Indiqube Spaces Limited (INDIQUBE) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Q2FY27 Earnings Conference Call for IndyCube Spaces Ltd. hosted by Nirmal Bang Institutional Equities. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Kundnani from Nirmal Bang Institutional Equities. Thank you and over to you, sir.

Thank you, Alaric. Good afternoon, everyone. On behalf of Nirmal Bang Institutional Equities, I would like to welcome you all to Q2 F527 Earnings Call of IndyCube Spaces Limited. With us, we have today from the management, Mr. Rishi Das. I will now hand over to the management for the opening remarks, after which we will open the floor for Q&A.

Over to you, sir.

Good afternoon, everyone. Hope I can start or you want me to wait for a couple of minutes for people to join.

Rahul, shall I start? Yes, yes, sir.

Good afternoon, everyone, and thank you for joining us for IndyCube Spaces Limited Q2 FY27 earning call. It is my pleasure to welcome our shareholders, analysts, investors, and all the participants joining us today. Our earnings presentation has been uploaded on the stock exchange and on our website, and we trust you had the opportunity to go through it. As we are all aware, India is increasingly becoming the world's innovation and operations of the rapid growth of global capability centers, as we call them GCCs in short, multinational corporations and Indian enterprises, is changing the way businesses think about their workplaces. Every one of these enterprises need workspaces that can be made available to them quickly, that can scale across cities, offer a consistent experience, and more importantly, does not require them to commit significant capital to real estate and infrastructure. This is a precise problem IndiQ was built to solve. Over the years, we have evolved from a managed workspace provider into an integrated enterprise workspace platform. Today, we manage approximately 10.86 million square feet across 138 settlers in 17 cities with approximately 2,41,000 seats and a total of 884 clients. Our business model is built around the carefully aligned investment and recovery cycle. We typically take spaces from landlords, develop it into customized workplaces and secure long-term commitments. From enterprise customers. Our average customer lock-in is approximately 35 months. We invest around 1,650 rupees per square foot in the fit house. And our investment recovery period is approximately 36 months. A new center typically reaches a professional break event at around 55 to 60 percent occupancy within six months of rent commencement. And it approaches steady state within 12 months. There is another important aspect of our model that we want to highlight. Our landlord arrangements typically have long underlying tenures, averaging around 15 years. However, our lock-in commitment is approximately on an average 38 months, after which we have the option to continue or exit subject to contractual terms. So what happens, this structure gives us access to long-term supply while maintaining flexibility in our own commitments. Let me now turn to our financial performance. We have delivered another strong quarter as you would have seen with our earnings presentation. In Q2 FY27, our revenue was approximately 475 crores. This has grown 34% year-on-year. EBITDA, as per... 05 rules. That grew by 63%. For the first half of the year, since we just completed H1, our revenue stood at 904 crores, growing 35%, and FAT was 92 crores, growing 66%, compared to the same period, last financial year. We also paid income tax of 22 crores in FY26 full year, and We have paid 13 crores in the first half of FY27. Our VAS revenue has reached 154 crores in H1, and this has grown very substantially, 74% year on year, and now this contributes around 17% of our operating revenue, compared to last year, which was 13%, now 17% of our operating revenue is coming from valued differences. Our steady state occupancy has also improved to 91% compared with 89% last year. This is an important demonstration of how portfolio maturity, improving occupancy, and additional services are contributing to our growth. Looking ahead, we have a significant growth runway. We approximately currently have 3.8 million square feet of headroom, and this represents about 85,000 seats. Of this... For approximately 2.67 million square feet, we have the LOI sign and this space is expected to become operational over the next 12 to 18 months. The balance 1.14 million square feet space is available in our operational buildings and this can be offered for client occupancy on immediate or shorter notice. Our expansion is also guided by the location preference of enterprise customers. and access to talent. We are continuing to deepen our presence in key micro markets of National Capital Region, NCR, Mumbai, and Hyderabad, in addition to already what is happening in Bangalore and Chile. Approximately 80% of our centers are within 3 kilometers of metro station and 3.46 million square feet of our portfolio is green certified. With that, I will now hand And over to my co-founder Beknagarwal. Thank you, Rishi.

