Nirlon Limited Q4 FY24 Earnings Conference
Summary of Nirlon Limited Q4 FY24 Earnings Conference Call (May 16, 2024)
Key Participants:
Rahul V. Sagar – Chief Executive Officer & Executive Director
Kunal V. Sagar – Director, Nirlon Management Services Pvt. Ltd.
Manish B. Parikh – Chief Financial Officer and Vice President (Finance)
Jasmin K. Bhavsar – Company Secretary, Vice President (Legal) & Compliance Officer
Ashish Bharadia – Vice President (Business Development and Investor Relations)
Financial Highlights:
Quarterly Performance:
Total Income: ₹154 crores, 4% YoY growth, and 0.7% QoQ growth.
EBITDA: ₹122 crores, 5% YoY growth, and 1.4% QoQ growth. EBITDA margin stood at 79.47%.
Profit After Tax (PAT): ₹51 crores, 3.3% YoY growth, but a 1.7% decline QoQ. PAT margin was approximately 33%.
Annual Performance:
Total Income: ₹607 crores, 5.5% YoY growth.
EBITDA: ₹481 crores, 4.4% YoY growth. EBITDA margin was 79.26%.
PAT: ₹206 crores, 30% YoY growth. PAT margin was approximately 34%.
Operational Highlights:
Occupancy:
Overall occupancy for Nirlon Knowledge Park (NKP) and Nirlon House was stable at 99.8%.
NKP was 100% occupied as of March 31, 2024.
Deutsche has agreed to take additional space, accommodating approximately 200 to 250 seats.
Key Discussions and Updates:
Restructuring and Tax Regime:
The company decided to stay with the old tax regime due to accumulated MAT credit, which offers more financial benefits than moving to the new tax regime.
Discussions about potential restructuring or value-accretive measures are ongoing, with the company committed to communicating decisions promptly.
Dividend:
Proposed a final dividend of ₹11.00 per share for FY24, in addition to an interim dividend of ₹15 per share paid in Q4 FY24.
Nirlon House:
Vacancy and Licensing: Some space is vacant, but major portions are licensed out.
Complex Ownership: Ongoing efforts to manage and find solutions for the multi-owner property. Updates will be provided when significant progress is made.
Future Growth and Development:
No significant CAPEX or asset additions planned in the near term.
Growth expected from increased license fees and potential new licensees.
Focus on maintaining asset quality through repairs, maintenance, and CAPEX.
Debt Repayment:
The company has a 5-year moratorium on debt repayment, currently paying interest only. Principal repayment will start after three more years with 25% due between years 6 and 10, and a 75% bullet payment at the end of the 10th year.
Fair Valuation of Assets:
Valuation as of March 31, 2024, was approximately ₹4,500 crores, determined by an approved valuer as per INDAS standards. There were discussions about market valuation and its relevance to protecting minority shareholders’ interests.
Promoter Shareholding:
Some promoter shares were sold for personal reasons, with no impact on the company’s performance or outlook. Management emphasized that no further block sales by promoters are currently planned.
Questions from Investors:
Share Sales and GIC's Involvement: Clarifications were provided on recent share sales by promoters and GIC’s involvement. No decision has been made regarding delisting or restructuring into a REIT.
Debt and Interest Rates: The interest rate on debt is linked to T-bills, and repayment terms were discussed.
Dividend Policy: The company aims to maintain a consistent and sustainable dividend policy, linking it to profitability rather than fluctuating cash flows.
CAPEX and Maintenance: Ongoing focus on maintaining and enhancing the quality of the existing assets.
Closing Remarks:
The management thanked all participants for their interest and reiterated their commitment to maintaining transparent communication and focusing on sustainable growth and asset management. The call concluded with an assurance that significant updates would be communicated promptly as they occur.
Growth Plans Discussed in Nirlon Limited Q4 FY24 Earnings Conference Call
Current Occupancy and Leasing:
High Occupancy Rates: The company reported high occupancy rates, with Nirlon Knowledge Park (NKP) being 100% occupied and overall occupancy stable at 99.8%.
New Leasing Agreements: Deutsche Bank agreed to take additional space at NKP, accommodating approximately 200 to 250 seats.
Revenue Growth Drivers:
Increased License Fees: Growth in revenue is expected to be driven by contractual escalations in license fees and securing new tenants at higher rates.
New Licensees: The company is focusing on attracting new, high-quality tenants, which could lead to increased license fees and better terms.
Operational Efficiency and Maintenance:
Asset Quality: Emphasis on maintaining and enhancing the quality of assets through repairs, maintenance, and CAPEX to ensure they remain attractive to high-grade tenants.
Upgrading Facilities: Continuous improvements and upgrades to facilities in NKP and the surrounding area to maintain a competitive edge and justify higher rental rates.
Long-term Growth and Expansion:
No Immediate Plans for New CAPEX: The company stated that there are no significant CAPEX plans or asset additions in the near term. The current phase is one of consolidation following the completion of Phase-5 in June 2021.
Potential for Future Development: While there are no immediate plans, the company is open to exploring future opportunities for growth, including potential redevelopment or expansion if market conditions are favorable.
Revenue Projections and Estimates:
Cautious Outlook: The management did not provide specific revenue projections for FY25 and beyond, citing the need to wait for contractual changes and new leasing agreements to materialize.
Potential Revenue Increases: Based on current trends and lease escalations, the company expects revenue to increase, but exact figures were not disclosed.
Ongoing Strategic Initiatives:
Restructuring Discussions: The company is engaged in discussions regarding potential restructuring or value-accretive measures, though no specific decisions or timelines were provided.
Stakeholder Communication: The management emphasized their commitment to promptly communicating any significant decisions related to restructuring or growth plans to shareholders.
Dividend Strategy:
Consistent Dividend Policy: The company aims to maintain a consistent and sustainable dividend policy, linking it to profitability rather than fluctuating cash flows.
Recent Dividend Announcements: Proposed a final dividend of ₹11.00 per share for FY24, in addition to an interim dividend of ₹15 per share paid in Q4 FY24.
Summary
Nirlon Limited's growth strategy for the near term focuses on maximizing revenue from its existing assets through increased license fees and attracting new tenants. The company is committed to maintaining high occupancy rates and ensuring the quality of its assets through ongoing maintenance and upgrades. While there are no immediate plans for new capital expenditures or asset additions, the company remains open to exploring future opportunities for growth. Additionally, ongoing discussions about potential restructuring aim to enhance shareholder value. The company maintains a cautious yet optimistic outlook for revenue growth, driven by contractual escalations and new leasing agreements.