Awfis Space Solutions Ltd Q3 FY2024-25 Earnings Conference Call

ladies and gentlemen good day and welcome to the Q3 fy2 earnings conference call of office space Solutions limited hosted by spark institutional equities private limited 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 the star then Z on your touchone phone please note that this conference is being recorded I now hand a conference over to Mr Kish CH from spark institutional equities private limited

thank you and over to you sir yeah uh good morning everyone uh on behalf of uh spark institutional equities I would like to welcome you all to the uh third quarter earnings call of uh office P Solutions um the companies represented by Mr Amit Rani the chairman and the managing director um Mr Sumit lakani the deputy CEO and Mr Ravi dugar the CFO uh I'll now hand hand over the call to uh the management for opening remarks and then we can open up for Q&A over to Mr amitra Man sir good morning and a very

warm welcome to everyone present on the call along with me I have Mr Sumit Lani our Deputy CEO Mr Ravi duer our CFO and SGA our investor relation advisers for Q3 and 9 month results we have uploaded our presentation on the exchanges and I hope everybody had an opportunity to go through the same let me start with a brief overview of the business for the quarter we are pleased to report a strong financial performance in Q3 F525 with a revenue growth of 44% year on year to 318 crores this growth was driven by contribution from

newly added higher occupancy across the established centers our strategic Center selection backed by research and groundwork has been instrumental in maintaining High occupancy levels our focus on maximizing utilization continues to yield results with occupancy steadily increasing in key locations as of December 2024 exit mon occupancy stood at 73% while centers operational for over 12 months reached 84% reinforcing our strong demand and our leadership in work flexible workspaces during the quarter our co-working and Allied Services segment grew by 52% to 243 crores contributing 77% to the total revenue meanwhile the construction fit out project including our

design and buil business experienced a robust growth of 35% reaching 73 crores and accounting for the remaining 23% of our Revenue our Abida registered strong growth increasing by 59% year on-ear to 107 crores with a margin of 38 33.8% an improvement of 320 basis points over the same quarter last year this expansion was driven by operating leverage from higher occupancy in mature centers successful absorption of additional seats and increased contribution from Enterprise clients and Allied Services I am pleased to share that we have surpassed 1 lakh 120,000 operational seats across 193 centers Nationwide moving closer

to our Target of 135,000 seats operational by March of 20125 including centers under fit out and letter of intent stages our total capacity now exceeds 1 lakh 60,000 seats across 237 centers spanning an extensive 8.0 million square feet I excited to announce that as of today we have surpassed the Milestone of 200 operational Cent this this achievement reflects a continued growth and Comm commitment to delivering exceptional service the demand for work spaces uh in tier 2 cities has risen significantly since the pandemic while tier one accounts for 85% of all commercial real estate demand there

is a growing Trend in tier 2 cities as well as e-commerce quick Commerce IT services both local and Global and many Global capability centers are increasingly exploring the these cities for talent we are proud to say that office is the first one to go into tier 2 cities we believe that India's 5 to 10 trillion economy is going to be written in these cities in line with this trend we are further strengthening our pres by expanding into another tier 2 City lakau since December 23 we have grown our footprint in tier 2 cities by 29%

increasing from 17 to 22 centers reinforcing our commitment to these high potential markets we are highly optimistic about the co-working sector fueled by strong demand for flexibility speed and quality The increased adoption of hybrid work models the rise of remote work and the companies seeking satellite office in stand of relying solely on centralized headquarters will drive continued demand these factors along with others are expected to propel growth in the co-working industry barring any unexpected macroeconomic challenges we foresee the sector growing at an annual rate of about 20 to 25% let me hand over the call

to Mr sumitani our Sumit our Deputy CEO to share Q3 F525 operational highlights over to you Su thank you AED good morning everyone I would like to share with you the operational highlights for Q3 fy2 on the supply side since December 2023 we have significantly expanded our footprint by launching 55 new centers and adding 41,7 786 new seats strengthening our presence across nine tier 2 cities and six new micr markets this strategic expansion has enabled us to cater to the growing demand for flexible workspaces in emerging business hubs as a result our total portfolio now

stands at 214 centers comprising 142,000 seats and covering 7.2 million square ft of chargeable area this Milestone underscores our commitment to scaling our operations and enhance ing accessibility for businesses of all sizes on year on-ear growth trajectory our year on year growth trajectory remains strong operational seats and centers grew by 52% and 40% respectively total seats and centers increased by 36% and 27% respectively we have a strong expansion Pipeline with signed Lois for 23 new centers adding 18,000 seats and approximately .8 million square F feet of chargeable area on the demand side we have signed

demand contracts for 15,000 new seats in Q3 fy2 and 40,000 new seats in 9 month of fy2 our Revenue base continues to be highly Diversified approximately 66% of our occupied seats are taken by large corporates and mnc's while around 20% are occupied bymes and another 13% by startups with the remain remaining share attributed to Freelancers additionally 39% of our clients operate across multiple centers within our portfolio our Blended exit month occupancy has has remained consistent at 73% and for centers older than 12 months the occupancy rate stands at 84% the total average client tenure is

