Earnings Call Transcript - XNSE:DEVX 2026-11-04

Operator

Ladies and gentlemen, good day and welcome to the Q2 and H1 F527 earnings conference call, hosted by Dave Accelerator Limiter. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Umesh Uttam Chandani, Managing Director of Dev Accelerator Limited. Thank you, Vanuwati U, sir.

Umesh Uttam Chandani, Other

Thank you so much. Thank you so much for setting this up. And very good afternoon to everyone. A warm welcome to Dev Accelerator Limited on Tkata. And first half ended September 30, 2026. I hope all of you have gone through the investor presentation and the media release that we have uploaded on the stock exchanges. Before I run through the company, it has been a brilliant day for us as we woke up to see that India has beaten New Zealand fairly easily in the first ODI that was being played at the grounds of New Zealand. That was a proud moment for us. Now, coming on to the summary of running through our business, I'll first start with how the quarter has been performed for us, and then spend some time on the expansion taking place across the ranks. Following that, I'll take you to the capability that we are building, and finally address our capital structure and the priorities for the second half. This quarter, to be very honest, has been very meaningful to us because we have achieved the highest ever quarterly revenue of 80.2 crores. The revenue has substantially increased by 54.8% compared to the previous corresponding quarter last year, while profit after tax has tripled to 5.5 crores. The capacity that we have been discussing in our previous calls is now contributing to our revenue, and our clients are also taking more services from us. So before I jump on to detailed numbers for the entire quarter, we have been surrounded with strong geopolitical environment. Despite that, we kind of made strong progress in the operating business. Not only us, the entire industry has been scaling and growing. There was a recent report by CBR, which is that the office leaving across India's top nine cities has reached a staggering 66.4 million square feet up till now, and it has been up by 8% on a year-on-year basis. More strongly is the fact that our global capability centers have taken 28 million square width out of that, which is roughly 42%. So flexible workspace is now becoming the prime real estate consumer of office spaces, and also the share of the industry is growing in the entire living sector. Collius, in their report, mentions that the flexible operators lease 12.6 million square feet across top 7 markets in the same period, which is up by 37% and roughly 23% of the overall leasing. And the most important piece to cover here is that top 7 markets has been covered, which does not include the cities where we operate, cities like Ahmedabad, Jaipur, Indore, Kochi, when we have almost half a million square foot of our operations. So that showcases the tailwind that this industry has to offer for us. Coming to the numbers, our consolidated revenue from operations for Water 2 F527 was 80.2 pros. Compared to 51.8 crores in quarter 2 FY26. On a sequential basis, a revenue increased by 49.2 percentage from 53.8 crores in the previous quarter. On a standalone basis, which largely represents our core functionality of providing office-based solutions, the revenue increased by 51.7 percentage on a year-on-year basis to 63 crores. Compared to 41.5 crores in the corresponding quarter last year. So for the first half, our conservative revenue has already reached 134 crores. That represents a growth of 24.7%. Our stand-alone revenue has also increased by 30.5% to 105 crores in the first half of this year. One of the developments that we referred during our previous call was the revenue contribution from the bigger asset in Ahmedabad, which is Capital One. That asset has become operational today, and its contribution is also visible in our numbers. As more of our signed capacity, in fact, as future signed capacity becomes operational, we expect the contribution from these centers to reflect in our performance in the coming quarters. Now coming to Profitaviti. Our consolidated EBITDA under IND-AS increased by 54.3% year-on-year basis to 40.8 crores with a margin of 50.8%. Consolidated profit before tax was 6.3 crores compared to 1.7 crores last year, while our PAD increased to 5.5 crores from 1.8 crores. For the first half of FY27, Consolated EBITDA increased by 34.4% to 71.8%. EBITDA margin improved to 53% compared to 49.2% in the corresponding period last year. A profit after tax for the first half reached a staggering 7 crores compared to 1.9 crores in the previous year. I think one important point to understand here is that our overheads have not increased at the same pace as our revenues. Our employees' costs also remain largely unchanged during the first half, while the other expenses is from 11% to 1.7% of the entire revenue. So the revenue base has increased largely, and we have been able to achieve operating leverage across the platform. As I have explained earlier, We also look at performance after rental outcours to understand the underlying economics of our workspace operation. Our consolidated cash EBIT, which we have defined in the press release as EBITDA less lease rental paid, more than doubled to 19.1 crore during the quarter, compared to 9.1 crore last year. So the margin has improved significantly to 23.8% from 17.5% which is an improvement of 6.25 basis points. For the first half, our cash debit reached to 31.5 crores with a margin of 23.5% compared to 17.9% in the first half of FY26. These numbers help us to understand the operating surplus after taking the lease rental. Before the impact of working capital and other cash outflows. On standalone leases, EBITDA under India increased by 58.8% to 43.9% with a margin of 67%. Fed to 66.6% in quarter to 526. So the first chart, the standalone EBITDA was 71.6% with a margin of 68.2%. So, the core workspace business continues to demonstrate the economics that we have been discussing with all of you, and that gives us the opportunity to bring in the additional technology into operations. Let me now come on to the operating side of the business, because this is where the scale-up becomes more visible. At the end of September, Our operational portfolio was approximately 1.16 million square feet, compared to 0.89 million square feet one year ago. We today have 17,400 operational seats across 28 centers in 12 cities and 6 states. Our occupied seats increased to 15,800 from 12,019 in the last season. The overall occupancy also showed a growth...