I think the numbers Rishi has shared demonstrate the scale we have built and the strength of our underlying business model. We are building long-term enterprise relationships, and a customer increasingly see us as a strategic managed space partner capable of supporting their growth across multiple locations. And a few numbers to reinforce this. Fifty-four percent of our revenue comes from GCCs, reflecting a strong positioning with the global enterprise. Forty-one percent of our revenue comes from the client occupying more than one IndyCube center, demonstrating the depth of our relationships and ability to grow alongside our clients. Clients with requirements of over 300 seats account for 65 percent of our occupied space, and these clients stay up for an average tenure of about 47 months. Across our portfolio, the average client tenure is approximately 42 months. Nearly 63% of our clients are acquired through our own brand and direct channels, while brokerage accounts for just 2.29% of our operating revenue. This reflects the strength of our brand, direct customer relationships, and distribution capabilities. These numbers tell us that we are building much more than a managed-based business. We believe the opportunity ahead of us is significantly larger than the traditional managed workspace market, and we are extremely excited about this journey. Historically, enterprises have managed the requirements like real estate, design, infrastructure, technology, food, transport, employee experience, sustainability, and ongoing operational management through multiple vendors and fragmented relationships. We believe that there is an opportunity to bring these capabilities together through a single integrated enterprise-based platform, and our strategy is therefore Built around three distinct layers of monetization. The one layer of monetization is GROW, the core platform. GROW is a managed workspace business and the foundation of Indicube. It provides reoccurring revenue, contractual visibility, and a nationwide network through which we serve enterprises across multiple cities. As centers mature and occupancy improves, this layer also benefits from improving operating leverage. More importantly, Grow creates the customer relationships and physical networks from which the rest of the platform can scale. Our layer two is managed space services, meaning expanding the customer wallet share. The second layer is all about increasing our participation in the managed space lifecycle. Once an enterprise occupies a space, it needs multiple services to operate it effectively. Through IndyCare, we provide facilities and property management, IT, food and beverage transportation, and other workspace services. We are also taking these operating capabilities beyond IndyCube centers into a distributed commercial network, such as retail outlets and branch management across India. Through DesignCube, we are leveraging our design, architecture, and project execution capabilities to serve enterprise customers beyond the spaces managed by IndyCube. Our proprietary technology stack, MyCube, sits across these layers, helping us manage service delivery, operations, and a consistent employee experience across locations. This allows us to grow with the customer without necessarily adding more real estate. And the layer three is the strategic adjacencies, deploying the growth capital. The third layer focus are the agencies where our existing capabilities and the customer relationship allows us to deploy capital selectively and create new revenue opportunities. Our solar journey began in 2019-20 with rooftop installation across our properties. Since then, we have scaled to more than 40 installations, expanded into captive solar generations across Karnataka, Maharashtra, and Tamil Nadu. We currently have approximately 30 megawatt plant of operational capacity with another 30 megawatt expected to become operational over the next year. We have already generated close to 15 crores in revenue from the solar solutions in H1 against an investment of approximately 46 crores. Under IndyCube Echo, we are scaling such sustainability solutions across green power, green building certifications, energy efficiency, water conservation, waste management, and renovation. We are beginning to see these three layers of monetization come together. And as we look ahead, we believe Integube is entering in a very exciting phase of its journey. Grow provides the reoccurring revenue base and the customer network. Workspace service increases our share of customer spend and extends our participation beyond the physical workspace. And lastly, the strategic agencies allow us to deploy growth capital selectively into capabilities that strengthen the platform over the long term. Our ambition is not simply to build more workspaces. It is to build India's most trusted, integrated, and profitable enterprise workspace platform. We remain focused on the disciplined growth, stronger customer relationship, and sustainable long-term value creation for our shareholders. Thank you for your continued trust and support, and would be happy to take your questions.

Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their 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 for the question queue to assemble. The first question comes from the line of Shamit Ashar with Ambit Capital. Please go ahead.

Yeah, hi. Thanks for the opportunity and congratulations on a great set of numbers. I just wanted to know your thought process behind, you know, the proposed investment of 35 odd crores you have made in SAI as a realty private. So if you could just, you know, give some rationale behind that, that would be great. And also on your solar capex, you mentioned you have already done 46 crores of capex during the year. So going forward, how much of capex are you earmarking for your solar, you know, your solar plants?

