Marathon Nextgen Realty Limited (503101) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Q1 FY '26 Earnings Conference Call of Marathon Nextgen Realty Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Kanav Khanna from EY IR. Thank you, and over to you, sir.

Thanks. Good noon to all the participants on the call, and thank you for joining in the Q1 FY '26 earnings call of Marathon Nextgen Realty Limited. Please note that we have mailed out the results to everyone, and you can also see this on our website, and it's also been uploaded on the stock exchanges. In case you have not received the same, you can write to us, we'll be happy to send it over. Now before we proceed to the call, let me remind you that the discussions may contain some forward-looking statements and may involve known and unknown risks, uncertainties and factors. It must be viewed in conjunction with our business that could cause the future result performance or its achievement to differ significantly from what we have expressed or implied. To take us through the results of this quarter and answer to all of our questions, we have the management of Marathon Nextgen represented by Mr. Chetan Shah, Chairman and Managing Director; Mr. Mayur Shah, Vice Chairman; Mr. Kaivalya Shah, Director; and Mr. Samyag Shah, Director. We will be starting the call with a brief overview of the quarter gone past and then we will follow it up with some question and answers. And with this being said, I'll transfer the call to the management. Over to you, sir.

Thank you, Kanav. Good afternoon, everyone. Thank you for joining us for Marathon Nextgen Realty's Q1 FY '26 earnings call. I am pleased to report that we have begun FY '26 on a strong note, delivering a robust performance across all key operational and financial metrics. This quarter's results demonstrate the strength of our business model and strategic positioning in Mumbai's dynamic real estate market. Starting with our operational performance. Area sold is 7% more as year-over-year growth. Presales value jumped 16% to INR 183 crores. Collections have surged 28% to INR 239 crores. These numbers demonstrate the continued market demand for our project and underscore our consistent execution capabilities and the trust our customers place in Marathon brand. Friends, the momentum we are experiencing is directly linked to the broader industry dynamics. The Indian real estate sector, particularly in the Mumbai Metropolitan region, where we operate, continues to benefit from favorable demographics, ongoing urbanization and improved infrastructure connectivity. Our strategic focus on high-growth corridors like Byculla, Bhandup, Dombivli and Panvel has positioned us perfectly to capitalize on these trends. Friends, this strategic positioning is paving -- paying off across our project portfolio, our market development, Marathon's Futurex at Lower Parel; Neohomes at Bhandup; Nexzone at Panvel are all experiencing positive market response and stable growth. This quarter, we received occupation certificates for three towers at Nexzone Panvel, which not only accelerate our revenue recognition but also demonstrates our execution capabilities in a competitive market. Three key micro markets have been -- have seen leadership in the market: Monte South in Byculla, ranked among top 3 projects in both supply and sales volume. Marathon Nexzone Panvel holds a similar top 3 position in Panvel, while Neohomes in Bhandup is also among the top 3 by market supply. These rankings across different price segments and locations showcase the breadth of our market appeal. Friends, beyond residential, our commercial portfolio in Lower Parel and Mulund. Lower Parel, we have Marathon Futurex and Mulund, we haven Marathon Millennium, continues to attract strong interest from both end users and investors adding another dimension to our revenue stream. The strategic highlights of this quarter was our successful QIP fundraising of INR 900 crores, INR 9,000 million. QIP closed on June 30, that is the last day of the quarter. The overwhelming response from the leading domestic and foreign institutional investors, including marquee names like Quant Mutual Fund, Kotak Alternate Asset Managers, reflects the market's confidence in our growth trajectory. We have been strategic about deploying these funds. Repayment of debt of about INR 340 crores in July and interest saving of INR 10 crores quarterly and INR 40 crores annually, which results from this repayment. Debt-to-equity ratio, which was already very low before QIP is now at absolutely 0 level with debt reduction in numerator and equity augmentation in denominator, net debt is 0 with a sizable liquid balance available with us. INR 300 crores out of the QIP funds are earmarked for land development and project acquisitions to build our future pipeline. Let me invite you to suggest good projects in Mumbai. Our focus is going to be redevelopment in South Mumbai. Additionally, INR 150 crores are earmarked for fast-pacing our ongoing projects. Friends, complementing this is our parent company's asset merger, which is progressing through regulatory approvals. This will bring valuable land assets and premium projects into the company, creating a simpler, more efficient structure that enhances our competitive positioning. These strategic initiatives are reflected in our financial performance for the quarter. Total income grew by 10% year-on-year to INR 191 crores, while EBITDA expanded to 27%, an amount of INR 81 crores. Most notably, profit after tax surged 63% year-on-year to INR 62 crores, significantly outpacing industry's growth and reflecting our focus on high-margin projects. Looking ahead, our execution capability, together with infusion of funds gives us a faster momentum in completing ongoing projects ahead of the schedule. Our diverse portfolio from luxury projects like Monte South, in Byculla, to affordable Neohomes, to commercial tower Futurex positions us well across market segments, combined with our strength, strengthened balance sheet and robust land pipeline, we are well equipped to capitalize on the positive industry outlook. The fundamentals supporting real estate remained very strong, steady GDP growth continued urbanization and supportive government policies. Our strategic focus on premium locations, operational excellence and financial discipline positions Marathon Nextgen to continue outperforming industry benchmarks while delivering sustainable value to all stakeholders. In conclusion, quarter 1 has established a solid foundation for financial year '26, which accelerated execution, stronger financial, and enhanced market positioning. We are confident that this will be a better year of strong performance and sustainable growth for Marathon Nextgen. Friends, I will now open the floor for your questions.

