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    Nexus Select

    NXSTGood
    Realty·30 Jul 2024
    Management Summary

    Nexus Select Trust delivered a resilient Q1 FY25 with 8% retail NOI growth and stable distributions despite temporary consumption headwinds from heatwaves and elections. Management introduced a bold five-year growth roadmap ('Nexus 2.0') targeting a 16% NOI CAGR through a mix of organic improvements and aggressive acquisitions. With a healthy leasing spread of 18% and a robust acquisition pipeline of 1.8 million sq ft, the Trust remains well-positioned to capitalize on India's long-term consumption story.

    Highlights

    8

    • Retail Net Operating Income (NOI) grew by 8% YoY despite a soft market backdrop.

    • Announced fourth distribution of ₹3,253 million, translating to ₹2.147 per unit (100% payout).

    • Tenant sales reached ₹30 billion, a 3% YoY growth, with June showing a stronger 6% growth.

    • Leasing occupancy improved to 97.4%, up 70 basis points compared to the previous year.

    • Achieved an 18% re-leasing spread on 0.18 million square feet leased during the quarter.

    • Unveiled 'Nexus 2.0' strategy aiming to double retail portfolio NOI over the next five years (16% CAGR).

    • Acquisition pipeline includes 1.8 million square feet currently under due diligence in North and South India.

    • Maintained a low Loan-to-Value (LTV) ratio of 14% with gross debt at ₹4,300 crores.

    What Changed1

    vs Q2 FY25

    Guidance items4 → 5 (+1)

    Key financials

    Single quarter

    06 metrics
    1. 01Retail NOI Growth8%+8%YoY
    2. 02Tenant Sales$30B+3%YoY
    3. 03Distribution Per Unit₹2.147
    4. 04Leasing Occupancy97.4%+0.7%YoY
    5. 05Re-leasing Spread18%

    Segment breakdown

    Retail
    8% NOI Growth6% Tenant Sales Growth (June)
    Hospitality
    3% Portfolio Contribution₹1.5 Cr NOI Gap vs FY24 Base
    List

    Guidance & targets

    5
    CategoryTargetPriority
    Profitability
    Retail Portfolio NOI CAGR
    16%
    		High
    Profitability
    Organic Retail NOI CAGR
    8.5% to 9.0%
    		High
    Other
    Annual Acquisitions
    1.5 million square feet
    		Medium
    Dividend
    Full Year Distribution
    ₹8.7 to 8.8 per unit
    		High
    Debt
    Post-Acquisition LTV
    28%-30%
    		Medium

    Risks & concerns

    4
    RiskSeverity

    Short-term Consumption Softness

    April and May were soft due to elections, heatwaves, and IPL, though June showed recovery. — Management acknowledged

    medium

    Interest Rate Stickiness

    A large part of the debt is floating; management is waiting for rates to soften before locking in fixed-rate long-tenure debt. — Analyst acknowledged

    medium

    Acquisition Execution and Regulatory Delays

    Management views regulatory hurdles as timing issues and remains confident in their ability to close deals based on their track record of 17 mall turnarounds. — Both downplayed

    low

    Areas of Evasion(1)

    • Specific details on the five 'pipeline' assets beyond the 1.8 million sq ft currently in due diligence.

    Q&A highlights

    3

    “The variable component salience... is between 12% and 13%. In Q1, it has been around 10% - 11% because of the lower tenant sales growth... we made it up by a very strong performance on leasing... and cost controls.”

    Explains how the Trust maintained 8% NOI growth despite only 3% tenant sales growth by offsetting lower revenue shares with leasing spreads and non-rental income.

    asked by Kunal Tayal, Bank of America

    2 min read5 chapters

    Detailed Narrative

    01

    Nexus 2.0: A Five-Year Roadmap for Growth

    Management unveiled 'Nexus 2.0', a strategic vision to double the retail portfolio NOI from ₹14.4 billion to approximately ₹31 billion over the next five years. This represents a 16% CAGR, driven by 8.5-9.0% organic growth and the acquisition of roughly 1.5 million square feet of retail assets annually. The organic growth is underpinned by 5% contractual escalations, 20% mark-to-market potential on expiring leases, and incremental consumption-linked revenue.

    02

    Leasing Momentum and Portfolio Optimization

    Leasing remains a core strength, with occupancy reaching 97.4%, a 70 bps YoY improvement. In Q1, the Trust leased 0.23 million square feet, achieving an 18% re-leasing spread on 0.18 million square feet. Management highlighted a stable expiry profile with roughly 10% of rentals expiring annually over the next three years, all carrying an average mark-to-market potential of 20%, which provides a clear runway for organic rental growth.

    03

    Consumption Trends and Category Performance

    Despite a 2% drop in footfalls due to extreme heat and elections, tenant sales grew 3% YoY to ₹30 billion, indicating higher spending per visitor. Electronics, jewelry, and family entertainment centers were the standout categories. While fashion was slower, management expects a turnaround in the second half of FY25 driven by the festive season and new inventory arrivals. June already showed sequential improvement with 6% sales growth.

    04

    Aggressive Inorganic Expansion Strategy

    The Trust is currently in advanced stages of acquiring 1.8 million square feet of assets, including three malls in Hyderabad and two additional assets in North and South India. Management plans to fund these primarily through debt, utilizing their low 14% LTV, but expects LTV to eventually settle in the 28-30% range. They are also open to Greenfield developments with partners in supply-constrained Grade-A markets.

    05

    Technology and Marketing as Growth Backbones

    Nexus is heavily investing in its digital platform, with the 'Nexus One' app now live in 9 malls and reaching 285,000 downloads. The loyalty program has a high conversion rate of 74%, providing rich consumer data for targeted marketing. Marketing spends increased by 20% in Q1, featuring new brand ambassador Ayushmann Khurrana, as the Trust focuses on 'summer activations' to drive footfalls and engagement.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.