EFC(I) Limited Q2FY25 Concall Summary:

Financial Performance:

• Consolidated revenue reached INR 171.08 crore, revenue grew by 63% in Q2 FY25 and 77% in H1 FY25 YoY.
• H1 FY25: Consolidated revenue reached INR 276.36 crore, EBITDA around INR 133.59 crore, and PAT of INR 52.33 crore.
• Consolidated net profit jumped by 131% in Q2 FY25 and 267% in H1 FY25 YoY.
• Consolidated EBITDA of around INR 84 crore, and PAT of INR 36.56 crore.
• Cash flow from operations stood at INR 150 crores for H1FY25, 4x from H1FY24.
• EPS for Q2FY25 is 7.34 not 14.69 which management reported in their exchange filing.

Operational Performance:

• Rental Segment: Generated approximately INR 89.2 crore in revenue, constituting 54% of total revenue.
• Design and Build (D&B) Segment: Contributed INR 77.24 crore, amounting to 46% of total revenue. Secured an order book exceeding INR 70 crore, including a large contract with TCS worthover Rs.18 crore.
• Rental Business: Operates on a ~30% EBITDA margin at the center level and ~25% at the corporate level.
• D&B: EBITDA margin averages 17-18%, with potential for higher margins (24-25%) on projects with higher complexity.
• In the Design and Build Segment total team size of 40 peoples, includes your architects that includes your designers and also includes your sales teams part of it.
• Furniture Manufacturing: Successfully completed the first order after commercial production commenced in September 2024. The order book looks promising, with a revenue target of INR 60-75 crore for the fiscal year.
• Managed Office Business: Increased leasehold area by ~125,000 sq. ft., adding 3,600 seats across four existing city centers.
• Total Footprint: 61 operational sites across eight Indian cities, covering 2.4 million sq ft, with a total seat capacity exceeding 50,000.
• Furniture business started its production on 28th September so actual number will flow from Q3 onwards.
• Rental Business: Receivable cycle is generally less than 30 days.
• Design and Build: Receivable cycle averages around 90 days, due to the project-based nature of the business.
• Furniture Manufacturing: Receivable cycle is expected to be between 60-90 days, with a focus on institutional clients.
• Management plans to share a detailed breakdown of receivables by segment in future financial updates.
• Management is committed to expand their seat capacity to 65,000 – 70,000 by end of this FY.
• Total Billed seats are 42183, up by 9% QoQ.

Key Takeaway from Concall:

• Usually Q1 has lower margin as compared to other 3 quarters, as seats are under development and discussion with landlords usually takes place in Q1. So once the seats get occupied and billing starts the benefits start from coming quarters. This cycle goes for every quarter but usually happens in Q1.

• Design and Build Division has higher receivables as it takes time from the day order is received and design build and approved. Also clients took some amount of money as retention money, typically what happens in EPC business. Roughly receivable periods go from 0 to 180 days.
• Since management is focusing on contract value of more than 25,000 square feet where organised clients are more, that’s why cash flow is in a better position than earlier.
• “All the assets that will be acquired that the SMREIT they will be independent and they will not be having any direct link to the assets that our company owns” EFCIL will book only the management fees under REIT business.
• One question is raised on the fixed rental and managed aggregation model; for which I’m attaching concall snippet as management has explained in a very simple way.

• Management is right on their part because if we see mgmt is providing fixed income to landlord, though downside is protected, mgmt is also not sharing revenue% with landlord, which can also impact margin in the future because everyone knows that COWORKING will exist here taking 5-10 years time frame, so why not go with some other model? And everyone is also aware of the WeWork scene so no one will commit the same mistake in the future.
• Going forward you can certainly at least expect a full revenue for 50,000 seats and obviously partial revenue for the new 15,000 to 20,000 seats which are going to be operational ahead.
• Management expects to maintain an annualized EBITDA margin around 30% at the center level and 25% at the corporate level. PAT margin of around 15-16%.
• In this year furniture will contribute not more than 15%, however in future the company will keep equal revenue for all the three divisions 33% each.
• Average rate per seats still remains around INR 6250 but with the new seats getting added more and more and they are getting sold at a higher rate of INR 6500 upwards as it is already evidenced by companies entering into larger office spaces.

Management on larger space; There are obviously benefits. In acquiring the larger space is the economy of scale that we are able to achieve. We are yes acquiring or rather acquiring these old rights over the larger area.

• Again a question is raised on competition in the industry, in which management admitted that competition will remain as always which exists in every industry but presence of PAN India players is still not visible in this space, regional players are more in this space.
• One very interesting question which was on valuation of INR 545 crore for whitehill, I know it’s a very absurd valuation and the fact the merchant banker and Registered valuer has already furnished the report so there is no question to be asked now. Why am I saying this? I’m doing my CA articleship in valuation domain and I know how we arrive at the final value, all the inputs are furnished by management and they provide the final value to be arrived at and it too depends on the future estimates of the management. There is no point to escalate this point further.

Not reflecting yet.
Can anyone comment on the future prospects of Rossell India post demerger