Indiqube Spaces (NSE:INDIQUBE) Q2 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the Q2 FY 'twenty seven Earnings Conference Call for Indiqube Spaces Limited hosted by Nirmal Bang Institutional Equities. 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. Then zero on your touch tone phone. Please note that this conference is being recorded. I now hand the conference over to mister Rahul Kundunani from Nirmal Bank Institutional Equities. Thank you, over to you, sir. Thank you, Alaric. Good afternoon, everyone. On behalf of Nomura Bank Institutional Equities, I would like to welcome you all to q two f y twenty seven earnings call of Indiqube Spaces Limited. With us, we have today from the management, mister Rashidash, chairman, ED, and CEO miss Meghnagarwal, cofounder and CEO mister Pawan Jain, CFO mister Vikas Agarwal, head investor relations mister Wangshi Chakrathi, AV marketing.

1:08 I will now hand over to the management for the opening remarks, after which we'll open the floor for Q and A. Over to you, sir. Thank you. Good afternoon, everyone. Hope I can start or you want me to wait for a couple of minutes for people to join? Good afternoon, everyone, and thank you for joining us for Indiqube Spaces Limited Q2 FY 'twenty seven Earnings Call. It is my pleasure to welcome our shareholders, analysts, investors and all the participants joining us today.

2:00 Our earnings presentation has been uploaded on the stock exchange and on our website, and we trust you had an opportunity to go through it. As we are all aware, India is increasingly becoming the world's innovation and operations of The rapid growth of global capability centers, as we call them GCCs in short, multinational corporations and Indian enterprises is changing the way businesses think about their workplaces. Every one of these enterprises need workspaces that can be made available to them quickly, that can scale across cities, offer a consistent experience and more importantly, does not require them to commit significant capital to real estate and infrastructure.

2:46 This is a precise problem INDIQUBE was built to solve. Over the years, we have evolved from a managed workspace provider into an integrated enterprise workspace platform. Today, we manage approximately 10,860,000 square feet across 138 centers in 17 cities with approximately 241,000 seats and a total of eight eighty four clients. Our business model is built around the carefully aligned investment and recovery cycle. We typically take spaces from landlords, develop it into customized workplaces and secure long term commitments from enterprise customers. Our average customer lock in is approximately thirty five months.

3:35 We invest around $16.50 per square foot in the pit outs. And our investment recovery period is approximately thirty six months. A new center typically reaches operational breakeven at around 55% to 60% occupancy within six months of rent commencement and it approaches steady state within twelve months. There is another important aspect of our model that we want to highlight. Our landlord arrangements typically have long underlying renewals, averaging around fifteen years. However, our lock in commitment is approximately on an average thirty eight months, after which we have the option to continue or exit subject to contractual terms. So what happens, this structure gives us access to long term supply while maintaining flexibility in our own commitments.

4:29 Let me now turn to our financial performance. We have delivered another strong quarter, as you would have seen with our earnings presentation. In Q2 FY 'twenty seven, our revenue was approximately INR $4.75 crores. This has grown 34% year on year. EBITDA as per IGAP stood at INR 105 crores, growing 40%, while PAT was INR 57 crores, and that grew by 63%. For the first half of the year, since we just completed H1, our revenue stood at INR $90.04 crores, growing 35% and that was INR 92 crores, growing 66% compared to the same period last financial year.

5:18 We also paid income tax of INR 22 crores in FY 'twenty six full year, and we have paid INR 13 crores in the first half of FY 'twenty seven. Our VAS revenue has reached INR 154 crores in H1. And this has grown very substantially, 74% year on year. And now this contributes around 17% of our operating revenue compared to last year, which was 13%. Now 17% of our operating revenue is coming from value added services. Our steady state occupancy has also improved to 91% compared with 89 last year. This is an important demonstration of how portfolio maturity, improving occupancy and additional services are contributing to our growth.

6:08 Looking ahead, we have a significant growth runway. We approximately currently have 3,800,000 square feet of headroom, and this represents about 85,000 seats. Of this, for approximately 2,670,000 square feet, we have the NOI signed. And this space is expected to become operational over the next twelve to eighteen months. The balance 1,140,000 square feet space is available in our operational buildings. And this can be offered for client occupancy on immediate or shorter notice. Our expansion is also guided by the location preference of enterprise customers and access to talent. We are continuing to deepen our presence in key micro markets of National Capital Region, NCR, Mumbai and Hyderabad, in addition to already what is happening in Bangalore and Chennai. Approximately 80% of our centers are within three kilometers of metro station and 3,460,000 square feet of our portfolio is green certified.

7:16 With that, I will now hand over to my co founder, Meghna Agarwal, who will take you through our strategy and key business insights for the quarter. Thank you. Thank you, Rishi. I think the numbers Rishi has shared demonstrate the scale we have built and the strength of our underlying business model. We are building long term enterprise relationships and the customer increasingly see us as a strategic managed space partner capable of supporting their growth across multiple locations. And a few numbers to reinforce this, 54% of our revenue comes from GCCs, reflecting a strong positioning with the global enterprise. 41% of our revenue comes from the client occupying more than one INDIQUBE center, demonstrating the depth of our relationships and ability to grow alongside our clients.