[Operator Instructions] The first question is from the line of Jai Chauhan from Trinetra Asset Managers.

So my question is regarding your marquee project, Monte South, as of last update, Tower B was approximately 65% complete, and Tower C was at 16%, right? So could you just provide kind completion status of both towers? And additionally, considering its premium nature, has there been any revisions on the estimated project cost? And what is the sales velocity that you are currently witnessing for the unsold inventory?

So Monte South is progressing very well. Tower B is almost at now 62nd floor. So like from RCC angle, it is almost like 90% complete. And we are about to -- we have already applied for part occupancy for the Tower B up to INR 35 crores. So Tower B is progressing very well as per the plan. Tower C is also progressing very well. It has now reached on a 12-floor level, and it is progressing very fast, almost slab to slab cycle, we have been achieving it every floor to floor is around 10 to 12 days. So that is also progressing very well.

Got it, sir. And any revisions to the estimated project costs and also about the sales velocity that you are currently witnessing?

There is no change in the estimated cost and the cost remains same. On the velocity part, like particularly during monsoon period, typically the site visits are normally less. But otherwise, we've been reporting every month around 5 to 6 bookings, that is a good velocity for the high-value project.

The next question is from the line of Kush Shah from B&K Securities.

So I just had a couple of questions regarding what would be the launch pipeline if going ahead for at least the next 1 year or 2 years?