Yeah, thank you, Jamit. See, for the side edge, what happens is that, as you know, a lot of our portfolio is into core micro markets, where occupancies traditionally have been more than 90 percent, so supply has always been a problem. Getting ready to move in supply is not easy. So what we realized is that it is a good strategy that we go and identify land parcels in those kinds of locations, which are not very large. And we work with either the landlords or investors and try to, in a co-ownership model, develop these assets where ultimately IndiQ pleases the asset and that asset is available for forward sale or is sold once the building is ready for occupancy. So that is a model which we are looking at as a pilot for one of the properties in Bangalore, and in that micro market we already have almost 800,000 square feet of space. And everything is full. We are already running at 97% occupancy in that micro market. So with this asset, we want to create a long-term strategic supply as per our requirement. And also, as you can imagine, once the forward sale or eventual sale happens, this will give us some capital appreciation. So it's a two-pronged thing, and this is a pilot we are doing. Depending upon how this pilot goes, we can consider as a part of our strategy to do similar kinds of things, maybe in other locations. But that's something, and this is still in the formative stage. So once we basically close the transaction, have more concrete details, we'll share that. Regarding solar, as Meghna mentioned, we are currently under process of doing a 30 megawatt expansion, which will be about 100 crores kind of a capital expenditure that is happening. For the next year, we see a similar kind of addition being planned, and what is happening with solar specifically, because we have very successfully done it for our set of buildings predominantly in Karnataka and in instances in Maharashtra and Tamil Nadu, a lot of our clients are coming and saying that they have other buildings, why can you provide us green Thank you.

Got it. And for full year FY27, what sort of EBITDA margins are you looking to clock?

We will be about range bound. Our EBITDA will be between, I will say, 19 to 21 percent in that range is the full year guidance that we see. And this should put us about 380 to 400 crores EBITDA margin for the whole year. That's how we see it.

Okay, understood. Thank you and all the best.

A reminder to all participants, you may press star and 1 to ask a question.

Participants, please press star and want to ask a question.

The next question comes from the line of Adhidev with ICICI Securities. Please go ahead.

Yeah, good afternoon, everyone. Thank you for the opportunity. I just wanted to understand the uptick in the cash debit margin for the quarter, and the vast revenue also has been higher. So, could you explain why the margins would have picked up quarter-on-quarter, just some broad breakdown, if you could help? That is one. Secondly, by the end of this year, what is the operational number of seats or area we are targeting, and what is the similar thing for FI28? Yeah, those were my two questions.

Okay. Thanks, Azideh. So, as you mentioned, that revenue growth is about 30%, and there's an uptick in the profitability. So, there are a few factors to it. So, one is the improvement in, if you see the steady state occupancy from 89% to 91%, which is about by 2%, that itself contributed to 40% of growth. Reduction in the finance cost has happened by 1%, which has contributed to 25% growth. Our WAX margin has also improved by 5%. And fourthly is the operating leverage. So, there has been a reduction of one person in the salary and other costs. So, when you put all these factors together, all four of them, that is given as the uptake of the profitability. Okay. The second question is, yeah, the second question you said. Yeah, do you have any questions on this one?

So just all this, the solar plants you're putting, right, could you just maybe quantify or just qualitatively explain, like, in terms of operational profitability, how it is helping us, the solar capex we are doing, just to, in broad understanding, to provide?

So solar is, honestly, it's giving us, the payback is about three years, but our revenue, you know, in the back, you know, because it's a multiple, the revenue is a combination of multiple services. It comes food, transport, solar, technology, even DesignCube. So as if now, these services are not of that scale where we are kind of dividing and individually giving it, you know, the individual P&L account, I'm very, very sure and very hopeful over the coming quarters, you know, once they are in a certain stage and scale, we would be able to give you individual P&L. But overall, as if now, we consider the margin of the VAC has improved from 15% to 20% overall. So this is where we are, which includes them as solar also. And the solar itself has given us a revenue of about 15 euros in H1. Okay.

So this 20% sort of vast margin is now the new floor, means this is the minimum we will be doing, going ahead.

The thing is, I mean, yes, but the point is, Adire, we have always mentioned that the VAS is also like a foot in the door, you know, for our clients, right? So there are a lot of times, especially the larger companies, MNCs and all, you know, we start with the services. It's like a foot in the door. So margin is not the priority as of now. We have always maintained for IndyCube, growth is a priority. I mean, definitely we will not grow at any cost. But with the foot in the door, my margins could reduce, but it will be, again, range-bound around about 18 to 20 percent.

Okay, okay, got that.

Yeah. The second question was about your area increase, right?

Yeah, for this year and maybe next year if you have some color.

So this year also is in the similar timeline, the similar numbers in which you've been talking about is close to about 2 million square feet in the rent-paying area, we would be adding it, which would translate about 44,000 seats per year. And you could see us also from the slide number 18, if you go through in our investor presentation, our total portfolio signed is about 10.86 million square feet, which is about 2,40,000 square feet. 3.05 million is about rent-yielding area. So that itself gives you a significant, you know, a headroom, I would say, which is about 3.87, about 85,000 seats of headroom. That would be operation in the next 12 to 15 months, you know. So similar kind of numbers is also what we are forcing in FY28 too.

Sure, sure. And just last one, if I can squeeze in this, the one where we have in Koramangla, the new building where you're proposing a bit on ownership and model. What is the timeline? Is it like three years away or it will be ready in 18 months or anything?

