Ladies and gentlemen, good day and welcome to the Earnings Conference Call of Nexus Select Trust for Q3 FY 2025. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Pratik Dantara, Head Investor Relations and Strategy from Nexus Select Trust. Thank you, and over to you, sir.
Thank you. Good evening, everyone, and thank you for joining the earnings conference call of Nexus Select Trust for the quarter ending December 2024. Before we proceed further, I would like to highlight that the management may make certain statements that may constitute forward-looking statements. Please be advised that our actual results may differ materially from these statements. Nexus Select Trust does not guarantee these statements or results and is not obliged to update them at any point of time. Specifically, any financial guidance and pro forma information that we will provide on this call are management estimates based on certain assumptions and have not been subjected to any audit, review, examination procedures. You are cautioned not to place undue reliance on such information, and there can be no assurance that we will be able to achieve the same.
Joining me today on the call are our Executive Director and CEO, Dalip Sehgal, our CFO, Rajesh Deo, our COO, Jayen Naik, and our Chief Leasing Officer, Nirzar Jain. We will start off with brief remarks on our business and financial performance and then open the floor for questions. Over to Dalip now.
Thank you, Pratik. Good evening, everyone. It is my pleasure to welcome you to the earnings update call for the third quarter FY 2025 for Nexus Select Trust, India's first listed REIT. Before we delve into our quarterly performance, I thought there are two key points that I want to touch upon. The first one that I think everybody has been talking about in the last few days is what the finance minister said in a recent budget speech. She has proposed substantial tax relief, particularly exempting incomes up to INR 12 lakh, which we believe is a welcome move for consumers and the retail industry. The government expects to provide an additional INR 1 lakh crore in the hand of consumers through these measures, providing a notable boost to disposable income in the hands of the middle-income consumer, encouraging discretionary spending. Very positive for consumer consumption story as we go into this year.
The second one is that if you look at our performance, and I will talk about quarter three. If you look at our performance over the last nine months, we have remained quite resilient despite a challenging backdrop in consumption growth, and I will talk about this a little later. I am sure you have seen some of the other results in the similar area from different companies and brands. Coming to our Q3 FY 2025 performance. First, we witnessed a strong financial performance in Q3 FY 2025, where net operating income grew by 6% year-on-year basis in an environment where consumption growth witnessed some green shoots after a soft first half. While these are early signs, we remain optimistic about improvement in consumption and the impetus provided by the government in the Union Budget.
On the back of this performance, we are delighted to announce our sixth distribution of INR 32.7 crore, translating to INR 2.196 per unit, up 10% year-on-year. With this, we have delivered. If you see from the date of listing, we have distributed almost INR 20.3 billion, and per unit, the distribution has been INR 13.425, and the delivered total return is upwards of 50% to our unit holders since listing. In the current financial year, we have declared distribution of INR 6.35 per unit. For FY 2025, we expect the full year organic distributions. It does not take into account any acquisitions, et cetera, that we may have. Organic distribution of the current portfolio to be approximately around INR 8.4 per unit. This is what we see as of now. Coming to the operational performance in the quarter.
We witnessed a consumption of INR 35 billion, which was a growth of 6% year-on-year. We observed a quarter-on-quarter improvement in consumption and expect that this momentum will continue. Our Q3 FY 2025 consumption growth is approximately 2.3x of the growth we reported for the first half of the year. So first half of the year, if you recollect, we had less than 3%, and now the growth in consumption is around 6%. So more than 2x higher growth. Let me share some category-wise consumption as well with you. Categories like jewelry, watches, beauty, and personal care, and family entertainment centers witnessed very strong growth in the quarter and continue to do well. So that jewelry, watches, beauty, personal care, and family entertainment centers.
Over a period of time, as we have said strategically, we are allocating additional spaces to these categories, and we will continue to do so as we go ahead. We have in the past indicated that we would focus on increasing the contribution of food and beverage, F&B, within our portfolio. I am happy to report that in line with our objective, we have revamped one of our largest food courts, which is in Chandigarh, Nexus Elante, and Nexus Koramangala in Bangalore. As a result of whatever we have done in terms of enhancing the experience, the rentals have gone up 2x in both these food courts. So I think the point that we had made earlier strategically is that A, F&B would become and continue to be important and will become larger as we go forward. Also with better offering, we would be able to realize better rentals.