8:07 Clients with requirements of over 300 seats account for 65% of our occupied space, and these clients pay us for an average tenure of about forty seven months. Across the portfolio, the average client tenure is approximately forty two months. Nearly 63% of our clients acquired through our own brand and direct channels, while brokerage accounts for just 2.29% of our operating revenue. This reflects the strength of our brand, direct customer relationships and distribution capabilities. These numbers tells us that we are building much more than a managed space business. We believe the opportunity ahead of us is significantly larger than the traditional managed workspace market, and we are extremely excited about this journey.

8:53 Historically, enterprises manage the requirements like real estate, design, infrastructure, technology, food, transport, employee experience, sustainability and ongoing operational management through multiple vendors and fragmented relationship. We believe that there's an opportunity to bring these capabilities together through a single integrated enterprise based platform. And our strategy is, therefore, built around three distinct layers of monetization. The one layer of monetization is GROW, the core platform. GROW is a managed workspace business and the foundation of Indiqube. It provides reoccurring revenue, contractual visibility and a nationwide network through which we serve enterprise across multiple cities.

9:40 As centers mature and occupancy improves, this layer also benefits from improving operating leverage. More importantly, Grow creates the customer relationships and physical network from which the rest of the platform can scale. Our layer two is managed space services, meaning expanding the customer wallet share. The second layer is all about increasing our participation in the managed space life cycle. Once an enterprise occupies a space, it needs multiple services to operate it effectively. Through Indiquare, we provide facilities and property management, IT, food and beverage transportation and other workspace services. We are also taking these operating capabilities beyond Indiqube centers into a distributed commercial network such as retail outlets and branch management across India.

10:32 Through DesignQube, we are leveraging our design architecture and project execution capabilities to serve enterprise customer beyond the spaces managed by Indiqube. Our proprietary technology stack, myCube, sits across these layers, helping us manage service delivery, operations and a consistent employee experience across locations. This allows us to grow with the customer without necessarily adding more real estate. And the layer three is the strategic adjacencies, deploying the growth capital. The third layer focus are the agencies where our existing capabilities and the customer relationships allows us to deploy capital selectively and create new revenue opportunities. Our solar journey began in twenty nineteen-twenty twenty with rooftop installation across our properties.

11:22 Since then, we have scaled to more than 40 installations expanded into captive solar generations across Karnataka, Maharashtra and Tamil Nadu. We currently have approximately 30 megawatt plant of operational capacity with another 30 megawatt expected to become operational over the next year. We have already generated close to INR 15 crores in revenue from the solar solutions in H1 against an investment of approximately INR 46 crores. Under Indiqube Echo, we are scaling such sustainability solutions across green power, green building certifications, energy efficiency, water conservation, waste management and renovation. We are beginning to see these three layers of monetization come together.

12:07 And as we look ahead, we believe INDIQUBE is entering in a very exciting phase of its journey. GROW provides a reoccurring revenue base and the customer network. Workspace service increase our share of customer spend and extend our participation beyond the physical workspace. And lastly, the strategic agencies allow us to deploy growth capital selectively into capabilities that strengthen the platform over the long term. Our ambition is not simply to build more workspaces. It is to build India's most trusted integrated and profitable enterprise workspace platform. We remain focused on the disciplined growth, stronger customer relationships and sustainable long term value creation for our shareholders. Thank you for your continued trust and support, and we'd be happy to take your questions.

12:55 Thank you. We will now begin the question and answer session. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment for the question queue to assemble. The first question comes from the line of with Ambit Capital. Please go ahead. Hi. Thanks for the opportunity, and congratulations on a great set of numbers. I just wanted to know your thought process behind, you know, the proposed investment of 35 odd crores you have made in realty private.

13:48 So if you could just, you know, give some rationale behind that, that would be great. And also on your solar CapEx, you mentioned you've already done INR46 crores of CapEx during the year. So going forward, how much of CapEx are you earmarking for your solar plants? Yes. Thank you, Sumit. Steve, for the high edge, what happens is that, as you know, a lot of our portfolio is in two core micro markets where occupancies traditionally have been more than 90%. So supply has always been a problem. Getting ready to move in supply is not easy. So what we realized is that it is a good strategy that we go and identify land parcels in those kind of locations, which are not very large. And we work with either the landlords or investors and try to, in a co ownership model, develop these assets where ultimately Indiqube leases asset and that asset is available for forward sale or is sold once the building is ready for occupancy. So that is a model which we are looking at as a pilot for one of the properties in Bangalore.

