Summary
Nirlon Limited - Q3 FY 2026 Earnings Call Summary Wednesday, February 11, 2026, 4:00 PM IST
Event Participants
Executives 3 Ashish Bharadia (VP Business Development & IR, Nirlon Management Services), Manish B. Parikh (CFO & VP Finance), Rahul V. Sagar (CEO & Executive Director)
Analysts 4 Amit Agicha (HG Hawa), Amoksh (Individual Investor), Ashok Jain (Ayush Capital), Laksh Jain (Individual Investor), Satindar Singh (Eon Infotech Limited)
Financials & KPIs (Consolidated)
| Metric | Reported | Commentary |
|---|---|---|
| Total Income | ₹173 crores | +6% YoY; Driven by contracted escalations and high occupancy levels. |
| EBITDA | ₹135 crores | +1% YoY; Growth tempered by operational costs; Margin remains robust at 77.93%. |
| Profit After Tax (PAT) | ₹69 crores | Reported with a 40.04% PAT margin for the quarter; 9M FY26 PAT was ₹275 crores. |
| Occupancy Rate | 99.7% | Near-full occupancy across Nirlon Knowledge Park (NKP) and Nirlon House; only ~7,800 sq. ft. vacant. |
| Cash & Bank Balance | ~₹325 crores | Balance as of January 31, 2026; earmarked for dividends and debt servicing. |
| Borrowing Cost | ~7.7% (Effective) | Priced at 1-month T-Bill + 233 bps; monthly resets; P&L finance cost appears higher (9.7%) due to Ind-AS discounting of security deposits. |
| Loan Outstanding | ₹1,150 crores | Total debt against the asset portfolio. |
Geographic & Segment Commentary
- Nirlon Knowledge Park (NKP): The primary asset remains essentially fully occupied (99.7%). Management successfully renewed ~25,000 sq. ft. with Citi at a rate exceeding ₹185 per sq. ft., representing a significant increase over previous rentals.
- Nirlon House: A strata-owned building with multiple owners; management noted its complexities due to volume and ownership structure but confirmed it remains part of the high-occupancy portfolio.
Company-Specific & Strategic Commentary
- Tax Regime Transition: The company migrated to the new concessional tax regime in Q2 FY26. This move has significantly boosted EPS and PAT margins, influencing the cash available for distribution.
- Lease Renewals & Escalations: Growth is primarily driven by contracted annual escalations within existing license agreements. Management noted that significant rent “resets” to market rates only occur during pure vacancies, as terms are locked for the duration of long-term contracts.
- Restructuring Status: Management proactively stated there are no updates regarding any corporate restructuring or REIT plans. They noted that the benefits of a REIT structure are typically higher under the old tax regime, which Nirlon has now exited.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Rental Income | Contracted Growth | Future increases will stem from inbuilt escalations; no major vacancies expected in the immediate term to reset to market. |
| Dividend Policy | Final Dividend in Sept 2026 | Interim dividend of ₹15 declared; final payout to be decided based on year-end cash balances and performance. |
| Expansion | No immediate plans | No significant proposals for vertical expansion at NKP or acquisitions in other cities at this time. |
Risks & Constraints
| Risk | Context |
|---|---|
| Growth Ceiling | With 99.7% occupancy and no immediate expansion plans, revenue growth is limited to contracted escalations (typically 4-5% range) unless major vacancies occur. |
| Buyback Constraints | Management indicated that current book value debt-to-equity ratio exceeds 2:1, which may legally restrict buyback eligibility under existing regulations. |
| Asset Concentration | The company remains a single-location platform (Goregaon, Mumbai), making it sensitive to local micro-market dynamics and commercial real estate cycles. |
Q&A Highlights
Rental Reversions
- Question: What was the rental uplift in the recent Citi renewal? (Laksh Jain)
- Answer: The new rate is north of ₹185 per sq. ft. with annual escalations. This represents a significant increase over the previous micro-range for that specific space (Rahul V. Sagar).
Dividend & Cash Allocation
- Question: Why was the interim dividend held constant despite higher cash and EPS? (Ashok Jain/Laksh Jain)
- Answer: The interim dividend is consistent with prior years. Management will evaluate the final dividend in September 2026 based on year-end cash positions. The EPS boost is largely due to the new tax regime transition (Rahul V. Sagar).
Finance Costs
- Question: Why does the finance cost look like 9.7% when the borrowing rate is lower? (Satindar Singh)
- Answer: The actual bank interest is 1-month T-Bill + 233 bps. The higher P&L figure is due to Ind-AS requirements to discount security deposits at present value, which is booked as a finance cost (Manish Parikh).
Buyback & REIT Potential
- Question: Will the company consider a buyback or REIT structure? (Laksh Jain/Satindar Singh)
- Answer: REIT benefits are reduced under the new tax regime. Regarding buybacks, the company is evaluating eligibility with advisors, noting a potential hurdle with the 2:1 debt-equity requirement (Ashish Bharadia).
Key Takeaway
Nirlon Limited delivered a stable Q3 FY26, characterized by a 6% YoY growth in total income and near-total occupancy of 99.7%. The quarter was highlighted by the strategic transition to a new tax regime, which significantly enhanced net profitability and EPS. Operationally, the renewal of 25,000 sq. ft. with Citi at rates exceeding ₹185 per sq. ft. demonstrates the company’s ability to capture market premiums in the Goregaon micro-market. However, with the portfolio essentially full and no immediate vertical or horizontal expansion plans, future growth is largely tethered to contracted annual escalations. While the cash balance remains strong at ₹325 crores, management maintains a conservative distribution stance with a ₹15 interim dividend, deferring larger capital allocation decisions to the year-end. Investors should watch for the debt-equity ratio’s impact on future buyback eligibility and any potential vacancies that could allow for further rental resets.
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