Ladies and gentlemen, good day and welcome to the Nexus Select Trust Q2 FY 2025 Earnings Conference Call. As a reminder, all participant lines will be in the 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. 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 ended September 2024. Before we proceed further, I would like to highlight that the management will make certain statements that may constitute forward-looking statements. Please be advised that our actual results may differ materially from these statements. We do not guarantee these statements or results and are not obliged to update them at any 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 procedure. 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.
Before we begin, I wanted to let everyone know that our Executive Director and CEO, Dalip Sehgal, isn't able to join us today on the call due to a personal family matter. I am here with the rest of the management team to lead the call and address any questions you may have. Thank you for your understanding. Joining me today on the call are 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. In Dalip's absence, let me take you through our performance in 2Q FY 2025. Before we delve into our quarterly performance, I wanted to spend a few minutes on two key topics. The first one is the acquisition of Vega City Mall that we had announced last month.
To give you all an update, we have raised the funds that are required for closing this acquisition. We are in the midst of closing this transaction and expect the deal to close in the next couple of weeks. Second topic I would like to touch upon is how is Nexus transforming malls from traditional real estate spaces into consumption hubs. As most of you are aware, our lease structures are designed to capture consumption-linked upside potential while ensuring minimum guaranteed rentals. This enables us to achieve stable cash flows with ability to participate in consumption-linked upside with revenue share clause in almost 90% of our customer contracts. We have been creatively monetizing spaces within the mall while improving the overall customer shopping experience. For example, we recently launched India's first double cuboid anamorphic screens at Nexus Hyderabad.
This state-of-art technology will not only provide a visually stunning experience, but also revolutionize in-mall advertising. Another example is that we are now the first mall platform in the country to sell the naming rights of food court, and thereby monetize it. You will see more of these unique branding deals from us in the future. We have also been generating additional income streams by optimally utilizing malls' open spaces. Our ticketed events revenue has seen a jump of 6x in the first half of this year compared to last year. We also believe that technology will be a big differentiator for our business as we go into FY 2026 and beyond. We have been working towards digitizing our customer shopping experience.
Over the last 12 months, the NexusONE app has become an integral part of the shopping journey for lakhs of our consumers across 12 properties, achieving over INR 4 lakh downloads. I am pleased to announce that the NexusONE app has excelled with 30% of transactions from repeat customers. I will come to the 2Q performance. We witnessed robust retail net operating income growth of 5% year-on-year, despite a soft market backdrop. On the back of this resilient financial performance, we are delighted to announce our fifth distribution of INR 304.1 million, translating to INR 2.007 per unit, which is in line with our projections and represents 100% payout. During the quarter, we witnessed tenant sales of INR 30 billion, which grew 2% year-on-year from a high base of last year, with a two-year CAGR in the zip code of 9%-10%.
Economic activity was low during this quarter, which was impacted because of heavy rains across key cities like Navi Mumbai, Delhi, Chandigarh, Shraadh, lower wedding days, coupled with no blockbuster movie releases. However, we have witnessed very strong tenant sales growth of 18% in the month of October with the onset of festive season. I am pleased to tell you that our malls have recorded their highest ever one-day sales on 27th of October leading up to Diwali. We expect this momentum to continue in the second half of FY 2025. Let me now share some category trends with you that we are witnessing across our malls. As you are aware, we have been allocating additional space to categories like electronics, jewelry, beauty, and personal care over the last few years. We have witnessed strong growth in the quarter in these categories.
We had indicated in our earlier calls that fast fashion players were sitting on old inventories, which was impacting their performance. What we are now seeing is that most of these fashion retailers have been able to liquidate the old inventory. They are seeing arrival of fresh new inventory, and with the increased number of auspicious days in the second half of the year, we expect tenant sales growth to improve going ahead. Let me now walk you through our leasing and marketing performance. Leasing performance. With strong demand from tenants, our leasing occupancy now stands at 97.4%, which is 40 basis points higher than last year. As we speak today, most of our malls are close to 100% occupied with a healthy wait list of tenants. In 2Q, we have leased 0.22 million square feet, out of which we re-leased 0.19 million square feet at 20% re-leasing spread.
Our malls continue to be the first port of call into the Indian market with signing of international brands like Foot Locker, YSL Beauty, Nespresso, Gucci Beauty, opening their first store in India with us. We also opened the first Tira store in Navi Mumbai at Nexus Seawoods. These brands are increasingly choosing our malls as their first port of call due to the immersive and engaging shopping experiences we offer. On the marketing side, as you know, we have onboarded Ayushmann Khurrana as our new Happyness Ambassador. We are working with him on creating exciting new content and also lining up concerts across our portfolio, which will augment footfall. In the coming months, we will also install the anamorphic screens across our other malls, further solidifying our position as industry leaders in mall experiences.
