the tax part. So there's definitely a tax loss to all the shareholders, and GIC is the biggest shareholder. I don't know they being the NRI, they being the foreign status, how does that impact them. But as a minority shareholder, it does impact us.

Yes, your points are appreciated and, definitely, been taken on record. We will take your suggestions on record. Your points are appreciated. And yes, thank you. But your points are definitely appreciated.

I appreciate, Rahul, this -- your stance. But what do we -- where do we go from here? Do we -- as a minority shareholder, do we have any hope from the management? We -- or we just keep sitting or we just exit the company, there is no response from the management. I don't know. We are really frustrated.

Sorry to interrupt, sir. May I please request you to rejoin the queue.

Sure, sure.

Okay. Thank you, though. Thank you. Sorry.

[Operator Instructions] We have our next question from the line of Dilip Jain from Ayush Capital.

Sir, given that the advance tax deadline of June 15 for the current fiscal is upcoming, are you going to compute and pay advance taxes as per the old tax regime or as per the new tax regime?

At this point with regards to advance tax we feel that the TDS should be enough to take care of it, and there is no real concrete plan to change anything significantly as of now.

So are we going to stick to the old tax regime despite our MAT credit getting completely exhausted on 31st March, as you mentioned in the last con call. So currently, we have exhausted all the MAT credits, right?

Yes, we have already answered this question earlier that at this stage, we can't comment on this question.

Mr. Jain, just to clarify, on the MAT credit, we have largely been using it for FY '25. So FY '26, we have to decide before the time of filing of the returns.

I know, I know. You mentioned that. But aren't we supposed to pay advance taxes going through Q1, Q2, Q3 and Q4 of FY '26?

In our case, basis the TDS that gets deducted, we don't really have much advance tax that is to be paid.

Okay. Okay. So if we decide to stick to the old tax regime, it's going to lead to a higher cash outgo, right? So I mean, is there any rationale that is coming from GIC as to what kind of restructuring we are looking forward to and paying this extra cash to the government?

As of now, it has not yet been decided whether it will be -- the decision will be taken by the date of filing of the returns. So...

So that is going to be next year of September, right, as you mentioned in the last call for this fiscal?

Yes.

Okay. So we have another 12, 13 months - 15 months for that. 15, 16 months.

Yes.

Yes, to decide.

Okay. So until that time, we are open to any kind of restructuring because we still technically stay in the old tax regime, right?

Yes. As and when we have anything significant, which is different from what we are doing now, we will, of course, tell you.

Okay. Okay. Sir, my next question is NTT and Barclays renewal and their interest, so what kind of rate per square foot per month are we looking at in this case?

Yes. So basically, we can say that the range for NTT and Barclays is approximately in the range of approximately, say, INR 174, INR 185. In that...

How much, sir? INR 170?

It's in the range of approximately INR 174 to INR 185.

Okay. Okay. And this is all at 80% efficiency, right?

Yes.

Okay. Okay. So I had another question. Morgan Stanley is supposed to vacate a large tract in the coming -- in this current fiscal in the coming months. So I wanted to understand how much moratorium for furniture does the new tenant get before their rent starts?

Yes. So each case is very -- each case is not the same. There's no fixed period as such. Every license with every licensee, the terms are not exactly the same, but we can say that we're busy with this case and in most of the cases, the actual gap between the vacating of Morgan Stanley and the new licensee coming in, well, for approximately, I think, 177,000 is coming due on the -- approximately on the 18th of June. But we can say that the time period, it's not very significant Mr. Jain from what some -- some of -- some part of that space has. We have -- has been signed, some part is proposed to be signed, but advances are very -- but discussions are highly advanced. But what we can say is that the immediate transition, the periods are not extensively long. It's fairly efficient in that regard. And whatever entries there are, are spread out more over the 5-year term.

Okay. Okay. So we can assume 3 or 4 months of moratorium, in general. Is that a fair assumption on an overall basis for various tenants?

Yes, the assumption, you must -- no, I mean -- in a way, it can be 4 months, it can be 5...

I know, I know.

But you must -- but it's not usually something that happens currently after the existing licensee -- basically, it can happen over a period of the license, which is sometimes approximately 5 years. So approximately it's over 60 months. It's usually not happening concurrently. Okay -- or upfront, so to speak.

I understand sir. All of it won't happen at once. So it's going to be like bits and pieces spread over all through.

Spread over different fiscal years.

I'm sorry?

Spread over different years. For different fiscal years, spread over different license fees also over approximately 5 years.

