Nirlon Limited (500307) Q3 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 and 9 months FY '26 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.

Thank you. 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 third quarter and 9 months 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 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 V. Sagar to start with his opening remarks, followed by financial and operational highlights of the company. Thank you, and over to you, sir.

Good afternoon, everyone, and welcome to our earnings conference call to discuss the performance of the third quarter and 9 months of the financial year 2026. Now let me first take you through the financial performance of the company. For the third quarter, the company reported a total income of INR 173 crores, which grew by around 6% year-on-year. The EBITDA was reported at INR 135 crores, which grew by 1% year-on-year and EBITDA margin stood at 77.93%. Profit after tax for the quarter was INR 69 crores with PAT margins at 40.04%. For the first 9 months of the financial year, the company reported a total income of INR 509 crores, which grew by around 5% year-on-year. EBITDA was reported at INR 400 crores. representing around 3.5% growth year-on-year. EBITDA margins were about 78.53%. Profit after tax stood at INR 275 crores and PAT margin stood at 54.1%. On the operational front, the average occupancy rate for the company as a whole, comprising NKP and Nirlon House stood at 99.7% for the quarter. As on 30th December 2025, approximately 7,800 square feet area was vacant at both NKP and Nirlon House. During the quarter, approximately 25,000 square feet has been renewed by Citi. Please note that the company has moved to the new tax regime for FY '26 onwards from Q2 FY '26 onwards. Accordingly, tax expense is based on the new concessional rate from Q2 FY '26 onwards. Lastly, the Board has declared an interim dividend of INR 15, 150% per share for FY '26. We understand that the company has a sufficient cash balance available and if any change in the dividend policy amount will be decided after the end of the financial year in the final dividend. And before we move on to the Q&A session, we would like also to proactively inform you that there has been no further update regarding any restructuring plans. Hence, we would appreciate it if the focus of the questions on this conference 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] The first question comes from the line of [ Amoksh ] an individual investor.

So, my question was that given that only 8,000 square feet remains vacant, how does the company plan on increasing...

Sorry to interrupt Amoksh, could you please use your handset? And there is a lot of background noise.

So, my question was that given that only 8,000 square feet remains vacant across NKP and Nirlon House, how does the company plan on increasing the rental...

Amoksh, could you repeat your question?

Yes sir. My question was given that only 8,000 square feet remains vacant across NKP and Nirlon House, how does the company plan on increasing the rental income going forward?

Okay. Amoksh, thank you. We can now -- we understood the question. We could hear you better the second time around. So basically, as we have said in the past, since we have practically 100% occupancy in NKP, which is the primary asset of Nirlon, the increase in income is primarily going to come through contracted escalations. And as and when there are vacancies, we have the potential opportunities for higher -- to relicense at higher rates, but that is potential. But basically, the increase in income will come through contracted escalations in the license agreements.

Amoksh, does that answer your question? Mr. Amoksh, I would request you to please join the queue again. We can't hear you. The next question comes from the line of Ashok Jain from Ayush Capital.

Congratulations on a good quarterly set of numbers. Sir, my question is, the recent union budget has reduced buyback tax on corporate promoters, whereas in complete contrast, it has increased it for individual promoters. Now given that you are an individual promoter with a small holding, are you eligible for reclassifying yourself into the public category of shareholders from the promoter category that you're currently in?

Yes. Okay. Ashok, the company will continue to evaluate this in more detail with our advisers and then come to a decision. At present, no such decision has been taken. If there's anything significant or -- as always, if there's anything significant in this area, we'll keep you well informed.

But Rahul, sir, since you yourself are the shareholder, are you eligible or not? I was not asking whether you're good or not eventually, but are you eligible to reclassify yourself? Hello? Am I audible, sir?

Let me just understand this in more detail and come back to you. I can come back to you in the next meeting also. Let me just understand this in more detail. You're asking whether I'm eligible -- on a personal level, I'm eligible.

Yes, yes. Personally, if you're eligible or not.

Yes. Okay. I've not checked anything personally, but I'll check in due course. Thank you.

Okay. All right. I'll move on to the next question, sir. The extra cash on the balance sheet is usually earmarked for dividend distribution as per Nirlon's policy. However, the interim dividend was constant, and that cash was not even used to repay our existing loan. So, do we intend to distribute the extra cash over and above the regular dividend that is going to hit us sometime in the next couple of months?