15:05 And in that micro market, we already have almost 800,000 square feet of space. And everything is full. We are already running at 97% occupancy in that micro market. So with this asset, we want to create a long term strategic supply as per our requirement. And also, as you can imagine, once the forward sale or eventual sale happens, this will give us some capital appreciation. So it's a two pronged thing. This is a pilot we are doing. Depending upon how this pilot goes, we can consider as a part of our strategy to do similar kinds of things, maybe in other locations. But that's something and this is still in the formative stage. So once we basically close the transaction, have more concrete details, we'll share that. Regarding solar, as Megha mentioned, we are currently under process of doing a 30 megawatt expansion, so which will be about INR 100 crores kind of a capital expenditure that is happening.

16:14 For the next year, we see a similar kind of addition being planned. And what is happening with solar specifically because we have very successfully done it for our set of buildings predominantly in Karnataka and in instances in Maharashtra and Tamil Nadu, a lot of our clients are coming and saying that they have other buildings, why can you provide us green power over there to meet their ESG requirements above. So broadly, we see about INR 100 crores of investment like this year, happening next year also into the solar expansion across predominantly these three states, yes. Got it. And for full year FY 'twenty seven, what sort of EBITDA margins are you looking to clock? It will be about range bound. Our EBITDA will be between, I will say, 19% to 21% in that range is the full year guidance that we see. And this should put us about $3.80 crores to INR 400 crores EBITDA margin for the full year.

17:16 That's how we see it. Yes. Okay. Understood. Thank you and all the best. Yes. Thank you, Shantanu. Participants, please press star and one to ask a question. The next question comes from the line of Adi Dev with ICICI Securities. Please go ahead. Yeah. Good afternoon, everyone. Thank you for the opportunity. Sir, just wanted to understand the uptick in the cash EBIT margin for the quarter, and the VAS revenue also has been higher.

18:05 So could you explain why the margins would have picked up quarter on quarter? Just some broad breakdown, if you could help us. That is one. Secondly, with this guide, by the end of this year, what is the operational number of key store area we are targeting? And what is the similar thing for FY twenty eight? Yeah. Those are my two questions. Questions. Okay. Thanks, Aditi. So as you mentioned that revenue growth is about 30% and there's an uptick in the profitability. So there were there are a few factors to it. So one is the improvement in if you see the steady state occupancy from 89% to 91%, which is about by 2%, that itself contributed to 40% of growth. Reduction in the finance cost has happened by 1%, which has contributed 25% growth.

18:53 Our VAS margin has also improved by 5%. And fourthly is the operating leverage. So there has been a reduction of one person in the salary and other costs. So when you put all these factors together, all four of them, that is given as the uptick of the profitability. Second question is... Yeah. The second question you said Yeah. Please go ahead. Yeah. Do you have any question on this one? So just all this... Solar plants you're putting. Right? We just maybe quantify or just qualitatively explain, like, in terms of operational profitability, how it is helping us, the solar CapEx we are doing just to... In broad understanding to provide. So solar is, I... Honest, is is giving us... It's it's... Payback is about three years.

19:39 But our revenue, you know, in the back, you know, because it's a multiple... The revenue is a combination of multiple services. It comes food, transport, solar, technology, even design cube. So as of now, these services are not of that scale, where we are kind of dividing and individually giving it the individual P and L account. I'm very, very sure and very hopeful over the coming quarters. Once they are in a certain stage and scale, we would be able to give you individual P and But overall, as of now, we consider the margin of the vast has improved from 15% to 20% overall. So this is where we are, which includes them in solar also. And the solar itself has given us a revenue of about $15 in h one. Okay. Okay. So this 20 sort of vast margin is now the new floor means the... This is the minimum we'll be doing going ahead over the The thing is... I mean, yes. But but the point is, Aditi, we have always mentioned that the VAT is also like a foot in the door, you know, for our clients.

20:37 Right? So there are lot of times for especially the larger companies, MNCs and all, you know, we start with the services. It's like a foot in door. So so margin is not the priority as of now. We always maintain for INDIQ growth is the priority. I mean, definitely, we will not grow at any cost. But with the foot in the door, the... My margins could reduce, but it will be, again, range bound around about 18 to 20%. Okay. Okay. Got that. Yeah. Yeah. The second question was about your area increase. Right? Yeah. For this year and maybe next year if you have some color in terms of yes. So this year also isn't a similar time line, the similar numbers in which we've been talking about is close to about 2,000,000 square feet in the rent paying area, we would be adding it, which would translate about 44,000 seats per year. And you could see us also from the Slide 18, if you go through in our investor presentation, our total portfolio signed is about 10,860,000 square feet, which is about 240,000 square feet.

21:40 50,000 is about rent yielding area. So that itself gives you a significant headroom, I would say, which is about 3.87 as about 85,000 seats of headroom that would be operational in the next twelve to fifteen months. So similar kind of a numbers is also what we are forcing in FY 'twenty eight too. Sure, sure. And just last one, if I can squeeze in this, the one where we have a... In Kurramangala, the new building where you are proposing bit on our ownership and model. What is the timeline? Is there, like, three years away, or it will be ready in eighteen months or anything? Can No. No. It's it's a land stage. It's definitely going to take about close to about three years. It's three years away. Okay. Three years away. Okay. Fine.