Operator

I am so sorry to interrupt you, sir. We are losing your voice in between.

Umesh Uttam Chandani, Other

Is this better?

Operator

No, sir. Now we can hear you. Please go ahead, sir.

Umesh Uttam Chandani, Other

Another important development is the increasing contribution from asking. We have been focusing on managed office treatment, where an enterprise client may have a very significant role. They have started accounting for roughly 75% of revenue from operations, compared to 65% in the corresponding quarter last year, and 70% in the previous quarter. Typically, these are all built-to-suit requirements that come to us. We work with them on identifying the location, designing and customizing the office infrastructure, and then continue to manage the workspace after they shift into the office space. Over time, this allows us to support them in additional cities and offer more services within the same relationship. One of the important ratios to understand this business is our revenue-to-rent ratio. During Q2, FY27, our revenue-to-rent ratio has significantly improved from 2.4x in the previous quarter last year. Our brokerage expense has also reduced to 1.13% of the revenue as compared to 1.6%. Brokerage expense is a significant contributor in our growth story and even in this industry. However, we have been very mindful of creating our own business development team so that we are not over-relying on our channel partners. Approximately 78% of our operational area is in clear-to-speak. So, the strategy with which we started Derex continues to remain at the center of our business. At the same time, our presence in Tier 1 cities is also important. An enterprise client may want an office in Ahmedabad, but may also require a space in Bangalore, Pune, or any other Tier 1 cities. We would prefer to serve that client across as many locations as we can through a single relationship. Now beyond what is operational today, there is a significant amount of capacity that we have already identified and signed. Our pipeline comprises of 17 new centers covering approximately 2.8 million square feet, which is almost three and a half times from the size that we have today. As outlined in our expansion plan, this is expected to take the platform to approximately 4.16 million square feet across 49 centers. The important fact is that this capacity is yet to fully contribute to our existing revenue. Our focus is now on bringing these centers into operations in phases, completing their fit-outs, and converting the leads into clients and then into occupied fees. Ahmedabad continues to be a strong example of how we intend to build this scale. Capital One on Amlipopal Road, with approximately 3.15 lakhs square feet, became operational with approximately 95% being pre-leased. Parallelly, we have also signed a development management project of roughly 8.6 lakhs square feet, which is India's largest managed office space asset being signed, right in Ahmedabad. For this project, we are intending to invest roughly 100 crores over a period of time in fit-out, furniture, and secure deposits. The project is planned for roughly 8,500 seats and would help us to achieve a revenue of approximately 120 crores at the scale of operations. What we intend to do is take the learnings from these assets and selectively replicate them in other micromarkets. You would want to do this where we understand the enterprise demand, have a relationship with landowners, and can see a requirement of institutional quality office space. We have witnessed this in the past that we are able to demonstrate an outcome in the cities that we already presented. Let me elaborate a little bit on the development management model, because that is going to play a very significant role in the coming years. In many Tier 2 cities, there are a lot of landowners. Which are intending to have consistent annuity income of lease. However, land ownership is fragmented. A land owner may have a right location, but would need the right understanding as to how do they bring in enterprise plans. What conversation should be done with institutional clients. And that is where Bayrex comes in with their expertise. of designing and building the right grade A institutional asset, which ultimately can be leased to an institutional client or a GCC going down the line. What we bring to the relationship is the core understanding of client requirements, design and technical specifications, execution capabilities, and ultimately managing the workspace. We by no means intend to own the asset, neither do we intend to get into construction activities. The landowner retains the ownership of the asset. Derex does not invest into acquiring the land, nor do we invest into funding construction under this model. We are a pure-play development management partner. Our investment would continue to be in security deposits, pit-outs, and