33 months with a lockin period of approximately 24 months demonstrating strong long-term client commitment a client profile is well Diversified with more than 3,000 active clients as on dece 31st December 2024 this concludes my update I will now hand over to Ravi our CFO for the financial discussion thank you so much good morning everyone and a very warm welcome to everyone let me give you a quick overview on our financial performance for Q3 of fy2 our Consolidated operating revenu stood at 318 cres a growth of 44% on year on-year basis the operating Abida stood at

107 crores which is a growth of 59% on a YY basis the margins stood at 33.8% as against 30.6% in quarter three of last year which is a growth of 320 basis points in QD fy2 our Pat excluding exceptional items is at rupees 14 cres versus a loss of rupes 6 cres in Q3 of last year on the igap equivalent basis which is adjusted for indas 116 lease rentals indas 109 and indas 102 our Q3 fy2 are Consolidated operating Revenue stood at 317 crores again a growth of 45% on a YY basis the operating Abit

stood at 47 cres which is a growth of 114% on a YY basis the margins stood at 14.7% as against 9.9% in Q3 of FY 24 which is a growth of 480 basis points for Q3 fy2 I Gap equivalent depreciation stood at 22 cres and finance cost at rupes 2 cres on a 9 month basis for uh fy2 our Consolidated operating revenu stood at 868 cres a growth of 41% on a Yi basis the operating Abida stood at 286 crores which is a growth of 61% on a Yi basis the margins are at 33% as

against 28.9% in 9 months of last year which is the growth of 400 10 BS on the I Gap equivalent basis which is existed for again inds 116 lease rental inds 109 and inds 102 the 9 Monon operating Revenue stood at 866 crores a growth of 41% on a YY basis the operating Abida stood at 119 crores a growth of 155% on a YY basis the margin stood at 13.8% as against 7.6% in 9 month of FY 24 this is this deflects a growth of around 615 BS for 9 month FY 25 IAP equivalent depreciation

stood at 57 cres and a finance cost as rupes 4 crores in 9 month of FY 25 bat excluding exceptional items is rupes 70 crores versus a profit of 7 cres in 9 months of last year our RI on an annualized basis has improved from 63% in Q3 of last year to 76% in Q3 of the current Financial year the company continues to have a comfortable liquidity position remaining debt free at the N at the net level our debt to equity ratio at the net level has improved to 0.29 as as of December 24th from

a negative of 0.28 as of December 23 this is all from our end we now open the floor for 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 your Touchstone telephone if you wish to remove yourself from the question Q you may press star and two participants are requested to use handset while asking a question 8s and gentlemen we will wait for a moment while the question Q assembled the first question is from the line of of Krishna

sha from ashika stock broking please go ahead um hi good morning so my first question is on the lines of the construction and fit out Revenue what expected for this quarter now that we' already completed close to 45 days in this quarter sorry can you repeat the question u i I didn't understand the question yeah so my question is to understand the revenue segmental revenue coming from construction and fit out projects for Q4 fi25 now that you already completed close to 45 days of this quarter so uh our construction and fit out business uh is

in line with our guidance that we have given which is roughly about uh you know 30% OD growth uh for this quarter we did about 23% came from uh the construction fit out business and 77% came from our co-working business this will continue in this uh almost in a similar kind of a ratio for uh the final quarter as well okay got it and uh can you just help me with the what was the actual rental expense for the last quarter one second uh we'll give you that number just give us two minutes yeah sure

61 crores 61 and what was it for the nine months of fi25 169 okay and my last question is on the cost side I just wanted to understand that cumulative if we look the employee expenses and other expenses uh have increased the percentage of net revenue for the quarter passed by S Q3 uh so can you just explain like what was uh what led to this increase in the cost sorry uh you are saying in the quarter three of the S has increased versus what uh from from the previous quarter as a percentage of net

revenue no but we have seen a decline in this quarter versus the last previous quarter uh for the other expenses for employee benefits you're seeing uh employee benefits have majorly I think because we let me sure sure so what has happened is because of this transition of a care business the office facility management business to an outside company which is SMS integrated Services the employee expenses uh the employees pertaining to that business have they have you know now they the expense for that particular thing has moved to housekeeping and security services so earlier that expense