We will continue to invest in technology to drive sales growth, which will be an important pillar in the coming years. Coming to our balance sheet. We have a robust balance sheet and are armed with a war chest of close to $1 billion for acquisitions. We have recently refinanced debt of about INR 2.5 billion at a debt cost of 7.5% per annum, resulting in debt cost reduction by 10 bps to 8%. On the ESG and sustainable side, we continue to lead the market with our ESG goals. We received GRESB five-star rating for the first time and were ranked second in Asia amongst the listed retail peers with an overall score of 92. Our progress from a score of 76 in 2022 reflects our ongoing commitment to sustainability initiatives.
Across our portfolio, approximately 40% of the energy requirement is met by renewable sources, and during this quarter, we installed 0.65 MW rooftop solar in Nexus Hyderabad with a potential of generating 870K units annually at 20% plus yield on cost. We are also proud to announce that as part of our Lakes of Happyness initiative, which we started in 2021, to date, we have successfully revitalized eight lakes across Bangalore, Chennai, and Maharashtra, with additional two lakes to be launched in Hyderabad later this month. With these new additions, the Lakes of Happyness initiative will now encompass 10 lakes, positively impacting over 1 lakh people, local wildlife, farmers, and creating local job opportunities. Lastly, summarizing our quarterly performance. Our retail NOI growth was 5% in Q2.
Leasing demand for our assets continues to remain robust with favorable demand-supply dynamics and Nexus being the first port of call for many international brands looking to enter India. On the consumption front, in the first half of the year, we are seeing growth of brands in our malls that is higher than similar brand stores outside our malls. We are also seeing strong growth in October and expect momentum to continue in the second half of this year. We have announced our fifth distribution of INR 304.1 million. We are expecting to close the acquisition of Vega City Mall in the next few days. Lastly, with a strong balance sheet, we remain committed to close the other two proposed acquisitions that we had spoken about last time in this financial year, and our pipeline continues to remain healthy. With this, let's now move to 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 touch-tone phone. 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. Again, if you wish to register for a question, please press star and one. Our first question comes from Mohit Agrawal from IIFL. Please go ahead.
Yeah. Good evening, everyone, and thanks for the opportunity. My first question is on your FY 2025 guidance, and versus that, the first half numbers. If I look at NOI and NDCF is about INR 4.1 for the first half, versus what you've guided is INR 8.7- INR 8.8. How confident are you that second half you'll see a pickup and you'll meet the guidance? On NOI also, we are about 6%, 7% below on an annualized number for the first half. Your comments on that.
Mohit, hi. Pratik here. Let me try and take that. I think we've had a very good October. I think with that, we would probably want to wait another quarter out to see where we end up. At this point of time, we are fairly confident that we should meet both the NOI and NDCF guidances that we've given out at the start of the year.
Okay. On the October number itself, what we saw is the 2% growth in the last quarter year-on-year, and now I think the month number is 18%. You mentioned that you continue this too. The divergence is huge. Could you explain actually what probably drove this? Is it a few particular malls where we've seen a turnaround? Because let's say if you see a Nexus Select CityWalk, it has grown 8%, but some of the malls have registered a negative consumption growth in the presentation. Just trying to understand, is it driven by a few particular malls, or is it driven by a few particular categories, and how should we think about the second half consumption on a second-half basis?
Hi, this is Jayen. I will take this. I will try and answer your query. In the Q2, you see that we were down in apparels, we were down in F&B, we were down even in cinema. These were critical aspects which actually pulled down our consumption. But with the advent of festive season and all, we have seen a big uptick in the apparel sales. In fact, I think apparel sales itself has grown by 19% against negative 2% or 3% in Q2. Cinema, of course, October, I am talking of South, where we have a large presence. South, there were good movies that came, and the revival was more than 100% in the South territory, which again helped us gain in footfalls also, gain in consumption also.
Again, F&B, which was, you saw QSR results also were across, they were in the negative, but with the kind of effort that we put in, and let me harp on the efforts that we put in, so that you know why and how this has happened. When we saw the entire trend coming across and with the rains being extended a lot, what we had already decided was that we will go in for a very aggressive marketing program. We had engagement activity, and that is why I think Pratik also touched upon his note that we have got themed events. This time around, right from the 5th of October, we had got themed events in all our malls. Somewhere it was a Dino World, somewhere it was a Sheesh Mahal, somewhere it was a Lost World.
