Efc I LTD

Company Update
EFC (I)
Perfectly aligned to capture sectoral tailwinds
We recently hosted Mr Umesh Sahay, founder and MD, and Mr Nikhil Bhuta, Whole Time CMP: INR504
Director, of EFC (I). EFCIL is a Tier I focussed integrated real estate service provider with a Rating: Not Rated
presence in managed office rental services (64% of FY24 revenue), design and build (D&B)
Date: September 15, 2024
services (28%), and furniture manufacturing (8%). In rental services, the management sees strong
demand due to the growing need for managed spaces, shift to opex from capex, a growing
startup culture, and decentralisation. To capitalise on the tailwinds, it plans to add 25,000–
30,000 seats annually to its current operational inventory of 42,773 seats. Bloomberg: EFCIL:IN
In the D&B segment, it is expanding its execution capacity and tapping larger contracts. It is
targeting a turnover of ~INR500cr in FY27 given the wide array of opportunities. It is setting up a 52-week range (INR): 206/618
furniture manufacturing facility which will have a revenue generation capacity of INR350cr. It is
Share in issue (cr): 4.98
targeting a turnover of INR300cr from the furniture segment in FY27. Margin in rental services/
D&B/furniture segment is pegged ~30% (excluding Ind AS 116)/15–17%/35–40% in FY27E. We M-cap (INR cr): 2,510
expect EFCIL to clock a revenue/EBITDA of ~INR1,700cr/~INR411cr (excluding Ind AS 116) in FY27.
A healthy Balance Sheet will lend support. We are bullish on its long-term growth story and are Promoter holding (%) 45.57
confident in the management’s ability to execute. At CMP, the stock trades at TTM EV/EBITDA
of 13.1x. Based on management’s guidance and our preliminary estimates, the stock trades at
an EV/EBITDA of 6-7x on FY27 earnings. The stock is not rated.
Key highlights from the management interaction:

i. Strong expansion plans:
Rental services: As of June, EFCIL had an operational inventory of 42,773 seats spread across
Mumbai, Pune, Hyderabad, Noida, Ahmedabad, and Kolkata and targets to expand in
Bengaluru, Gurugram and Delhi markets. Mumbai, Pune and Hyderabad are its large markets
while Noida is the fastest growing. In coming years, EFCIL plans to add 25,000–30,000 seats
annually to its inventory and cross the 1lk seat mark by FY26-end. Additions will occur in cities
where it has a presence under the straight lease model. By FY27, seat inventory is expected to
touch 115,000–120,000.
D&B services: EFCIL is aggressively building capabilities, enabling it to bid for larger contracts
with marquee clients. In FY24, it clocked a revenue of INR113cr. In Q1FY25, it bagged contracts
worth INR75cr, with another INR100cr under negotiation. In the near term, it aims to deliver
80–100% CAGR.
Furniture manufacturing: Furniture is a key adjacency to the D&B business, constituting 40–
50% of the total fitout cost, which makes sourcing a significant decision. EFCIL sources furniture
from multiple manufacturers across cities. To aid the strong growth expected in the D&B
segment and optimise cost, it is setting up a manufacturing plant, with a peak revenue potential
of INR350cr, at a capex of ~INR25cr. The plant will be operational by Q2FY25-end. The
management anticipates a revenue of INR60–75cr/INR200cr/INR300cr from this facility in FY25
/FY26/FY27. At peak utilisation, the segment can achieve an EBITDA margin of 40%.
ii. SM REIT and AIF: To create an ownership platform, derisk from uncertainties regarding the
property, and for better control over operations and planning, EFCIL set up two subsidiaries:
EFC REIT Pvt and EFC AIF. SM REIT will purchase property from existing landlords, with EFCIL as
the operator. The rental income and related operating expenses will be booked in the REIT,
while EFCIL will charge asset management fees to the SM REIT, which will be equivalent to the
net margin that it currently earns in the rental segment (~15% of rental income).
It will invest ~5% of the total corpus in the SM REIT. In the long term, the management aims to
convert the SM REIT into a large REIT, with assets worth INR5,000–6,000cr under management.
EFCIL is one of three players and is the only operator to apply for a SM REIT licence (other two
are fractional ownership platforms). The nuances of this model and the involvement of AIF is
yet to be understood. We will get more clarity as and when the model becomes operational.
iii. Unit economics for rental services: EFCIL charges INR6,500-–7,000 per seat per month, which
translates to a monthly revenue of INR160–175 per sq. ft. Average fitout capex required per
seat/sq. ft. is ~INR50,000/INR1,250. In 85-90% cases, EFCIL asks the landlord to provide a
Amit Agarwal
furnished space and pays a premium for it. This essentially spreads out capex over the life of
agarwal.amit@nuvama.com
the contract and limits upfront capex. Key cost components include i) rental cost for bareshell
or warmshell property — INR50–60 per sq. ft.; ii) the cost of fitouts (if furnished by the landlord) Rishith Shah
— INR20–25 per sq. ft.; iii) operating expenses (electricity, water, data, staff, etc.) —INR28 per rishith.shah@nuvama.com
sq. ft.; and iv) common area maintenance (housekeeping, consumables, etc.) — INR12 per sq.
ft. After these expenses, it is left with a centre-level average net income of INR40–60 per sq.
ft., or a margin 25–35%. At the corporate level, EBITDA margin stands at 22–25%.
Nuvama Group has two independent equity research groups: Institutional Equities and Professional Clients Group. This report has been prepared by the Professional Clients Group. 1
Company Update
EFC (I)
iv. Others:
i) Around 40% of new business in the rental services segment ensues from existing clients on the back of positive customer
experience and value-for-money. As a result, ~50% of transactions occur without the need for a broker (typical brokerage
in the industry is rent for around two months).
ii) In the D&B segment, besides fitting out and designing commercial offices, EFCIL executes projects for research and
development centres, educational institutions, and healthcare centres. Realisation and margin for specialised projects are
typically better than commercial offices.
iii) In the rental segment, while fitouts are undertaken by the landlord in 85–90% of cases, the fitout contract often gets
awarded to its D&B division given its competitive pricing and quick turnaround.
iv) A flexible office rental business is viable for an operator in cases where the centre’s size is larger than 500 seats, or 20,000
sq. ft. Below this threshold, the centre’s operating expenses and fitout cost become unviable and squeeze margin for the
operator.
v) Company intends to get itself listed on NSE in FY26.
Outlook and view

