EFC (I) Limited (EFCIL) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to EFCI Limited Q2 and H1 FY27 earnings conference call. 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 and zero on a touch-to-one phone. Please note that this conference is being recorded. To discuss this quarter's performance, we have from the management, Mr. Umesh Sahai, Chairman and Managing Director, Mr. Nikhil Bhutta, Whole-Time Director, Mr. Uday Vora, Chief Financial Officer, and Mr. Aman Gupta, Company Secretary. Before we proceed with this call, I would like to mention that some of the statements made in today's call may be forward-looking in nature and may involve risk and uncertainties. For more details, kindly refer to the investor presentation and other filings that can be found on the company's website and stock exchanges. I now hand the conference over to Mr. Umesh Sahai for his opening remarks. Thank you, and over to you, Mr. Sahai.

Thank you, thank you. Good morning, everyone. Thank you for joining us for EFC quarter 2 financial 27 earning conference call. I would like to begin by thanking our shareholder, investor, customer, and business partner for their continued trust and confidence in EFC. I'm pleased to share that we have continued to maintain encouraging business momentum during the second quarter, supported by our enterprise, relationship execution capabilities, and the growing strength of our integrated business model. Our three business vertical leasing, design and build, and furniture manufacturing continue to provide us with complementary growth opportunity, enabling EFC to participate across the commercial workplace value chain. Looking at the broader industry, the underlying market opportunity across all three verticals remain encouraging. India's office market recorded approximately 66 million square feet of absorption during the first nine months of 26. In design and build, growing office demand, expansion of GCC, Global Capability Center, and investment in data centers. India furniture. It's expected to grow steadily with increased reference for organizing and quality-focused manufacturers. This trend reinforced our confidence in the long-term growth potential of our business. An important trend we are witnessing is that enterprises are increasingly prioritized, flexible, efficient, and speed of execution in their workspace this season. Business today wants the ability to expand, consolidate, or reconfigure their office requirements without significant upfront capital commitment. This creates a strong opportunity for professional managed workspace. EFC asset-light leasing model, which does not depend on ownership of the underlying real estate, allows us to address these evolving requirements while maintaining a focus on scalability and capital efficiency. Our design and build capability further strengthen our ability to deliver high-quality commercial space efficiently, while furniture manufacturing expand our participation in the broader interior and furnishing market together. This business position EFC as an integrated workspace solution, provide rather than merely a conventional office leasing company. During the quarter, we have also taken important study steps, including our proposal. Our proposed corporate structuring and the acquisition of ultra-fresh, this initiative are aligned with our broader objective of building a more focused, integrated and scalable organization. Nikhil will elaborate on this development shortly. As we look ahead, our priorities remain clear. Strengthening our enterprise relationship, maintaining execution excellence, improving capital efficiency, and pursuing profitable, sustainable growth. Our ambition is not simply to build a larger EFC, but to build a stronger, more competitive, and more valuable EFC, one that delivers consistent performance and creates long-term value for all stakeholders. I remain confident in the opportunity I had in our team's ability to execute our strategy. Thank you once again for your continued support. With that, I would now like to invite Mr. Nikhil Bilibhai Bhuta to take you through our key business development and strategic initiative. Thank you. Nikhil Bhai.