Fashion category, which saw no growth at all in the first half of the year, at least in quarter three, did see a low single-digit growth, with some of the brands obviously performing better than the others. The value segment overall seems to be still doing reasonably well. Finally, as most of you know, cinemas came back this quarter because of a couple of blockbusters that got released in the quarter. Let me now walk you through our leasing and marketing performance. Leasing performance first. With strong demand from tenants, our leasing occupancy now stands at 97.6%. We have re-leased 0.31 million sq ft . It is about 3 lakh sq ft at a healthy re-leasing spread on the back of robust demand of above 20%.
This is again something that we had mentioned at the time of the IPO, which is that about 10% of our rentals come up for renewal, and we get a mark-to-market spread of about 20%. That continues to be true this quarter as well and in the nine-month period. Our lease expiry over the next three years is around 1 million sq f t per annum, which cumulatively represents 40% of our total rentals, on which we are confident of achieving 20% spread. Let me just explain this. Over three years, 3 million sq ft will come up for renewal. That is 30% in terms of area and 40% in terms of rental. On that 40% of rentals, we hope, of course, to do at least what we have done, which is 20% mark-to-market. The demand from both international and domestic brands is strong.
As far as international brands are concerned, we got the first Foot Locker store into Select City, Saket. We have got YSL Beauty, we have got NARS, Nespresso. We opened the Apple store, as you know, in Saket. Massimo Dutti, Tim Hortons, and there is large number of other brands as well, which are waiting in the wings to enter the market. I think the overall scenario in terms of demand for A-grade space is pretty strong. In terms of our marketing performance, we continue to invest in technology and customer experience to drive better footfalls and sales growth. Happy to note that after a long time, we have seen a positive footfall growth in quarter three. Our Nexus One app continues to be one of the best shopping mall apps in the country with a lifetime uploading of bills totaling to upwards of INR 1,000 crore.
We have also got very good traction on the app with 5 lakh, half a million consumer base who have contributed approximately 10%+ of consumption in these malls during April to December. I think basically two points. One, we now have a base of 5 lakh consumers who are on our loyalty program, and the fact is that they have uploaded upwards of INR 1,000 crore in terms of bills. It is something that is now sizable, and while we are still in 12 malls, we hope to now go to the other five as well, as we go forward. In this quarter, our marketing team has curated and implemented 17 experiential events like the Toy Factory, Clown Town, Jungle Tales, Winter Wonderland, The Polar Express, et cetera.
The whole idea has really been to provide experiences which are very different and unique and build footfalls as a result of this. This is really what has helped us in terms of getting new footfalls as well, because families with kids have come in. Our size and scale allows us to plan for pan-India promotions. In this quarter, we published more than 300 print ads and launched multiple digital campaigns reaching half a billion eyeballs. As you also know, we now have Ayushmann Khurrana as our brand ambassador, and he has been part of this entire campaign, both over Diwali as well as Christmas and New Year. In the previous quarter, we had installed India's first twin stacked anamorphic cubic cuboid screens in Hyderabad.
I am pleased to tell you that we have now installed two more of these screens during the quarter in our malls, with one in Seawoods, Navi Mumbai and the other in Nexus Vijaya. In the coming months, we are planning to install four or five anamorphic screens across other malls also. Again, these are screens that provide a very unique and different experience to the customer, and this is the first time that it has been done in any mall in India. These screens have revolutionized the in-mall advertising. As we speak today, more than 15 brands have tied up with us for advertising. This opens up a new income stream for us. Now coming to the balance sheet. On debt, I am delighted to tell you that we have reduced our debt cost by 30 bps year-on-year with annualized saving of INR 120 million.