I understand. So sir, over the last 2 years, I've seen a top line that is rental collections in our case, go up by about mid-teens, about 12%, 13% growth in 2 years. So it's -- for us, shareholders, we would like to know, like based on your forecasting, based on the pricing for the new agreements and based on the legacy contracts, do you envisage like a high single-digit top line growth in this fiscal as compared to last year? Or are we looking at 4%, 5%? Or are we looking at...

We don't want to speculate on the future. But if you really look at this industry, if you look at the business, if you look at the industry, everything is fairly consistent. The escalations, whether they are every 3 years or whether they are now, in some cases, annual are also fairly consistent. So I don't want to speculate on a number with regard to growth. But if you can see that consistently, most of the licenses are fairly consistent, whether it's 3 year growth or annual growth, et cetera, et cetera. So in that regard, I think we will -- we should hopefully not -- in terms of the agreed licenses. So hopefully, things will progress as per the licenses signed and proposed to be signed.

Okay. So we are looking at more of a linear consistent growth, if I look at the historical trend, for rental correction?

I mean, you can -- that really -- that depends how you want to classify it. We can only say that we will go exactly as per the licenses. And you can see what has happened in the past, which should -- I mean, you can make your conclusions from what happened in the past with regard to the numbers. Yes, yes.

Okay. Okay. And sir, there's a question on the balance sheet. So we have a capital work-in-progress as of 31/3/2025, and that's of INR 9 crores. So could you please throw some light on what this is?

These are some of the miscellaneous CapEx that we have to incur to maintain the complex, so some of these works are still in progress. So that's why it is...

So this is all just maintenance CapEx, nothing more than that?

Correct. Correct.

Okay. And sir, there's one more entry that I wanted to discuss. The cash and cash equivalents, they have gone up from INR 54 crores to INR 164 crores, as of 31/3/2025. So is there any reason why we are keeping so much cash on the balance sheet. I mean, we could -- technically, we could prepay loans.

This cash will be distributed by way of a dividend to shareholders. This meeting...

No. Exactly, exactly. That was my question. So if you say that the dividend outgo is going to come in October, right? And that is INR 11 per share. That is going to be about INR 99 crores, right?

Yes.

And what we have is about INR 165 crores. By the end of H1, we are going to have INR 110 crores of PAT, right, for this H1 or H1 of this fiscal. And then we'd have accumulated depreciation of INR 30 crores. So we have INR 140 crores coming in the next 6 months. And then we -- beyond that, we have INR 160 crores of cash on the balance sheet. So if I forecast the balance sheet for H1, that is of Q2's ending, we are going to sit with INR 300 crores of cash, of which you are going to distribute just INR 99 crores. So that was my question. I mean, why are we keeping so much cash on the balance sheet?

Your point is noted. Noted.

Sir, but could you let me know like what are the options that we have? Like put them in an FD or use it for Nirlon House or give a special dividend of the same? I mean something, right?

Yes, because we can let you know, at this point in time, apart from the results, which we have discussed, there is nothing significant to say really.

Sir, this cash is just going to lie around on the balance sheet for no reason?

We have invested this into fixed deposits, so we are earning interest on it. And right now we have no proposal to repay the loan or anything, so that's why it is lying in the books.

Sir, any development on Nirlon House?

Nothing significant.

[Operator Instructions] We have our next question from the line of Satinder Singh Bedi from Eon Infotech Limited.

Yes. What's the exit rate of interest as of 31st of March '25? And what is the markup? Is it repo-linked and what is the markup, please?

Interest rate as on March is around 8%.

Okay. And sir, it is repo-linked? Or is it MCLR-linked?

No. It's linked to 1-month T-bill.

Okay. Okay. Okay. It's 1 month T-bill linked, okay. With a quarterly reset, is it right?

Sorry?

Monthly reset.

With a quarterly-reset?

Monthly reset.

Monthly.

Okay, monthly reset. Okay sir. And what is the MAT credit left as of 31st of March, '25?

Entirely utilized.

Entirely utilized, okay. Okay. Okay, sir, and what is the valuation arrived at? So we would have got a fair valuation of the investment properties done as of 31st of March '25, so what is the value figure for that like?

Sorry. Can you say that again, what is the valuation...

The fair valuation or fair value of investment properties as of 31st of March '25. We get this done as an annual exercise, okay? So every 31st of March, we have to...

Yes, so that we will be putting that in the annual report.

Okay. Okay. But sir, that would already be -- otherwise, the valuation would already have been done, no?

No, no, we'll just put it -- whatever it is, it will be in the...

Annual report.

Annual report.