Thank you, Mr. Sir. Good morning to all our investors, analysts, and stakeholders. Umesh Shari has spoken about our performance during the quarter and the larger vision that I would like to take this forward and discuss three important aspects of our business. First, how our individual businesses are progressing and contributing to the overall platform. Second, the strategic decisions we have taken, particularly the proposed corporate restructuring and acquisition of Ultrafresh. And third, how these initiatives are helping us build a stronger competitive position and create opportunities for sustainable growth. Business performance and operational progress can be briefed as under. Let me begin with our business performance. During Q2 FY27, we continued to focus on strengthening our operation across leasing, design and build, and furniture manufacturing. Starting with our leasing business, this remains the foundation of our platform and an important source of recurring revenue. We continue to benefit from our established presence across multiple cities and our relationship with the enterprise customers. What is encouraging is the changing nature of our customer demand. Large enterprises and GCCs are increasingly looking for partners who can offer not only quality office infrastructure, but also flexibility, consistent services, and ability to support their expansion across locations. Our experience in operating managed workspace and understanding enterprise requirements puts us in a good position to address these opportunities. Our focus is not simply on adding more seats. It is on improving utilization, strengthening customer relationship, and ensuring that every center contributes meaningfully to the overall business. Now, coming to design and build turnkey contracting solution segment, this business continues to be an important part of our growth strategy. Over the years, we have developed capabilities in commercial interior design, turnkey executions, project management, and MAP services. Today, these capabilities allow us to participate in a wider range of opportunities, including enterprise offices, institutional projects, and multi-locational assignments. An important aspect of this business is that it is increasingly developing independently of our leasing operations. We are not relying on This is important because it allows us to address a much wider market while also strengthening the execution capabilities of our overall platform. Being a project-driven business, the timing of execution and project milestones can influence performance between the quarters, but our focus remains on maintaining a healthy pipeline and delivering projects on time and protecting execution quality. Now, moving to furniture manufacturing vertical. This is the business where we seek considerable long-term potential. Through egg design, we have been building our manufacturing capabilities, expanding our product portfolio, and strengthening our presence in institutional and customized furniture solutions. Our strategy has been to develop this as an independent manufacturing business while also supporting the requirement of our leasing and design. Capacity utilization, procurement efficiency, and product mix will also be an important drivers of profitability. We believe that the investments we are making in this vertical can help us create a stronger and more diversified manufacturing platform over time. Our CFO will cover the financial contribution and performance of each of this vertical in a greater detail. Our integrated business strategy that I would like to dwell upon Now, I would like to explain how we look at this business strategically. At EFC, we have always believed that the growth should come from building capabilities that strengthen each other. Let me give you a simple example. A company may initially approach EFC for managed office space. As that company expands, it may require a larger office, a customized fit-out, or furniture solutions. Because we have capabilities across this area, we have an opportunity to serve that customer at multiple stages of its growth. Similarly, a customer who first engages with us for a design and build project may subsequently become a customer for our managed office or furniture business. This creates opportunity for cross-selling deeper customer relationships and better utilization of our resources. Thank you. To grow independently, while benefiting from the capability of our larger group. That's the real advantage of our model. We are not dependent on a single business or a single source of growth. We are building multiple businesses that can create opportunities for one another. This integrated approach also helps us improve execution, control, procurement efficiency, and customer service. I'd like now to, you know, look at little on the, you know, the corporate restructuring that we have proposed through the demerger that is filed with the NCAT. Coming to one of our important strategic initiatives, that is this proposed demerger and corporate restructuring. I'd like to explain the thinking behind this decision because we believe it is important for the investors to understand its long-term relevance. As our workspace business has grown, we have developed two distinct operating models. The first is our leased-premise managed office business, where our focus is on managing workspaces, serving enterprise customers, and generating recurring operating revenue. The second is our owned property business, where we identify suitable commercial properties, acquire or develop them, improve their utilization, and operate them as an income-generating asset. Both businesses have attractive opportunities, but their capital requirement and return characteristics are different. Our view is that as these businesses become larger, they should have a structure that reflects their respective operative capital requirement. Under the proposed arrangement, the lease premises, managed office operation will be housed within EFCI Limited, that is a standalone listed company, while the owned property operation will remain within EFCI Limited, the holding on subsidiary of EFCI Limited. The objective is very straightforward, greater business focus. Clearer capital allocation and improved accountability. We believe this will allow us to manage the asset-side operating business and the property ownership business with greater clarity. It also supports our longer-term approach towards asset management and real estate monetization. For example, when we identify a commercial property with stronger potential but lower capital current utilization, our experience in managed workspace can help us reposition these assets, attract suitable enterprise customers, and improve its income-generating potential. In such cases, we may be able to create value not only through workspace operation but also through improvement in underlying property commercial value. The proposed restructuring is intended to provide a more suitable framework for pursuing these opportunities while maintaining financial discipline. We also believe that a clearer capital business structure will help investors better understand the economics, capital requirements, and value drivers of our different activities. Of course, the proposed scheme remains subject to applicable approvals and implementation requirements. But we are very confident that, you know, the proposal will soon go through the NCLT, receive the NCLT approvals. UltraFresh acquisition, which is another important strategic milestone, which is strengthening our manufacturing platform. The second important strategic development, which is this acquisition of UltraFresh. Modular solutions. I would particularly like to highlight why we see this acquisition as strategically important. When we started building our furniture manufacturing business through AgDesign, we were clear that we wanted to create a business much larger than simply supplying furniture to our managed offices. We wanted to build capabilities in institutional furniture, customized products, OEM manufacturing, and other market opportunities. However, as we evaluated the next phase of growth, we recognized that manufacturing capacity alone is not sufficient. To build a successful manufacturing business at scale, you also need product capabilities, design expertise, distribution, customer relationships, and market access. This is where Ultrafresh spits into our strategy. Ultrafresh brings an established presence in modular furniture solutions, particularly kitchens, wardrobes, and other customized home furniture products. It also brings manufacturing infrastructure at Nalagad, at Himachal Pradesh, and established brand design capabilities within existing network of studios and customer touch points. For us, this acquisition is not merely about adding revenue. It is about acquiring capabilities, market access, and established operating platform that would otherwise take considerable time to develop organically. We see these multiple opportunities from this combination. First, manufacturing optimization. We can evaluate how best to utilize the combined manufacturing infrastructure, improve production planning, and strengthen procurement and supply chain efficiencies. Second, geographical expansion. Ultra-fresh presence in North India complements our existing manufacturing footprint and creates opportunities to serve customers across the wider market. Third, product diversification. While Egg Design has been developing its institutional and commercial furniture business, UltraFresh gives us access to modular home segment. And fourth market is the market excel. UltraFresh brings an established customer-facing network and brand presence which can support our broader manufacturing ambitions. Our immediate focus would be on integrating the business effectively, identifying operational synergies, and improving the efficiency of the combined platform. We are also conscious that an acquisition creates value only when it is integrated and managed properly. Therefore, we intend to approach this with discipline, preserving the strengths of the acquired business while using the larger EFC ecosystem to support its growth. We see UltraFresh as an important step in building a more diversified furniture and modular solution business. However, strategies strengthen our competition position. Now, if you look at these developments together, there is a clear strategic direction. Our leasing business provides long-term enterprise relationships and recurring revenue opportunities. Our design and build business expands our participation in commercial infrastructure and executions. Our furniture and manufacturing business strengthens our supply chain while creating independent growth opportunities. And the ultra-fresh acquisition expands our manufacturing capacity, product portfolio, and market. Our proposed corporate restructuring is intended to bring more efficiency, more focus to our workspace operations and owned property activities. These are not separate or unrelated initiatives. Each one is intended to strengthen a different part of the overall EFC platform. We believe this approach can give us an important competitive advantage. In the managed office workspace industry, companies often compete on location, pricing, and capacity. In commercial interiors, the competition is often around executional capabilities, timelines, and project cost. And in furniture manufacturing, success depends on product quality, manufacturing efficiency, and distribution and scale. At EFC, we are bringing capabilities from this different business vertical together. This allows us to offer customers a more comprehensive solution, gives us the opportunity to improve efficiency across the group. We believe this is one of the reasons our business model has been able to develop and grow across multiple verticals. However, we also recognize the competitive advantage is not something that can be established once and taken for granted. It has to be earned continuously through execution, customer satisfaction, operational efficiencies, and responsible decision making. That remains our focus. Execution priorities and outlook. Looking ahead, our priorities are clear. In Dezing, we will continue to focus on enterprise relationships, occupancy, customer retention, and asset productivity. In design and build, our emphasis will be on expanding external business opportunities, strengthening execution capabilities, and maintaining project discipline. In furniture manufacturing, we believe focus on capacity utilization, product diversification, operational efficiency, and integration of our profession. At the corporate level, we will continue progressing with the proposed restructuring and evaluating opportunities that can strengthen our business while maintaining discipline and capital allocation. We also recognize that as EFC grows, working capital management, project execution, cash flow generation, and operating system will become increasingly important. Our objective is to ensure that the growth is supported by a stronger operational and financial foundation. I would like to conclude with one thought. Our strategy is not to grow by simply adding more businesses. It is to ensure that every business we build and every strategic decision we take makes the overall EFC platform stronger and stronger. We believe that this approach can help us sustain our growth, improve our competitive positions, and create long-term value for our stakeholders. With that, I would like to invite our CFO, Mr. Udaybara.