No, no, it's in that land state. It's definitely going to take about close to about three years. It's three years away.

Okay, three years away. Okay. Yeah. Fine.

Yeah.

That answers my question. Yeah. Thank you and all the best. Thank you.

The next question comes from the line of Mohit Agrawal with IIFL capital. Please go ahead.

Yeah, good afternoon, everyone, and thanks for the opportunity. Congratulations on great set of numbers. I have just one question. This is on, so our strength lies in, you know, a lot of leasing that happens in-house. What kind of advantage does it give us when these contracts come up for renewal? So, let's say three and a half, four years, typically when they would be up for expiry, what percentage of our contracts are renewed by the same tenants? And second part to that question is that how are the terms, how do the terms change, typically considering that the fit-out cost and all may not recur for a renewal? Typically, how would the terms for a renewal client be different versus, let's say, a real-easing client, if you could give some color on that?

Thank you, Mohit. So, see, our attrition is about close to 10%, I will say, annually. That's the attrition. So, suppose we have a rent yielding area of 7 million square feet. So, you will see about 700,000 square feet. The second thing is whatever contracts come up for renewal, there we are seeing that 80% of these contracts get renewed. So, 80% are like that. 10% clients are there where we have to give some relaxation in the escalation. Maybe instead of 6% escalation, we may agree for 2%, 3% escalation. And there are about 10% cases where we have to give some discount. So, suppose a client has stayed with us for 3 years, 4 years, and we have recovered a large part of our capital expenditure, we provide some little bit of discount. But overall, what we have seen is that there is an increasing trend that our renewals and all generate about, I will say, 5% growth year on year. That has been the thing for us over here.

Sure. Vishi, just a couple of clarifications. You said that if you have 7 million square feet of area, 10% comes up for expiry, which is what you call as attrition. Of that 7 lakh square feet coming up for expiry, what percentage that a contract would renew with the same client, if you could share that number broadly?

No, actually, 7 lakh is what they leave. That's what people are leaving, is about 7 lakh. I will say about a million square feet. So basically about 90% of the customers they renew the contract. What will be the attrition?

Understood. And one more clarification, you said that, you know, with most of 90% contracts, 80%, 90% would be on same terms. What happens to the fit-out cost? Is there a refurb cost, you know, that you incur for them? Or typically that continues? Because I'm just trying to assess the profitability of a renewal contract. Is that meaningfully higher or the discounts kind of take care of the lower fit-out spend than, you know?

So, basically, if you ask me, the way we have said also earlier that we invest about 1,650 rupees now, and a lot of them which are coming up for renewal, that Capex was 1,500. So, technically, in the three-year period, when the lock-in gets over, which is our typical lock-in, we have recovered most of the Capex. So, if you ask me, the EBITDA, which we were getting till then, actually converts to more of a PBT kind of a scenario, because Capex has already been recovered. So that is a very healthy thing that most of the money that we get after three years is pure PVT from that perspective. And as I said that about 5% year on year, even on the renewed contract, we are able to achieve that. What is happening is also because a large part of our portfolio is into the key and the core micromarkets where you don't see that 5% rental inflation being a challenge actually. In fact, a lot of our properties have seen even inflation which is more than that. And the third point that you talked about, the renovation and that expense, typically I would say about 40-50 rupees a square foot is on an average is the investment that we do when clients renew and that we don't capitalize. So that is treated as an operating expense. So that's how we have been doing. And moreover, whenever any renewal comes in, we insist on a new lock-in. For example, if somebody is renewing and is not giving a lock-in, then even this 50 rupees is not spent on that. Suppose they want to extend by year and all that. But if they are giving us a 2-year, 3-year commitment, then we don't mind putting some more CAPEX. So that CAPEX, or I must not know, CAPEX is not the right word because we are expensing it off. But whatever additional investment that we are doing is only done and we use that as The currency to see that the clients give a higher lock-in.

Great, this is clear. Thank you so much and wish you all a very happy Diwali.

Thank you. Same to you. Happy Diwali.

The next question comes from the line of Rishit Shah with Access Capital. Please go ahead.

Thank you for your opportunity. Two questions. So firstly, on the branch management business that you alluded to in the opening remarks, can you elaborate a little more on it? And on related, so this is a new segment that we are entering in. We are also looking to co-develop the new property while also kind of continuing to expand our VAS offerings. And our grow business continues to expand. So, with these multiple business or multiple segments in mind, so how do you think of management bandwidth in this regard? So, the two questions. Thank you.