Owing to the strong sectoral tailwinds, an elaborate expansion plan, and value-conscious offerings, we expect EFCIL’s share in the
flexible office leasing market to rise in coming years. In the D&B segment, we expect the business to reap the benefits of the
strong capabilities that it has created over the years. We see the size and frequency of order wins increasing meaningfully from
hereon. In the furniture space, while the D&B segment will be its anchor customer, we see it tapping the B2B market. We see the
lion’s share of the revenue accruing from external customers ahead. A strong Balance Sheet (net debt-to-equity ratio of -0.16x),
tightly integrated offerings, and confidence in management’s execution capabilities provide comfort in its long-term growth story.
At CMP, the stock trades at TTM EV/EBITDA of 13.1x. Based on management’s guidance and our preliminary estimates, the
stock trades at an EV/EBITDA of 6-7x on FY27 earnings, which is a 40-50% discount to Awfis Space Solutions. We find the gap
unwarranted given EFCIL’s strong financial performance, an equally robust growth pipeline and a healthy balance sheet.
Key financials
Year to March (INR cr) FY21 FY22 FY23 FY24
Revenue n.m. n.m. 103 410
EBITDA n.m. n.m. 55 173
PAT n.m. n.m. 4 63
PAT margin (%) n.m. n.m. 4 14
RoACE (%) n.m. n.m. 10.5 15.9
Net debt-to-equity ratio n.m. n.m. 0.8 (0.2)
P/E ratio (x) n.m. n.m. 60.5 35.9
Company Update
EFC (I)
About the company

Established in 2012 by first generation entrepreneurs, Mr Umesh Sahay and Mr Abhishek Narbaria, EFCIL is India’s first listed
company operating in the managed office and co-working space. In FY12, it commenced operations with a single office (99 seats)
in Pune and an aim of providing a workplace to entrepreneurs and startups in the IT and ITeS segment on a not-for-profit basis.
The traction and commendation that it received for this initiative led it to explore the flexible office market as its primary line of
business. The company converted this venture into a for-profit business in 2014 and began expanding its presence in Pune in a
cost efficient and a capital light manner. Since then, it has rapidly expanded and is now present in nine cities with an inventory of
42,773 operational seats and capacity of 47,000 seats.
Exhibit 1: Key milestones in the rental services segment

2012–14 2016–18 2019 2020–2024 till date
•Starts off with •Adds 1,900 seats •Expands its •Significantly

one centre with in Pune in 2016. presence in expands its
99 seats in 2012. Crosses the 4,000- Kolkata, presence, adds
•Acquires 350 seat mark in 2018 Hyderabad, and centres in
seats in Pune in Chennai. Seat Mumbai, Noida,
2014 count rises to Gurugram,
14,500 Bengaluru, and
Delhi. Inventory
crosses 42,000
Source: Company, Nuvama Wealth Research
As the pace of expansion increased and EFCIL’s annual inventory addition run-rate grew significantly, the management decided to
in-source design and fit out of centres and developed capabilities and workforce internally. While the initial stages were a learning
phase for the company, it was gradually able to optimise operations and rationalise costs. Since it had already developed the
required capabilities, it began offering D&B services to external clients as well. At present, it caters to multiple marquee clients
across industries and is one of the most cost-efficient service providers in the industry with one of the fastest turnaround times.
Furniture is one of the largest cost components (~50% of the total cost) in fitting out a bareshell commercial property. With the
D&B segment achieving scale, EFCIL is applying the same set of business logic that it used for the D&B segment. It is setting up an
in-house furniture manufacturing facility to save cost and target value-conscious external customers. At present, it has tied up with
multiple manufacturers across locations for sourcing furniture. Its new facility is under development and is expected to commence
operations in September.
Driven by strong expansion in the rental segment and identification and exploration of key adjacencies (D&B and furniture
segments), EFCIL has significantly scaled up its operations in recent years. In FY24, it clocked a revenue of INR410cr, with
INR263cr/INR113cr/INR34cr accruing from the rental/D&B/furniture segment.
Company Update
EFC (I)
Exhibit 2: Revenue mix
8%
4%
FY24
Rental services
28%
FY23 D&B
Furniture
64%
96%
Exhibit 3: Multi-brand approach
Exhibit 4: Organisation structure
Company Update
EFC (I)
Flexible office rental services

