Marathon Nextgen Realty Ltd — Call Transcript 2023

Regd. Address : Marathon Futurex, Mafatlal Mills nn] MARATHON Compound, N. M. Joshi Marg, Lower Parel (W), Mumbai - 400 013.

Date: 30/05/2023

To Department of Corporate Services, Listing Department, P.J. Towers, Dalal Street, BKC, Bandra (E) Mumbai- 400 001 Mumbai-400 051 Scrip Code equity: 503101 Symbol: MARATHON Debt: 973776, 973681, 973682

The BSE Limited National Stock Exchange of India Limited

Sub: Transcript of Q4 FY'23 earnings conference call

Pursuant to Regulation 30 and Regulation 46(2) (ca) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, please find enclosed the transcript of Q4 FY'23 earnings conference call held on Friday, May 26, 2023. The Transcript is also available on the Company's website at https:/ /www.marathonnextgen.com /

Kindly take the same on record.

Thanking you, Yours truly,

For Marathon Nextgen Realty Limited,

K.S. Raghavan Company Secretary & Compliance Officer Place: Mumbai Encl: A/a

MARATHON NEXTGEN REALTY LTD. T:022 6724 8484/88 CIN: L65990MH1978PLC020080

702, Marathon Max, Mulund-Goregaon Link Road, E : [email protected] WEB: www.marathon.in Mulund (W),Mumbai 400080 www. marathonnextgen.com

"Marathon Nextgen Realty Limited

Q4 FY'23 Earnings Conference Call"

May 26, 2023

MANAGEMENT: MR. CHETAN R SHAH – CHAIRMAN AND MANAGING DIRECTOR – MARATHON NEXTGEN REALTY LIMITED MR. MAYUR SHAH – VICE-CHAIRMAN – MARATHON NEXTGEN REALTY LIMITED MR. KAIVALYA SHAH – PROJECT HEAD, NEO HOMES, MARATHON NEXTGEN REALTY LIMITED MR. SAMYAG M. SHAH – PROJECT HEAD, MARATHON FUTUREX AND NEXTGEN – MARATHON NEXTGEN REALTY LIMITED MR. S. RAMAMURTHY – CHIEF FINANCIAL OFFICER, WHOLE TIME DIRECTOR – MARATHON NEXTGEN REALTY LIMITED

MODERATOR: MR. BINAY SARDA – ERNST AND YOUNG

Moderator: Ladies and gentlemen, good day and welcome to the Marathon Nextgen Realty Limited Q4 FY '23 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, please signal an operator by pressing star, then zero on your touchtone telephone. Please note that this conference is being recorded.

I now hand the conference over to Mr. Binay Sarda from Ernst and Young. Thank you and over to you, sir.

Binay Sarda: Thanks, Melissa. Good afternoon to all the participants on the call and thanks for joining this Q4 FY '23 Earnings Call for Marathon Nextgen Reality Limited. Please note that we have mailed out the press release and presentation to everyone and you can also see the results on our website as well as it has been uploaded on the stock exchanges. In case if you have not received it, you can write to us and we'll be happy to send it over to you.

Before we proceed with the call, let me remind you that the discussion may contain forwardlooking statements that may involve known or unknown risks, uncertainties and other factors. It must be viewed in conjunction with our businesses that could cause future results, performance or achievement to differ significantly from what is expressed or implied by such forward-looking statements.

To take us through the results of this quarter and answer our questions, we have with us the management of Marathon Next Gen represented by Mr. Chetan Shah, Chairman and Managing Director, Mr. Mayur Shah, Vice-Chairman, Mr. Kaivalya Shah, Project Head, Neo Homes, Mr. Samyag M. Shah, Project Head, Marathon Future X and Nextgen and Mr. S. Ramamurthy, Chief Financial Officer, Whole Time Director. We'll be starting the call with a brief overview of the quarter gone past, which will then be followed with the Q&A session.

With that said, I'll now hand over the call to Mr. Chetan Shah. Over to you, sir.

Chetan Shah: Thank you, everybody, for being part of this conference call. I'll briefly mention about the group. For over 52 years now, Marathon Group has been helping shape Mumbai's skyline. Founded in 1969 by my father, Ramniklal Zaverbhai Shah, the group has completed over 100 projects in the city with a portfolio encompassing townships, affordable housing, luxury residential, retail, small business spaces and corporate parks.

