Nirlon — Q4 FY25 earnings call

Call held 21 May 2025

Management summary

Nirlon Limited reported a steady performance for Q4 and full-year FY25, with modest single-digit growth in income, EBITDA, and PAT. Operational metrics remained strong with a high occupancy rate of 98.2%. Key discussions revolved around the ongoing tax inefficiency due to the current corporate structure, the utilization of growing cash reserves, and the status of large lease renewals, with management largely deferring specific answers on restructuring and cash deployment.

Highlights

  • Q4 FY25 Total Income: Rs. 161 crores, up 4% YoY.

  • Q4 FY25 EBITDA: Rs. 126 crores, up 2% YoY, with margins at 78.22%.

  • Q4 FY25 PAT: Rs. 54 crores, up 5% YoY, with margins at 33.29%.

  • FY25 Total Income: approximately Rs. 645 crores, up 6% YoY.

  • FY25 EBITDA: Rs. 512 crores, up 6% YoY, with margins at 79.33%.

  • FY25 PAT: Rs. 218 crores, up 6% YoY, with margins at 33.83%.

  • Average occupancy rate for Q4 FY25 was 98.2%.

  • Approximately 177,000 sq ft due for renewal on June 18, with discussions highly advanced.

Concerns

  • Tax Inefficiency due to current corporate structure

Key financials

3 periods

Headline

  • Cash & Cash Equivalents (31-3-2025)
    ₹164 Cr
  • Capital Work-in-Progress (31-3-2025)
    ₹9 Cr

Q4 FY25

  • Total Income
    ₹161 Cr
    YoY +4%
  • EBITDA
    ₹126 Cr
    YoY +2%
  • EBITDA Margin
    78.2%
  • PAT
    ₹54 Cr
    YoY +5%
  • PAT Margin
    33.3%
  • Occupancy Rate
    98.2%

FY25

  • Total Income
    ₹645 Cr
    YoY +6%
  • EBITDA
    ₹512 Cr
    YoY +6%
  • EBITDA Margin
    79.3%
  • PAT
    ₹218 Cr
    YoY +6%
  • PAT Margin
    33.8%

What they filed

Q1 FY27: revenue up 3.1%, net profit up 19.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue160 161 158 163 165 +3%170 +6%171 +8%168 +3%
EBITDA129 131 123 128 129 +0%132 +1%132 +7%129 +1%
Net profit56 58 54 58 148 +164%69 +19%71 +31%69 +19%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Guidance & targets

Tax

  • Tax Regime Decision for FY26 Tax · FY26 · Medium confidence To be decided before filing of returns
    For FY26, we have to decide before the time of filing of the returns.

    — Ashish Bharadia

Capital Allocation

  • Use of surplus cash Capital Allocation · Future meetings · Low confidence To be updated when company decides on dividend
    We will take into account certain balances and in future meetings we will, of course, update you when the Company decides on the dividend. But apart from that, there is nothing really significant to say with regards to uses of the surplus cash.

    — Rahul Sagar

Operations

  • Lease Renewals for 2025-26 Operations · 2025-26 · High confidence 136,000 sq ft finalized, 147,000 sq ft under advance discussions
    Of the approximately 316,000 square feet coming up for renewals in 2025-26, we have already finalized terms for re-licensing 136,000 square feet and the balance approximately 147,000 square feet is under advance discussions.

    — Rahul Sagar

  • Transition period for 177,000 sq ft vacancy Operations · Around June 18 · Medium confidence Not extensively long, fairly efficient
    Approximately 177,000 is coming due on the 18th of June, we can say that the time period, it is not very significant, Mr. Jain. Some part of that space has been signed, some part is proposed to be signed, but discussions are highly advanced, but what we can say is that the immediate transition, the periods are not extensively long, it is fairly efficient in that regard.

    — Rahul Sagar

Risks & concerns

  • Tax Inefficiency due to current corporate structure

    high

    Analysts highlighted that the current structure leads to significant tax leakage (double 35% cuts), severely impacting minority shareholder returns, while the majority shareholder (GIC) might be less affected. Management noted the points but provided no concrete plan or timeline for change.

    Analyst acknowledged

  • Suboptimal Capital Allocation / Growing Cash Reserves

    medium

    The company is accumulating substantial cash (Rs. 164 crores, projected Rs. 300 crores) without clear plans for its use beyond a standard dividend, leading to concerns about idle capital and missed opportunities for value creation. Management stated the cash is in FDs earning interest but has no proposal to repay loans.