was appearing as an employee benefit expense now it is appearing as security and housekeeping expenses that's that's why the other expenses have gone up where at the same time we see a decline in the employee benefit expenses okay and it will be it will continue in the similar uh uh manner going forward as well yeah yeah the accounting will continue to be in the similar manner so this changes happened in Q3 essentially okay go and in terms of like the percentage of net revenue also it will be on similar lines right yeah okay all thank

you so much thank you the next question is from the line of Akil from Nama please go ahead hello hello good morning oh yes sir you're a please go ahead yeah hello good morning first and foremost list to the management team on theying such a strong set of numbers I have two questions first question is could you please provide an update on the current status of the office care contraction yeah you can go ahead so as you aware our facility management division namely office care were diversed on a slum Sate basis for a cast consideration

of 275 million out of which we received 255 million in quarter three uh quarter 2 which was recognized in the quarter 2 financials of the balance consolation of 20 million to be received certain milestones and fulfillment of certain terms and conditions as specified in the business transfer agreement rupees 17.21 million has been recognized during the current quarter ended 31st December 24th the same has been disclosed as an exceptional line item in Q3 and Q2 of f25 and the financial results uh the remaining amount of rupes 3 million is expected to be received in in the

current quarter which is quarter four of the financial year okay so that will complete the transaction okay got it so my second question is so as we are seeing with several co-working space companies recently filing a DRP so how do you foresee the competitive landscape evolving and what are the effects that put these developments on the market position and the Strategic plan additionally how does office perceive its position within this changing environment and what potential impact would this increased competition have on your business so uh industry obviously as we can see is growing at a

very very fast pace right India gross leing has been the highest 77 million square feet the highest ever in our history Flex continues to be very very strong with between 20 to 25% of the share um on a year on year basis so this makes us believe that there's a strong and a large market and enough room for everyone to operate um while we continue to hold the market leadership with 200 plus centers and our Network um we believe that our ability to service our our client base is very very strong because of our product

portfolio if you look at the network that gives me the ability to service almost 100 plus uh localities today so that means uh we can service clients in tier one and a large portion of tier 2 cities today uh second clearly we have built our product portfolio in a multier uh product as we had mentioned uh our Flagship product which is office continues to be about 85% of our portfolio office gold which is a bit premium and then Elite which we had talked about last time in our earnings call is uh combined is about 15%

so today we can service every size of cohort and every price point in this country and we believe that this network with this multi-tier kind of product portfolio creates a completely differentiated model second on our supply side we have talked about the managed aggregation model which makes us risk miate when it comes to our occupancy buildup because in majority of our portfolios almost 65% today we are partnered with our landlord which is in a profit share model and the minimum guarantee is typically about 50% of the market rental second a majority of the capital in

this situation comes from our uh landlord partner so this does two things one it makes us asset life and second it mitigates a large portion of our risk um so on the supply side that makes it a big differentiator and that results in a high uh you know return on Capital employed for us as we mentioned earlier it's about 75% plus and we are one of the only few players branded players which are catering to all sizes of Cs right we have talked about almost 55% of our portfolio today is more than 100 seats 45%

is less than 100 seats and which we see as a big competitive Advantage Plus we have the opportunity to have integrated platform which creates multiple upselling opportunities we are expanding DMB and our Tech Lab vertical um so we are confident that we'll continue our upward trajectory based on these differentiating factors and I think the and we believe the market is large enough that many uh large um players can operate uh in this space understood sir thank you thank you for the opportunity the next question is from the line of chenit from gck Capital please go

ahead hello uh Mr chintan your line has been unmuted please go ahead with your question sorry I was on mute uh thank you for the opportunity and a great set of numbers couple of questions you know if if I look at uh uh the ma shift when when we say uh the 83 73% occupancy despite we adding uh significant seat addition uh how do you feel uh the occupancy uh you know to sustain at this level given the demand which you are witnessing in the market see we expect uh the occupancy uh rate to stay

stable in the future as well uh because this aligns the occupancy and the demand aligns with the velocity of a supply addition and uptick in our sales velocity and lower jurn uh if you see uh in this uh Financial year so far over the 9mon uh period we have uh sold closer to about 40,000 seats uh in the full of last Financial year uh which is the financial year of 24 uh we sold closer to about 36,500 OD seats so we uh there's a great increase in the overall new seat sold uh velocity uh and

at the of the year we gave the original guidance that the Blended occupancy uh the whole portfolio level uh will was expected to be about 70 to 73% uh the uh greater than 12 month Center uh vintage uh you know occupancy is expected to be between 83 to 85% so we continue to you know track well on these numbers even the new centers which we are signing up uh we see uh within uh 9 to 10 months uh you know that we are able to hit about 85% kind of uh you know occupancy so U