Marathon is design-driven and engineering-focused with a leadership team comprising of technocrats. Myself, Mr. Chetan Shah, Chairman and my brother, Mayur Shah, Managing Director, have completed their engineering from US. And the third generation of the company comprising of three Directors, Mr. Kaivalya Shah, my son, and Mr. Parmeet Shah and Samyag Shah, both Mayur's sons, are highly qualified, having completed their education from USA and bring years of real estate experience to the group.

Marathon has strong in-house capabilities in design, engineering, execution, marketing, sales and prides itself on its transparency, customer centricity and is among one of the most trusted developers of Bombay. The group has ongoing projects and land banks at Lower Parel, Byculla, Mulund, Bhandup, Thane, Dombivli and Panvel.

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If we come to the consolidated financial year, '23 financial performances, Net revenue grew by 134% year-on-year to INR717 crores, compared to INR306 crores in FY '22. EBITDA grew by 129% year-on-year to INR293 crores, compared to INR128 crores in FY '22. Profit before tax, PBT, grew by 346% year-on-year to INR156 crores, compared to INR35 crores in FY '22. Profit after tax, PAT, grew by 218% year-on-year to INR124 crores, compared to INR39 crores in FY '22.

We have shared all the Q4 data also, so I would skip that and I will just say that we are pleased to report strong performance during the quarter and the full year led by momentum in sales, booking across our projects. We have had a phenomenal year in terms of pre-sales amounting to about INR530 crores, giving healthy visibility for the coming quarter. We recently received occupation certificate for phase 2 of Monte South till 54th, first floor of Tower 1 and we continue to witness incredible response to the launch of the higher floors.

In our unwavering commitment towards debt reduction, we managed to reduce the debt by INR352 crores during FY '23. We remain positive on demand environment and would continue to focus on strengthening our financial performance by reducing debt, enhancing our collection efficiency and generating healthy operating cash flows. With a strong launch pipeline and strong execution capabilities, we are confident to achieve outstanding and profitable growth over the mid to long term.

Main operational highlights for the year FY '23, area sold stood at 452,000 square feet, booking value stood at more than INR601 crores, collection stood at INR548 crores, average realization stood at INR20,206 per square feet for commercial and INR9,250 per square feet for residential. On the net debt front, the net debt as of the year end was INR1,195 crores, which was reduced by 31, March '23 to INR838 crores, which I already mentioned.

Thank you very much for initial remarks and we can now start taking questions.

Moderator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer-session. We have the first question from the line of Monika Arora from Shares Giants Wealth Advisors. Please go ahead.

• Monika Arora: Hello. Thanks for giving me this opportunity. Congratulations on a good set of numbers. So my first question is, you have vast potential of future land area, if I see, in your listed company. So any timelines or more details? When do you plan to develop this land? And are you considering it doing yourself or it will be done by a JV partner or someone? It will be a joint development or how is it? I want your thoughts on that.
• Chetan Shah: Sure. So we have -- at group level, we have a large land bank as we mentioned in Parel, Dombivli and Bandup area. So these three land banks at opportune times, we are transferring to the listed entity here and we are doing. For example, we have already done 6.5 acre of Bandup already transferred here. The Panvel 25 acre of Nexzone development that is happening is also happening in a 91% subsidiary of the listed company. So at every opportune time, we are transferring.

Currently, we have a large development already in the pipeline. So if you see the project under pipeline, they are substantial and some of the next phases of those projects under pipeline, the numbers we have shared on the PowerPoint, those are also in line. For next three years, we have from a committed land already with the company, we have a substantial cash flow revenues coming over next three years.

• Monika Arora: Okay. And so I just want to understand that out of the projects that you have recently launched, how much is the inventory which is still available? Like I am just talking about the ready to move one, the ready to move unit?
• Kaivalya Shah: Yup. So out of the total OC received is I think the question, the Occupation Certificate received but unsold value is around INR390 crores and around 1,85,000 square feet is what is unsold. The inventory part that is the inventory. Is that your question?
• Monika Arora: Yes, correct. That was my question, sir. And one last question if I could squeeze in. So based on some macro scenarios that we are seeing like rise in the interest rate, so does it affect your demand in terms of how much inquiries you would now receive or conversion rate or the overall demand in the affordable, mid-income and luxury segments? And what is the current state of end market demand? So that is the impact of, specifically the impact of increasing rate hikes and other macro scenarios.
• Chetan Shah: Mayur Shah will answer that question.
• Mayur Shah: See, one thing is that the reduced interest rate during the COVID time, which was around 7%, was a kind of a very unique situation, which had never happened for several, I think, couple of decades. But after that, let's say, by increase, what has happened is like 1.5% to 2%. So up to 9% and 10%, the affordable as well as mid-luxury segments, it is not really affected by the interest rate hike because such a range was always there.