On the cost front, we are continuously rationalizing our operating costs. At the like for like level, the operating costs have increased by only 3% in an inflationary environment of 5%- 6%. The costs have gone up by half of that, and that is a testimony to the control that we have in terms of maintaining costs under control. On the rental collections, I am pleased to report that we now are able to reduce the timelines for collection from 12 days from the billing date to five days, which is the lowest in the industry. In some of the malls, we managed to reach a zero day outstanding. So really remarkable. On ESG, which has been an important factor for us over the last couple of years. On the sustainability side, we continue to lead the market with our ESG goals across our portfolio.
Approximately 43% of the energy requirement is being now met by renewable resources during the nine months of the year, and this is up 1,300 bps compared to last year. We are also proud to announce that we have been recognized as a great place to work for the fifth consecutive year, which is in there, which further solidifies our position as a market leader, delivering outstanding value to all stakeholders, including employees. Let us now share some updates on the proposed acquisitions. I am sure this is a question that has been at the top of your minds as well. That, look, we have announced a set of acquisitions and where are we on that? I think one of the acquisitions we had announced was Vega City in Bangalore. I think because of issues in the registration and administration, it has got delayed.
I think we are very confident that it will happen quite soon now. On the North India acquisition, we are in the last phase of documentation again and expect to close the transaction. Just to summarize, we witnessed green shoots in consumption growth in the quarter at 6% growth compared to 3% in the first half, coupled with the proposed amendments of the union budget, where a lot more money will come into the hands of the consumer. We do believe that consumption will pick up in FY 2026. Leasing demand for our assets continues to remain robust with favorable demand-supply dynamics. We have over nine months seen new brands coming into our malls. Our year-on-year NOI growth was 6% with steady operating cash flows.
We have announced our sixth distribution of INR 2.196, as I said earlier, up 10% year-on-year, and this since listing is INR 13.425, giving a return of 50% since listing. We are expecting to close the acquisition of Vega City soon and in the north as well. That is really a quick snapshot of quarter three and where we are on various strategic issues. Thank you so much for listening to this, and now we can move to the Q&A.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Murtuza Arsiwalla from Kotak Securities. Please go ahead.
Yeah. Hi, sir. Just wanted to check. Our understanding is that October was a bit more favorable month in terms of consumption, in terms of the pace and the way the various festival days were. Could you
Murtuza, your voice is a bit muffled. We cannot hear you very well.
Is it better now?
Slightly better. Go on.
Okay. No, I just wanted to check. October was a little more favorable month, as I understand from consumption. Can you help us? The 6% obviously is an improvement from first half. Can you give us a monthly breakup of how the consumption trends were October, November, December, and if possible, how January is trending?
Yeah. First of all, as far as the quarter is concerned, please understand that quarter three is typically the festival period. To give you a breakup, honestly, will make no sense because depending on when Diwali and Dussehra happened last year and this year, which were in two very different months, you have to look at October plus November together, and then you look at December. If you look at October plus November, it's around 6 odd percent, and December also was a similar number. But if I give you October, November separately, it makes no sense because the festival were in very different months.
Any sense you can get on how January is trending?
Too early to say anything, but let's wait and see because I think the budget announcements also just happen. By the time people see the money coming in, maybe the overall mood, et cetera, will change. So, very early days to say anything. Again, I'm not in the favor of looking at a monthly kind of number. I think it's always better in a country like India, which is so vast, where festivals happen in different areas. Yeah. It's better to look at a quarter. But, yeah.
All right. Thank you so much.
Thank you. The next question is from the line of Parvez Qazi from Nuvama Group. Please go ahead.
Hi, good afternoon. Thanks for taking my question and thanks for the good set of numbers.
Can't hear you.
Sorry to interrupt, Mr. Parvez. I would request you to please use your handset.
Hello. Am I audible now?
Yes.
Yes, we can.
Much better .
Sure. Yeah. I wanted to get some update about the proposed acquisitions that we had in Hyderabad. What is happening there?