So look, Indicare has always been there. We've been managing the operations of the offices, you know, whether it is food or the facilities, transport, everything. Now, I would say it's again a pilot what we've done in the Indicare retail sector, because when we were talking to a few banks, you know, they happened to see our technology, the MyCube stack and all. They said, why don't you also serve us? You know, because when it comes to even the retail and the branch management, 80% of needs are similar. It's a similar kind of a workstation, similar kind of a manager cabin, similar kind of a grid ceiling or a gypsum ceiling, you know, the visitors' chairs, tiling, everything. You know, 80%, I would say, the interior is mostly the same. And here we're talking about large volume. We're talking about the FinTech, you know, the branches are an uptake mode. So they're talking about like 500 branches to about 1,000 branches every year. So, it's a new segment, I would say. We are entering into retail. We are still testing the water. We have done for a large gold bank, we have done at least close to about. About 30 branches so far, you know, and, you know, we're still learning the rope, but as I said, it's 80%. This stuff is same. It's not separate. And just because we have a present in our 17 cities, we do have the network of the partners, the vendors, the supply chain management is always there. It is just we are kind of leveraging on the entire lifecycle, which already the grow model has created. So, it looks like it's in a different one, but it is not. It's a different vertical which we're entering into it. And regarding the management bandwidth, I said, grow model is, you know, it is taking a bandwidth, but it is still, you know, we've been doing for the last 10 years, so we know how it kind of do it. So, like, but 50% of the management bandwidth is grow, it goes into your existing expansion, existing grow model expansion, and the 50% goes into finding out the newer opportunities, right? Like the way we have done in the pilot, in the buying the asset, in the side property, or getting into the IndyCube retail, you know. So it's kind of a balance, you know, which we do it. Because in the retail, if you see the Thailand, India has lower penetration than Thailand in retail. So it's a large market we are talking about, and we are taking very, you know, baby steps into this thing.

Sure, sure. That explains a lot.

Just a follow-up, how are the commercials that you think about on the branch management segment, or is it too early to commit?

It is, honestly, it is early because the branches we are talking about is about 800 square feet to about 1,200 square feet. They're costing the CAPEX cost because it is, there are two models into it again. It is, one is the refurbishment or the new branches plus the management of those branches. So what is the value proposition to them that all the branches, for example, if any company has got about 1,000 branches, they come to our MyQ platform and they can see, you know, the dynamic dashboard, depending on the shareholders, they can see what is all happening in these branches. So when you say the renovation or the new branches, there's a CAPEX model. Their CAPEX would be around about 1,400 going up to 1,800 rupees per square feet. And the management of the branches also depends on the OPEX model, depends on the number of hours, you know, they want the facility or the security of the store manager. So it's a little early to predict them, but, yeah, but this is the ballpark figures we're talking about here.

Sure.

Thank you, Sama.

The next question comes from the line of Dharia Trivedi with DJT Investments. Please go ahead.

Hi, congratulations on a very strong set of numbers and thanks for taking my question. So, we had a rent-paying area of 7.84 million square feet at the end of FY26, which is now at 8.2 million square feet. So, given the guidance of adding 2 million square feet area this year, which means the bulk of the square feet relation is going to come in H2. Then in that scenario, should our EBITDA growth in H2 be much higher than the 37% that is run in H1? I'm just trying to reconcile the numbers with the guidance that we need.

So, you are right that a lot of addition of space will happen in the second. So, I think the right comparison will be that if you look at, say, for example, our last year number, say Q2 FY26, our rent paying area was 6.7 million, and we today for the Q2 FY27, we are at 8.2 million. So, we have added almost 1.5 million. And there will be area addition. And in fact, it is the other way, like because when new rent-paying area gets added, it takes us 6 to 12 months to achieve steady-state occupancy. So basically, that is definitely a period where our pre-operating cost and all that starts coming in.

So, a lot of gains typically accrue

beyond a year of property acquisition. So, definitely there is a good amount of delivery of properties that is going to happen between now and say end of H2. And, yeah, so, but as I said that mostly on the EBITDA and all that margin and You can see us range bound. Typically, we are at 22. We will mostly see as between 19 and 21, 22 kind of number. So I don't see that there will be too much of fluctuation, but yes, there will be a good amount of rent paying area that will get added in the H2.

I just wanted to understand what will be the total operational square feet and the total number of operational seats at the end of FY27?

One minute, yeah. So, 9.7 million will be the rent paying area at the end of FY27.

Okay, and just one last question, I mean, if I see the Q4FI26 numbers, the total operational square foot was 7.84 million, which will now move to 8.2 million, but the total number of operational seats has remained the same. So any reason why this has happened?