If you look at five years ago, the interest rates were always between 9% and 10%. So the impact what we are seeing in our affordable segment is absolutely negligible. Even in a luxury segment, which we have posted our results, even the pre-sale numbers are quite high, actually reaching at INR530 crores, is something which is very good. So in our projects, which we are doing, we are not really affected by the rate increase.

• Monika Arora: Okay, so you are seeing the same demand as you were seeing before this?
• Mayur Shah: Not just the same, it is actually demand has increased because the pandemic numbers were very low. So if we look at the pre-pandemic numbers, we are almost reaching there or even going beyond that.
• Monika Arora: Great, sir. Many congratulations for that. Thank you so much, sir.
• Moderator: Thank you. We have the next question from the line of Shreegopal Agarwal from Aagman Advisory LLP. Please go ahead.

on this affordable segment, if you see Neo Park and Phase 3, all these projects have very low

Chetan Shah So currently, as it stands, Sunset is the brand outside the listed entity. Yes.

Jatin Sanghvi: I have one more question. Basically, that we are in two MMR regions. And we are quite an old company and a very good brand and a goodwill. We have a Macrotech, who is also our in the same Mumbai MMR region. We have Godrej, we have Oberoi, we have Rustomjee. All companies have one umbrella, all entities under one umbrella. They do all projects under one umbrella. So are we in future, we are planning to merge all entities or all your unlisted company or the parent company with Marathon? So, that this confusion with the listed entity and unlisted entity or different promoter entities, it will get resolved?

Chetan Shah: Yes.

Jatin Sanghvi: And sir, maybe our market cap will get increased a lot?

Chetan Shah: Yes, I understand that these many investors have expressed this view and we are also looking at that possibility. As you would understand, currently the percentage holding in the listed entity is already at 75%. So whenever any 100% project gets merged with a listed entity, the holding goes beyond 75%. However, we are looking at external investors also participating and trying to do everything, under one umbrella.

One thing that, we have to keep in mind is Marathon Group started much earlier and the listed company came in at a later stage. So, there are a lot of legacy projects or land banks that, we had already purchased, even before Marathon Group took over this Marathon Nextgen Realty, which was earlier Piramal Spinning And Weaving Mills Limited. So that is why, there is a lot of things, which are outside. But as I mentioned, most of it are being brought into the listed entity as and when they mature.

• Jatin Sanghvi: One last question. Whenever, we see consolidated results, the profit from JV from Montesouth, it doesn't reflect right now, in the books. So, have we booked something as a profit or the profit is going to come yet?
• Chetan Shah: No, we have already started booking because the booking happens on a percentage completion method that we follow at all of our projects. But since the holding into this project is only 40%, it doesn't get reflected in the top line, that is the top revenue, but it gets reflected at the profit level. Profits from joint venture is one of the columns that we have shown and we have already reported that, in our reported accounts. So, there is a profit from joint venture, which is a line item that gets added.
• Jatin Sanghvi: The amount of profit from JV, it is very small compared to the Montesouth project. The substantial profits still are yet to come?
• Chetan Shah: Yes, that is correct. So, based on percentage completion, applied to sales already executed. So that major part of the profit is yet to get reflected in the books.
• Jatin Sanghvi: Thanks a lot for answering all my questions.

Chetan Shah: Thank you.

Moderator: Thank you. We have the next question from the line of Jojo Shaju from Alpha Invesco Research Services. Please go ahead.

Jojo Shaju: Hello. Yes, thank you for giving me this opportunity. Sir, my question is regarding the commercial portfolio. So, I need to understand the construction status on the Marathon Futurex project and also on the revenue front. What is the total revenue potential from this project and how much percentage, we have sort out so far?

Chetan Shah: Okay, Samyag is the Project Head for Marathon Futurex. He will answer this question.

Samyag Jain: Good evening. So the status of the project is that, overall the project is 38 floors, 38 story building. And out of that, as of December, we had already received OC up to the 35th floor. So

only three floors, which were sort of, which had not received OC or was still under construction. As we speak, we have actually completed the terrace work, the top slab work and we are expecting OC for a couple of floors, which is 36 and 37 anytime now, maybe in the next three odd weeks. So that is essentially the status of the project.