with the growing portfolio uh we are uh you know very uh you know confident with respect to maintaining uh the overall Blended occupancies right uh great and if I look at your your average seat revenue on the occupied seats or on the on the total seat even if I look at that uh has State firm uh despite uh incrementally the tier two uh centers are getting added in the system right which which uh I presume has a relatively lower rentals versus the uh Metro or tier one city so how incrementally how do you see given

that the model itself has a 5% escalation every year how do you see uh uh your SE Trent is likely to pan out going forward yeah see uh See U at a portfolio level um it's a very interesting kind of question I probably you know give you a bit more U Deep dive into the the way we look at uh the seat pricing and the whole uh the way model Works uh the seat pricing has a direct correlation to the micro Market uh rental and uh the minimum guarantees which we have signed up with the

space owner or at that prevailing period of time uh in the existing client contracts uh for smaller cohorts the General um escalations which we have tied in ranges from 5 to 8% in terms of the larger cohortes the uh the price escalations are usually between uh you know 4 to 6 OD per so at the time of renewals we uh you know get these kind of you know price increases but in a up uh rental kind of you know cycle like what we are seeing right now any new customer which comes in that Center uh

we are able to get a much higher kind of a you know uh calization because uh the calization is directly reflecting the current uh kind of you know rental Trend now because we are across 50 plus micro markets almost about uh closer to 100 localities different buildings which have very different kind of rental profile the Blended uh seat pricing uh prediction also becomes a bit of a uh you know challenge but uh on an overall basis when we look at you know building our financial models we look at closer to about 85% of the business

continues to come from tier one cities uh about 10 to 15% is coming from tier 2 cities and mind it tier 2 cities uh couple of tier 2 cities don't have a lower rental uh profile as well so at a overall level uh at a seat realization uh thing we expect the SE realizations to be on similar kind of a trend great great uh couple of bookkeeping questions one is on on the profit share uh rentals for if you can provide for the quarter and 9 month Visa last year just to have that sense of

profit share of rental you provided the total rental cost but if you can share the profit share uh under the ma model would be great and second is on the uh anary Revenue what what is the percentage right now because in the opening remark you mentioned that inary revenues were the KY D for the growth if you can provide how how that uh inary Revenue has uh has trended over over the last nine months or quarterly you know Visa last year just give us a minute we'll give you these numbers sure I'll join back in

you for yeah yeah thanks thanks and all the very thank you uh yes sir should we move on to the next question hello the next question is from the line of Aman from attitute Investment Management please go ahead um yeah good morning sir yeah um are you through with your calc for the last question or should I wait don't you please go ahead with your question yeah yes my first question is on our uh on our uh cheat cohort so we have around 3,000 odd customers uh could you talk about how many of these customers

uh um take say greater than 100 seats yeah uh so almost about uh 58% of our customers have taken uh I'm talking from a seat basis 58% of the customers have 100 plus that that number I have S I was talking in terms of number of c um oh in terms of the number of clients um I think that number is not handy with us uh currently in terms of the number of clients on a coh Dev basis okay if you can share it uh in later part of the call sure uh yeah and and

my uh another question on this cohort of 100 plus C could you also talk about because this is a very wide coh there will be some customer taking 300 seats 500 seats so is is there a median in terms of number of seats that a customer take in this Cort because average won't be the right uh number to take um and what is the typical CH rate in this kind of sorry can you repeat the second part of the question I could understand the first part where you are asking in a 100 plus seat cohort

what is the usual median uh of seats which we look at what is the second part of the question you asked on this second part was the the CH because beyond the point it might make sense for customer to look at their own centers so just want you to understand say if a customer is above 300 500 CED then it is it more likely to turn what kind of turn are we seeing in say greater than 500 seeds versus between say 100 to 300 ceds sure okay so uh in terms of the average seats in

100 plus seat cohort uh what we see is broadly is about 360 um approximately in our you know current portfolio uh to your question earlier question on the number of clients for G than 100 seats is closer to it's about between 140 to 150 clients who would have taken more than 100 seats now uh it's a very interesting point where do uh a client looks at setting up their own Center versus continuing to be in uh co-working uh or Contin to be in a flex space now the first part to this is U we uh

create a usual cost of ownership for a customer uh When U in terms of choosing co-working versus their own space till about 200 250 y seats um the total cost of ownership if a customer ends up choosing a flex space um is in favor of flex spaces versus setting up their own office and the the savings ranges from about 3% to 20 OD per smaller the cohort it is uh you know better for the overall customer to do in terms of the larger cot of 200 plus or 250 plus seats the customers are generally choosing

uh flexible uh you know operators for multiple reasons one they are looking at tenure flexibility uh if you set up your own space one is looking at uh being in that space for almost uh you know 7 to 8 years and uh you know depreciating the whole asset so CFOs of those companies prefer doing that whereas if a operator like us is giving a three to five year kind of a lock in also it's a uh great kind of flexibility for these customers so flexibility in terms of tenure is one reason why a larger cohort