Thank you, Nikhil, sir. A very good morning to all our investors, analysts, and stakeholders joining us today. As Umesh, sir, and Nikhil, sir, have explained, EFC continues to make progress in building an integrated business platform across managed office leasing, design, and build And furniture manufacturing. I will now take you through our financial performance for the second quarter and first half of FY27. Highlight the contribution from our individual business verticals and share our key financial priorities as we move forward. Let me begin with our consolidated performance for the quarter ended September 30, 2026. I am pleased to share that we have delivered another quarter of healthy growth. Both in terms of revenue and profitability. Our consolidated revenue from operation stood at $332 crores, compared with approximately $255 crores in the corresponding quarter last year, representing a year-on-year growth of 30%. Our EBITDA stood at approximately 134 crores. Registering a year-on-year growth of 21 percent, while our profit after tax increased to approximately 77 crore compared with 57 crore in the corresponding quarter last year, reflecting a growth of 36 percent. Our EBITDA margin for the quarter stood at approximately 40 percent, while our PAT margin was approximately 23 percent. What is important to highlight is that our revenue growth continues to be supported by contributions from All three business verticals, while profitability reflects the operating strength of our integrated platform. Moving to our performance for the first half of the financial year, for H1 F527, we reported consolidated revenue of approximately 650 crores compared with 474 crore in the corresponding period last year, representing growth of approximately 30%. Our EBITDA increased from approximately 213 crore to 257 crore while profit after tax increased from approximately 103 crore to 148 crore. This translates into PAT growth of approximately 43% for the first half. Our earnings per share for H1 FY27 stood at approximately 10.11 compared to Rs. 7.09 in the corresponding period last year. These numbers demonstrate our ability to expand our business while maintaining healthy profitability. Let me now briefly discuss the performance of our three business verticals. Our leasing business continues to be the largest contributor to consolidated revenue and an important driver of our recurring operating income. During Q2 F527, the leasing segment reported revenue of approximately 168 crores. Compared with 129 crore in Q2 FY26, representing growth of approximately 30%. For H1 FY27, leasing revenue stood at approximately 322 crore, compared with 252 crore in corresponding period last year. This performance reflects the scale of our managed workspaces operations and the continued contribution from our enterprise-customer relationships. From a financial perspective, our focus in this business remains on improving assets, productivity, optimizing operating costs, and ensuring that incremental capacity translates into sustainable returns. Coming to my DNB segment, this segment reported revenue of approximately 129 crore during the quarter compared with 112 crore in the corresponding quarter last year, representing growth of approximately 16%. For the first half, revenue stood at approximately 230 crore, compared with 196 crore in H1 F526. As explained, this business is expanding beyond the requirement of our internal workspace ecosystem and increasingly participating in external commercial and institutional projects. Being a project-driven business, quarterly performance can vary depending on executions, schedules, and contractual milestones. From our financial management perspective, our emphasis remains on project-level profitability, milestone-based billing, timely collections, and disciplined working capital requirement. Our furniture segment reported revenue of approximately 35 crores in Q2 F527 compared to 14 crores in the corresponding quarter last year, representing growth of approximately 149%. For H1 F527, revenue stood at approximately 63 crores, compared with 27 crores in the corresponding period last year. This segment has demonstrated strong revenue growth from a relatively smaller base. Our focus going forward will be on improving capacity utilization, procurement efficiencies, inventory management and operating leverage as the business scales. The acquisition of UltraFresh further expands our manufacturing platform, and we intend to pursue integration and operational synergies in a financially disciplined manner. Looking ahead, our financial priorities remain closely aligned with our broader business strategy. We continue to focus on profitable revenue growth, disciplined capital deployment, and strengthening our balance sheet. With leasing, our emphasis will remain on occupancy, asset productivity, and returns from our operating portfolio. Within design and build, our priorities will be project execution, discipline, billing efficiency, and working capital management. Within furniture manufacturing, we will focus on improving utilization, managing inventory, and realizing operational efficiency as the business expands. At the consolidated level, our objective is to strengthen cash flow generation, maintain financial flexibility, and ensure that our investments and strategic initiatives are supported by sound financial fundamentals. And H1F527 performance demonstrates the progress we are making in scaling EFC's integrated business model. We have delivered healthy revenue growth, maintained strong profitability, and continue to strengthen our presence across all three business verticals. While we remain optimistic about the opportunities ahead, our approach will continue to be guided by financial discipline, operational efficiency, and responsible capital allocation. Our objective is not merely to achieve growth in recorded numbers, but to ensure that this growth translates into sustainable earnings, stronger cash flows, and long-term shareholder value. On behalf of the company, I would like to thank our shareholders, investors, and analysts for their continued trust and support. With this, we would be happy to take your questions. Thank you.

Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on your touchstone 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. The first question comes from the line of Pramod Mohan with Gigi Family Office. Please go ahead.

Thank you so much. First of all, I would like to congratulate Team EFC for the good performance in the last quarter. My first question is around your current portfolio occupancy and how does it compare between mature and newly commissioned centers? Do we expect any improvements for the next two quarters?

Thank you so much, and thank you for wishing us well for the performance that we have posted. Yes, with regards to the occupancy level, as we have always maintained that we generally have more than 90% plus occupancy across. And, you know, the occupancy has always been, you know, stabilized and improving positively and maintained at 90%, you know, quarter-on-quarter and year-on-year. And we'll continue to achieve that, and there is no change, which is, you know, because the overall strategy is such that we kind of add those capacities which we believe, And we strongly have committed businesses that can bring the occupancy at the optimal level. So, yes, we continue to achieve that occupancy, and we believe that it will continue for even the future quarter on the similar lines, considering the strategies also that we keep adopting for the same.

Okay, noted. Follow-up question is, how sustainable it is for EFC to grow as a design and build in furniture manufacturing? Because now it has become a larger contributor. Thank you very much. It remains at its tropical level, or it will normalize in the coming future with the changing mix.

No, I think, listen, I mean, obviously, as we have always explained that, you know, the design and build vertical and the furniture vertical are integral part of our overall business model. And we've also maintained that going forward, you know, they will contribute substantially to the total top line because at the end of the day, the design and build vertical brings the growth, and also the furniture vertical helps us improve our profitability margins being the, you know, the manufacturing arm once it kind of works at its optimal level, optimal capacity. And particularly now that we have come to a stage, both in the furniture manufacturing and in the design and build vertical, where we have created such an expanded business model, where we are not just restricted to a particular... You know, segment of businesses where we have kind of captured across, you know, the commercial place, design and build, and also, you know, supplying different types of furniture products, whether it is, you know, for residential purposes, commercial purposes, projects, exports, and so and so forth. So we strongly believe that this is completely sustainable, not just from the revenue growth point of view, but also from the margin perspective.

