EFC (I) — Q2 FY25 earnings call

Call held 25 Oct 2024

Management summary

EFC (I) reported strong Q2 and H1 FY25 results, driven by robust performance in its managed office (rental) and Design & Build (D&B) segments. The company expanded its seat capacity to over 50,000 and secured significant new orders in D&B. The newly operational furniture manufacturing division is expected to contribute meaningfully in the coming quarters. Management reiterated its aggressive growth targets, including doubling revenues in FY25 and reaching 65,000-70,000 seats by year-end.

Highlights

  • Q2 FY25 Consolidated Revenue reached ₹171.08 crore.

  • Q2 FY25 EBITDA stood at ₹84 crore, with PAT at ₹36.56 crore.

  • H1 FY25 Consolidated Revenue was ₹276.36 crore, with EBITDA at ₹133.59 crore and PAT at ₹52.33 crore.

  • Rental segment contributed ₹89.20 crore (54%) and D&B segment ₹77.24 crore (46%) to a partial H1 revenue breakdown.

  • Total seat capacity crossed 50,000, with 3,600 seats added in Q2 FY25 across 4 centers.

  • D&B division secured an additional order book of over ₹70 crore, including a ₹18 crore+ contract with TCS.

  • Furniture manufacturing division (Ek Design) commenced commercial production on September 20, 2024, and completed its first order.

  • Receivables reduced from ₹120 crore in Q4 FY24 to ₹60 crore in H1 FY25.

Key financials

3 periods

Q2 FY25

  • Consolidated Revenue
    ₹171.08 Cr
  • EBITDA
    ₹84 Cr
  • PAT
    ₹36.56 Cr

H1

  • FY25 Consolidated Revenue
    ₹276.36 Cr
  • FY25 EBITDA
    ₹133.59 Cr
  • FY25 PAT
    ₹52.33 Cr

H1 FY25

  • Receivables
    ₹60 Cr

What they filed

Q1 FY27: revenue up 28.6%, net profit up 51.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue166 177 211 220 255 +54%270 +53%293 +39%283 +29%
EBITDA79 93 109 102 111 +41%112 +20%144 +32%123 +21%
Net profit37 40 48 47 57 +54%62 +55%69 +44%71 +51%
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.

Segment breakdown

Share of Revenue
₹166.44 Cr Total
  • Rental Segment (H1 FY25 Partial Breakdown) ₹89.2 Cr 53.6%
  • Design & Build (D&B) Segment (H1 FY25 Partial Breakdown) ₹77.24 Cr 46.4%

Guidance & targets

Capacity

  • Total Seats Capacity · by 31st March 2025 (end of FY25) · High confidence 65,000-70,000 seats
    But what we are taking as guidance is that by the end of this financial year, as of 31st March 2025, we are expecting to touch this mark of anything between 65,000 to 70,000 seats and that is the guidance that we are still committed and stand by right now.

    — Nikhil Bhuta, Whole Time Director

Revenue

  • Overall Company Revenue Growth Revenue · FY25 · High confidence double revenues
    Sorry to press you again on this guidance thing. But I believe in the last quarter, you had said that you were looking to double your revenues in FY 25. So, it is still intact for the Company overall...

    — Nikhil Bhuta, Whole Time Director

  • Furniture Division Revenue Revenue · FY25 · Medium confidence 60-75 crore
    we would definitely achieve anything around, 60 to 75 crore of revenue for the furniture division.

    — Nikhil Bhuta, Whole Time Director

Profitability

  • WhiteHills Division Performance Improvement Profitability · FY25 · Medium confidence 100% improvement
    And naturally, in the furniture manufacturing business, this is the first year. So, we are certainly looking forward that we kind of capitalize and really build the business. The way the factory looks back on us, if you look at the factory, the way it is built and the way the entire infrastructure has come up, we are really hoping that it will deliver whatever all our expectations have been over the years.

    — Nikhil Bhuta, Whole Time Director

Revenue Mix

  • Furniture Division Contribution to Total Turnover Revenue Mix · by end of FY25 · Medium confidence around 15%
    But by the end of this year, I believe it will certainly be around, at least if not more, but around 15% or so and year on year, it will definitely get improved and the target is that all the 3 divisions will at least do an equal business of 33% each. But this financial year, I presume, based on the target and the estimates, the furniture, manufacturing division would contribute around 15% to the total turnover.

    — Nikhil Bhuta, Whole Time Director

  • Contribution of each division (Rental, D&B, Furniture) Revenue Mix · long term · Low confidence 33% each
    the target is that all the 3 divisions will at least do an equal business of 33% each.

    — Nikhil Bhuta, Whole Time Director

Pricing

  • Minimum Seat Rate Pricing · ongoing · High confidence 6250 per seat
    We would certainly maintain our seat rate at 6250 minimum per seat and, right now, as you know, that we already have 50,000 seats.