Overall inventory, if we were to talk, then these are approximate figures and we could give you the details later as well. So about 1.6 lakhs is the total ready and unsold inventory. However, out of that close to 35,000 square feet is leased. So, it is leased but technically unsold. And we have another close to 1.05 lakhs, so 1,05,000 square feet, which is not ready with OC, which is the 36th to 38th floor.

• Jojo Shaju: Okay, sir. So going forward, are we going to lease out the space here or are we going to completely sell the space to customers?
• Samyag Jain: So like Chairman Mr. Chetan Shah mentioned, we would like to have optimum use of the cash flow that is available. So while we will sell, if we can lease and sell at a better rate in a pre-lease fashion, or if we see the market trend increasing, we may want to hold it also. So, whatever will give us the best realization over the next couple of years, we would like to follow that strategy. As such, we are not fixated on just leasing or just selling. We will look at the opportunities available and decide on that.
• Chetan Shah: For example, we had some of these portions.
• Samyag Jain: That's correct. So, one of the space on 27th floor, this is Q3 of this year, we had actually leased the space to Nykaa and then we sold it as a pre-lease space to one client. So when we think, the pricing is right and it's a good use and we get good cash flow, we are happy to sell it in pre-lease as well.
• Chetan Shah: So this was a news item because purchaser was a star family, Hrithik Roshan family. So Nykaa fashion's pre-lease premises was sold to Hrithik Roshan family. Film Crafts was their company, which had purchased that property.
• Jojo Shaju: Okay, sir. Understood, sir. So just one last question. So, do we have any revenue sharing agreement with the unlisted parent entity for Marathon Futurex?
• Chetan Shah: No. Marathon Futurex has for the upper floors that we mentioned, we have given you effective area. But yes, there is a revenue sharing of 56%, 43% for the last phase of the Futurex. But the numbers that you are seeing is actually effective numbers.
• Jojo Shaju: Okay, effective numbers that listed entity will receive, right?

Management: Yes.

Jojo Shaju: Okay, sir. Thank you.

Moderator: Thank you. We have the next question from the line of Shrishti Tandon from NVS Brokerage. Please go ahead.

• Shrishti Tandon: Thank you for the opportunity, sir. Sir, can you please share your growth strategies and major key focus areas for next three years to five years?
• Chetan Shah: So, growth strategy, we are very seriously looking at acquiring a new redevelopment project in the South Mumbai, Lower Parel and Worli or South Mumbai area, where our presence is very strong and that's the area, which we are really looking at. Other than that, we are already have a good land bank as well as upcoming projects, which is there in our presentation. That also, we would like to bring in quickly as and when the opportunity arises.
• Shrishti Tandon: Okay. And sir, can you give some insights about the profit visibility and sales?
• Chetan Shah: The revenue estimated sales, revenue has been shared in upcoming projects. Without applying this 40%, we have a possible revenue numbers of 4660 in upcoming projects and if you see in ongoing projects, we have estimated revenue yet to be recognized of 3,302. So, these are some of the pipelines that we have. Profits are something that, we have to see the profit percentage that we have actually received are going to be better in future. So, from that perspective, profit numbers can be calculated but we are not sharing the future booking statement here.
• Shrishti Tandon: Okay, sir. Thank you.
• Moderator: Thank you. We have the next question from the line of Aditya Sen, an Individual Investor. Please go ahead.
• Aditya Sen: Yes, good afternoon, sir. So, in '19- '20 FY, we gave INR190 crores to Matrix from Sango and five years moratorium on principal and interest. So, how we will be receiving back from FY '24? In what term? Interest or?
• Chetan Shah: Yes. So, these are the money that are going towards the new project like I mentioned. In Dombivli, we have 50 plus acre of land bank that is available. So, some of those are going to be converted into projects. So, that is regarding Matrix Enclaves. Which other question did you ask?
• Aditya Sen: Yes. So, what are we going to receive interest on it or just revenue sharing of 20%?
• Chetan Shah: Not 20%. This is going to be the whole project that will come into MNRL. So, in fact, we will be sharing a small land value to the Matrix Enclaves, but majorly it would be in this company. For example, we have already done similar deal in Bandhup, this new project that we are seeing, where the revenue top line sharing of 12.5% is given to the group company and 87.5% comes to the listed entity. So, similar arrangement at the fair market valuation will be done at the time of launch of such project.
• Aditya Sen: Okay. Great. And when will you start generating revenue from the Dombivli project? Any idea, on this one?
• Chetan Shah: Well, it will take another year or so.
• Aditya Sen: Okay, sir. Another question is when will we recognize a large chunk of revenue from Monte South, regarding RK?