you know let's say 300 500 cater cohort ends up choosing this second uh a lot of companies now are also not sure in terms of uh the uh overall business model the growth and they want um uh the UPS option to upsize and you know downsize around um you know that's that's the other reason the third which is a massive reason and which brought about the behavioral change in the overall sector was the rise of distrib Ed working today the companies are looking to set up more than one office location in a single City and

that's the reason why uh we are seeing that the average size what uh we talked about uh is increasing in terms of your the flex uh portfolio so these are the kind of you know three reasons U till about three years back I would have given you a very clear answer that uh 300 to 400 seat is the code Beyond which people will end up setting up their own conventional office but the kind of deals we are seeing in the market and the kind of customer profile uh this number is going upward of you know

500 or 600 that's probably a kind of a cut off in my mind where people should end up you know looking up their own offices sure sir this helps just one clarification the number you said 360 is it average I was looking for the median number which is the most common not the average because this is so uh the current available data point which I had was around on uh you know uh the me we'll see if I can give you Medi by end of the call yeah yeah my second question is on our ma

model sir it is a very reative model for our company and even for uh landlord it is good because Roc and everything is quite good uh so we have explained in previous call that uh so there are two returns that a uh landlord gets one is obviously the rental yield but he's also getting a part of profit shares and uh we had explained that uh the yield on the kex that uh the the landlord does is around 10 11% um this is in addition to whatever returns he's getting from the rental whe so on this

uh this question is on this capex and this 10 11% yield so is my understanding correct if a if a landlord is entering in a ma model and he's spending his own money uh then he's getting 10 11% yield for to uh get back that money he he will need 9 to 10 years of leas to get back the uh money he has spent on capex is my understanding correct see uh the way I look at uh is the rental yield on a warm shell basis is closer to about 5 to 6% now in terms

of the return on capex um I would say it is primly the return uh on uh it's more like a interest he's earning on the capital he has spent right so that is uh when I when we say about 10 to 11 OD perc is the kind of you know uh return um U on that uh you know uh Capital there look on a overall basis from a landlord perspective uh their usual payback ranges between four years to you know five years for the uh kex or you know a bit lower than that uh sorry

uh if the yield is 10% how is the pay payback four to 5 years you're including it's not the yield which is 10% I'm saying uh let's say you know someone has spent about 5 wat crores into towards the capex so the annual interest or the return they get on that 10 odd cor only the just the principal amount itself is about you know 4050 odd lakhs uh sorry yeah 50 OD laks 10 %c and the overall payback period uh of the capital uh in which the total Capital gets returned for the space owner is

much lower in terms of the number of years because the uh so that's that's how it works right uh maybe I'll get more clarification is on the side um I wanted to Mr can you please fall back in the queue for further questions sure sure I'll do thank you ladies and gentlemen in order to ensure that the management is able to answer questions from all participants please limit your questions to two per participants and if you have more questions please come back in the que the next question is from the line of moit Agarwal from

iifl Capital please go so Mr chintan the numbers what you wanted profit share for 9 month is 59.4 crores 3 months is 19.4 cres for the current quarter and ASR revenue for Q3 is 31.5 crores which in last year was 15 gr for the quarter three of last year which is a growth of 110% go ahead M yeah hi uh good morning everyone and and congratulations to the team on great set of numbers my first question is on margins and you know if I look at your igap equivalent margins you've been clocking in for the

last two quarters about 15% uh is this the new normal at least in the near term or this margin number could be vulnerable to the kind of seat additions that you make so you know in the next to meet your guidance you'll do almost 13 30 or, thousand uh you know seats that you'll have to operationalize so how do we look at the margins number and if you could give some color on you know how do we expect this over the medium term so moit I think U you know clearly is when we started the

year the guidance that we had given was about 1 and a half% and obviously uh we have done much better than that uh I think uh as far as the seat addition goes I think the trajectory has been almost similar as Sumit mentioned earlier we're looking to add in terms of Supply about 40,000 new seats uh by March of 25 and the velocity of our seat sale uh has improved considerably from last year where last year we for the full year we had done about 36 or th000 seats uh we have already for the 9month

period done about 4,000 seats so obviously our seat addition uh is uh in terms of our new seat scale are keeping in Pace and they'll continue to be in that direction so we have seen our operational evid grow from 9.9% and Q3 of f524 to currently approximately the 15 odd per. uh which is obviously Improvement so this in itself is a significant Improvement on back of our very strong Revenue growth occupancy uh Improvement in Enterprise client Allied Services operating efficiency so at the beginning of year we had given the guidance of one and a half