running the operating infrastructure, depending on the arrangement that we have with the landowners. This allows us to create the supply that our clients need while keeping our capital focused on the operating business. We believe this model is particularly relevant in markets where enterprise demand is growing, but the availability of a quality office infrastructure remains limited. There is also a sustainability aspect to this approach. We are looking to work with landowners to create Grade A IGDC Platinum 35 buildings. By participating early in the development process, we can help bring the building specifications and client requirements together before the asset is ready. Over time, we want this approach to become a reputable way of creating quality office supply across all the selected tier-to-city markets. The way we are looking at data today also goes beyond providing managed office space. We are not close to the front. Infrastructure solution provider, where you drive from office infrastructure to providing interior, to running the office operations, conducting recruitment activities, running the payroll, managing the facility, all comes under the single umbrella of Pevix. And that is where, when a global company decides to set up a capability center in India, we become the natural and the first choice for them. We already have the capabilities across several of these areas. Our objective is to bring them together so that the client can work with Devix across India for their expansion plan. Our internal design and build business, which is Netherlands Fed, provides the design and execution capabilities. For the first half, the business reported a revenue of approximately 30 crores, and this does not include the design and build activities that we do for Derex. This is all business that we do it for external clients. As we have shared earlier, this capability was initially developed around building offices for Derex. Since then, we have built-in resources to extend it to our external clients. And it also gives us an opportunity to grow this business independently while also supporting the expansion of our own workspace portfolio. Our technology subsidiary, SASJ Solutions Private Limited, adds another layer of capability for us. For the first half, SASJ reported a revenue of approximately 2.8 crores. Till date, we have not capitalized on the revenue side of this business. It is more on the lines of providing and building technology capabilities within the organization. It brings in the capability of software development, cloud services, and other technology requirements that are relevant to enterprises and GCC clients. Within the GCC opportunity, our focus is particularly on mid to large size organizations which are looking to set up operations in India. In the revenue terms, any organization which is $250 million to $750 million or $70 million is the right target audience for us. These companies may not have a large internal team to coordinate for infrastructure, recruitment, payroll, or technology, and that is where we see an opportunity to become their operating partner and also support them to grow in India. As we discussed during our recent investor interactions, the idea is to combine initial setup And mix it up with recruitment and payroll services, and put a layer of technology on top of it, and become a single solution provider. Just to help you understand the thinking, a client may initially come to us only for office fees, which is a foot in the door for us, as we understand that business and have built that relationship. Following that relationship, we participate in their hiring requirements, technology needs, and operating requirements as well. This allows us to penetrate in the single-client relationship and increase our engagement with the client without having to create an entirely new relationship for every service. We are also strengthening our leasing and business development teams to support this opportunity. As the portfolio expands, the organization has to build the capacity to execute across small locations and manage a larger number of client requirements. Technology today remains an important part of the platform that we are intending to build. We see ourselves as AI's first AI-native organization, and there are a lot of initiatives being taken place internally. Our initiatives of PropTech are aimed at identifying solutions around operating efficiency, automation, customer experience, and better use of data. Most public today is when our partnership with Inc. 42 to source prop tech solutions would go live with the landing page to source prop tech solutions. Our focus would be on solutions that can improve how we source, how we operate, and scale our centers at scale. As these initiatives progress, we will continue to assess them on their commercial application and the benefits they can bring to our existing