And what about the EBITDA margins we are looking at? Will it be normalizing?

So EBITDA margin would, I mean, as we've always mentioned, that, you know, on a consolidated level, we'll be able to maintain a margin of upwards of 20% plus. And at a different vertical level, we have always maintained that on a corporate level, with regards to the leasing vertical, we'll be able to make at 25%, while at center level, we'll be able to make 30%, while on the design and build, we'll be able to make between 18% to 22%. And at furniture manufacturing at an optimal manufacturing capacity, again, around 24%, 25%. So those are the margins we'll continue to make and achieve those mixed project, I mean, integrated platform level margins of 20%, 22%, which we'll continue to achieve. And we believe that, you know, except for the quarters, which, you know, in a quarterly basis, it may kind of go up and down primarily because of, you know, that there are differences in the project execution cycles, project expenses that has to be incurred, and, you know, those timing differences may kind of bring a bit of variations in the margins. But on an annualized basis, you will see that we will be able to achieve these numbers which we are talking about. And which have been also been achieved over the years.

Thank you, Nikhilji. I have just last question left. I was looking at the numbers and found a transition with related to Samrithi Alpha private tribute. Can you put a light on it? Like what it is? What was the transition?

So basically, this is, you know, we've been really categorically mentioning about our strategy of asset ownership model that, you know, we are one of the few players in the market who really own the real estate, which are put to the managed office operations also. So what we have done in this particular transaction that, you know, if you see in our investor presentation, we mentioned that we own roughly about 8% to 10% of our portfolio, leasing portfolio, under our ownership, not just under the leasehold rights. So one such property that we had acquired in about a year, more than a year back, was a property here in Pune, which was we kind of acquired the property, you know, redeveloped the property in terms of then the fitted out, fit outs and furnishing related work. And then identified the best, you know, long-term customers and then created value by selling that property, which is now not just redesigned and rebuilt, but also put to, you know, income generating levels. And hence, we could maximize the return that we could earn on that property when we acquired it, let's say, about a year back, and when we kind of, you know, kind of hived it off after leasing it out. And that, again, then when we hived off the property, it was an asset sale and lease bag model. So ultimately, we still remain the operating partner of that property, but the ownership we have transferred to the potential investor. And as a result, For the company, we generated around 39% to 40% on return of capital on these transactions. So this is a very important part of our strategy where we are monetizing an asset and also this will enable us to reduce our debts because, you know, when we acquire this property, we take these properties on LRD or LAP structure and then when we create value, we are not able to just... You know, kind of get rid of that, you know, asset-backed debt, but also create this value, which we are able to do through the asset sale and lease-back of these properties that we acquired. Excellent. Thank you so much. So that was the transaction that was carried out with the Sanvitri Alpha.

Alpha. Yes, yes. Thank you so much. Thank you so much. Quite insightful. Many form of resolution. Thanks for that. Thank you. Bye-bye.

Thank you. Next question comes from the line of Sahil Singh with Arkhanda's Capital. Please go back.

Yeah. Thank you. Thank you, ESC team, for, you know, explaining the CO2 results in detail and congratulations for wonderful results. So, sir, we have two questions. One is related to the DNB business. I understand in the previous calls, you know, the DNB business expected to grow during the years is 50 to 60 percent. With the H1 result, we can see only 16% to 17% of growth in the D&B business. But do you think this number is still achievable in the next quarter, next half of the year, or do we see any kind of number, you know, shrinking from 50% to 60% growth to the current level?

No, no, absolutely. You know, we are on target to achieve the annual target that we have set for our design and build vertical. Yes, I mean, we have set a target of 50% to 60%, and that is a target that we all are geared up to achieve. The kind of order book that we already have in place right now really support, you know, that claim that we are making that we will certainly be able to achieve our targeted growth of 50% to 60% under the design and build vertical. Yes, quarter and quarter, as you have seen, the numbers may have not grown in the same ratio in which the annual target is set, but that is not the right indicator because obviously, you know, there are multiple projects which are under execution, and execution cycle also takes its own time. It's not necessary because the large projects that we execute, you know, need not to get completed within a period of, you know, like two to three months, which is the quarter that we are talking about. So we are absolutely confident on achieving the targets that have been set, and that is primarily because of the kind of order book that we already have, which is more than 300 crore class. And I think that both the next quarters, that is quarter three and quarter four, would be really promising for this particular vertical, and we will certainly be able to achieve targets.

Okay. Thank you for, you know, giving understanding on this point. Second point is, I understand the consolidated revenue has grew from 30% in Q2 year on year, whereas our EBITDA just grew to 21%. So, you know, is there any specific reason where, you know, our margin has compressed compared to the revenue growth or, you know, do we see any kind of key reason for the diversion of, you know, margin being, you know, reduced compared to the revenue growth? Or the margin will recover in a subsequent quarters.

