Nexus Select — Q3 FY25 earnings call

Call held 4 Feb 2025

Management summary

Nexus Select Trust reported a resilient Q3 FY25, characterized by a recovery in consumption growth and strong leasing momentum. The Trust achieved 6% YoY growth in both NOI and consumption, with management highlighting 'green shoots' following a softer first half. Financial discipline was evident in reduced debt costs and improved collection cycles, while the acquisition pipeline remains active despite some administrative delays.

Highlights

  • Net Operating Income (NOI) grew 6% YoY in Q3 FY25 with steady operating cashflows.

  • Quarterly consumption reached ₹35 billion, representing 6% YoY growth and a significant improvement from H1 FY25.

  • Announced sixth distribution of ₹3,327 million (₹2.196 per unit), up 10% YoY.

  • Leasing occupancy remains robust at 97.6% with 0.31 million sq ft re-leased at 20%+ spreads.

  • Debt cost reduced by 30 bps YoY, resulting in annualized savings of ₹120 million.

  • Rental collection timelines improved significantly, dropping from 12 days at listing to 5 days.

  • Management expects full-year FY25 organic distribution to be approximately ₹8.4 per unit.

Key financials

  1. Net Operating Income — +6%YoY
  2. Consumption ₹3,500 Cr +6%YoY
  3. Distribution per Unit ₹2.196 +10%YoY
  4. Leasing Occupancy 97.6%
  5. Re-leasing Spreads 20%

What they filed

Q1 FY27: revenue down 17.3%, net profit down 24.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue307 348 332 371 317 +3%382 +10%433 +30%307 −17%
EBITDA302 343 327 366 311 +3%376 +10%427 +31%300 −18%
Net profit254 281 259 290 232 −9%297 +6%349 +35%220 −24%
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

Dividend

  • Full year organic distribution Dividend · FY25 · High confidence ₹8.4 per unit
    For FY25, we expect the full year organic distribution to be approximately INR 8.4 per unit.

    — Dalip Sehgal, CEO

Margin

  • NOI Margin Margin · FY26 · Medium confidence 74%-75%

    Previously 72% → 74%-75%

    Around 74%-75% of NOI margin

    — Dalip Sehgal, CEO

Other

  • Portfolio Size Other · next 4-5 years · Medium confidence Double the portfolio
    And that meets the target that we have set for ourselves, which is within 4-5 year period, to double the portfolio.

    — Dalip Sehgal, CEO

  • Lease Expiry Spreads Other · next 3 years · High confidence 20%+
    Our lease expiry over the next three years is around 1 million square feet annually... on which we are confident of achieving 20%+ spreads.

    — Dalip Sehgal, CEO

Risks & concerns

  • Acquisition Delays

    medium

    Vega City and Hyderabad acquisitions delayed due to administrative issues and government NOC requirements.

    Both acknowledged

  • Consumption Sustainability

    medium

    Analysts questioned if 6% growth is sufficient; management relies on government budget impetus to drive future spending.

    Analyst bullish

  • Negative Carry

    low

    Funds raised for Vega City acquisition are currently incurring a negative carry until the deal closes.

    Management acknowledged

Areas of evasion (1)

  • Specific monthly consumption breakdown for January (declined to give monthly data, preferring quarterly).

Q&A highlights

2 direct
Consumption Growth vs Peers Direct
If you look carefully our peers has few new malls which were started operations in last two years... As per our understanding, the like for like consumption growth for our peers will be between 6% and 7% which is in-line with our consumption growth.

Clarifies that NXST's 6% growth is competitive on a like-for-like basis despite headline numbers from peers appearing higher.

Asked by Pritesh Sheth, Axis Capital

Non-Rental Revenue Streams Direct
In my view, large part of this business, maybe about 90% plus, will still be lease rentals. But the balance 10%, we would obviously attempt to grow as we go forward.

Reveals management's strategy to diversify income through ticketed events and in-mall advertising (anamorphic screens).

Asked by Mohit Agrawal, IIFL Securities

Hyderabad Acquisition Delay Partial
The malls are next to the metro that the government and seller have kind of jointly developed... They have to give an NOC for transfer of the lease.

Explains the regulatory hurdle (NOC from government) causing the delay in the Hyderabad acquisition.

Asked by Biplab Debbarma, Antique Stock Broking

1 min read 5 chapters

Detailed narrative

Consumption Recovery and 'Green Shoots'

Management highlighted a significant rebound in consumption, which grew 6% YoY to ₹35 billion in Q3 FY25. This growth rate is approximately 2.3x the growth reported in the first half of the year. Specific categories like Jewellery, watches, and family entertainment centers showed strong performance, while F&B rentals doubled at Nexus Elante and Nexus Koramangala following food court revamps.

Leasing Momentum and High Occupancy

Leasing occupancy remains a core strength at 97.6%. The Trust re-leased 0.31 million square feet during the quarter with spreads exceeding 20%. Looking ahead, approximately 1 million square feet of leases are set to expire annually over the next three years, representing 40% of total rentals, on which management is confident of maintaining 20%+ spreads.

Acquisition Pipeline and Regulatory Hurdles

The Trust is pursuing 1.8 million square feet of acquisitions across Vega City, North India, and Hyderabad. While the North India deal is in the final documentation phase, Vega City and Hyderabad have faced administrative delays. Specifically, the Hyderabad acquisition requires a government NOC for lease transfer due to its proximity to the metro.

Financial Discipline and Debt Optimization

Nexus Select successfully reduced its debt cost by 30 bps YoY, leading to ₹120 million in annualized savings. Operational efficiency also improved, with rental collection timelines hitting a record low of 5 days from the billing date. The Trust's NOI margin is trending toward a new normal of 74%-75%.

Marketing and Technology Initiatives

The Nexus One App has reached a milestone of ₹1,000 crores in lifetime sales, with a 0.5 million consumer base contributing 10% of total consumption. The Trust is also pioneering in-mall advertising with anamorphic cuboid screens in Hyderabad, Navi Mumbai, and Chennai, creating a new non-rental income stream that has already attracted over 15 brands.

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