clients and operations. Over time, these structures can give us access to additional funding options and also support the expansion of the platform. We will keep you updated as there are a lot of conversions that are going on with the larger REIT players to acquire our existing assets which are under the prop code or commodity that we own. We will keep you updated as if there are some movements happening in these initiatives. Let me now address our capital structure. During August 2026, we raised 100 crores to secured, rated, and listed non-convertible debenture. This financing has supported in two ways. We have refinanced our existing loans and provided capital for our expansion plan. At the end of September, our consolidated gross debt was approximately 222 crores, with cash equivalence of approximately 37 crores. And net debt today is 185 crores, compared to 89 crores at the end of last year. And net debt today remains well below our equity. There is also an accounting aspect that all of you should keep in mind when you look at our balance sheet. Under index, our lease commitments are recognized as lease liability with corresponding right of user assets. These are obligations that we need to service to the operations of our rentals, wherein our customers pay the revenue and we pay the rentals. But they are not our borrowings. We are not supposed to raise the finance for paying that. So this is to clarify and bring some light as to how the lease liabilities are supposed to be treated. So, while assessing leverage, it is useful to look at borrowings and lease commitments separately, and then consider the client contracts and revenue available to support those obligations. Our approach is to use the structure appropriate for each asset, whether there is a trade lease model, a landlord-funded model, or a development management initiative. The objective remains to expand while protecting the economics of each individual center. For the second half, one of our clear priorities is cash conversion. We have achieved growth in revenue and profitability. Now we want to translate that into stronger cash emissions through faster billing and collection. This will remain important as we complete fit-outs and commission those centers with more capacity. The focus will be on aligning expenditure with delivery schedules and making sure that growth is supported by financial prudence. So when I look at quarter two and first half of FY27, I would look at both the performances that we have delivered and what we are building behind those numbers. We have achieved our highest quarterly revenue. We have an occupancy of 91%, out of which enterprises contribute approximately 75%. Our revenue to rent has improved, and there's a strong pipeline that can take the platform beyond 4 million square feet. Alongside this, we are building the design, technology, and operating layer that can increase our participation across the client's business. Our vision is to make Derex a partner that global companies can work with as they establish and expand their India operations. Clear2 would always remain central to that vision and closer to my heart. Because you understand these markets and see an opportunity to connect enterprise demand with local talent and quality infrastructure. For the remainder of FY27, our priority is execution. Bring the signed centers into operation, deepen enterprise relationships, grow the GCC services offering, and improve cash conversion. We believe the opportunity ahead is significant for us. At the same time, we will continue to focus on center-level economics, capital efficiency, and building an institution that can support this scale over a long period. With that, I conclude the business update for the partner of SAR. Thank you for your continued support. My team and I now would be happy to take any questions that you have.

Operator

Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question, may press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants who wishes to ask a question may press star and 1 now. A reminder to all the participants, if you wish to ask a question, please press star and 1. Ladies and gentlemen, anyone who wishes to ask a question may press star and 1 at this time. A final reminder to all, to ask a question, please press star and 1. As there are no questions from the participants, I now hand the conference back to management for closing comments.

Umesh Uttam Chandani, Other

So, super. Thank you so much. Thank you, everybody, for joining on the call. For further information, if you have any, please feel free to get in touch with our Investor Relations teams. And, till then, happy to be with you. Thank you so much for joining us.

Operator

Thank you very much, sir. On behalf of Dave Accelerator Limited, that concludes this conference. Thank you all for joining us today, and you may now disconnect your lines.