Business as is
EFCIL offers managed workplace solutions to clients ranging from large enterprises to SMEs and startups. Around 75–80% of seats
are taken up by enterprises, which typically have a lock-in period of three to five years. The rest is divided among SMEs and startups,
which have a lock-in period of one to two years.
A managed office can either be a single client or a multi client centre. For EFCIL, ~65% of seats are occupied by single client centres.
These centres provide it with longer lock-ins and stability of rentals, at the cost of a slightly lower realisation per seat. The centre
is customised as per the client’s requirement. A single client centre is branded as ‘EFC’ but can also house the customer’s brand
logo. Conneqt Business Solutions (a part of Quess Corp) is one of its largest customers occupying single client centres across various
cities.
Around 35% of seats are occupied by multi-client centres. While these centres have multiple tenants, it is not a shared space
concept. Each client has its own dedicated space, with a separate access door. The client size can range from five to 200–300 seats.
It operates via three brands in this segment: EFC, Sprint, and BigBox (refer Exhibit 3). EFC is typically used for single client offices
while a multi client office sports the Sprint brand. Subsidiary Big Box Ventures, which was recently acquired, has more than 3,000
seats across nine locations in Pune and is expanding in NCR, Ahmedabad, and Kolkata. EFCIL intends to operate Big Box Ventures
as a separate entity, with its erstwhile management and its own brand name. It holds a 51% stake in Big Box Ventures.
Exhibit 4: Snapshot of key trackables in the rental services segment (as of June-end)
Monthly
Operational seats Chargeable area Area/seat Occupancy Monthly ASR
revenue/seat*
42,773 2.2mn sq. ft. 40 sq. ft. 91% INR6,250–7,000 INR5,999
Weighted average
Centres Contribution margin EBITDA margin Average centre size Number of clients
tenure
57 60% 25–30% ~38,000 sq. ft. ~3 years More than 500
*in FY24; Source: Company, Nuvama Wealth Research
Exhibit 5: Seat split (type of centre) Exhibit 6: Seat split (type of client)
35% 20-25%
65%
75–80%
Single client centre Multi-client centre Enterprise clients Others
EFCIL invests in a single client centre only when it has a customer who is ready to take up the space once it turns operational.
The client here is typically a large enterprise that needs a fully managed office and is ready to commit for a longer lock in period
(which ranges from three to five years). The centre is fitted out as per the client’s requirement. It allows the client to use its own
brand logo in the office.
Company Update
EFC (I)
A multi client centre is partly speculative. EFCIL typically puts up a shared centre in micro-markets that it understands well and is
confident of filling up. Here too, it typically has an anchor client. For the remaining space, it hunts for tenants during the fit out
period or post commissioning. It can fill up a shared space centre within six to eight months of operations.
Driven by: i) a high share of single client centres, and ii) its ability to fill up a large part of a shared centre during the fit out period,
occupancy is maintained in excess of 90%, which is one of the best in the industry.
What drives the ability to fill up a centre is the high degree of referrals and demand from existing customers. Around 40% of
demand accrues from referrals and existing customers. Another 10% is directly sourced demand, i.e. without the involvement
of any third parties. The balance ensues from brokers and intermediaries.
On the supply side, it rents out space from the landlord on a straight lease for five to nine years. In Maharashtra, the lease period
is restricted to five years given the hefty stamp duty obligation for holding a property beyond five years.
Exhibit 7a: Key marquee customers
Exhibit 7b: Recent additions to the client base
Exhibit 9: Billed seats clocked 12.9% CQGR over

the last five quarters
50,000 16%
14%
40,000
12%
30,000 10%
8%
20,000 6%
4%
10,000
2%
- 0%
Q1FY24 Q2FY24 Q3FY24 Q4FY24 Q1FY25
Billed seats QoQ growth (%, RHS)
Company Update
EFC (I)
Exhibit 10: Key performance indicators for the rental services segment
Particulars FY23 FY24 Q1FY25
Revenue from rental services (INR cr) 99 263 67
Rental revenue as a percentage of total revenue 96 64 63
Number of operational seats 23,000 36,539 42,773
Monthly revenue per seat (INR) 3,587 5,999 5,205
Occupancy (%) n/a 93 91
Average monthly seat rate (INR) n/a 6,480 5,730
Chargeable area (mn sq. ft.) 1.0 1.9 2.2
Monthly revenue per sq. ft. (INR) 83 115 101
Number of centres n/a 50 57
Area/centre n/a 38,000 38,596
Exhibit 11: Centre-level unit economics