No, absolutely. I mean, first of all, we've always maintained that Q&Q numbers are not the correct indicator for comparing the margins. The margin comparison should happen on an annualized level, and that is how, you know, a business cycle or business trend could be analyzed well, rather than just analyzing on a quarter-on-quarter basis. Having said that, obviously, the nature of our businesses are such, let's say, for a leasing business, there are always gaps in terms of when we are developing properties, incurring expenses in developing those assets, which we have to put to use for leasing purposes, or the corresponding revenue that we realize from that. There is always that timing difference, and that timing difference sometimes gets reflected in the way the income and expenditures are recognized and recorded in the books of account. But on an overall level, on an annualized-based level, as we always maintain, that we'll be able to achieve the margins that we kind of go out to achieve on an end, which is what we have always kind of indicated, and also rather mentioned in our presentation now that each vertical, what kind of margins that we are able to earn on a stabilized level. And also for the other verticals, whether it is design and build or the furniture manufacturing, in fact, you know, all of those, all these verticals are growing, you know, kind of rapidly and are able to maintain those margins, having, you know, particularly, like I said, on the quarter-on-quarter margins and relating to the last year's margin versus last year's, this year quarter versus current quarter comparison or YOY comparison if you, or quarter-on-quarter comparison if you're looking at, you know, margin. Wood, like I said, may not be the right indicator on this quarter basis, but still, because of this timing difference is number one, and also, naturally, this quarter in particular, there has been quite substantial increase in the prices of materials, prices of different services that has been available, and that obviously has contributed a little bit of pressure. But like I said, on an overall basis, we'll certainly be able to maintain those margin levels which we have set out for on an annualized basis.

Understood. Thank you so much. I think this is helpful for us, and I wish you a happy Diwali to you, too.

Thank you. Next question comes from the line of Vishal Kundan with Future Front Edge LLP. Please go ahead.

Hello. Yes, sir. I have one question, sir, what was the rationale for acquiring Ultrafresh via a 54 crore share swap, and how does modular furniture complement EFP? Also, I wanted to know what valuation method was used.

So, yes, I mean, the rationale for acquiring Ultrafresh, as we have mentioned in our speeches and also into our, you know, corporate announcements are that first, it is into manufacturing of furniture, modular furniture. And also has a wide distribution network that it has created in the tier two market. Secondly, you know, I mean, you know, the, you know, when the acquisition is carried out, we got access to the northern market in terms of having set up the manufacturing facility in North India in Himachal Pradesh. So, kind of that brings us a lot of supply chain efficiency, a lot of logistic efficiency, if we have to cater to that market or that region, number two. Number three, modular furniture is part and parcel of our overall strategy. As you know, that we already have a large manufacturing setup in the design. So, there also we carried out a lot of modular furniture, a lot of office infrastructure furniture, a lot of residential high-end furnitures, whether seating systems, etc. Also for, you know, the export purposes that we carry out. So all those reasons were very obvious that, you know, the acquisition of Ultrafresh, number one, gave us the access to manufacturing capabilities in the northern market. Also, it gave us access to, you know, the network that they have created through more than 160 touch points that they have across, you know, the tier two, tier three cities in India. And hence, the rationale was very clear. With regards to the acquisition price, yes, it was acquired at a valuation of about $54 crore. It's into this business where it is into largely enterprise businesses. And such businesses, you know, based on the advices of the, you know, the recognized and reputed valuers, are generally valued anything around 1.5 times the top line. And this acquisition that we carried out, in fact, was at about 1.49 times of their FY26 revenue. So in that sense, the acquisition was fairly justified. You know, that was... That was one aspect, but another important aspect was the share swap was carried out where the EFC shares was also valued at a price of Rs.270 per share, which is the fair value that, you know, was arrived at by, you know, the big four valuation agencies. And based on that, even the, you know, the seller, the erstwhile owners of Ultrafesh. Modular, which was very, you know, reputed companies, have accepted this valuation, and hence we got an inherent benefit. Where, you know, despite our, you know, market price was at a little lower than what this price is worth, we got the maximized value, which is the true potential value of our company, which is at 270 rupees per share that we could establish or we could achieve for this transaction. And hence, this was absolutely, you know, a transaction where we were able to kind of not just acquire at the right value, but also, you know, create a margin through the, you know, the price at which our shares were valued. And hence, we gain, you know. Overall, we were, you know, positive from both aspects. In terms of, you know, the benefit this transaction can bring in in terms of, you know, because now the shares are issued naturally, the share base is increased by a few number of shares which are issued for acquiring this company under a share sub-transaction. But this EPS would certainly get attractive with the increasing revenue that we'll be able to establish for this business, because now when this business is getting synergized with EFC platform, we'll be able to kind of add a lot of revenue generation and a lot of synergies, which could immediately bring in a lot of B2B businesses, a lot of project businesses, a lot of export activities, apart from their ability to market through the network that they've created. I believe this is absolutely EPS-accretive transactions in the long term, and the kind of benefits that it offers through the manufacturing infrastructure in the northern market and the distribution network across India, it really makes a lot of sense for the EFC as a platform.