what we have achieved right now I think we'll continue to maintain that for at least uh next quarter and we will at the end of next quarter uh in May give the guidance for f26 okay um and actually that was my next question but just you know if you could give some color on what kind of seat addition considering the demand Trends and the Lois time uh should we expect uh you know more or less the FY 25 is done so just in FY 26 should we expect you to continue a 40,000 kind of a

number in terms of seat addition it could it accelerate just a broad color or directional color would be fine yeah so uh Mo without going into specifics I would just say um you know we at the beginning of the call we gave the guidance about 1 lakh 120,000 odd seats that are operational uh today uh in terms of under fit out and uh with uh centers where we have signed an Loi we have a additional 40,000 uh you know View our guidance for this full year was 135,000 seats so we already U operational seats so

we have a clear visibility of another 255,000 seats on top um so for F5 26 we feel very very strong uh about the continued growth of our supply uh addition of our seeds uh I would not want to make a specific comment on specific numbers uh we will provide that at the uh next quarterly call sure that's fine and one last question on the construction fed out business Sor to Sir can yeah I'll join back with you yeah yeah the next question is from the line of a Sabo from Choice Equity please go ahead yeah

hi uh can you give us some insights regarding the the rent for seat for the ma model and the SL model and also the kex cost that we incur the per seat for the ma and SL mod yeah so the Kix cost uh what we are incurring at this point of time is in the range what we gave in the prospectus so it is in the range of around 54k per seat kind of a thing so that's a blended between Ma and SL and obviously you know an MA model our side from our side that's

a lower number and when you do a straight leas that's a higher number currently the portfolio managed aggregation is about 65 % of our portfolio and 35% is Straight Lead so when you blend it together it's that 54 odd th000 that you know RI mentioned uh and hence our return on Capital employed ends up being much higher around the 75% plus range okay and also um can you differentiate between like if you have to say like rent proceed for the ma model and the SL model so what would that be so that is not really

uh relevant because when we establish a center be it Ma Center or a Straight Lead Center the seat realization is a reflection of the micromarket rental it is not a reflection of the model that we are deploying um so that is neutral as far as uh it goes it just depends on the micromarket uh rental and obviously you know the specific City and micromarket that we are operating in okay okay so I mean there's no way we can take an average rental for Reed on a Consolidated basis that you can still do the only thing

is for us rental is a function of the micro Market what you know where we Opera but at the company level you can calculate that number of okay thank you the next question is from the line of yesu Agarwal from ARA wealth and investment please go ahead yeah hi sir congratulations set of L and I hope you doing very well I have few questions on uh C working as well as on construction and F out segment so so on the coworking segment the question is that what are the center levela margins in slm model versus

m model and what are and the other question I will answer so the first question than this so um in terms of the U you know as I think we have given the original um guidance around it as well when we do a straight Le the margin the contribution margin at a center level ranges between 30 to 35% uh when it comes to the ma model this ranges between 20 to 24% depending on the structure uh with the cetric landlord and such and the amount of investment uh that is being put in so that's where

the lended then obviously comes somewhere in the range of what 24 to 25 what per. it so and on the construction and cout segment so so I want to know that how the segment is planning out and out of the revenue that we have done in this quarter um let's say the total revenue of DMB segment of this construction was around 75 crores so out of the 75 what part of that has come from the our own business let's say the CeX that has been done by the landlord and what is the revenue that has

come from the third party and how does the margin profiled on both Le yes sir yeah so um in terms of the you know the revenue it's almost 5050 split uh 50% of the revenue comes from um you know what uh the our landlord partners are giving to fit out the center and about 50% comes from third party clients um at a contribution margin level uh this uh business is somewhere in the about Blended between 16 to 177% margin okay and sir how has the growth been for this third party segment in this growth has

been fairly good if you look at it on a year and year basis it's about 40% odd growth that has happened in this segment okay got it so and so the question on construction F out is that what is the working capital requirement sorry can you repeat the question yes sir from con segment what is the working capital requirement so the working capital requirement you can get the number from the segment result however to answer your question uh the requirement comes from the you know so as a construction progresses we keep on bilding the uh

customer bases the agreement which has been signed with the customer so it could be a you know maybe a complete construction then we complete Construction completion so then we build to the customer uh you know once the construction is completed or there could be a milestone based building also so the working capital requirement normally arises from that side so till the time we build to the customer it it consumes our working capital got it sir and sir in terms of days I'm sorry to interrupt sir uh yes can you please come back in the queue

sure sure sure I will come back in que thank you and good luck thank you the next question is from the line of sham from 3A financial services please go ahead hello good morning I'm audible yes yeah so uh I can see that quarter on quarter the P margins that is the profit before exceptional items the margin has pretty much remained the same so can actually it has decreased a bit so can we expect the same margins going on or what what can be the guidance regarding back margin so uh so at the beginning of