Key cost components INR per sq. ft.
Rental cost for a bareshell or warmshell property 50–60
Add-on rental for fitouts and fixtures* 20–25
Total rental cost 70–85
Operating expenses 28
Common area maintenance 13
Total cost 110–125
Rental income 165–170
Net centre level EBITDA 40–60
Centre level average EBITDA margin (%) 30
*In 85–90% cases, EFCIL rents out a fully furnished property; Source: Company, Nuvama Wealth Research
Exhibit 12: Snapshot of newly commissioned centres
Sprint Antaaya Baner (Pune) | entire building | ~60,000 sq. ft. | ~1,200 seats
Sprint Kharadi (Pune) | ~155,060 sq. ft. | 3,827 seats
Company Update
EFC (I)
Sprint Hyderabad | Three floors | 149,365 sq. ft. | 4,435 seats
Way forward
Led by: i) the growing need for fully managed offices, ii) greater preference for an opex-led cost model versus a capex-led
model for corporates, iii) a growing startup culture (startup count clocked 68% CAGR over 2019–23), iv) influx of GCCs
(expected to clock ~10% CAGR over 2023–26), v) decentralisation, and vi) a need for plug-and-play setups, the management
sees a strong demand undercurrent. It expects demand for flexible office spaces to clock 20–25% CAGR going forward. To
capitalise on tailwinds, it plans to add 25,000–30,000 seats annually to its current operational inventory of 42,773 seats.
Occupancy is one of the key differentiators for EFCIL, with average occupancy staying in excess of 90%. It expects occupancy
to stay in a similar range going forward. We see average realisation for the industry expanding by 5–6% annually in coming
years. Based on the management’s conservative expectations, revenue from rental services segment can clock 51.7% CAGR
over FY24–27 to INR919cr.
Exhibit 13: EFCIL expects to add 25,000–30,000 seats annually; see inventory growing at 45.1%
CAGR over FY24–27E; occupancy to stay elevated
1,11,539
1,02,058
1,20,000 93% 93%
86,539
79,183
1,00,000
61,539
92%
55,631
80,000
36,539
33,829
90% 92%
60,000 92% 91%
23,000
40,000
90%
20,000
- 89%
FY23 FY24 FY25E FY26E FY27E
Seat inventory Billed seats Occupancy (RHS)
Company Update
EFC (I)
Exhibit 14: Revenue from rental services can expand at 51.7% CAGR over FY24–27E led by a 45.1%
inventory CAGR, stable occupancy, and annual price growth of ~5%
1,000 180%
160%
800 140%
120%
600
100%
679 919 80%
400
60%
200 454 40%
99 263 20%
- 0%
Revenue from rental services (INR cr) Growth (RHS)
Design and build (D&B) services