Hi, Parvez. Pratik here. On the Hyderabad piece, we very recently received comments on the draft documents that we had submitted to the government, because, again, there's government angle there. We had to take comments on the documents from that. Our teams at this point of time are looking into those comments, and we will be able to share an update on the same, once we have gone through it. At this point of time, the comments have come in from them very recently, and our teams, legal teams and commercial teams, are looking at it.
Sure. Thanks and all the best.
Thank you.
The next question is from the line of Pritesh Sheth from Axis Capital. Please go ahead.
Hi. Thanks, and just couple of questions. First on consumption. Not trying to compare, but just wanted to understand difference. One of our peers reported 10% like-to-like growth. Ours was 6%. Anything different in terms of how the mix of tenant is in our portfolio versus theirs? Second question is on consumption growth versus NOI growth. Generally, we have been a tad higher. Obviously, I don't want to look on every quarter basis. But this time it was in line, consumption growth and NOI growth. So what's the difference versus our past couple of quarters performance on that front versus this quarter?
Okay, let me answer. I think there are two separate questions. The first one is in terms of numbers reported by our peer. If you look at it carefully, because there's a lot of new malls in that, so even the like-for-like is actually not completely like-for-like. Our understanding and judgment, this is whatever number we have seen, is probably between 6% and 7%, is the like-for-like comparison. Not very different from where we are. Also, in the key cities where both of us are present, I think it is in Bangalore. Bangalore, they have grown at 3%, we've grown at 8%. Mumbai, including some additional area that has come into Palladium, 250,000. They've grown at 5%. Without that, it's about 2%. We have grown at 6%. Chennai, they've grown at about 3%, we've grown at 8%. Pune, they have grown at 11%.
We're flat or marginally negative. That is the impact of the new mall that has come up in Pune, which is close to the Westend Mall. So that's really the situation where like-for-like, whichever city you talk about, I think we have, in effect, done better, both in the quarter as well as nine months. If you take the nine-month period, Mumbai is 2% for them, 5% for us. Bangalore is negative 1%, we are up 5%. Pune, they are up 7%, we are down 5% because of Amanora. Chennai, they are at 3%, we are at 6%. That's the nine-month position. So don't want to get into too much of detail, but the fact is that I think the like-for-like growth, in cities where both of us have malls for some period of time, I think we may be a shade better.
Having said all that, I think the good news is that overall, both of us have grown at 6% plus like-for-like. Maybe in their case, it may be a little bit better. I don't have, obviously, access to all the data. But having said all of that, I do believe that, I think it's the sustainability of whatever growth has happened in quarter three, which is going to be key as we go forward. I think the pillar that will support this growth is the INR 1 lakh crore that is coming into the hands of the consumer over the period of a year. But at least in terms of sentiment, it should start pretty soon. That's my understanding. That is part one of your question. Part two was that, look, this time it's 6% and 6%.
Earlier, it used to be we are 6%, I think, NOI growth in nine months, so that is no different. Yes, we were 2.5% on top line. I think we have explained that in the past as well, that if the top-line growth is a little lower, we tend to have lower revenue share. It does not make too much of a difference, but can make half a percent difference. So and that in a sense, got covered in the earlier quarters by what we explained to you, which is other sources of income, et cetera. So like- for- like, I think we have been trending at around 6% growth right from quarter one onwards. Obviously, the top line of 6% will mean a better revenue share as we go forward. Yeah.
Got it. That is really helpful, and thanks for the very detailed answer on the first one. That is it from my side. All the best.
Thank you.
Thank you. The next question is from the line of Mohit Agrawal from IIFL Capital. Please go ahead.
Yeah, thanks for the opportunity. My first question is, if you could, for the third quarter, what has been the footfall growth like?
1%.
1%.
Versus a negative in the first half.
In the first half. My second question is on, you have highlighted the marketing initiatives that you are taking in your portfolio, and I see some of them are ticketed. You mentioned some revenues as well. Is the objective to increase footfalls and thereby consumption growth, or do you plan to separately monetize these events in a meaningful way? If yes, what can we expect as a share of the non-rental marketing events as a percentage of your total NOI or revenues? You could give some color around that.