22:26 Yes. That answers my questions. Yes. Thank you, and all the best. Thanks. Thank you. The next question comes from the line of Mohit Agrawal with IIFL Capital. Congratulations on great set of numbers. I have just one question. This is on our strength lies in a lot of leasing that happens in house. What kind of advantage does it give us when these contracts come up for renewal? So let's say, point five, four years, typically when they will be up for expiry. What percentage of our contracts are renewed by the same tenants? And second part to that question is that how are the terms how do the terms change typically considering that the fit out cost and all may not recur for a renewal?

23:20 Typically, would the terms for a renewal client be different versus, let's say, re leasing client, if you could give some color on that? Thank you, Mohit. So see, our attrition is about close to 10%, I will say, annually. That's the attrition. So suppose we have a rent yielding area of 7,000,000 square feet. So you will see about 700,000 square feet of space, which will be coming up for attrition, is the attrition. The attrition is around 10%. Second thing is whatever contracts come up for renewal, there, we are seeing that 80% of these contracts get renewed with no change. Like for example, we have an escalation clause of about 6% in our contracts. So most of the clients go with that.

24:12 There is a so 80% are like that. 10% clients are there where we have to give some relaxation in the escalation. Maybe instead of 6% escalation, we may agree for 2%, 3% escalation. And there are about 10% cases where we have to give some discount. So suppose a client has stayed with us for three years, four years, and we have recovered a large part of our capital expenditure, we provide some little bit of discount. But overall, what we have seen is that there is an increasing trend that our renewals and all generate about, I will say, 5% growth year on year. That has been the thing for us over here. Sure. Rishi, just a couple of clarifications.

24:58 You said that if you have 7,000,000 square feet of area, 10% comes up for expiry, which is what you call as attrition. Of that seven lakh square feet coming up for expiry, what percentage would that a contract would renew with the same client, you could share that number broadly? No, actually seven lakh is what they leave. That is the that's what people are leaving, is about ZAR 7 lakh. And yes, yes, that is what they are leaving. And any I will say about 1,000,000 square feet. So basically, about 90% of the customers, they renew the contract typically. 10% will be what will be the attrition. That's what you see happening over there, yes.

25:45 Understood. Understood. And one more clarification. You said that with most of 90% contracts, 80%, 90% would be on same terms. What happens to the fit out cost? Is there a refurb cost that you incur for them? Or typically that continues? Because I'm just trying to assess the profitability of a renewal contract. Is that meaningfully higher or the discounts kind of take care of the lower fit outspend and that is the thing that I'm trying to answer? So basically, our if you ask me, the way we have said also earlier that we invest about $16.50 now that and a lot of them which are coming up for renewal that CapEx was INR 1,500. So technically, in the three year period, when the lock in gets over, which is our typical lock in, we have recovered most of the CapEx.

26:37 So if you ask me, the EBITDA, which we were getting till then actually converts to more of a PBT kind of a scenario because CapEx has already been recovered. So that is a very healthy thing that most of the money that we get after three years is pure PBT from that perspective. And as I said that about 5% year on year, even on the renewed contracts, we are able to achieve the escalation on them. And why it is happening is also because a large part of our portfolio is into the key and the core micro markets, where you don't see that 5% rental inflation being a challenge actually. In fact, a lot of our properties have seen even inflation, which is more than that. And the third point that you talked about the renovation and that expense, Typically, I would say, about forty, fifty a square foot is on an average is the investment that we do when clients renew and that we don't capitalize.

27:35 So that is treated as an operating expense. So that's how we have been doing. So that's and moreover, whenever any renewal comes in, we insist on a new lock in. See, for example, if somebody is renewing and is not giving a lock in, then even this INR 50 is not spent on that. Suppose, they want to extend by year and all that. But if we are giving us a two year, three year commitment, then we don't mind putting some more CapEx. So that CapEx or I must note CapEx is not the right one because we are expensing it off. But whatever additional investment that we are doing is only done, and we use that as a currency to see that the clients give a higher lock in subsequently or renewal. Great. This is clear. Thank you so much and wish you all a very happy Diwali.

28:25 Yes. Thank you. Same to you. Happy Diwali. The next question comes from the line of Rishit Shah with Axis Capital. Please go ahead. Yes. Thanks for the opportunity. Two questions. So firstly, on the branch management business that you elaborated in the opening that you alluded to in the opening remarks, can you elaborate a little more on it? And on a related note, so this is a new segment that we are entering in. We are also looking to co develop the new property while also kind of continuing to expand our vast offering. And our grow business continues to expand. So how do you... With these multiple business or multiple segments in mind, so how do you think of management bandwidth in this regards? Those are the two questions. Thank you.

