Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Nirlon Ltd (BOM:500307, Financial) reported a total income of INR158 crores for Q1 FY25, reflecting a year-on-year growth of approximately 6.6%.
- EBITDA for the quarter stood at approximately INR122 crores, representing a year-on-year growth of about 4%.
- The company's average occupancy rate for Nirlon Knowledge Park and Nirlon House combined was stable at 99.8%, with NKP remaining 100% occupied.
- Despite the vacating notices from Morgan Stanley, the company has seen consistent interest for relicensing the space.
- The company is actively exploring potential restructuring or other value-accretive measures to benefit shareholders.
Negative Points
- Profit after tax for the quarter was approximately INR50 crores, which remained stable year-on-year but declined by about 3% quarter-on-quarter.
- EBITDA margins saw a quarterly decline of about 1%, despite the year-on-year growth.
- The applicable tax rate increased to 34.94% from 29.12% due to the company's turnover exceeding INR400 crores in FY22-23.
- The company faces challenges in selling Nirlon House due to regulatory and ownership complexities.
- Investors expressed concerns over high taxes and requested quicker decisions on restructuring and more involvement from key stakeholders like GIC.
Q & A Highlights
Highlights of Nirlon Ltd (BOM:500307) Q1 FY25 Earnings Call
Q: As per the media report dated August 6, 2024, IDFC leased about 1.6 lakh square foot in a commercial tower in our vicinity at INR233 per square foot per month. Our leasing rate last year was about INR160 per square foot per month. With the leasing rate moving significantly upwards, don't our assets deserve a fair value revaluation?
A: (Kunal Sagar, Executive Vice Chairman): The rate mentioned for IDFC is a carpet area rate, whereas our rate is a chargeable area rate with an 80% efficiency. The two are not comparable. We will disclose fair value in our annual report as required, but it is not a market value.
Q: What is our current carpet area per square foot per month rate?
A: (Rahul Sagar, CEO and Executive Director): Our current licensing rate is just north of approximately INR160 per square foot per month on an 80% efficiency basis, translating to a carpet area rate of INR200-plus per square foot per month.
Q: There has been a decrease in interest cost this quarter. What is the current interest rate we are paying, and are we seeing further reductions?
A: (Kunal Sagar, Executive Vice Chairman): The current interest rate is 8.54%, which fluctuates slightly based on monthly tables.
Q: What is the status of our Nirlon House, which we are planning to sell?
A: (Kunal Sagar, Executive Vice Chairman): The sale is under discussion with various regulatory bodies due to the profile and nature of ownership. We are working on it, but please do not assume any specific timeline.
Q: We are paying high taxes, and the dividend is taxable at 35%. Can GIC accelerate their decisions on restructuring?
A: (Rahul Sagar, CEO and Executive Director): Noted. We understand the concern and will communicate this to GIC.
Q: Can we have a key person from GIC on the next call for more clarity?
A: (Kunal Sagar, Executive Vice Chairman): Noted. We will consider this request for future calls.
Q: Will we go for a fair value re-measurement while publishing this year's annual report?
A: (Kunal Sagar, Executive Vice Chairman): Yes, the fair value disclosure will be in our annual report as statutorily required, but it is not a market value.
Q: What is the percentage increase in leasing rates you have observed?
A: (Kunal Sagar, Executive Vice Chairman): It would be misleading to mention a specific percentage increase as it varies based on different assumptions and terms.
Q: Can you provide more details on the leasing rates and efficiency levels?
A: (Kunal Sagar, Executive Vice Chairman): The rate mentioned for IDFC is a carpet area rate, whereas our rate is a chargeable area rate with an 80% efficiency. The two are not comparable.
Q: What is the current status of discussions with regulatory bodies regarding Nirlon House?
A: (Kunal Sagar, Executive Vice Chairman): Discussions are ongoing, and we are working on obtaining the necessary approvals. We will keep you posted on any developments.
Q: Can you provide more details on the tax rate and its impact on the company?
A: (Rahul Sagar, CEO and Executive Director): The tax rate applicable from the current year is 34.94%, up from 29.12% earlier. The incremental costs are estimated to be negligible due to the max credit available to the company.
Q: What are the company's plans for potential restructuring or value accretive measures?
A: (Kunal Sagar, Executive Vice Chairman): Discussions and consultations with concerned parties continue. We aim to ensure that any potential options are carefully considered and genuinely value accretive to all shareholders.
Q: Can you provide more details on the company's financial performance for the first quarter?
A: (Kunal Sagar, Executive Vice Chairman): The company reported a total income of INR158 crores, a 6.6% year-on-year growth. EBITDA is approximately INR122 crores, with a 4% year-on-year growth. Profit after tax stood at approximately INR50 crores, stable year-on-year.
Q: What is the average occupancy rate for the company?
A: (Kunal Sagar, Executive Vice Chairman): The average occupancy rate for Nirlon Knowledge Park and Nirlon House combined was stable at 99.8% for the first quarter, with NKP remaining 100% occupied.
Q: What is the company's plan regarding the space currently occupied by Morgan Stanley?
A: (Kunal Sagar, Executive Vice Chairman): Morgan Stanley has given notices to vacate approximately 13,000 square feet in Q3 FY25 and approximately 122,000 square feet in Q4 FY25. The company has seen consistent interest for relicensing the space.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