Yes. So the Marathon -- see, basically, you may be knowing that Mumbai market was facing a huge challenge on the environmental clearances. And fortunately, as of last week, the Supreme Court has given a good judgment, whereby the environmental clearances in Mumbai will start very soon. Looking at that in mind, we have Monte South commercial, which we would like to launch in the next 2 quarters. That is approximately 8-lakh square feet carpet and GDV of around INR 3,500 crores. Recently, we've been looking at commercial supply in the South Mumbai area particularly and even BKC, the vacancy rates have really gone down and there is a good demand or commercial office as well as retail. So this building has been designed to look at ground and one as a retail and upper floor as offices. And so that is one launch which we are looking at in the next 2 quarters. Secondly, at next June, we are looking at Phase 3 being launched, approximately 4-lakh square feet and GDV is approximately of INR 500 crores. So in a continuity, there's a good sales in Marathon Nextgen Panvel, the airport coming up, the ceiling is also connecting to South Mumbai almost 40, 45 minutes. So there is a good demand in Marathon Nextgen Panvel project. So we are going to capitalize on that demand. And thirdly, we are looking at our micro market, Neohomes that is Bhandup. We will be launching two more projects accounting for approximately 3-lakh square feet and GDV of approximately INR 500 crores. So in next 2 to 3 quarters, Marathon is looking at almost 15-lakh square feet of launch and INR 4,500 crores of GDP. In addition to that, as Chairman already mentioned, we have earmarked approximately INR 300 crores for new land acquisition, new project. Our model will be asset-light model, JD, JV, and targeting to Central Mumbai and South Mumbai cluster redevelopment project. So we are already identifying those projects and appropriate time, we will announce those tie-ups.

My next question would be, what would be the launch, if you could give some more insights on the launch of the land at Panvel?

Sorry, can you repeat the question, please?

Yes. Any development on that Panvel land, the loan?

So the Phase 3 will be launching in the next 2 quarters, like Mayur bhai mentioned, it's a INR 500 crore GDV, and it's around 3-lakh square feet. That being said, there is additional land coming in through the merger, that if the merger will take around 12 to 15 months. And post that, we'll be launching additional projects in Panvel.

Understood, sir. And the land which will be coming through the merger, anything on that?

Yes, that's the land. So all in all, we have around 418 acres that we are getting through the merger, where 130 acres is in Bhandup, 83 acres is in Dombivli, and 205 acres is in Panvel. So these are some of the land assets that the group company had, which will come in through the merger. And all in all, 4.2 crores square feet is what will be the area, the carpet area that can come through with this land. So this is subject to the approval from the authority. But that being said, we are working hard on getting that done in 12 to 15 months.

That sounds really massive. And just -- I just had one last question. What would be the potential FSI expectation going forward?

In the merging -- the company that's getting merged?

Yes.

Yes. So I mentioned around 4.2 crores square feet is the carpet area that will be coming in from the 418 acres of land.

[Operator Instructions] Next question is from the line of Mitesh Goyal from Growth360.

I just want to know that you are quoting that next 2 to 3 quarters, the GDV would be INR 4,500 crores. And sir, what would be the completion date out of this GDV? Let's say, the revenue for, let's say, it's [ INR 2,930 crores ] or something like that?

So all projects are -- will be launched and typically these are large projects and completing in least 3 to 5 years period. However, we tend to take part occupancies of towers. And so the recognition can come in 2.5 to 3 years, start coming in.

The next question is from the line of Neil Desai from Desai Investments.

Sir, my question was regarding the merger. So I just wanted to understand what assets will continue to be held by promoter entity? And are there any assets that are still pending to transfer to the listed company?

Yes. So currently, the company in the Holdco is called Marathon Realty. Marathon Realty has an asset, which is Futurex, which is also coming in the merger, along with 418 acres. And there are a few live projects in Lower Parel, that is also coming into the merger. So the merger pretty much, it is getting in almost all the land bank that is part of the company. And typically, all these land banks are vetted legally and hence, it is getting brought in. So yes, we are bringing pretty much everything within the merger.

Okay. So we can definitely assume that post-merger, the entire Marathon Group operations will effectively be housed under this listed entity?

No, there are other assets which are outside, which are litigated, which we have not brought in. So there would be asset outside the listco, belonging to the Holdco. But all the development that will happen in the future is going to be in the listed company.

Got it, sir. Sir, I have one more follow-up -- one more question on the balance sheet front, sir. So post the proceedings of QIP, so just wanted to understand the capital allocation and the impact of this on our credit ratings or will reduce the debt, the finance cost will reduce. So I just wanted to understand your thought process regarding this.