29:13 So look, Indiqube has always been there. We've been managing the operations of of the offices, you know, whether it is food or the facilities, transport, everything. Now I would say it's again a pilot what we've done in the Indiqube retail sector. Because when we were talking to few banks, you know, they happen to see our technology, the MyQUBE stack and all. They said, why don't you also sell us, Because when it comes to even the retail and the branch management, 80% of needs are similar. It's a similar kind of a workstation, similar kind of a manager table, similar kind of a grid ceiling or a gypsum ceiling, the visitors' chairs, filing, everything. The 80%, I would say, the interior is mostly the same. And here we're talking about large volume. We're talking about the fintech, the branches are an uptick mode. So they're talking about like 500 branches to about 1,000 branches every year. So it's a new segment, I would say. We are entering into retail. We are still testing the water. We have done for a large gold bank, we have done at least close to about 30 branches so far.

30:21 And we're still learning the role, but as I said, it's 80% the staff is same. It's not separate. And just because we have a present in our 17 cities, we do have the network of the partners, vendors, the supply chain management is always there. It is just we are kind of leveraging on the entire life cycle, which already the grow model has created. So it looks like it's in a different one, but it is not. It's a different vertical which we're entering into it. And regarding the management bandwidth, I said grow model is, you know, it is taking a bandwidth, but it is but it is still... You know, we... We've been doing for the last ten years. So we we know how it kind of do it. So, like... But 50% of the management bandwidth is grow it goes into your existing expansion, existing grow model expansion and the 50% goes into finding out the newer opportunities, right, like the way we have done in the pilot in the buying the asset in the site property or getting into INDIQUE retail.

31:18 It's kind of a balance which we do it. Because in the retail, if you see the Thailand, India has lower penetration than Thailand in retail. So it's a large market we are talking about. And we are taking very baby steps into this thing. Sure, sure. That explains a lot. Just a follow-up. How are the commercials that you're thinking about on the branch management segment, or is it too early to comment? It is... Honestly, it is early because the branches we are talking about is about 800 square feet, about 1,200 square feet. They're costing the CapEx cost because it is there are two models into it again. It is one is the refurbishment or the new branches plus the management of those branches. So what is the value proposition to them that every all the branches, for example, if any company got about 1,000 branches, they come to our MyQUBE platform and they can see the dynamic dashboard depending on the shareholders, they can see all what was all happening in these branches.

32:20 So when you say the renovation or the new branches, there's a CapEx model. Their CapEx would be around about INR 1,400 to going up to 1,800 per square feet. And the management of the branches also depend on the OpEx model, depends on the number of hours they want the facility or the security of the store manager. So it's a little early to predict then, but yes, but this is the ballpark figures we're talking about here. The next question comes from the line of Dahlia Trivedi with DJT Investments. Congratulations on a very strong set of numbers, and thanks for taking my question. So we had a rent paying area of 7,840,000 square feet at the end of FY twenty six, which is now at 8,200,000 square feet.

33:12 So giving a guidance of adding 2,000,000 square feet area this year, which means the one company square feet relation is going to come in h two. Then in that scenario, should our EBITDA growth in h two be much higher than the 37% that is done in h one? I'm just trying to reconcile the numbers with the guidance that we've given. So so so you are right that a lot of addition of space will happen in the second. So I think the right comparison will be that if you look at, say, for example, our last year number, say, Q2 FY 'twenty six, our rent paying area was INR 6,700,000. And we today for the Q2 FY 'twenty seven, we are at 8,200,000. So we have added almost INR 1,500,000 over there. And there will be area addition. And in fact, it is the other way, like because when new rent paying area gets added, it takes us six to twelve months to achieve steady state occupancy.

34:15 So basically, is definitely a period where our pre operating cost and all that starts coming in. So a lot of gains typically accrue beyond a year of property acquisition. So have quarter. Lot of inventory the we a And mostly on the EBITDA and all that margin and all, you will see a range bound. Typically, are at 'twenty two, you will mostly see us between 'nineteen and 'twenty one, 'twenty two kind of number. So I don't see that there will be too much of fluctuation. But yes, there will be a good amount of rent paying area that will get added in next.

35:04 Okay. So what is the rent paying area that we are seeing at the end of FY '27? Yes. Yes. Just wanted to understand what will be the total operational square feet and the total number of operational seats at the end of FY 'twenty seven? One minute. Yes. Just... Yes. So INR 9,700,000 will be the rent paying area at the end of FY 'twenty seven. So yes. Okay. And just one last question. I mean, I see the Q4 FY 'twenty six numbers, the total operations square foot was 7,840,000, which is now moved to 8,200,000, but the total number of operational seats has remained the same.

35:51 So any reason why this has happened? No. No. In the quarter one, the the operational was 7.8, and in quarter two is 8.2. So so there is a change in the operational seats. So I... Which numbers are we referring here? On the operational square feet, it was 7.84 in... At the end of q one FY twenty seven, which is now 8.2. Right? Yes. Correct. But, I mean, in the presentation, the number of operational seats is more or less the same. So there will be... There there is a... So if you... Actually, the easiest calculation is the million square feet because... So because we have varied kind of clients. Right? So the people would not take on just the number of seats.