No, in the quarter 1, the operational was 7.8, and in quarter 2 is 8.2. So, there is a change in the operational seats. So, which numbers are we referring here?

The operational square feet was 7.84 at the end of Q1FI27, which is now 8.2, right? Correct, but I mean, in the presentation, the number of operational seats is more or less the same.

There will be, there is a, so if you, actually the easiest calculation is the million square feet, because, so, because we have varied kind of clients, right? So, people would not take on just the number of feet. The moment any client goes beyond 100 feet, then they do a deal in the per square feet. So, the easiest calculation, which is also mentioned in our presentation, that we divide the area with 45. So, if you divide 7.8 million square feet, divide by 45, you will get the number of feet and operation, and similarly, 8.2. So, this is the difference, could be just about 10,000, 15,000. That is probably why you are not seeing the thing. It is 7.8 divided by 45 is about 17,000 odd seats, and 8.2 divided by 45 is, yeah, so that is how you have to do the calculation. I don't know which number because in a presentation also, it is a different number. So if you can refer me the slide, that would be easier for us to understand.

A reminder to all participants, you may press star and want to ask a question. The next question comes from the line of Chayan Jain, an individual investor. Please go ahead.

I'd like to congratulate on your amazing set of numbers. So, my first question is regarding your investment in science, reality, and foray into solar. So, are you not seeing enough opportunities for growth in your core business as compared to your peers, and what is the profitability and growth breakdown across these new segments?

So, basically, Chen, thank you so much. If you look at, as I said earlier, with one of the questions, the side-edge investment that we are talking about is exactly in line, because what is happening is a lot of good-performing micro-markets, for example, in Gombe, if you look at Andhiri today, and if you try to acquire good-quality properties in Andhiri, it is not easy to get something off the shelf. So, you need to go well in advance and plan. So, basically, this is more like going upstream for us, where we are looking at that, okay, if we can see, it's like, suppose, tomorrow a hotel chain says that I want to open 10, 15, 20, 50 hotels, right, in good quality locations. Now, one way is, you go in a bag of money, try getting it, but you don't get that. So, very similar thing we are finding that in very high-performance micro markets, the properties are not there. So there we are looking at that how can we work with, say, investors, landlords. in a co-investment model and create the supply. And once the supply has been created, IndiQ leases the supply and then the asset is transferred. The idea is not like basically that where we want to hold the assets in IndiQ's balance sheet and P&L. So it's like a you can say co-invest, lease and sale kind of a sale and lease back kind of a model. So there we are seeing that this allows us to create Good quality supply. And then, as I mentioned, this is a pilot that we are doing. This is that we will see that how we have to take this forward. Now, talking on the solar again, as Meghna mentioned, that we basically, like, when we started into, like, the solar journey into 1920, from there, we have reached a very good place where we already have 30 megawatts of installations, all of that. And now, this we are seeing as a big opportunity because if you We look at a lot of our clients. Most of the clients have a ESG target. They have to transition to green. And that is one of the big workspace solutions that we are asking for. Since we already have the capacity, the capability, we are co-locating and trying to build out the solar assets which take care predominantly of our own requirement. And at the same time, if we can extend that to our clients typically, that gives us better operating leverage, economies of scale and all of that. So it is more like an adjacency that we are seeing. We are not looking at like going utility-scale solar or doing a few gigawatts of installations and all of that. So predominantly what we are solving for us and along with that is what this is happening. This is more like adjacency kind of opportunity. And SIEH is more going upstream to basically secure high-quality supplies in prime micromarkets.

So how much will it impact the margins and the payback period?

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

Okay, understood. And my second question would be around your one-time revenue. So what was the one-time revenue under VAS and rental revenue for this quarter? Since the rental revenue sort of increased by 10%, yet the occupied seats increased by 4% or 5%.

So there are two questions in here. So the thing is, we are actually, the reoccurring and non-reoccurring was creating a lot of confusion because non-reoccurring is also kind of a reoccurring. So it might not be the same client, but the revenue, the numbers would be same. So now it is a little tough for us to kind of, so we are talking about the total revenue now because this would be reoccurring nature. The client name could change. So there's no further bifurcation which we are doing for reoccurring and non-reoccurring here.

And on the rental revenue fund?

So the rental, you mean, so your question is that your occupied areas only increase by 21% and the revenues increase more. Is that the correct question?

So, occupied seats increased by 4% to 5% on a quarter-on-quarter basis, and rental revenue increased by 10%.