Business as is
To leverage available synergies and expand its base of offerings, EFCIL strategically diversified into the interior fitout business. As
the rental services segment achieved scale, it scaled up its annual seat addition pipeline and decided to develop capabilities to
design and build a centre in-house (erstwhile outsourced to contractors). It has set up a separate subsidiary — White Hills Interiors
— for executing D&B contracts and operates under the White Hills brand. At present, it designs and builds bareshell and warmshell
spaces for internal as well as external customers.
Exhibit 15: Snapshot of EFCIL’s key capabilities and differentiators
Company Update
EFC (I)
Exhibit 16: Key processes and scope of service
It utilises D&B services for developing its own centres as well as offices leased by external customers. In 85–90% cases, it leases
out a fully furnished property from the landlord. While the landlord is free to choose the D&B contractor for the centre, it ends up
employing White Hills in most instances as it is one of the most cost-efficient players in the industry. Driven by internal efficiencies,
standard SOPs, exclusive tie-ups, and an internal design team, it can execute a standard D&B contract for around INR1,250 per
sq. ft., over which it charges a margin of 15–17%, as against INR2,500–3,500 per sq. ft. by its competitors. It offers quick
turnaround, with a conversion period of two to three months. Besides designing commercial offices, it builds healthcare centres,
educational institutions, and research and development centres. For external clients, it offers D&B as well as a built to suit service.
In both cases, the focus is on cost optimisation, quick turnaround, and quality offerings.
In FY24, the D&B segment clocked a revenue of INR113cr, with an EBITDA margin of 15–17%. Average fitout duration for a centre
is two to three months. While the company typically receives an advance for mobilising its workforce and buying materials, the
receivable period is 60–90 days. Net working capital requirement in the business is 30–60 days. The customer is billed as
construction progresses and a milestone is hit.
In Q1FY25, it clocked a revenue of INR35cr from the D&B segment and bagged orders worth ~INR75cr from various sectors. During
the quarter, it successfully completed a 1lk sq. ft. project for Coforge in just 62 days. With the expansion of capabilities and
precedence for executing large fitouts for marquee customers, it is seeing strong traction in enquiries. Contracts worth INR100cr
are under various stages of negotiation.
Exhibit 17: Key customers in the D&B segment
Company Update
EFC (I)
Way forward
Branded players that focus on quality, cost, and turnaround time have significant growth potential in coming years. India is
absorbing an inventory of ~60mn sq. ft. of Grade A office spaces annually, of which EFCIL is fitting out less than 1%. As it
executes contracts for marquee customers, the enquiry pipeline will expand significantly. To support increased enquiries,
it is investing in expanding capabilities. We see a gradual and steady expansion in its market share going forward.
The management expects to grow at 80–100% CAGR in the near term and clock at least INR500cr revenue in FY27. EBITDA
margin is seen in the 15-17% range. On a conservative basis, we expect the D&B segment to clock a revenue of INR481cr in
FY27, at a CAGR of 62.1% over FY24–27.
Exhibit 18: See 62.1% revenue CAGR from D&B services over FY24–27E on market share gains and
increasing capabilities
600
481
500
400 344
300
215
200
113
100
4
-
D&B revenue (INR cr)
Exhibit 19: Recently commissioned projects in the D&B segment for external clients
Coforge | ~100,000 sq. ft. | Turnaround time – 62 days
Company Update
EFC (I)
Tata Consultancy Services
Xolopack
Company Update
EFC (I)
Furniture trading/manufacturing
Business as is
Furniture and fittings constitute 50–60% of the total cost of fitting out a commercial office. As a result, a furniture manufacturing
facility perfectly complements the D&B segment. Since the D&B segment is relatively small, EFCIL has tied up with manufacturers
in multiple locations to secure its supply of furniture and fittings. With the segment expected to generate scale, it plans to execute
the same strategy as it did in the D&B segment and intends to bring the entire manufacturing process in-house.
It has obtained regulatory approvals to establish the manufacturing facility at Fursungi, Haveli taluka, Pune. The facility is spread
over three acres and contains a customer experience centre. Machinery has been ordered from best-in-class manufacturers to
ensure the highest levels of efficiency. The facility will employ more than 200 workers. The management expects the facility to be
commissioned by the end of September.
Exhibit 20: Key machinery vendors and civil contractors
While part of the facility will cater to the demand from Managed Office vertical, a large part will serve external customers. In the
first phase, EFCIL intends to target B2B customers and will cater to commercial (office and hospitality segments) as well as
residential distributors. It has designed more than 300 SKUs which are ready for production. In the initial stages, to ensure a quick
ramp up, it is looking to produce white label goods for a couple of large retailers. In the second phase, it is aiming for the B2C
market and will use both online and offline distribution channels. It will brand its products as ‘Ek Design’.
Way forward
As per the management, the manufacturing facility has the potential to generate a revenue of INR350cr at peak utilisation
in a single shift. In H2FY25, it expects to clock a revenue of INR60–75cr and scale up to INR200cr/INR300cr in FY26/FY27. At
optimal utilisation level, it expects the segment to generate an EBITDA margin of 40%.
Exhibit 21: Sees 106.3% revenue CAGR from furniture sale over FY24–27 to INR300cr
300
200
70
43
0
Company Update
EFC (I)
Blended business outlook
Based on management estimates, we see revenue growing at 60.6% CAGR to ~INR1,700cr by FY27, with rental services/D&B
services/furniture sales contributing 54%/28%/18% to total revenue (FY24: 64%/28%/8%). Blended EBITDA margin can
range from 24% to 25% (excluding Ind AS 116). EBITDA seen at INR411cr in FY27E.
Exhibit 22: EFCIL sees 60.6% blended revenue CAGR over FY24–27 to INR1,700cr
1,800
1,600 300
1,400
1,200 481
200
1,000
800 344
70
600 215
400 34 919
113 679
200 454
263
- 99
Rental services D&B services Furniture
Exhibit 23: Segment mix to tilt towards D&B (high growth) and furniture (low base)
100% 4% 8% 10%
90% 16% 18%
80% 28% 29%
70% 28% 28%
60%
50% 96%
40%
30% 64% 61% 56% 54%
20%
10%
0%
Rental services D&B services Furniture
Company Update
EFC (I)
Strong balance sheet, supported by healthy cash flows