36:37 The moment any client goes beyond 100 seats, then they do a deal and that's per square feet. So the easiest calculation, which is also mentioned in our presentation, that we divide the area with 45. So if you divide 7,800,000 square feet, divide by 45, you will get the number of seats and operation, and similarly, 8.2. So this is a difference could be just about 10, 15,000. That is probably why you're not seeing the thing. Like, a 7.8 divided by 45 is about 17,000 odd seats, and 8.2 is about divided by 45 is... Yeah. So this is how you have to do the calculation. Right. Okay. Alright. Thank you, all the best. I don't know which number because in our presentation also, it it... It's a different number.

37:24 So if you can refer me the slide, that would be easier for us to understand. A reminder to all participants, you may press star and 1 to ask a question. The next question comes from the line of Chayan Jain, an individual investor. Please go ahead. Hello. I'd like to congratulate on your amazing set of numbers. So my first question is regarding your investment in and into solar. So are you not seeing enough opportunities for growth in your core business as compared to your peers? And what is the profitability and growth breakdown across these new segments? Basically, Chen, thank you so much. If you look at, as I said earlier, with one of the questions, the high edge investment that we are talking about is exactly in line because what is happening is a lot of good performing micro markets, for example, in Bombay, if you look at Adairi today. And if you try to acquire good quality properties in Adiri, it is not easy to get something off the shelf.

38:35 So you need to go well in advance and plan. So basically, so this is more like going upstream for us, where we are looking at that, okay, if we can see it's like, suppose tomorrow, our hotel chain says that I want to open 10, 15, 20, 50 hotels, right, in good quality locations. Now one way is you go with the bag of money, try getting it, but you don't get that. So very similar thing, are finding that in very high performing micro markets, the properties are not there. So there, we are looking at that how can we work with, say, investors, landlords in a co investment model and create the supply. And once the supply has been created, Indiqube leases the supply and then the asset is transferred. The idea is not like basically that where we want to hold the assets in Indiqube's balance sheet and P and L. So it's like a, you can say, co invest lease and sale kind of a sale and leaseback kind of a model. So there, we are seeing that this allows us to create good quality supply. And then as I mentioned, this is a pilot that we are doing.

39:40 This is that we will see that how we have to take this forward. Now talking on the solar, again, as Mekna mentioned that we basically, like when we started into like the solar journey in 2019, 'twenty, from there, we have reached a very good place where we already have 30 megawatts of installations, all of that. And now this we are seeing as a big opportunity because if you look at a lot of our clients, most of the clients have a ESG target. They have to transition to green. And that is one of the big workspace solutions that we are asking for. Since we already have the capacity, the capability, we are co locating and trying to build out the solar assets, which take care predominantly of our own requirement.

40:28 And at the same time, if we can extend that to our clients typically, that gives us better operating leverage, economies of scale and all of that. So it is more like a adjacency that we are seeing. We are not looking at like going utility scale solar or doing a few gigawatts of installations and all of that. So predominantly, what we are solving for us and along with that is what is happening. This is more like adjacencies kind of opportunity. And five is more going upstream to basically secure high quality suppliers in prime micro markets. So how much will it impact the margins and the payback period? Look, there will be no impact as such.

41:15 Why will there be impact? Because this is like as I said, that this deal is still in the works because we needed to create an entity, that's where you have seen the announcement. And we will share details in subsequent calls. But there will be no margin impact because that INR 35 crore investment that we are making is it will happen at a basically a very high yield asset. And when the asset will eventually be sold, it will happen at a substantially lower yield. So there will be substantial amount of basically capital gain that we will get. And the property will come like the regular property, like any regular property of Indiqube that we take on long lead. Eventually, it will be like that. So the way the numbers will be that by investing INR 35 crores, we are looking at making a few times actually profit on that, not in the percentages by that investment, yes.

42:18 Okay. Understood. And my second question would be around your onetime revenue. So what was the onetime revenue booked under VAS and rental revenue for this quarter since the rental revenue sort of increased by 10, yet the occupied seats increased by 4% or 5%? So there are two questions in here. So the thing is we are actually the reoccurring and nonreaffirming was creating a lot of confusion because nonreoccurring is also kind of a reoccurring. So it might not be the same client, but the revenue, the numbers would be same. So now it is a little tough for us to kind of so we are talking about the total revenue now because this would be reoccurring nature. The client name could change. So there's no further bifurcation what we are doing for the recurring and non reoccurring year.