    Analyst not addressed

  • Lack of Transparency and Engagement from Majority Shareholder (GIC)

    medium

    Analysts repeatedly requested the presence of a GIC key person on calls to address strategic issues, but this has not happened for 12 quarters, indicating a potential disconnect between majority and minority shareholder interests.

    Analyst deflected

Areas of evasion (5)

  • Corporate restructuring status
  • GIC's involvement in calls
  • Specific plans for excess cash utilization
  • Timeline for addressing analyst concerns
  • Nirlon House development

Q&A highlights

0 direct, 3 evasive
Status of corporate restructuring and tax inefficiency Evasive
Basically, we would like to clearly state that at this point, we have nothing further to really add, nothing significant to say which we can tell you at this point.

This is a recurring and highly frustrating issue for minority shareholders, directly impacting their returns due to high tax leakage, and management consistently defers any concrete updates.

Asked by Arun Malhotra

Utilization of growing cash reserves and dividend policy Evasive
But apart from that, there is nothing really significant to say with regards to uses of the surplus cash.

The company is accumulating significant cash (Rs. 164 crores, projected Rs. 300 crores), but management provides no clear plan for its deployment beyond a standard dividend, leading to concerns about capital allocation efficiency.

Asked by Dilip Jain

Absence of GIC representatives in earnings calls Evasive
Sagar sir, we have been requesting you for just the key person of GIC from 12 quarters. You have not been able to do that.

GIC is the majority shareholder, and their absence from calls despite repeated requests from minority shareholders highlights a lack of direct engagement and accountability on strategic issues like restructuring and cash use.

Asked by Harshit

2 min read 6 chapters

Detailed narrative

Q4 and Full Year FY25 Financial Performance

Nirlon reported a stable financial performance for Q4 FY25, with total income reaching Rs. 161 crores, a 4% year-on-year growth. EBITDA stood at Rs. 126 crores (2% YoY growth) with a margin of 78.22%, while Profit After Tax (PAT) was Rs. 54 crores (5% YoY growth) at a 33.29% margin. For the full Financial Year 2025, total income was approximately Rs. 645 crores, and both EBITDA (Rs. 512 crores) and PAT (Rs. 218 crores) grew by 6% year-on-year, maintaining strong margins of 79.33% and 33.83% respectively.

Operational Highlights and Lease Renewals

The company maintained a high average occupancy rate of 98.2% for Q4 FY25 across NKP and Nirlon House. As of March 31, 2025, approximately 92,000 sq ft at NKP and 6,200 sq ft at Nirlon House were vacant, with 76,000 sq ft already licensed and 15,000 sq ft under advanced discussions. For the upcoming 2025-26 renewals, out of 316,000 sq ft, terms for 136,000 sq ft have been finalized, and 147,000 sq ft are in advanced discussions, indicating proactive management of lease cycles.

Tax Inefficiency and Restructuring Concerns

A significant point of contention was the company's tax structure, which analysts repeatedly highlighted as highly inefficient. Satinder Singh Bedi pointed out that a Rs. 100 distributable income could see two 35% tax cuts, leaving less than 50% for shareholders, while the majority shareholder (GIC) might benefit from double taxation treaties. Management, however, consistently stated that there was "nothing further to really add" regarding restructuring plans, leading to frustration among minority shareholders.

Growing Cash Reserves and Capital Allocation

Nirlon's cash and cash equivalents increased from Rs. 54 crores to Rs. 164 crores as of March 31, 2025, with projections of reaching Rs. 300 crores by year-end. Despite this, management provided no specific plans for utilizing this surplus cash beyond a declared dividend of Rs. 11 per share (approximately Rs. 99 crores total). Manish Parikh noted the cash is invested in fixed deposits earning interest, but there is "no proposal to repay the loan or anything," raising questions about optimal capital deployment.

Lease Renewal Rates and Vacancy Management

Management indicated that renewal rates for key tenants like NTT and Barclays are in the range of Rs. 174 to Rs. 185 per square foot per month, at an 80% efficiency. Regarding the upcoming vacancy of approximately 177,000 sq ft by Morgan Stanley on June 18, management assured that the transition period to new licensees is "not extensively long" and "fairly efficient," with rent-free periods spread over the 5-year lease term rather than occurring concurrently.

Lack of Engagement from Majority Shareholder

Analysts expressed strong dissatisfaction with the consistent absence of a key person from GIC, the majority shareholder, in the earnings calls for over 12 quarters. This lack of direct engagement was seen as a significant issue, particularly concerning strategic decisions like corporate restructuring and the utilization of substantial cash reserves, leaving minority shareholders feeling unheard and unrepresented on critical matters.

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