EFCIL rents properties from landlord on a straight lease, for a period ranging from four to nine years. Entire capex for fitouts and
interiors is borne by the company. However, to de-risk its cash flows and avoid upfront one-time capex cost, it asks the landlord
to do the fitouts and provide EFCIL with a fully furnished property. The landlord, accordingly, asks for a higher rental (refer Exhibit
11). Company follows this model for almost 85% of the properties it takes up. For the remaining ~15%, it incurs the required capex.
This setup has helped the company extensively in managing its cash flows and ensuring optimum utilization of internal accruals.
Driven by i) prudent cash management, ii) sharp improvement in profitability, and iii) fund raise of ~INR273cr in December 2023
by issue of equity shares, EFCIL enjoyed a net cash position of INR70cr as of FY24-end. We do not see any meaningful
deterioration in its position going forward and expect it to be able to fund its capex via operating cash flows.
Operating cash flows were impacted in FY24 due to a sharp increase in receivable cycle. However, the jump was on account of
a one-off aberration and expect the receivables to normalize going forward. Inventories will see a jump in the coming years as
the furniture segment ramps up. Normalized working capital requirement could range from 60-70 days.
Based on our preliminary estimates, we see the company generating cumulative operating cash flow of ~INR440-445cr over
FY25-27, of which ~INR170-180cr will be invested in expanding capacities. We see cumulative free cash flow of ~INR270-275cr
accruing to EFCIL over FY25-27.
Despite a higher working capital requirement, operating cash flows can see a jump on the back of a sharp improvement in revenue
as well as profitability. Consequently, we see a multi-fold jump in RoE, from 13.6% in FY24 to more than 30% in FY27.
Exhibit 24: Cash flows to improve meaningfully Exhibit 25: Led by healthy cash flow and
on sharp growth in profits and efficient working rationalized capex, leverage to remain at
capital management healthy levels, RoE to expand on profit growth
600 1.0 40%
0.8 35%
400
30%
0.6
200 25%
INR cr
0.4
- 20%
0.2
15%
-200 -
10%
-400 -0.2 5%
FY23 FY24 FY25E FY26E FY27E -0.4 0%
Gross operating cash flow Changes in working capital
Net operating cash flow Net D/E ratio (x) RoE (RHS)
Key risks
• The flexible office demand is highly sensitive to the overall office leasing demand in the country. Any cyclical downturn in the
sector will impact the leasing, occupancy and profitability of flexible lease operators.
• Any delay in expansion might limit the revenue growth potential
• Intense competition might hurt the pricing power
Company Update
EFC (I)
Appendix 1: Comparison of key parameters of the larger flex space operators in the industry
Exhibit 26: Comparison of key financial and operational metrics of EFCIL with AWFIS and SmartWorks
EFCIL AWFIS SmartWorks
Particulars (INR cr)
FY23 FY24 FY23 FY24 FY23 FY24
Financial metrics
Revenue 103.2 410.3 545.3 848.8 711.4 1,039.4
EBITDA (with IndAS 116) 55.4 173.5 155.6 245.4 391.3 585.9
EBITDA margin (with IndAS 116) 53.7% 42.3% 28.5% 28.9% 55.0% 56.4%
PBT 7.2 81.0 -46.6 -17.6 -136.2 -67.6
PBT margin 7.0% 19.7% -8.6% -2.1% -19.1% -6.5%
PAT 4.3 58.0 -46.6 -17.6 -101.0 -50.0
PAT margin 4.2% 14.1% -8.6% -2.1% -14.2% -4.8%
Rental revenue 99.0 263.0 418.8 618.9 664.6 987.0
Fitout/interior revenue 4.2 113.1 105.0 204.9 - -
Other revenue 0.0 34.2 21.4 25.0 46.8 52.3
RoE 6.0% 13.6% -27.5% -7.0% -321.1% -99.9%
Operational metrics
Number of operational seats 23,000 36,539 68,203 95,030 1,37,564 1,63,022
Monthly revenue per seat (INR) 3,587 5,999 5,118 5,427 4,026 5,045
Occupancy n/a 93% 75% 71% 77% 80%
Monthly average seat rate (INR) n.m. 6,480 6,824 7,644 5,246 6,325
Chargeable area (mn sq. ft.) 1.0 1.9 3.5 4.8 6.2 7.2
Monthly revenue per sq.ft. (INR) 82.5 115.4 99.7 107.5 89.9 114.1
Area/seat (sq. ft.) 43.5 52.0 51.3 50.5 44.8 44.2
Centres n/a 50 119 160 39.0 39.0
Area/centre n.m. 38,000 29,412 30,000 1,57,949 1,84,872
Valuation