43:11 And on the rental revenue front? So the rental, you've been saying so your question is that your occupied areas only increased by 21% and the revenues increased more. Is that the correct question? Occupied seats increased by four to 5% on a quarter quarter on quarter basis and rental revenue increased by 10%. Yes. Yes. So same thing. So even this occupied area of the seats, as we call it, it cannot translate. We cannot see it translating into revenue growth on a one to one basis. There are multiple factors which kind of impact the revenue growth. And the factors are, one is the rental escalation because existing contracts typically carry annual rent escalations, as we mentioned earlier, also is 5% to 6%, which kind of gives you the growth without incremental addition to the occupied area or the seats.

44:00 Secondly, the higher VAS contribution because we have seen the increase in the VAS revenue contribution that also do not translate to the area, but it translates to overall revenue growth. Plus there's been a change, there's been uptick in the steady state occupancy from 89% to 91%, which is by 2% that has also contributed to the revenue growth. So the occupied area cannot be seen on a one on one basis here. The next question comes from the line of Rahul Kundanani with Nirmal Bank Institutional Equities. Please go ahead. Yes. Sir, congratulations on good set of numbers. I just had one question on the vast fund.

44:47 So vast is currently 17% of the total revenues. Do we see as in... Where do we see this number going ahead? Do we... As in we are quite ahead of peers in terms of batch revenues? Do we see it going to 20... More than 20%? And by what time? And how much time do we see this increasing? Yeah. So as you rightly pointed out, our batch has been contribution has been consistently increasing from 12 to 15% and now it's about 17%. And the VAC remains a definite integral part of the strategy and the client offering. Going forward, we're expecting the VAS revenue to increase further by at least 2% to 4%. So while the quarterly percentage honestly might because the quarterly percentage might change and fluctuate, But on a yearly basis, we see growing minimum 2% to 4% with from the existing percentage what we have today.

45:45 Got it. And the last one on occupancy. So do we see our occupancies, are there a small dip in the overall occupancy from 87% to 86% this quarter? So do we see this trajectory increasing and going towards 90% similar to the mature one? How is the try... Tragedy would be over the next one year, one and a half year? So, again, you know, it is it is it is very tough, you know, because the quarterly will vary. That is the model, I think, one we have to... All of us have to embrace with because the quarterly fluctuations would happen depending on the rent area addition, and we take about five to six months to breakeven and nine to twelve months to reach about 90% of occupancy. Ideally, we do not want to grow more than 90% because that do not give any room of growth to the existing clients. So 90%, 91% is the maximum we would ideally like to go for the steady state.

46:38 Now the quarterly fluctuation is we do not look at if 86% has gone to 85% or 87% has gone to 86 We always maintain these are range bound. When it comes to the steady state occupancy, we have to look at 85% to 90%. And when we are talking about the corporate occupancy, we have to look at the range of 80% to 85%. That's the healthy way of looking at it because that gives a headroom of growth for the client to expand. Because the same client, if you could see, my 42% of my client, the same client is growing with us. So if we do not have the headroom of the growth, where would I give them the supply? And most of my supply is in the best of the micro markets, right? So I have to kind of control my supply and make sure my client expands with us. Right? Because if they do not have that growth space, they they would leave.

47:23 So, you know, it's better and and this is an inherent business need, 80% to 8585% to 90%. Please do not look at it as a look at it as a dip or even an increase. It's a range bound. Got it. Got it. And the last one would be, what is the ambition in terms of a 30 megawatt generation capacity? Where do we see that going? And how much of incrementally are we going to have this 100 crore CapEx for this over the next couple of years each year? Just a bit of color on this one. So basically, as you mentioned, the payback is about three years in this whole investment. So if we are doing an investment of about 100 crores, we expect about INR 30 crores worth of basically returns to come to us so that over a three year, we are able to recover our money. And as I mentioned, we are not looking at like basically hyperscaling it or doing that at this point of time. The primary focus will be mostly Karnataka, Tamil Nadu, Nadu, Karnataka, these three states and building it around our clients, enterprise clients that we have for their portfolio of real estate, focused on these three locations and around that kind of a number. So there is very healthy, I must say, unit economics.

48:47 And since we are working with a set of clients, which we already know where we have relationships or we understand them, we see that this should be very, I will say, sustainable, predictable kind of opportunity to tap in. Also, I must mention because we understand that today, if you look at even IRDA or you look at, say, RBI, the way they are going and basically in a way nudging the banks as well as the insurance companies to actually have very high level of ESG compliance. Now this is this we are seeing as a very good opportunity because we have been one of the early guys to implement a lot of sustainability solutions at scale. So now we are getting a lot of requests. We are working with two large one large insurance and one large bank, where we have picked up the mandate to do the entire audit of their ESG compliances across India.

49:51 Now basis that those insurance companies and banks are now saying that, okay, you have identified these problems. Can you help us mitigate all of that and ensure that we are green certified? So we are seeing green as a very, very big opportunity to have a foot in the door and start working with a new set of enterprises. And as we talked about the branch, the retail, a lot of those opportunities are also opening and the foot in the door for us is not just what Indiqube has been doing so far, but foot in the door is becoming the ESG part of it. So we are seeing solar, our both ECO products more in that way that this is the top priority for customers because it is coming from regulators.