All those events were primarily aimed at pulling people back into the malls. The promotion of these actually worked wonders for us. Normally there is a traditional this thing that Navratri is slow. We do not face that. In fact, we had a good run even in Navratri. In the East and like Bhubaneswar and all, we know that Durga Ashtami is always big. The fast or the early advent of themed events and all that helped us really pull in people in even larger numbers than we did last year. In fact, the Expo Tower clocked its highest ever sales, monthly sales before that. The mall that we talked about in terms of Hyderabad or Ahmedabad, where you felt that there was a little bit of a slowdown, we actually achieved our best numbers right there.
I think that all is a part and parcel of the work that has happened and the trend that we see.
Going forward, we do believe that the trend will definitely continue, and there is no reason why it should decelerate from here and now on.
Mohit, just to summarize what Jayen is trying to say is, I think the category growths were broad-based across our categories. Categories which were soft in Q2 have actually bounced back in October. Apparel, accessories have seen a bounce back, significant strong bounce back.
For this consumption growth numbers of 2% for last quarter and 18% for October, could you give the corresponding footfall growth as well?
It's about 2% in the month of October.
Sorry.
And 2% down in Q2.
Okay. So 2% up for October footfall and 2% down for the last quarter?
Yes.
Okay. That is all from my side. Thanks a lot, and all the best.
Thank you.
Thank you. The next question comes from Pritesh Sheth from Axis Capital. Please go ahead.
Yeah, good evening. Thanks for the opportunity. Just following up the previous question. So this 18% growth, could one say that there is some bit of seasonality, in that because probably last year, you mentioned that Q2 was impacted because of a few days of strikes, so things have reopened versus last year. The 18% growth was also looking higher because of early festive season start this time around, and what would be your expectation in November, December when things normalize? Could we continue to see that 8%, 9% growth in terms of consumption for second half?
Yeah, Pritesh. Thanks for the question. I think, obviously, 18% is a huge number. Obviously, there's a festive impact in that. On a steady state basis, you should see 9%, 10% growth, in this business. On a two-year CAGR also, if you look at it even on a Q2 basis, we had a base wherein we grew at about 16%, 17%, and then there's a 2% growth in Q2. So on a two-year CAGR basis, it's a 9%, 10% growth business, which is what we would probably guide you to on a longer-term basis.
And Pritesh, just to add, because Diwali was in November previous year, so we should be looking at October plus November, which gives you a kind of 10%, 11% growth.
Also this year
Sure
we expect the festive wedding season to take off in the second half because there were no wedding dates in the earlier part. We are confident, but maybe not at the 18%, but the long-term growth rates could be maintained.
Got it. Just understanding on this Vega City acquisition, whenever we complete, how would it impact NDCF/NOI positively or negatively? Will these acquisitions in general be accretive from day one, that is how you structure it, or to make it accretive, we will have to wait for six months to see that turnaround and then start becoming accretive?
Pritesh, let me, as a concept, take you through how we think about it. Not specific to Vega, but any acquisition that we do, if it is an under leased or an under managed asset, it will need about six to eight to 12 months to actually turn around. So when you talk about being accretive to shareholders, it will be accretive on a stabilized basis. Specific to Vega, I think let us just wait for a few more days. When we close the transaction, we will come out with a note, which will have details around accretiveness, et cetera, and then we can have a chat again.
Okay. But just, keeping your guidance in mind, second half, we are expecting better than the first half. Will this Vega City acquisition impact our guidance, or this is already baked into the numbers?
No, sir, it shouldn't impact our guidance.
Okay. Fair enough. And just on the acquisition pipeline, so three assets in South, one in North. Obviously, three in South, one i s Vega City. Other two, one of them is Hyderabad, or for now, considering the lack of clarity on that, we have taken it out and probably added a couple of more acquisitions there?
No, that's the Hyderabad one that we are awaiting-
Yeah.
regulatory approvals on, and of course, there is one in North as well, that we have completed diligence, and we are in the midst of transaction documentation finalization there.
We have added one more, apart from these three that we have already in discussion, right?
Yeah. So there are three separate transactions. The Vega one has got announced, and it is due to close in the next few days. The Hyderabad one has got announced, and we are awaiting regulatory approvals and clearances there. Then there is a third one, which is an asset up north, where diligence has been completed, and we are actually in the midst of finalizing transaction documentation.
Okay, got it. I was just referring to slide four where you mentioned South India, three malls, North India, one mall. So there are four, but you are talking about three deals here.
Three deals, but that is four malls. Three in South, one in North.
Okay. Perfect. Thank you. That is helpful, and all the best.
Thank you.
Thank you. The next question comes from Parvez Qazi from Nuvama Group. Please go ahead.
Hi. Good evening, and thanks for taking my question. My first question is for Vega City Mall, you were saying that you expect the acquisition to get completed over the next few days. Will Vega City get consolidated from the likely date of acquisition going ahead, or will you consolidate it for the entire full fiscal?