Market cap 2,511 2,511 5,054 5,054 n.m. n.m.
Enterprise value 2,566 2,441 5,047 5,081 n.m. n.m.
P/E (x) 579.1 43.3 n.m. n.m. n.m. n.m.
EV/EBITDA (x) 46.3 14.1 32.4 20.7 n.m. n.m.
EV/seat (INR) 11,15,792 6,67,958 7,39,986 5,34,715 n.m. n.m.
EV/sq ft (INR) 25,663 12,846 14,420 10,586 n.m. n.m.
Exhibit 27: Snapshot of key performance indicators of top six players in the flexible office space segment
Particulars EFC AWFIS Smartworks CoWrks Table Space WeWork
Number of centres 57 160 41 15-25 60 53+
Desks 42773 95030 180000+ 20000+ 50000 90000+
Operational area
2.2 4.8 8+ 1-2 5+ 8+
(mn sq. ft.)
Cities 7 16 13 8 7 8
Average facility size (sq. ft.) 35,000-40,000 30000 150000-200000 40000-90000 70000-120000 100000-150000
Tier 2 invetory (mn sq. ft.) n.a. 0.5 0.2-0.25 n.a. n.a. n.a.
Operator model Managed Hybrid Managed Co-working Managed Hybrid
Longer duration Multiple tenure Longer duration Multiple tenure
Average tenure 24 months 33 months
offerings offerings offerings offerings
Focus Cohort >100 seats All >100 seats Small to medium >100 seats All
Organic leasing Medium Medium Low-medium Medium Low-medium Medium
Company Update
EFC (I)
Appendix 2: A snapshot of India’s flexible office space industry in charts along with key growth drivers
Exhibit 28: Indian flex leasing Exhibit 29: Share of flex inventory in the India leasing market
market has grown 4x the overall has grown from 3.1% in 2018 to 7.4% in 2024; see inventory
industry over 2018-23 growing at 16.6% CAGR over 2023-26E to support the rapid
demand surge
27.2% 8.3%
120 9%
7.4%
8%
100 6.4% 7%
80 5.2% 5.5% 6%
4.9%
mn sq. ft.
5%
60
3.1% 4%
40 2.1% 3%
7% 1.3% 2%
20
1%
- 0%
2016 2017 2018 2019 2020 2021 2022 2023 2024E 2025E 2026E
Flex leasing market CAGR India leasing market
(2018-23) CAGR (2018-23) Supply (tier I) Tier 1 Inventory (tier I) Share of flex inventory (RHS)
Source: CBRE, AWFIS RHP, Nuvama Wealth Research
Exhibit 30: Against a 16.6% inventory CAGR, see annual demand (absorption) growing at 23.3%
CAGR over 2023-26 from ~181,000 seats per annum to ~340,000 seats
4,00,000
3,50,000
3,00,000
Number of seats
2,50,000
2,00,000
1,50,000
1,00,000
50,000
-
2019 2020 2021 2022 2023E 2024E 2025E 2026E
Source: CBRE, AWFIS RHP, Nuvama Wealth Research
Exhibit 31: Access to quality talent pool at a lower Exhibit 32: Start-ups saw a surge post-COVID,
cost, demographics driving GCCs to expand base growing at 68% CAGR since 2019; sharp
in India growth expected to continue
1,900
2,000 80 1,40,000
1,580
1,400 1,430 1,510 1,20,000
1,17,254
1,500 1,182 1,250 60
Number of startups
981
1,00,000 81,000
1,000 620 40
80,000
500 285 20 54,458
60,000
- 0 34,412
40,000
Pre FY05 FY10 FY15 FY19 FY20 FY21 FY22 FY23 FY25E 19,914
FY00 20,000 8,635
-
Number of GCCs in India GCC revenue in India ($ bn, RHS) 2018 2019 2020 2021 2022 2023
Source: NASSCOM, IBEF, Nuvama Wealth Research
Company Update
EFC (I)
Exhibit 33: Comparison of cost to tenant in a flexible lease and a traditional lease over a three-year period
Cost per seat in traditional v/s flex lease Total cash flow over three years
Traditional Traditional Flex
Particulars Flex lease Particulars (INR cr)
lease lease lease
Number of seats 100 100 Total annual recurring cost 1.9 1.9
Seat density 80 60 Rent (incl CAM and opex) 5.8 5.8
Area required (sq. ft.) 8,000 6,000 Security deposit 0.6 1.0
Rent (INR/sq. ft./month) 120 270 Capex (INR2,200/sq. ft.) 1.8 0.0
Opex (INR/sq. ft./month) 60 - Total outflow 8.1 6.8
CAM (INR/sq. ft./month) 20 -
Total monthly charge (INR/sq.
ft./month) 200 270
Source: AWFIS RHP, Nuvama Wealth Research
Company Update
EFC (I)
Financials
Income Statement
Year to March (INR cr) FY21 FY22 FY23 FY24
Income from operations - - 103 410
Cost of units sold - - 37 187
Employee cost 0 0 5 14
Other expenses 0 0 5 36
Total operating expenses 0 0 48 237
EBITDA -0 -0 55 173
Depreciation and amortisation - - 35 76
EBIT -0 -0 21 98
Interest expenses - - 15 35
Other income 0 0 1 18
Profit before tax 0 0 7 81
Provision for tax 0 0 3 18
Profit after tax 0 0 4 63
Adjusted EPS 1 0 8 14
Common size metrics as a percentage of net revenue

