Nirlon Limited (500307) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Nirlon Limited Q1 FY '26 Earnings Conference Call. [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 first quarter of the financial year 2026. 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 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 of 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 V. 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. Good afternoon, everyone, and welcome to our earnings conference call to discuss the performance of the first quarter for the financial year 2026. Let me first take you through the financial performance of the company. For the first quarter, the company reported a total income of INR 167 crores, which grew by around 6% year-on-year. EBITDA was reported at INR 132 crores, representing around 8% growth year-on-year. EBITDA margins were about 78.93%. Profit after tax for the quarter stood at around INR 58 crores, which grew by 17% year-on-year, while PAT margin reported at 34.95%. On the operational front, the average occupancy rate for the company as a whole, comprising NKP and Nirlon House stood at 97.5% for the quarter. As of 30th June 2025, approximately 280,000 square feet was vacant at both NKP and Nirlon House combined, out of which approximately 269,000 square feet at NKP has been licensed or agreed to be licensed by Deutsche Bank, Barclays, MUFG, Citi and EY. Additionally, Accenture has licensed approximately 28,000 square feet at NKP and Citi has exercised its option to renew 196,000 square feet at NKP as well. The Board has, in its May 2025 meeting, proposed a final dividend of INR 11 per share for the financial year ending 2025 subject to approval by the shareholders in the forthcoming AGM. Lastly, before we move on to the Q&A session, we would also like to proactively inform you that there has been no further update regarding any restructuring plan. Hence, we would appreciate if the focus of the questions on this con call are about the operations and the financials of the quarter under review. We assure you that as and when any definitive decision is taken on these matters, we will inform our shareholders. With this, we conclude our opening remarks and open the floor to questions. Thank you.

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

As of 30th March 2025, that is the fiscal year-end, approximately 92,000 square foot was vacant at NKP and around 6,000 at Nirlon House. This figure went up to 2,71,000 at NKP and 9,000 at Nirlon House as of the end of Q1, that is 30th of June 2025. But in Q1 of this fiscal, for how long was this 2,80,000 square foot space vacant, sir?

Okay. So we just -- I'm just going to give you a summary of what it actually was. So was -- the majority of this space was the space that was being vacated by Morgan Stanley as we know, okay? So what we want to say is that the space vacated by Morgan Stanley has been licensed and/or committed with security deposits/LOI as on date. And whatever vacancy there was, was essentially interim -- was the interim period between the old licensee vacating Morgan Stanley and the new licensee/icensees coming in. So essentially, as of 30th June 2025, all the spaces vacated by Morgan Stanley have either been licensed, license has commenced and/or serious commitments with LOIs have been signed. So there's no real issue there. There is no space right now vacated by Morgan Stanley, which is vacant without an LOI/LNL.

Okay. Was there...

Vacated at different times. It was not a onetime thing or a one-shot thing. It was a periodic thing. Some spaces needed some work to be done. So there were larger gaps between the new licensee coming in and licensee going out. Some spaces, there were very small gaps of just a few days or weeks. So that's really what it is. But in a nutshell, there is no committed/unlicensed space vacated by Morgan Stanley.

Okay. But for the majority -- I understand the dates were staggered around the quarter, but I can assume that for the majority of the quarter, we lost 2,80,000 square foot rental income, right? For majority of Q1?

No.

Not for the majority.

Not for the majority of Q1. That's not a correct statement to say because a lot of -- actually, 180,000 square feet was vacated by Morgan Stanley, I think, around the 18th or 22nd of June -- 18th of June or sometime in the second half of June. So as I said, there are different dates for different areas being vacated by Morgan Stanley, but we cannot say that the majority of the space was -- of this 279,000 was vacant.

Okay. But all of it has been relicensed now and the rental income for the entire about 2.7 lakh square foot has commenced, right? It's going to show up in Q2, right?