Yes. So, we don't want to speculate on exactly how much dividend we are going to pay or whether we are going to pay more. But this, as you know, for '25, '26 is an interim dividend. And of course, there will be a final dividend in September '26 as there has been for the past few years. And yes, so basically, we'd like to say that this is not the final opportunity. If there is an opportunity for further distribution based on the cash balances at that point in time, of course, it's a very valid point. It's a very valid point that you raised. It's a valid point. It's a valid question. But as you know, this is not the final dividend for the year. This is the interim dividend. And let's just see how we close out the year and things going forward. And of course, we have an opportunity to do the final dividend in approximately 6 to 7 months' time once more.

Okay. Okay. So, we are not wrong in affording to be optimistic as such?

I mean we all like to be optimistic. Everybody likes to be optimistic. That's really up to you. But thank you for your kind words.

The next question comes from the line of Satinder Singh with Eon Infotech Limited.

Congratulations for a very fine quarter. So, my questions are around, one, is the -- while I understand there's hardly any area available for leasing, but like other REITs have indicated that Bombay has seen lot of traction and the rentals have gone up maybe double digit in the last 6 months or so. So, have we seen that kind of a traction in our latest lease that we did, okay, or renewal that we did. So just a flavor on the rental rates. And connected to that, one of the REITs has talked of trying to reduce now their efficiency from 78% down to 70%. We are at 80%. So, do you see that as a lever going forward? And if that exists, when does it come up? Does it come up in FY '28 when we have some renewals coming up or whatever expiries coming up?

Okay. So, thank you. So, firstly, we -- on the first question, we'd like to say that as you can see also from the numbers and from the investor presentation and the quarterly presentations over the past few quarters, the space vacated by Morgan Stanley has given the company an opportunity to relicense some of the space. As you may have seen, the general trend is for rents increasing to some extent, consistent increases as well as annual escalations, as you can probably see in majority of the cases. With regard to efficiency, it's not something that we put a lot of importance on because at the end of the day, it's very easy to do a calculation on carpet area, et cetera, et cetera. So reductions in efficiency and increases in efficiency, of course, various companies and various REITs, et cetera, can have different strategies, but it's not -- we don't really see that as -- I mean, it's not something very significant, which we want to -- which we feel is -- can be a significant catalyst for increase or decrease of license fees because carpet area calculations, frankly, are very easy to do. And all the licensees whom we are dealing with are equally experienced and very seasoned licensees in various office IT/commercial spaces over India for the past 10 and 20 years. So, they are very experienced as well. So, yes, thank you.

Yes. Okay. And on the -- you've said -- so I just wanted to understand the contracts typically. So, when you say renewal options, so clients have renewal options, let's say, every 3 years or 5 years. Is the rent reset at that time to the market rent or is that also already enshrined in the original contract, the percentage of increase?

No, that differs from contract to contract. What I meant was, to some extent, say, for example, when Morgan Stanley left, we had some opportunity to increase license fees in some of those spaces when there is a final renewal with no in-built escalations, et cetera, et cetera, we have the opportunity to increase license fees or decrease license fees as the case may be. So, in general, it's very specific, it's case to case. And yes, it's -- what we have done though to some extent is that we are trying to, of course, incorporate annual escalations wherever possible, and this has been successful to some extent in some of the new licenses we have signed.

Yes. No, exits, Mr. Sagar, I understand. At the time of exit, when you have a new tenant coming in, obviously, okay, the rents will get reset to the market. But for, let's say, a 9-year contract with a renewal every 3 years. So, typically -- I understand, again, it might be contract to contract. But typically, after the, let's say, first, let's say, 3 years, okay, and there's a renewal option, do the rents typically reset to market? Or is the increase predetermined and enshrined in the original contract?

As you know, the entire period is contracted in the agreement -- the entire rentals are contracted in the agreement and the ability to reset your rentals, whether up or down, whether you're resetting to market, whether it's higher or lower, realistically can happen only when there is a pure vacancy. Within the parameters of the contract, it's not really possible to reset anything to market, whether it's an increase or a decrease.

Okay. Fine. I get it. Okay. And on the finance cost, so when we look at the cost for this quarter, the all-in cost works out to almost about 9.7%. So, if we look at the INR 1,150 crores loan and the total finance cost annualized this works out to about 9.7%. Our understanding is that the -- actually the borrowing is at 90-day T-bill plus 233 bps, which works out about 7.7%. So, how can we reconcile this, please?

Actually, this is the Ind-AS impact. We have to discount the security deposit at its present value. So that cost goes as a finance cost in the P&L. So that's why it shows an increase.

Okay. But otherwise, the cost to the -- what we pay to the lender is 90-day T-bill plus 233. Is that correct?

No, it's 1 month T-bill -- 30 days T-bill plus 233.