Year to March FY21 FY22 FY23 FY24
Operating expenses n.m. n.m. 46 58
Depreciation n.m. n.m. 33 18
Interest expenditure n.m. n.m. 14 9
EBITDA margin n.m. n.m. 54 42
Net profit margin n.m. n.m. 4 14
Growth metrics (%)

Revenue n.m. n.m. n.m. 298
EBITDA n.m. n.m. n.m. 213
PBT n.m. n.m. n.m. 1,026
Adjusted net profit n.m. n.m. n.m. 1,237
Adjusted EPS n.m. n.m. n.m. 69
Company Update
EFC (I)
Balance Sheet
As of March 31 FY21 FY22 FY23 FY24
Equity share capital 1 1 7 10
Reserves and surplus 1 1 66 417
Shareholders’ funds 2 2 73 427
Total debt - - 58 115
Other long-term liabilities - - 295 337
Sources of funds 2 2 424 885
Net block - - 90 132
Capital work in progress - - 19 28
Total fixed assets - - 109 161
Investments 0 0 0 0
Inventories - - - 25
Sundry debtors - - 15 120
Cash and equivalents 0 1 3 185
Loans and advances 0 1 75 121
Total current assets 0 2 92 451
Sundry creditors and others - 0 42 70
Provisions - - 6 1
Total current liabilities and
- 0 48 71
provisions
Net current assets 0 2 45 379
Other assets 2 - 271 345
Uses of funds 2 2 424 885
Ratios
RoAE (%) n.m. n.m. 11.7 23.2
RoACE (%) n.m. n.m. 10.5 15.9
Debtor days n.m. n.m. 52 106
Inventory days n.m. n.m. - 22
Payable days n.m. n.m. 52 42
Cash conversion cycle (days) n.m. n.m. (1) 87
Debt/equity ratio n.m. n.m. 0.8 0.3
Debt/EBITDA ratio n.m. n.m. 1.1 0.7
Adjusted debt/equity ratio n.m. n.m. 0.8 (0.2)
Valuation parameters
Diluted EPS (INR) n.m. n.m. 8.3 14.1
Diluted P/E ratio (x) n.m. n.m. 60.5 35.9
Price/BV ratio (x) n.m. n.m. 34.6 5.9
EV/EBITDA ratio (x) n.m. n.m. 46.3 14.1
Nuvama Wealth and Investment Limited, Edelweiss House, Windsor Ln, Kolivery Village, MMRDA Area, Kalina, Santacruz East,
Mumbai, Maharashtra 400098
Sandeep Raina Digitally signed by

SANDEEP SANDEEP ASHOK RAINA
Head of Fundamental Research
ASHOK RAINA Date: 2024.09.15
16:51:03 +05'30'
sandeep.raina@nuvama.com
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Company Update

Key highlights from the management interaction:

Outlook and view

About the company

Exhibit 1: Key milestones in the rental services segment

•Starts off with •Adds 1,900 seats •Expands its •Significantly

Source: Company, Nuvama Wealth Research

Exhibit 2: Revenue mix

Source: Company, Nuvama Wealth Research

Exhibit 3: Multi-brand approach

Exhibit 4: Organisation structure

Source: Company, Nuvama Wealth Research

Flexible office rental services

*in FY24; Source: Company, Nuvama Wealth Research

Single client centre Multi-client centre Enterprise clients Others

Source: Company, Nuvama Wealth Research

Exhibit 7a: Key marquee customers

Exhibit 7b: Recent additions to the client base

Source: Company, Nuvama Wealth Research

Exhibit 9: Billed seats clocked 12.9% CQGR over

Billed seats QoQ growth (%, RHS)

Source: Company, Nuvama Wealth Research

Exhibit 11: Centre-level unit economics

Exhibit 12: Snapshot of newly commissioned centres

Sprint Kharadi (Pune) | ~155,060 sq. ft. | 3,827 seats

Source: Company, Nuvama Wealth Research

Seat inventory Billed seats Occupancy (RHS)

Source: Company, Nuvama Wealth Research

Revenue from rental services (INR cr) Growth (RHS)

Source: Company, Nuvama Wealth Research

Design and build (D&B) services

Exhibit 15: Snapshot of EFCIL’s key capabilities and differentiators

Source: Company, Nuvama Wealth Research

Source: Company, Nuvama Wealth Research

Exhibit 17: Key customers in the D&B segment

Source: Company, Nuvama Wealth Research

D&B revenue (INR cr)

Source: Company, Nuvama Wealth Research

Coforge | ~100,000 sq. ft. | Turnaround time – 62 days

Source: Company, Nuvama Wealth Research

Exhibit 20: Key machinery vendors and civil contractors

FY23 FY24 FY25E FY26E FY27E

Source: Company, Nuvama Wealth Research

Blended business outlook

Rental services D&B services Furniture

Source: Company, Nuvama Wealth Research

Rental services D&B services Furniture

Source: Company, Nuvama Wealth Research

Strong balance sheet, supported by healthy cash flows

Source: Company, Nuvama Wealth Research

Source: CBRE, AWFIS RHP, Nuvama Wealth Research

Source: CBRE, AWFIS RHP, Nuvama Wealth Research

Source: NASSCOM, IBEF, Nuvama Wealth Research

Common size metrics as a percentage of net revenue

Growth metrics (%)

Sandeep Raina Digitally signed by

Research analyst has served as an officer, director or employee of subject Company: No

NWIL has financial interest in the subject companies: No

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