Yes. So there is definitely a strengthening of balance sheet. As I mentioned in my speech, debt-to-equity ratio, which is a ratio of two different denominator and numerator. Denominator has grown by INR 900 crores of capital infusion and the numerator, the INR 340 crores debt has already gone away. So currently, we are sitting on a sizable bank balance. So instead of debt, it is a sort of a negative debt or cash in the bank kind of a situation. With this, we have already approached all our credit rating -- existing credit rating agencies and new agencies to rerate the company, and that process is on.

Okay. Okay. And sir, lastly, I just wanted to -- on the macro front, I just wanted to ask you one question is that now as we see particularly Mumbai, so the suburbs are also -- have started getting good realization in terms of the area. So -- and the projects into luxury. So luxury projects are also in demand. So is there any plan that you would like to launch in the suburb part of the Mumbai?

So we have always had a policy of distributing all our projects across three segments. One is, like you mentioned, luxury or South Mumbai project, where we already have Monte South going on. And we are actively seeking new projects in that area, because our Marathon Futurex, the commercial tower is -- has been completed. So there is, in a way, a vacuum from the city side that is South Mumbai. Then we already have a project in suburbs, which is the Bhandup and Mulund area. So in Bhandup, we have -- like Mayur mentioned, we are going to be launching three projects worth about 3-lakh square feet. That is a suburban project. And the third segment is periphery, that is Mumbai Metropolitan region, outside the city and suburb, the peripheral area of Panvel. And there, again, we are going to be launching Phase 3 of Nexzone. So this is how we have been managing. At times, one market goes very strong. The other market is not giving so much of sales. But overall, our numbers keep on ticking.

Sure. Sir, lastly, on the realization front. Sir, do you think that the current realizations are -- will be sustainable? How is the demand scenario which we are looking on a ground level, sir?

The demand scenario is good. Like I mentioned again in my speech, the three micro markets that we are active in, all three micro markets, we are at top 3 rank in terms of sales and supply. So that is how it is. Yes, markets do go through ups and downs. But currently, the way the demand is being seen is excellent healthy demand in all these three micro markets.

And that being said, Marathon always acquired projects at a price, which is actually lower than the market. Hence, we can -- we have a higher margin. Hence, we can survive in any kind of condition.

[Operator Instructions] The next question is from the line of [ Parshva V. ] from Gorilla PMS.

Just a small quick summary. I think we have some 420 acres, right, as on date, including the amalgamated entities?

Yes, yes. When it gets merged with listco, the listed company will have that.

So that would be approximate -- What would be the valuation for that 420 acres approximate like INR 4,000 crores, INR 5,000 crores, INR 6,000 crores? Any idea?

Net value of the whole incoming asset is around INR 3,100 crores, the net value of that. So in that, again, 418 acres specifically is coming in and around 2.33 lakh square feet carpet in Lower Parel in a project called Futurex is coming in, another 54,000 square feet in a project called Marathon Chambers, right beside Futurex in Lower Parel, will be coming in. And two live projects in Lower Parel. So these are the assets that are coming in/projects that are coming in. And that all -- everything is brought in that net value of -- net discounted value of around INR 3,100 crores.

So of this INR 3,100 crores, how much is realizable in the coming 3 years?

So I mean, we are actually going through the merger process. And post the merger process, which is at 12 to 15 months, we're going to launch a few projects there. That being said, we have a live project, which is OC ready around 2.33 lakh square feet in Futurex, which we are selling simultaneously. So that value itself at the current rate of, let's say, 45,000 will be more than INR 1,000 crores. So that is a ready asset that is coming in. And that assuming the merger goes through is, will be realized as and when it's sold once, post the merger.

And as you would have seen in our past presentation also, there are upcoming projects which are already ongoing for next 2, 3 years, they will give substantial turnover.

And I heard before, you were saying some 4 crores square feet is a sellable listing, which is available with us post the merger is done. So how would you turn term in the realizable amount in rupees? 4 crores square feet into how many rupees? If you can just give me an idea.