Okay. Without getting into too many details, because this has just started, I think the whole attempt is to bring in better quality footfalls and more footfalls. Any, let us say, event that you do, there is a cost to it. Let us assume last year we were eventing at about INR 100 per event. This year we are saying we will spend more, we will have better engagement, and we will spend INR 150. Where will that INR 50 come from? Part of it will come from ticketing. Believe me, meaning some of these experiences are so different that kids and parents, et cetera, are more than willing to do it. How large will all of this become? We will have to see as we go along. I think it is still early days. The fact is that there are three, four streams of income. There is space on hire.
There is a lot of stuff that we do for brands, both within the mall and on the façade of the mall. That is called space on hire. That is an income stream. Some of these ticketed events will become larger income streams, et cetera. But in my view, this business, a large part of it, maybe about 90-odd percent plus, will still be lease rentals. But the balance 10%, we would obviously attempt to grow as we go forward.
Understood. My last question is on your acquisition strategy. Beyond the Vega City and the Hyderabad and the other north asset, how is the pipeline currently looking like? Just trying to get an update that we had a target of adding about two to three malls every year. How do you see the pipeline shaping up in terms of availability of assets and the valuations? If you could update on that as well.
Hi, Mohit. Pratik. The pipeline is looking pretty strong at the moment. We need to close what is on hand at the moment. Focus is on that. At the same time, there are about three, four more assets that we are engaging with, and hopefully that should kind of consummate the pipeline for the next year. I think pretty much on track, a little delayed to start off with, but once that starts, I think the flow should be more linear.
The two, three malls that you are looking at beyond this would be hopefully closed in FY 2026, right?
Yes.
Okay, understood. Thanks a lot. Those were my questions. All the best.
Thanks, Mohit.
Thank you. The next question is from the line of Arya Mehta from Maximal Capital. Please go ahead.
Yeah, good evening, sir. On the pipeline question, so apart from these three malls, totaling 1.3 million sq ft, are there any confirmed entrances to this pipeline, because this has been this way for the past few quarters I guess. Are there other possible acquisitions that have gone into the slightly more advanced stage that you can throw some color on?
Arya, Pratik here again. These announced acquisitions, in the sense Vega City, the Hyderabad Mall, and the North India acquisitions, in total about 1.8 million sq ft. Apart from that, like I spoke about earlier, there are a few more acquisitions that are in the pipeline. I wouldn't want to give out too many details at this point of time because these are bilateral conversations. At this point of time, let's just keep it at 1.8 million sq ft that we've announced, and we're looking to kind of close those.
That meets the target that we've set for ourselves, which is to, over a four, five-year period, to double the portfolio.
Okay, you seem well on track on doing that. There's no change in that.
Yeah. It can be lumpy at times, depending on how the administrative part, how it all closes. Some of this is very unexpected, but I guess, at a state level, these things can happen. But suffice it to say that we are on top of it.
And a little bit of giving us any sort of advantage to sort of accelerating this towards potential mall acquisitions and all?
Arya, sorry, I couldn't follow that question. If you can please repeat.
So this little bit of slowdown that we have seen in the consumption space, is it sort of a little bit of positive for us to sort of go and talk to the potential sellers? Are they more willing now because of this?
Not really. Somewhere it does matter, but ultimately, from our standpoint, it's more about long-term, whether we see that asset, we can turn around that asset, what value add can we do from that asset? From a seller standpoint, I think, frankly, it all boils down to what valuations we give them, right? While there may be temporary blips and people understand consumption slowdown, may be a good time to start conversation, but some of these narratives change pretty quickly. So it's not necessarily the only point on their minds.
Okay. On the nine-month numbers, the NOI growth has been 6% for the entire nine months?
Yes.
How should we pension this thing? Because, say, for nine months, we have got 6%, but the DPU growth is tracking only 4%, adjusted for the 10.5 months for last year. Right. In this quarter, again, we have done 6%, but we have got 10% DPU growth. How do we sort of model the NOI growth versus the DPU growth? Because these two numbers are not sort of matching.
I would suggest you just look at the nine-month number. That is probably directionally where it should be. Obviously, within a quarter, it could be a little different, but I think directionally, NOI growth and DPU growth should kind of track.