No, we will consolidate it from the day we close the transaction.
Which will be-
Which will be the date when we announce the closure of the transaction.
Got it. You said Vega City has almost about INR 40 odd crore of monthly consumption. When we talk about. Hello?
Yeah, we are there.
Okay.
We can hear you.
Yeah. When we talk about consumption in H2, this number is included in your guidance, or this will be over and above that?
No, it will be over and above. Our guidance is purely organic, like-for-like guidance that we have given.
Sure. With regard to the rentals during Q2, what percentage came from the variable component or revenue share?
It was around 9% to 10%.
Nine, got it. Sure. That is it from my side, and all the best.
Thanks, Parvez.
Thank you. The next question comes from Praveen Choudhary from Morgan Stanley. Please go ahead.
Thanks so much for taking my question. Congratulations for getting such a good number for October. I have one question, pretty much, which is the dividend per share, which is down quarter-over-quarter 7%. I know we should not look at QoQ, normally YoY is better, but we do not have that availability. So I am just trying to understand what drove that, especially because your NOI and revenue is kind of flattish.
Hi, Praveen. Pratik here. I think that is on account of a slight dip in NOI on account of seasonality in Q2. There is a slight dip in NOI, and there is an increase in cash taxes by about INR 15 crore. That has driven the decline in the DPU.
Okay. When you are looking at the DPU guidance for the full year, as the question was asked about the Vega City Mall, it will impact your NOI. Sorry, it will impact your NDCF and DPU in the second half as well. But would you be able to separate that for full year so that the guidance is on organic basis or-
Yes. We will be able to give you like-for-like numbers, so that you will get to the organic DPU growth or number.
Okay, great. Finally, the last question is 9%-10% organic growth that you mentioned on a steady-state basis, which historically you have been able to deliver. Do you think any reason why in future we may not be able to achieve it? We have seen last two quarters, consumption has been a little bit weak in general in India and in retail space. Do you think macro is impacting that at all, or you are very confident about that 9%-10% going forward? Thank you. That is my last question.
I think we have been talking to brands globally, and obviously first half is what it is, but I think brands are very confident that the consumption will pick up in the second half of the year. Almost most of them have had a very strong Diwali and October. So we are kind of hopeful that this momentum will continue in the second half.
Thank you. Thanks so much, and all the best.
Thanks.
Thank you. A reminder to all the participants, you may press star and one to ask a question. Participants, you may press star and one to ask a question. The next question comes from Jatin from Bank of America. Please go ahead.
Yeah, hi. Thanks for taking my question. Quickly wanted to check the ticketed event revenue part, which you highlighted. Do you consider that as part of your retail NOI, which you report? And if yes, how much would your NOI growth be X of that, considering that it was a pretty significant fixed example in that number?
Jatin, this is Rajesh. That is part of the retail NOI, which comes from other streams of retail. But we put that from a perspective that it is not only rental which is coming, we have other streams of revenue, but this is immaterial in the scheme of things as of date.
Understood.
One point that we would like to highlight is that I think over the years, we have moved from being traditionally or owning traditional real estate spaces to transforming these real estate spaces into consumption centers, right? This journey is a journey that has happened over years as we acquire malls and transform them. What this has done is beyond pure rentals, which is MG based. We have added newer streams of revenue.
Revenue share is one that has got added and it gets added to the rental fees. But apart from that, we have added newer streams of revenue, be it branding spaces within the mall, and like I said, we branded our food court, and we are earning a branding income out of it. There is space on hire across the mall, and we are leading that space. We set up kiosks that have the highest per square feet rentals, and we introduce new brands through kiosks. Ticketed events that you touched upon. We try and build in rooftop solars to optimize on costs. So we are trying to build additional streams of income beyond the traditional minimum guaranteed rentals. And I think over the years, you will see that some of these become reasonably large contributors to our retail NOI.
Understood, got it, Pratik. Thanks, Pratik. Thanks, Rajesh. Yeah, that is my only question.
Thanks.
Thank you. The next question comes from Pradyumna Choudhary from JM Financial Family Office. Please go ahead.
Yeah, hi. We are hearing from certain companies regarding signs of slowdown in urban consumption, right? Are we witnessing any initial signs of that? Or would you say our target segment is different altogether and so there's not been any issue?
Pradyumna, hi, Pratik here. I think with what we've seen in October and what we are now seeing in November, we are not seeing slowdown as yet. Obviously, first half was a different story, but as we get into the second half, we remain very bullish that the momentum is back and should continue for the second half. Yeah.
All right. Thank you.
Thank you.
Thank you. As there are no further questions from the participants, that concludes today's presentation. On behalf of Nexus Select Trust, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines. Thank you, everyone.
Thank you.