Yes. I mean, basically, what has not been relicensed has been committed. However, the proposed license commencement dates have been finalized. In some cases, the gap is very, very small between Morgan Stanley vacating and the new licensees coming in. So I think Q2 will see some of these licenses and license commencement date and license fee commencement both.

Okay. And the new leases were being signed at what rental rate per square foot per month, including the license fee at 80% efficiency?

So essentially, we want to say that some of these new leases are, of course, being signed at -- with annual escalation at higher rates than what we had in the past, okay, especially the leases for the last building vacated by Morgan Stanley in the second half of June 2025. The rates were higher, of course, going in and -- going -- increasing as well.

How much, sir? Figure? How much?

As well as with annual escalation. So essentially, we can say that we signed at 180 plus -- plus -- at approx 180, 185 with annual escalation as well. Some things are in the 170s with annual escalation as well. And also, we should also look at the gap between the day that Morgan Stanley left and the day on which the license and license fee commencement begins. That's a very important gap as well. In some cases, as I said, the gap was very, very small, even less than a month, in some cases, even hardly 15 days, frankly. So we have to look at everything together. But basically, we have signed licenses in the region of 180 to 185 with annual escalation as well. So yes, it's not really anything uncommitted, unlicensed.

Right. I understand there's tremendous demand for NKP. So on a Y-o-Y basis, how much do you think is this 180 comparable to on a staggered basis? If you may just give me a ballpark percentage, that should be fine, sir.

I mean we don't want to comment specifically on this Y-o-Y because there are different commencement date, there are different rentries...

Right, I understand.

You can see -- if you follow the IR reports and if you follow the financials of the last -- few years and few quarters, you can see the growth in the license fees/license revenue, whatever you want to call it. And yes, it is what it is now. And it's been -- I don't know what you want to call the growth, whether it's a steady growth or a consistent growth. But I mean, the numbers are there, and you can really decide what -- how you want to classify this growth.

Okay. Because despite the occupancy rates going down from 99.8% in last fiscal Q1 to 97.5% this fiscal Q1, we've actually shown a Y-o-Y rental income growth of 4.5%. So is it fair if I say high single-digit annual growth in rental income? Should that be fair, sir?

Sorry, what was that?

Despite the occupancy rates going down from 99.8% in Q1 of last fiscal to 97.5% of Q1 of this fiscal, we've actually shown a Y-o-Y rental income growth, right? Despite the occupancies being down by about 2.5%, we've shown a rental income growth of around 2.5%. So can I assume that the 180 is more like high single-digit growth on a Y-o-Y basis? Is it fair? Because this is very complicated as the dates are staggered, like we cannot make apple-to-apple comparison, but would a high single-digit growth in rental income be a fair assumption for the future?

We don't want to comment on the specific number like this, which is extrapolated with various assumptions. But you can see the quarterly financial performance in the annual report, and it's fairly clear. You should also keep in mind that [ Visa ] is basically based on Ind AS, which is straight-lined. So the effect of the straight-lining is also captured in the quarterly numbers as well. But I think you should look at the next 2 quarters as well and whatever we are seeing now and whatever the answers you're looking for will -- hopefully, you'll see them in the numbers in the next -- in Q2 and Q3 as well.

Okay. So in Q2, we should have the entire relicense space in the results, right?

Well, I mean, you'll see it. It's exactly like we said that we are not really short of any [indiscernible].

And sir, since our MAT credit now has been completely exhausted, the final call on the tax regime to choose in the future, the old tax regime or the new tax regime, when will this call be taken? By the end of this fiscal? Or are we doing it any sooner?

So theoretically, one has up to September -- approximately September '26 to decide. But as you know, we are acutely aware of this issue. And once any decision is taken in this regard, we will communicate that to you. That's really what we want to say for now.

Okay. And sir, is our TDR monetizable in the future?

Sorry, what is that?

Our TDR. Of developmental rights, is our TDR monetizable in the future?

No.

No, it's not.

No.

Okay. Why so sir?