All right, sir.

Thank you. Thank you. Next question comes from the line of Ashdosh Chaudhary with A.B. Bluecoat. Please go ahead.

Hi. Thank you, Nikhilji, for such an informative speech as well as the answers for the questions being asked. My question is, as design and build scales, could receivables and the working capital grow disappropriately? And what are current debtors aging, especially collection cycles and retention balances, and how does the EFC convert project profit into cash?

That's an interesting question, Ashutosh, and, you know, we have always maintained that, you know, while design and build vertical is an asset-like vertical, obviously, it demands a certain amount of working capital deployment because, you know, these are those projects where milestone-based payments are released. And, you know, yes, there are retention payments, there are performance guarantees, those are to be issued because, you know, we are developing these projects, delivering these projects within certain timelines, and those obligations are very critical for these projects because institutional clients won't probably get into those, you know, projects or design and build activities without, you know, leaving those strict timelines for us. So we'll certainly be able to kind of, you know, achieve those numbers in terms of the top line, as we mentioned earlier, but it certainly requires the working capital deployment. But having said that, you know, it doesn't grow disproportionately, naturally, because the project mix also that we choose is always in a manner that, you know, there are projects which are institutional, large institutional projects where, you know, payments are released on a, you know, very strict milestone basis. There are projects which we, private projects and private institutional business projects where we do where we are able to demand and we are able to kind of dictate kind of working capital cycles which are much favorable to us. So all in all, obviously, it is certainly a working capital intensive business. But having said that, it doesn't really grow disproportionately with the growth in this business. So we are certainly able to kind of, you know, number one, like I said, maintain the working capital cycles of anything around, you know, about 90 days to 120 days, because, you know, that is the time the entire projects get realized, not just from the milestones point of view, but also the retention, which are generally around 5% of the total project value, but, you know, that is the kind of timeline that we generally have to account for, because, you know, the kind of scale at which we are working, obviously, we have to do multiple projects and institutional activities, and which requires, you know, the working capital cycle to be in the range of, like I mentioned, anything around. 90 days, depending upon the projects and depending upon the type of work that is to be executed.

Thank you. Thank you for the answer, sir, and best wishes for the next quarter.

Thank you. Next question comes from the line of Shailendra with Damani and Damani. Please come with me.

Good morning, everyone. I am Shailendra from Damani and Damani. I have two, three questions relating to proposed merger. So my first question is, what is the economic rationale for the proposed merger or the structure in whatever you want? How will it improve the transparency, capital allocation, accounting, and shareholders value? What will be the post-restructuring structure, financial impact, timeline, cost, and risk involved? My second question is, how will the administration, investments, and restructuring? Created shareholders value beyond this revenue growth. My last question is, how does EFC ensure the arm length dealings along with all dealings across all subsidiaries, inter-corporate companies' transactions? Share support acquisition and restructuring. How that is the basis of online dealing, sir? There are three questions. And lastly, happy Diwali to everybody.