Yeah, yeah, so same thing. So, even this occupied area of the seats, as we call it, you know, it cannot translate. We cannot see it translating into revenue growth on a one-to-one basis. There are multiple factors which kind of impact the revenue growth, and the factors are one is the rental escalation, Because existing contracts typically carry annual rent escalations, as we mentioned earlier, also 5% to 6%, which kind of gives you the growth without incremental addition to the occupied area or the seats. Secondly, the higher VAS contribution, because we have seen the increase in the VAS revenue contribution, that also do not translate to the area, but it translates to the overall revenue growth. Plus, there's been a change, there's been an uptick in the steady state occupancy from 89 to 91, which is by 2%, that is also contributed to the revenue growth. So, the occupied area cannot be seen on a one-on-one basis here.

Okay, fine. Thank you, and I wish you all the best.

Yeah, thank you.

The next question comes from the line of Rahul Kundanani with Nirmal Bang Institutional Equities. Please go ahead.

So congratulations on a good set of numbers. I just had one question on the VAS front. So VAS is currently 17% of the total revenues. Do we see, where do we see this number going ahead? Do we, as in, we are quite ahead of peers in terms of VAS revenues? Do we see it going to 20, more than 20% and by what time? In how much time do we see this increasing?

Yeah. So, as you rightly pointed out, our VASH has been, contribution has been consistently increasing from 12 to 15, and now it's about 17 percent. And, you know, the VAX remains definitely an integral part of the strategy and the client offering. Going forward, we're expecting the VAX revenue to increase further by at least 2% to 4%. You know, so while the quarterly percentage honestly might, you know, because the quarterly percentage might change and fluctuate, but on a yearly basis, we see growing, you know, minimum 2% to 4% from the existing percentage what we have today.

Got it. And the last one on occupancy. So do we see our occupancies, there's a small dip in the overall occupancy from 87 to 86% this quarter. So do we see this trajectory increasing and going towards 90% similar to the mature one? How is the trajectory going to be over the next one year, one and a half year?

So, again, you know, it is very tough, you know, because the quarterly will vary. That is the model, I think, one we have to, all of us have to embrace with, because the quarterly fluctuations would happen depending on the rent area addition, and we take about five to six months to make even, and nine to 12 months to reach about 90% of occupancy. Ideally, we do not want to grow more than 90% because that do not give any room of growth to the existing clients. So, 90-91% is the maximum we would ideally like to go for the steady state. Now, the quarterly fluctuation is we do not look at if 86 has gone to 85 or 87 has gone to 86. We have always maintained these are range-bound. When it comes to the steady state occupancy, we have to look at 85 to 90%. And when we are talking about the corporate occupancy, we have to look at the range of 80 to 85%. That's the healthy way of looking at it because that gives a headroom of growth for the client to expand Because the same client, if you could see, my 42% of my client, the same client is going with us. So if we do not have the headroom of the growth, where would I give them the supply? And most of my supply is in the best of the micro markets, right? So I have to kind of control my supply and make sure my client expands with us, right? Because if we do not have that growth space, they would leave. So, you know, it's better, and this is an inherent business need, 80% to 85% and 85% to 90%. Please do not look at it as a dip or even an increase. It's a range bound.

Got it, got it. And the last one would be, what is the ambition in terms of, you know, a 30 megawatt generation capacity? Where do we see that going and how much of, you know, incrementally are we going to have 100 crore capex for this over the next couple of years, each year? Just a bit of color on this one.

So basically, as you mentioned, the payback is about three years in this whole investment. So if you are doing an investment of about 100 crores, we expect... About 30 crores worth of basically returns to come to us so that over three years we are able to recover our money. And as I mentioned, we are not looking at like basically hyperscaling it, doing that at this point of time. The primary focus will be mostly Karnataka, Tamil Nadu, Maharashtra, these three states, and building it around our clients. Thank you. Please understand that today, if you look at even IRDA or you look at, say, RBI, the way they are going and basically, in a way, You actually have a very high level of ESG compliance. Now, this we are seeing as a very good opportunity because we have been one of the early guys to implement a lot of sustainability solutions at scale. So now we are getting a lot of requests. We are working with two large... One large insurance and one large bank where we have picked up the mandate to do the entire audit of their ESG compliances across India. Now, this is that those insurance companies and banks are now saying that, okay, you have identified these problems. Can you help us mitigate all of that and ensure that we are green certified? So, we are seeing green as It is a very very big opportunity to have a foot in the door and start working with a new set of enterprises and as Meghna talked about, the branch, the retail, a lot of those opportunities are also opening and the foot in the door for us is not just what IndiCube has been doing so far but the foot in the door is becoming the ESG part of it. So we are seeing solar, our whole eco products, more in that way, that this is the top priority for customers because it is coming from regulators. So that presents a very, very good opportunity for us.