Okay. And how often is it reset, please?

Every month.

The next question comes from the line of Amit Agicha with H.G. Hawa.

Congratulations for a good set of numbers. Sir, my question was like connected to like the -- company remain to remain a single asset platform or scale into multi-city IT park operator. Like is there any possibility of vertical expansion like redevelopment potential of NKP?

Is there any possibility of vertical...

Vertical expansion of the NKP.

You mean on the existing structures?

Yes, yes.

On the physical structures, you mean?

As well as the land which we have.

Yes. Okay. So, I think this point we have discussed in the past, people have asked and there is no -- at this point in time, there is no proposal or plan for any significant further increase in volume. Of course, if that happens, we will let you know in due course. But at this point in time, there is nothing -- no significant plan for any increase in volume in NKP.

And neither sir -- I mean any other city are you targeting?

Sorry?

Any other city where you want to expand to.

Not right now, there's no significant plan or no significant proposal that we are considering at this point.

And sir, can you put some color on like what is the like NKP rental compared to BKC or let's say Powai?

Well, I mean, it's -- you've seen in the numbers what really the approximate rentals are, what the average license fees are, what the approximate average license fees are. And we don't really want to compare to any other micro markets. Of course, BKP is a completely different micro market with regard to the profile of the space, the volume of the space, et cetera, et cetera, location. Powai will -- could possibly be more similar -- could be a more similar profile to NKP, but we are not exactly -- we don't really want to comment whether somebody else's license fees are higher or lower than ours. Our endeavor is always to try to get the best possible commercial terms with the best possible licensees in terms of creditworthiness profile, et cetera, et cetera. So, it's a little bit of -- it's not such a straightforward comparison, and we don't really want to comment on comparatives with other micro markets and other commercial parks, et cetera, because it's not just a comparison of black and white of a particular -- of a single number also. It's a variety of factors, as you will appreciate. Thank you.

The next question comes from the line of Laksh Jain, an individual investor.

My first question, sir. Sir, what is our current cash and bank balance, sir?

Is approximately INR 325 crores.

I missed that sir. How much sir.

Sorry, INR 325 crores.

INR 325 crores. This is as on December 31.

As on 31st January.

31st January. Okay. Despite having such high balance, we decided to distribute only INR 135 crores for -- as interim dividend. Is there some expansion plans we are planning, sir, with the remaining excess cash we have?

As we said in the past, nothing significant to say at this point in time. This is the interim dividend for '25, '26, as you know, and there is -- over the past 2 years, you've seen there's an interim dividend and a final dividend as well. So yes, this is the interim dividend for now. Thank you.

Okay. So, sir, we can expect a special dividend, sir, in the near future considering there is no expansion plan?

No, no, I'm not saying that. No, no, no, I'm absolutely not -- I'm absolutely not saying that. I'm saying that if you see over the past few years, there has been an interim dividend and a final dividend. So, this is the interim dividend, which is consistent with the previous years as well. And we will take a call with regards to the performance of the company and the numbers, et cetera, et cetera, at the point in time when we have to pay the final dividend. But...

Yes, that is there, sir. Why I ask this question because historically, we were distributing more than our EPS. Last year, it was INR 24, we distributed INR 26. Before that it was INR 22, we distributed INR 26. So, this time, even if you take a conservative basis, despite of having higher EPS, higher cash, it comes to -- on a conservative basis, is coming INR 34, sir. So that is why this question raised sir. Sir, we distributed -- historically, we have been distributing more than our EPS as dividend. And this time, despite us having a lot of -- tremendously higher cash, we stick to our old [indiscernible].

This is -- as you know, this is the interim dividend, and we look at the performance and the numbers at the end of the year at that point in time, and we will take a decision at that point in time. Your point is well noted. The increase in the EPS is also significantly due to the change into the new tax regime as well from Q2 2025-'26, as you are well aware.

My next question sir. Sir is it fair to assume, sir, that we won't see any increase in rental income in FY '27 as there is -- renewals are negligible. So, market rate renewal will also be negligible?

Well, I mean, whatever is contracted -- we are very confident that whatever is contracted in our license agreement is going to happen and should reflect in the numbers. As of this point, there are no significant potential vacancies to report. As and when there are potential vacancies to report, let's see what happens. So, for now, we continue to go as per the license agreement that we have with all of our licensees for approximately 99% to 100% of NKP.

Okay. My next question, sir. Sir, what is the gap between our rates and the market rates at present on an average sir? How much room we have, sir?

How much...?

How much is the gap? How much more room do we have to like reach at least near above the market rates?