    — Nikhil Bhuta, Whole Time Director

  • Average Seat Rates Pricing · going forward / by end of FY25 · Medium confidence increase
    we will be able to improve the seat rates hopefully by at least when you take out the average by end of this year.

    — Nikhil Bhuta, Whole Time Director

Risks & concerns

  • Competition in the managed office/co-working space

    medium

    Management acknowledges the market is crowded but emphasizes EFC's integrated model and focus on quality and pricing to differentiate.

    Analyst acknowledged

  • Leasing larger spaces and maintaining 90% occupancy

    low

    Management states that established presence in big cities, understanding of micro-markets, and strong sales/broker networks mitigate the risk, allowing for better economies of scale and negotiation.

    Analyst downplayed

Q&A highlights

3 direct
Seasonality in margins and business development cycle Direct
So, obviously, the seasonality is relating to the way the development cycle happens, so that typically all our development for a particular financial year happens in Quarter 1 and Quarter 2.

Explains the underlying operational reasons for margin fluctuations, linking it to new site development and occupancy timelines.

Asked by Sahil Sharma, Columbus Capital

Receivable cycles for different business segments Direct
with regards to the vertical for rental business, the receivables are generally less than 30 days... On account of the Design and Build division is concerned, Design and Build division, it runs around average is about 90 days... typically, there also the receivables will remain between 60 days to 90 days [for furniture].

Provides crucial insight into working capital management across the company's diverse business lines, highlighting differences in collection periods.

Asked by Sahil Sharma, Columbus Capital

Strategic choice of straight lease model vs. managed aggregation model Direct
we are confident of this model. We have been working with this model for more than 10 years now. Our sales teams and our marketing team is strong enough to be able to maintain an average occupancy of around 90%.

Reveals management's core strategy and confidence in their direct lease model, emphasizing control over margins and high occupancy rates, backed by long-term corporate contracts.

Asked by Manohar Rao Yadav, Individual Investor

3 min read 7 chapters

Detailed narrative

Strong Q2 and H1 FY25 Financial Performance

EFC (I) reported robust financial results for Q2 FY25, with consolidated revenue reaching ₹171.08 crore, EBITDA at ₹84 crore, and PAT at ₹36.56 crore. For the first half of FY25, consolidated revenue stood at ₹276.36 crore, EBITDA at ₹133.59 crore, and PAT at ₹52.33 crore. These figures underscore the company's resilience and strategic focus, with management expressing unwavering commitment to growth.

Managed Office Segment Expansion and Capacity Growth

The company significantly enhanced its managed office capacity in Q2 FY25, adding approximately 175,000 square feet and over 3,600 seats across four existing cities. This expansion brought the total seat capacity to over 50,000 across 61 sites in 8 cities, managing about 2.4 million square feet. The rental segment contributed ₹89.20 crore, representing 54% of a partial H1 revenue breakdown, with a target to reach 65,000-70,000 seats by the end of FY25.

Design & Build (D&B) Division Growth and Order Book

The D&B division demonstrated strong performance, contributing ₹77.24 crore (46%) to the partial H1 revenue breakdown. The division secured an additional order book of more than ₹70 crore in Q2, including a significant contract with TCS valued at over ₹18 crore. Management highlighted average margins for D&B ranging from 70-80%, with competitive office infrastructure projects yielding 24-25%.

New Furniture Manufacturing Division (Ek Design) Commences Operations

The furniture manufacturing division, Ek Design Industries Limited, successfully completed its first order after commencing commercial production on September 20, 2024. EFC (I) acquired 76% of Ek Design with an initial capital investment of ₹5 crore, and a total investment including working capital of approximately ₹25 crore. The company projects this division to contribute around ₹60-75 crore in revenue and approximately 15% to the total turnover for FY25.

Working Capital Management and Receivable Cycles

The company demonstrated improved working capital management, with receivables decreasing from ₹120 crore in Q4 FY24 to ₹60 crore in H1 FY25. Receivable cycles vary by segment: less than 30 days for the rental business, approximately 90 days for the Design & Build division, and 60-90 days for the new furniture division. Management attributed the improvement in D&B receivables to dealing with more organized, larger clients.

Strategic Model and Market Positioning

EFC (I) continues to operate predominantly on a straight lease model, which management believes offers better control over margins compared to managed aggregation models. The company maintains an average occupancy of around 90% and focuses on acquiring larger spaces to achieve economies of scale and better negotiation power. Management emphasized their integrated model, which differentiates them in a competitive co-working market.

REIT Formation and Future Asset Management

EFC (I) is in the process of forming and registering an SMREIT with SEBI. EFC will act as the manager and sponsor, contributing 5% of the fund required to acquire assets. While revenue from REIT assets will go to the REIT, EFC will earn management fees, which are expected to maintain similar margins to its current operations. The D&B and furniture divisions will also contribute to the development and maintenance of these new REIT assets.

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