Yeah. At INR 8.4, which is what we think we will end up, is around a 6% growth over last year annualized, which is in line with the NOI growth.
And just the whole piece around NOI growth, you need to kind of also factor in that we kind of, at this point of time, have some bit of negative carry on the Vega fund that we have raised. The deal should get done very soon now. But it is just that piece is having a negative carry today.
Okay. And I think part of it has also increased to 75% or I think last quarter it was 72%, if I am not wrong. Going forward, should this be the new normal or how should we sort of model that in?
Around that number.
Yeah.
72%, 75%, depending on that particular quarter.
Okay.
Around 74%, 75%.
74%, 75%.
Understood. Thank you and all the best.
Thank you. Thank you so much.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. A reminder to all the participants that you may press star and one to ask a question. The next question is from the line of Biplab Debbarma from Antique Stock Broking. Please go ahead.
Good evening, everyone. My first question is, looking at all the narrative and macro scenario so far, how do you see this 5%-6% consumption growth year-on-year? Should we see this as a good consumption growth looking at the current scenario or how do I see the consumption? That's what I'm trying to ask. Is it good, bad or ugly? How do I see the consumption?
I think you have to put it in perspective of what has happened in the first half of the year, where I said that the growth was less than 3%. We're now at 6%. If you take a period of five years pre-COVID and see the average consumption growth is around 7.5%. If you see what is the long-term trend, it's around 7.5%, depending, of course, year-on-year, what the inflation rates, et cetera, have been. Was there an issue in terms of consumption? I think that's clearly there. The fact that the government and the finance minister recognized it's not every day that she will put INR 1 lakh crore in the hands of consumers. Because they're also aware of the fact that there has been a slowdown in consumption.
To answer your question, is 6% good, bad, ugly? I think depends entirely on what is the context. I think once the money starts coming into the hands of the consumers, then we will have to see, is 6% good enough? Should it be better, et cetera? And how long will it take for that to actually fructify in terms of improved consumption?
Okay. Something like 8%, 9%, say, next few quarters you report 8%, 9% or 10% or something like that.
More than 7%.
Then we should consider that as well.
I think like that. Good consumption growth. No, 8%, 9%, 10% has never happened in the past except post-COVID, when obviously two years there was nothing. I am saying the long-term trend is 7%, 7.5%. We are currently at 6%. I would not speculate, but I presume that if all this money comes into circulation, we should see an improvement. How much and when? I think time will tell. But I would not hazard a guess to say will it be 10%, 12%. That we do not know.
Okay, fair enough. Sir, just one more question. Regarding Hyderabad Mall, I believe you mentioned some comments from government. How government is involved in that acquisition of Hyderabad Mall?
Biplab, hi. The government kind of has that asset and the malls are annexed to the metro that the government and L&T have jointly developed. Hence the government angle that.
Okay. Government has some stake into the mall. Is that the case?
No, they are the landlord.
They have given NOC.
They have given NOC on that.
Okay. Thanks. That is all.
Thank you.
Thank you.
The next question is from the line of Jatin from Bank of America. Please go ahead.
Hi. Thanks for the opportunity. Most of my questions have been answered, but just a quick one. Would you be able to break down the nine months NOI growth into the usual components, rental escalations, MTM, and revenue share?
Sorry?
Rental escalation, MTM. So like Dalip sir mentioned, around 4%, 4.5% comes from escalation. And this year in particular, there was 8 lakh sq ft, which was supposed to come on re-leasing. Like we said, we have made a re-leasing spread of 20%, so that's around 1%, 1.5%. So that's 5.56%, and the revenue share is flat. There's no growth. So that's the 6% number on an NOI growth.
Oh, okay, great. That's very helpful. Thanks so much.
Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Pratik Dantara for closing comments.
Thank you everyone for joining the call. If you have any further questions, do reach out to us and the IR team. Thank you.
On behalf of Nexus Select Trust, that concludes this conference. Thank you for joining us, and you may now disconnect your line.