In terms of license fees?

No, rental per square feet, sir.

Yes. In terms of license fees per square feet, we can't comment specifically how much gap we have to reach the market, whether we are above or whether we are -- this is specifically, we feel that we have good consistent A-grade licensees with consistent license fees coming in, and we want to progress -- we will progress as per the existing license agreements. We can't really make a comment as to whether there is a gap or no gap compared to the market because every micro market has a different set of parameters and license fees, of course, are not just a black and white number. There are various other significant commercial points, which one has to take into consideration as well as the credit rating, et cetera, of the licensee. So yes, we are just doing what we feel is best for NKP, and we don't want to comment on any perceived gap or any other -- we don't want to comment on any perceived gap with the market. Thank you.

Got it. Okay, sir. The next question, sir. Now we shifted to the new tax regime. Is my reading right, if I say that REIT option is completely ruled out as we no longer would enjoy tax efficiency, which an SPV would enjoy being in an old regime, sir?

So, Mr. Jain, there is two parts to it. One is, there can be SPV under a new tax regime as part of the REIT. So, there is no regulatory requirement where it says it can't be done. Second, we agree that the benefits in a REIT are largely when companies are under the old tax regime.

Okay. So, a possibility is still there, but the purpose will not be valid, like it won't be reasonable for someone to convert it because being in a new tax regime, the whole purpose of the REIT gets disturbed.

Point taken, point taken.

All right sir. Sir my last question, sir. Sir, now being -- buyback being more lucrative after the budget changes, can we -- thinking from a minority shareholder point of view as well, can we expect buybacks to also be in our radar, sir, apart from dividend? Because dividend gets taxed at 35% at minority hands, sir.

So, Mr. Jain will evaluate this in more detail. Primarily, as of now, what we understand is there's a condition of book value debt-to-equity to be less than 2:1, which the company does not need. But we are evaluating this with our advisers. And if such things are there, we'll -- and anything we'll keep everyone updated.

That was helpful, sir. And my last question, sir what was the previous Citi rental rate? I mean Citibank which got renewed, what was the previous rate and the new rate, sir? For 25,000 square feet.

So, I think the new rentals, you can -- possibly you can see on all these various CRE metrics, et cetera, et cetera, it's possibly out in the public domain. There has been a significant increase in the rate per square foot. There has been some increase in the rate per square foot, of course, as well as the annual escalation -- as well as annual escalation. So as we said earlier, it's going in what we think is the right direction. If you take all the important commercial parameters.

No, sir. What I asked was what was the change in the rental rate per square feet? Like what was it before, and what is the new renewal rate?

Yes. So that's exactly what we're saying. As we said that I don't want to speak of specific numbers on this call as always, but there is a significant increase. It is also one must look at the other parameters such as annual escalations, et cetera, et cetera. You can really find all these details very easily. If you look at what the new numbers are, it's north of -- approximately north of 185 and the previous numbers -- the previous rentals for this particular space was -- I don't have that in front of me, but from what we can, rental rate was not in that micro range at all. So you can say, if you like, you can interpret it to say that there is some increase, but I don't want to discuss specific numbers in out of context. But yes, there is -- it is north of 185 with annual escalation, et cetera. So, as we said, we feel this is -- there is some increase, yes.

So this north of 185 is the new rate you're saying?

Sorry?

This north of 185 which you're telling, sir, that is you're talking about the new renewal rate?

Yes, yes, yes.

[Operator Instructions] The next question comes from the line of Satinder Singh with Eon Infotech Limited.

So, any update on Nirlon House, any progress on that, please?

Yes. So, that's a fair question. Thank you. Look, I mean, we are not going to tell you unless there's something very significant to say, okay? If there's something very significant, we will definitely keep you informed. But as you know and as we've said in the past, it's a strata-owned building. There are multiple owners. The volume is not so large. So, it has its own complexities and challenges. If there's something very significant, we will tell you.

Okay. And just one final suggestion, okay? It's obviously for consideration of the Board. The suggestion is, like you did mention one possible hurdle regarding buyback. So, the only suggestion it's obviously for consideration and the scheme at the Board level is please do consider buyback because it's; one, more tax efficient; second, it will help support the share price, which we feel is undervalued for the intrinsic value. So, it can serve both the purposes, okay? So please do consider the possibility of that when you plan your final dividend payout on [indiscernible].

Thank you for your suggestion. Thank you for your suggestion.

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

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 insights 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 managers at Valorem Advisors. Thank you. Thank you once again for your interest and your questions. It's greatly appreciated, and thank you very much, everybody. Thank you.

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