50:37 So that presents a very, very good opportunity for us. Thank you. The next question comes from the line of Hitendra Pradhan with Maximal Capital. Please go ahead. Yeah. Hi, sir. I hope I'm audible. So regards on the good quarter. So my first question is, I'm referring to Slide nine. The EBIT margin that you had provided, is this 14% sort of steady state margin that we can expect going forward? Or there is some upside to it? So the EBIT margin...

51:22 So all these margins again would be range bound. This is 14%, but usually, it will be in the range of about 11% to like 12% to 14%. So some quarter it could be 12% depending on the additions on the area. Sometimes the ramp up would have taken fast, so it will be 14%. So it will be in the same range, 12 to 14%. So this is how we have to look at. We have to look at the occupancy, EBITDA, EBIT, and PAT, all are range bound. Right. Right. Yeah. That's helpful. That's simple. And second one is sort of a big picture question and for. So, sir, like, just wanted to hear your thoughts on, you know, AI and the, you know, overall impact on the office demand, the flex demand.

52:09 Is it even a factor in India or, you know, at at this moment, it is more benign and uncertain according to you? So I think it is this is as of now, of course, the big elephant in the room is AI. All of us, like you recently saw the way Microsoft made that announcement. So definitely, that is the thing. But what I can say is that the good part has been that the if you look at the addition of real estate for the nine month period has been about 66,000,000 square feet. And this is about 11% higher than the last year. So this will be a record year when it comes to real estate absorption. That is one thing. Second thing I will say is look at the companies that are putting GCCs in India. A lot of them are basically hardcore AI native kind of companies and very big ones also. I don't want to name them on the call. But if you look at, they are picking up zero five million, 1,000,000 square feet campuses, putting thousands of crores into their labs and infrastructure over here. So I think this gives us a very good comfort that they are seeing that in next five, ten years, they are bullish on expanding in India.

53:24 Another fact I will highlight is that as a country, India has 15,000,000 people who are in the private sector white collar jobs, right? And if you multiply that by about 70 square feet, you get 1,000,000,000 square feet of real estate. And that is the total portfolio of our real estate in India. Now we on a base of 15,000,000 in India, we are adding almost 1,000,000 white collar private sector jobs in a year, which is about 7%. And this includes all of us on the call kind of people also who are not from so called IT industry or AI industry and all of that. So far, India adds about 7%, 8% white collar private sector job, which is about 1,000,000 job. And if you multiply that 1,000,000 square feet 1,000,000 jobs by 70 square feet, we are talking about 70,000,000 square feet kind of space addition.

54:14 So I and the stack is very deep. Like this 15,000,000 jobs, if you look at, IT is about 6,000,000, GCC is about 2,500,000, 1,500,000 is your start up new economy, million is our Indian businesses, banks, financial services, healthcare, hospitality, all that is 5,000,000. So it's a very diverse stack. And when COVID was at its peak, IT was booming, startup was booming. There was no concept of GCC. Now we are seeing GCCs are growing very fast. IT is not growing so fast, especially the large IT. But startups, again, as you see the number of IPOs and often have happened, there is a very strong growth in the unicorns and late stage startups and all that. So basically, we have such a deep economy, consumer driven domestic economy as well that one way or the other, we are very hopeful that if India is adding about 10,000,000 to 12,000,000 people every year into the workforce or potential workforce, at least 1,000,000 white collar jobs will get created.

55:12 And so far, about 1,000,000 white collar jobs are getting created. I don't see a challenge that this 60,000,000, 70,000,000, 80,000,000 square feet of real estate should be a problem typically. So that's what is giving us a comfort and to double down and keep growing, yes. The next question comes from the line of Atul Mehra with Motilal Oswal Asset Management. Please go ahead. Yes. Hi. Good afternoon, thanks for the opportunity. So one question on this 30 investment in rand. Even you mentioned this is a pilot and the gestation is three years. Can we assume as a commitment that you will not invest anything further in any other land asset? Did you see success in this?

56:03 Yes. Thank you, Azul. So basically, yes, you're so right on that, that is not the core business that we have been in. And we are doing this as a pilot. And definitely, like this pilot is a long drawn one, which will take three years to complete. So we don't see that, that we have a big pipeline or anything like that. And yes, so you can take it as an assurance from our side that there is nothing in the pipeline where we are looking at that. Certainly, we will have lot many projects. It's a very calculated pilot that we are doing at this point of Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for the closing remarks.

56:58 Yes. Thank you. Thanks to all of you, and thanks to Dirmal. And from their side, Rahul and the team, thank you all for the lovely questions and the patience. Hope we have been able to answer your queries. If you have anything else, please feel free to write to us, and we'll be happy to get in more detail and talk about them. Yes. Thank you so much. Thank you. Thanks a lot. Thank you, sir. Thank you, ma'am. Ladies and gentlemen, on behalf of Nirmal Pang Institutional Equities, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.