the year obviously we gave a guidance which was 1.5% and we are you know delivering more than that so in the next quarter I mean is what we can say is we'll continue with the growth trajectory what we are seeing right now however for the next year margins fi 26 we'll give a guidance uh you know maybe in the next quarter call okay sir and the Blended occup depy rate is around 75% 74 to 75% so do we see it increasing to say around 80 85% in the next couple of years so uh in terms

of the current uh next couple of quarters we expect it to be in the range of about uh 70 to 73% on a blended basis uh over uh you know um uh gradually over next couple of years you will obviously see uh you know the overall uh the the Blended occupancy going up higher because the 12 month plus Blended occupancy ranges between 82 to 85% for us so centers with a vintage of 12 months plus so as there are more centers as a percentage of the total portfolio which are in 12 month plus vintage you

will see uh Improvement in the overall Blended occupancy as well okay so thank you very much uh and uh one of the questions asked by the previous uh analyst regarding the profit share in the ma model is that figure available to us right now yes I think we shared right I think we Shar Shar the just to I'll call out the numbers again for 9 month The Profit share is 59.4 CR and for for the quarter it is 19.4 C okay sir uh that's all from my I will hear very thank you thank you the

next question is from the line of shabia Sai mukarji from baj F please go ahead yeah hi uh uh first question is uh on the cash flows uh if you can provide the cash flow from operations number for 9 month fi25 corresponding to the I Gap equivalent Abita number of 119 crores that I see in the presentation that so uh s s I mean there's no requirement to disclose the numbers in the 9 Monon period uh however we had done that in H1 and we'll be doing that in the full year uh earnings call if

you can disclose the H1 number uh H1 will tell you just give us a moment just give us a moment we are opening the file for H1 yeah sure sure and also if you can give the FI 24 number as well fully number sure we'll come back on this just give us a minute we opening the file over here sure sure so uh for FY 24 uh the cash flow from operation s uh incling the income taxes paid the net cash flow was 229 crores and for the six months period the N net cash flow

from operating activities was 210 crores no no the all this is IND I'm asking for the igap equivalent cash flow number because this cash flow number is inflated one right the act so the IAP the IAP EIT number cash EIT what we usually call it uh for H1 is uh 90.4 and for for FY 24 one second full year you want H1 of last year you want full year okay just give me some sure the reason why I mean in the meantime the reason why why I'm asking is U you know I'm going through your

annual report and U cash flow statement Consolidated cash cash flow statement where it says that 228 crores is a net cash flow from operations but there is some U you know there are two elements uh on the cash flow from financing activities uh particularly on the payment of principal portion of lease liability and interest ped on lease liability both this put together is close to 174 175 crores I believe this number has to be adjusted to derive at the true cash flow number uh if my math suggest this right that number is somewhere around 54

55 cres for the full year 24 um please correct cashit number for the last Financial year was 97 crores and for H1 it was 90 crores yeah uh but um the cash flow the the the the true cash flow from operations number should be somewhere around 54 55 crores for f24 U am I am I correct on so was 97 cres okay 97 cres cash a bit Yeah okay maybe I'll take this offline on the calculation front but again uh coming back to that number so n if it it is 97 crores on on on

uh uh on that number we we had done almost I think 144 crores of Kix last year yes uh so basically our free cash flow is negative uh for fi2 4 and I believe uh H1 is also negative uh so going ahead uh what are our plans for the funding to sustain this kind of growth so so right now as I mentioned we are a net debt free company our debt to equity is minus 0.29 uh so we are sufficiently funded on the and our liquidity position is very comfortable at this point of time and

internal approvals are also very strong so uh to answer your question the first part yeah last year it was uh you know the net cash uh fund flow was a negative one uh we were managing part of the capix from you know from our own sources Equity not from the generations however this year we'll be somewhere you know we'll be mostly meeting our kex requirement through our internal approvals I mean given given the kind of profitability what we're experiencing okay so there will no need for uh fundraise uh for for the expansion plans uh if

you're talking Q4 obviously no we are not going anywhere uh for a fundraise next year I'll not be able to com in at this point of time okay got it okay I'll I'll touch base offline on this thank you yeah thank you the next question is from the line of Ashish kurana from a ank Capital please go ahead good morning uh thanks for the opportunity so I had two broad questions around competi competitive intensity that we are seeing in this sector so firstly on the demand side so as far as I can tell in the

co-working space uh there is no Indian brand with top of the Mind recall especially among the working population probably because the sector is in early stage so now you know it can be argued that awfs is uniquely positioned because firstly I think the sheer number of sent s are high and secondly I think because of you know addressing smaller cohorts as well uh the company is relevant to a larger number of people in general uh so my uh question on this was uh do you think going forward uh in this industry or in this space