Okay. Okay. sir. Okay. I would like to urge you -- so this is an issue, which probably others have also mentioned. I would like to urge you to do something about the structure because the current structure is highly tax inefficient. So we are talking about INR 100 of kind of distributable income on which, at the company level, we are suffering now a 35% tax. So that leaves us with 65%. And then you pay out the rest of it all in the form of dividend and we suffer a hit of again about 35%, 30% plus, plus, okay. So that leaves only -- so out of the INR 100 of distributable income, when you apply 2 cuts of 35%, that leaves less than 50% with us. Now the majority shareholder, which is GIC might not be taking these similar hit because of their status as a foreign investor, they might be taking a hit of about probably 10% on the dividend under the double taxation treaty. So the minority shareholders are getting very badly hit because of this 35% on dividends. So kindly do something about the structure? Like others have mentioned, it's been going on for a long time, so that's the feedback we want you to convey to the majority shareholder, okay, because we don't have access to them directly. So kindly do keep this in mind.

Yes.

It's most tax inefficient, okay? And at management, you are committed to maximization of shareholder wealth, so -- which will not happen in case we have such inefficient structure. So kindly do convey that.

Yes.

Finally, one housekeeping. So this quarter, the -- while the occupancies dropped by about 1%, the revenue from operation has gone down by about 3% or thereabouts. So anything to read in this, okay, as to...

This is basically -- it has to do with the transition from Morgan Stanley to the new licensees. In some cases or in 1 case, there was a gap of approximately 2 months, and that would probably be the reason.

Okay. Okay. Fine. Fine. Okay. So does this mean we account for a rental income on an accrual basis? Or is it lease equalization, so how do we kind of address this? Do we apply Ind AS 116, okay, wherein we even out the income over the period of the lease? Or so what is the standard we follow for this?

Over the lock-in period of the license.

Okay. Okay, fine.

Yes, but I think your question was that -- yes, okay.

So I get it. So you're saying that the premises was vacant and not earning rent for a certain period of time. And thereafter you equalize the rent over the lease period, okay? Is that the correct understanding?

Over the lock-in period, not the entire lease period.

[Operator Instructions] We have our next question from the line of [ Harshit from Flair Investments ].

Yes, I just have 2 questions, sir. Sir, first of all, as we have requested for more than 12 quarters for any GIC's key person to attend any of the calls, but I don't think you have accepted our request, but no issues. We just have 2 questions. I request you to kindly reply on those. Please, sir. The first question is on the Nirlon House, sir. Has there been any development in Nirlon House?

Okay. And the second question?

Has the tenant approved, sir, Nirlon House?

Okay. No, we have nothing significant to say for Nirlon House at this point.

Okay. Okay, sir. So my next question is, sir, we are very clear that we don't want to do any expansion. Despite of this, we have declared a dividend of only INR 10, that is INR 1 -- the [indiscernible] is INR 11. As another shareholder has clearly mentioned, we will be having an excess cash of INR 300 crores by end of this year, what is the purpose of this extra cash, sir? Please, I request you to kindly answer these 2 questions, sir. GIC is also not coming in any of the con call or even in the AGM, no problem, sir, but I know they will be very busy, but I request you kindly -- you are the key person of GIC, I believe. And I request you to reply these questions, sir. A very humble request to you, sir.

Okay. So we will take into account surplus balances. And in future meetings, we will, of course, update you when the company decides on the dividend. But apart from that, there's nothing really significant to say with regards to usage of the cash. As and when there is a dividend we have been updating you in the past, and we will continue to do that.

Sir, but this kind of cash has never been generated sir.

Okay.

Yes, so how are we going to use this cash sir? It has never been generated in our history.

As and when there's anything significant to say in this regard, of course, we will be letting you know.

Sagar sir, we have been requesting you for just a key person of GIC from 12 quarters, you have not been able to do that. We are asking you one question, how will we be using this cash, you're not replying on that. How -- whom should we go and ask the question, sir?

Noted, noted.

Every time my questions have been noted, but never been answered. And you have noticed from past 4 or 5 con calls, I have not attended any of your con calls because only my questions are getting noted and not replied on.

Okay. Okay. When there's anything significant, we will, let you know.

So by when can I expect a call from you sir or a reply from you sir? From past 12 quarters, I have not got any reply from your end. So at least now can I ask you time, sir?

I can't really make a comment on that. Thank you.

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

Thank you. Thank you all for participating in this earnings con call. I hope we were able to answer your questions satisfactorily and, at the same time, offer insight into our business. If you have any further questions or would like to know more about the company, please reach out to our Investor Relations Manager at Valorem Advisors. Thank you once again on behalf of all of us here in this room and the management, Ashish and Manish as well. Thank you.

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