Thank you, sir. You are really testing my memory. But, you know, I will certainly try to answer all the three questions one by one. First, coming to the proposed re-merger, the proposed restructuring that is planned, as we have explained in our speech and also in our presentations very clearly, that, you know, the proposed re-merger brings a lot, you know, a lot of transparency in terms of the way our business models are going to get conducted through different entities. So, sir, to just put it simply, the entire leasing vertical, which is our managed office business, which is, in a sense, an asset-light business. It's getting de-merged from our Holyon subsidiary, which is EFC Limited, and getting merged into our... Our main parent listed company, which is EFCI Limited. So now, the EFCI Limited, which is our parent company, will have two verticals housed on a standalone basis. One, the design and build vertical, which is also, in a sense, an asset-light vertical, except for the working-out requirement, and the leasing vertical, which is also an asset-light business, where both these businesses will kind of get housed under EFCI Limited on a standalone basis. Another important aspect during this restructuring is that all the project-specific SPVs which were there under the leasing vertical, all of them are also folding into the EFC India Limited. Hence, we are making the structure absolutely clean in terms of the leasing vertical and the design-in-built vertical, where everything is housed at a listed level, and there are no multiple entities which are getting into these businesses, where we had project-specific SPVs or we have region-specific SPVs. All of this now is becoming only getting into one entity. The second important aspect which becomes critical of the restructuring exercise is that all our assets, which are all the real estate that we own, under our asset ownership model, as we have explained earlier, that our leasing vertical, we divide into two parts. One is the asset operating model and one the asset ownership model. So, all the asset operationally model is all shifting toward the listed company, as I mentioned. Now, the all assets which are owned by us will remain at EFC limited level, the only on subsidiary level. So, now there is a clear allocation of capital that can be defined, clear allocation of the profitability that can be defined in terms of the asset light business, asset operating business versus asset ownership business. And we are able to obviously arrive at the right amount of ROC. We are also able to arrive at the right amount of, you know, kind of returns that each businesses are throwing and then obviously return on capital that, as I mentioned, could be achieved through this. So this is a very important aspect of the complete restructuring exercise as the demerger scheme is concerned. With regards to the rationale that you mentioned about all these acquisitions and investments and the restructuring that we are talking about, Obviously, sir, that you would appreciate that in today's time and age, you know, the corporate governance is of utmost importance. And we need to establish, you know, those standards which are of highest integrity, highest transparency. With these structures, we are able to not just kind of, you know, bring those, you know, highest corporate governance standards, but also this kind of, you know, helps us create, like I mentioned, you know, you know, verticals where we are able to create, Great efficiencies, execution capability, and deeper customer relationships through this, you know, complementary structure by, you know, where you are able to, one, on the other side, the asset line model is created, and on the other side, we have the asset ownership model is created. So, absolutely, sir, these acquisitions or investments that we are making, either they are adding to our overall plan of growing business as a platform, where we are not just kind of looking at, you know, the revenue growth, but we are also looking at a long-term objective to improve the return on capital, asset productivity, you know, the recurring earnings and cash generations, right? So this restructuring, acquisitions, investments are all aligned towards this objective, sir, and we are sure that we will be able to achieve them. And to your last question about, you know, the maintaining the, you know, transparency with regards to the related party transactions, you know, the transactions between the subsidiaries, please appreciate that. First of all, our business model is such that we derive value from the backward and forward integration, and we try to maintain the margin within the group itself. So that's a very integrated part of our business model. Having said that, all these verticals operate as a standalone profit centers, right? So they compete with each other in terms of bringing their businesses. And when they compete with each other, obviously, you know, the arm's leg pricings are established by default. Because, you know, it is not a question that, okay, if there is a business with Design and Build Vertical wants to give to a furniture division, it goes just because it is my, you know, subsidiary or it is my sister concern, I have to give that business to them. They have to compete internally. They have to, you know, compete with the other two, other three, you know, service, I mean, you know. So, give their quotations and pricing, and once, obviously, the L1, the best, you know, quotation will always win the, you know, the order. So, you know, this is very clear that we have very transparent. We have a way of operations where arm's length pricing is established through, you know, Big Four financial institutions, I mean, Big Four accounting firms who really helps us in setting the arm's length pricing. And, you know, when we carry out these transactions and report this transaction to SEBI, which is anyway a regulatory requirement, we ensure that all the pricing and all the terms at which these transactions are, you know, kind of carried out or conducted internally are carried out at the arm's length price only. And that has very well, like I said, documented and established. So, since we are very cognizant of these aspects of maintaining the full transparency, maintaining the arms and pricing, maintaining, you know, those competitiveness within the organization and not bring any slackness in terms of, you know, our growth going forward and also growth in the overall margin profile that we want to achieve through this integrated business model. I hope, sir, I have kind of answered all your questions, and thank you so much, and also happy Diwali to you, sir.

Thank you. Thank you.

You're welcome, sir.

Thank you. Next question comes from the line of Miraj with AP Alpha, please.

Good morning, all. First of all, congratulations, ESC team, for delivering great performance this quarter to your investors and shareholders. I have two questions, more on the forward-looking perspective. Now, with H1 already passed, is ES1 track to achieve its annual top-line and bottom-line targets? And which are the verticals who are behind or ahead of the plan? And out of them, what will drive H2 growth on higher contribution towards revenue and profits?

Thank you so much. First of all, yes, as I explained earlier, that we are absolutely on track to achieve our annual targets, and we are confident that as a platform, we will certainly be able to achieve the growth that we have set out for, number one. Number two, you know, all the three verticals, which is leasing vertical, which is furniture vertical, and design and build vertical, are fairly on track in terms of achieving the targets. You know, let's say the leasing vertical has already achieved the numbers that it is targeted to achieve on a proportionate basis, and the same is the case with furniture vertical as well. Design and build vertical, yes, it looks apparently with the numbers that is recorded and registered for the first half year that it is lagging behind a bit for the annual levels, but it is not because of the order book that we already have right now in hand and the orders which are under execution. Had this order book not been in hand, then obviously one may have a concern around this. But since there is an order book in hand, and since we are very confident that these orders will get executed within this financial year itself, we are very confident to even achieve the targets within the design and build vertical as well. Hence, overall, all the three verticals, number one, are absolutely on track in the first half, and we're expecting that it will do much better comparatively in the second half as well, which is generally the case if you look at our previous share performances. So, forward-looking, we are absolutely on track, Neerji, and we are confident to achieve the growth targeted for all the three verticals.

Thank you. Ladies and gentlemen, that was the last question for today. If the time comes space, we have reached the end of question and answer session on the afternoon.

Thank you for joining us.

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