Good. Thank you very much and good luck to you.

Thank you.

The next question comes from the line of Hitendra Pradhan with Maximal Capital. Please go ahead.

Yeah, hi sir. I hope I'm audible. So, congrats on the good quarter. So, my first question is I'm referring to slide 9, the EBIT margin that you have provided. Is this a 14% sort of steady-state margin that we can expect going forward or there is some upside to it?

So the EBIT margin, so all these margins again would be range bound. This is 14%, but usually it will be in the range of about 11 to, like 12 to 14%. So some quarter it could be 12, depending on the additions on the area. Sometimes, you know, the ramper would have taken fast, so it will be 14. So it will be in the same range, 12 to 14. So this is how we have to look at. We have to look at the occupancy, EBITDA, EBIT and PAT, all are range bound.

Right, right. That's helpful, that's helpful. And second one is sort of a big picture question and for Rishi, sir. So, sir, like, just wanted to hear your thoughts on, you know, AI and the, you know, overall impact on the office demand, especially the flex demand. Is it even a factor in India or, you know, at this moment, it is more denial and uncertain, according to you?

So, I think, this is, as of now, of course, the big elephant in the room is AI, and all of us, like you recently saw the way Microsoft made that announcement, so definitely that is the thing, but what I can say is that the good part has been that if you look at the addition of real estate for the nine-month period has been about 66 million square feet, and this is about 11% higher than the last year. So, this will be a record year when it comes to real estate absorption. That is one thing. Second thing I will say is, look at the companies that are putting GCCs in India. A lot of them are basically hardcore AI native kind of companies and very big ones also. I don't want to name them on the call, but if you look at, they are picking up half million, one million square feet campuses, putting thousands of crores into their labs and infrastructure over here. So, I think this gives us a very good comfort that they are seeing that in the next 5-10 years, they are bullish on expanding in India. Another fact I will highlight is that as a country, India has 15 million people. Apply that by about 70 square feet, you get a billion square feet of real estate, and that is the total portfolio of a real estate in India. Now, on a base of 15 million in India, we are adding almost 1 million white-collar private sector jobs in a year, which is about 7%. And this includes all of us on the call kind of people also who are not from so-called IT industry or AI industry and all of that. So far, India adds about 7-8% white-collar private sector job, which is about a million jobs. And if you multiply that million jobs by 70 square feet, we are talking about 70 million square feet kind of space addition. And the stack is very deep. Like this, 15 million jobs, if you look at IT is about 6 million, GCC is about 2.5 million, 1.5 million is your startup new economy, 5 million is our Indian businesses, banks, financial services, healthcare, hospitality, all that. So it's a very diverse stack. And when COVID was at its peak, IT was booming, startup was booming. There was no concept of GCC. Now we are seeing GCCs are growing very fast. IT is not growing so fast, especially the large IT. But startups, again, as you see the number of IPOs and all that have happened, there is a very strong growth in the unicorns and late-stage startups and all that. So, basically, we have such a deep economy, consumer-driven, domestic economy as well, that one way or the other, we are very hopeful that if India is adding about 10 to 12 million people every year into the workforce, for potential workforce, at least a million white-collar jobs will get created, and so far, about a million white-collar jobs are getting created. I don't see a challenge that this 60, 70, 80 million square feet of real estate addition should be a problem, typically. So that's what is giving us the comfort to double down and keep growing.

Got it. The next question

comes from the line of Atul Mehra with Motilal Oswal Asset Management. Please go ahead.

Yeah, I'm not sure, man. Thanks for the opportunity. So, one question on this 30-year-old investment in land, even you mentioned this is a project and the gestation is three years. Can we assume as a commitment that you do not invest anything further? In any other line effect, did you see success in this?

Yeah, thank you, Atul. So, basically, you are so right on that, that is not the core business that we have been in. And we are doing this as a pilot, and definitely, like, this pilot is a long-drawn one, which will take three years to complete. So we don't see that we have a big pipeline or anything like that. So you can take it as an assurance from our side that there is nothing in the pipeline where we are looking at that suddenly we will have not many projects. It is a very calculated pilot that we are doing at this point of time.

Thank you very much.

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for the closing remarks.

Thank you.

Thanks to all of you, and thanks to Dirmal, and from their side, Rahul, and the team. Thank you all for the lovely questions and the patience. Hope we have been able to answer your queries. If you have anything else, please feel free to write to us, and we'll be happy to get in more detail and talk about them. Thank you so much.

Thank you. Thanks a lot.

Thank you, sir. Thank you, ma'am. Ladies and gentlemen, on behalf of Nirmal Pang Institutional Equities, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.