you know a consumer facing brand uh with good recognition and identity would be of relevance and if so what are the efforts that the company uh is putting in that uh regard I mean not just the efforts in term of Investments but also in terms of you know execution uh if you are you know conscious about that and know putting specific efforts with regards to that yeah um thanks Ashish um it's a very interesting question you answered a part of it for for us U so uh the way we uh looked at approaching the brand

was also by touching base into a larger kind of a customer segment both smaller midsize and larger cohorts and creating a much larger kind of a network work now the way uh we look at our overall brand positioning and uh strategy is similar to uh what we say as of a Hospitality player uh if you look at uh we have created a multi-tiered approach in terms of product office office Cod and Elite uh in our uh you know internal uh you know discussions we look at similar to like a code chart by marott marott and

JW kind of approach to life uh across every uh brand every Center uh there is a very consistent kind of experience which a customer uh uh you know uh gets and this is where uh uh because we are catering to a B2B uh customer base and the relevant number of companies U or the time for for this in India is closer to about 10 to 15,000 companies now if we are uh you know able to provide them consistent experience to them in one particular City then when they are looking for expans in other city or

other micro Market by default they end up choosing us rather than you know any other Regional or any other you know uh player around because uh from a client perspective also uh the B2B client perspective they prefer working with uh you know at Max two or three uh you know players who gets approved as a kind of a vendor and all so those are that is you know so consistency in exp you know experience um is one of the you know primary uh uh we look at creating the brand apart from it we on a

very regular basis engage U on various kind of you know B2B brand building as well as marketing activities we are very active on uh relevant forums of commercial real estate around like coret uh and uh you know a couple of others and we continue to doing you know a lot of B2B marketing and brand building activities to uh to create uh impact for uh this relevant segment of customers okay thank you for the elaborate answer um second one again with regards to competitive intensity on the supply side U so we uh Target you know a

certain uh profile of uh properties a certain profile of landlords and uh again you know since there are many players you know competing uh uh for I mean I mean you could say uh similar uh uh kind of you know similar kind of a micro Market you know there can be only that much Supply and we have this additional risk of you know filling the centers after uh we have uh kind of you know taken up the property so would that mean that uh you know at a certain point we'll face a supply constraint or

we'll have to you know move at the fringes of the micro Market to keep growing or I mean there's something else which would be a worker on to that yeah so as just from a competition intensity perspective if I can say uh from 2018 onwards uh the SE had been fairly Hy uh you know strongly competitive the top five companies uh which you see within the sector had been fly competing since 2018 for both uh the Chunk on demand and Supply uh we created our differentiation in terms of uh you know uh picking Supply in

a very different manner than most of the competition one we look at partnering with the landlord while it takes a bit uh you know more hard work and longer time but uh we think it creates long-term value second if you look at uh the way we have uh worked is we look at more midsize assets within the portfolio whereas a larger portion of most players look at uh you know more larger size assets so this gives us a larger universe of available uh buildings in the key micro markets in India uh and uh uh it

sounds easier that a strategy that anyone can copy and you know bring about more uh focus on creating more assets and more centers by creating uh picking up midsize assets but on the back end it's a very uh you know one needs to create a very large engine and a strong uh kind of processes uh to operate and run 200 plus centers to have simultaneously about 40 to 50 projects running around to have simultaneously a you know engine which is driving a due diligence of almost about 25 to 30 different properties so the execu capability

is a kind of a very large mode which we have created and we think we have a great level of heads up with respect to competition in terms of uh you know following this strategy now in terms of the overall Supply availability as well uh when we do our maths and we pick up the stock which is available for Supply in the next 1 to two years the target Supply especially of midsize assets uh available for us in terms of the uh available supplyer plus the supply which is under construction in the micro markets which

we need to be there is almost about 300 million plus square feet so I don't uh at least we internally don't have a kind of a challenge in terms of the availability of Supply to be a hindrance uh for our growth uh around uh and uh I mean the execution capability and I assume that uh I mean the fair practices that you follow would probably and your size would probably attract more and more landlords to you anyways right so that should happen yes that's that's correct that's correct okay thank you so much for your answers

all the best thank you thank you ladies and gentlemen this was the last question for today's conference call I now hand the conference over to the management for the closing comments um so with urbanization accelerating in India and the growth of uh Global capability centers in the country and a thriving Services sector we strong Believe The Best Is Yet To Come for the co-working space industry the growth prospects are very promising and we remain highly optimistic about the future we thank everyone for joining the call today we hope we have been able to give you

a detailed overview of our business and also answer your queries should you have further queries or clarifications please feel free to reach out to SGA our investor relations advisers thank you thank you thank you on behalf of spark and institutional equities private limited that concludes this conference thank you for joining us and you may now discuss