EFC (I) Ltd (BSE: 512008) Q2 2025 Earnings Call dated Oct. 25, 2024
Corporate Participants:
Nikhil Dilipbhai Bhuta — Whole-Time Director
Analysts:
Sahil Sharma — Analyst
Manohar Rao Yadav — Analyst
Yash Gandhi — Analyst
Vineet — Analyst
Rahil Shah — Analyst
Ankur Kumar — Analyst
Shreyansh Jain — Analyst
Krishna Shah — Analyst
Presentation:
Operator
Ladies and gentlemen, a very good morning and welcome to the Earnings Conference Call of EFC India Limited for Q2 FY ’25.
We have with us today, Mr. Umesh Sahay, Founder and Managing Director of EFC India Limited; and Mr. Nikhil Bhuta, Whole-Time Director of EFC India Limited.
[Operator Instructions]
I would now like to hand the conference over to Mr. Nikhil Bhuta, Whole-Time Director, to give his opening remarks and discuss further on Q2 FY ’25 performance. Thank you and over to you, sir.
Nikhil Dilipbhai Bhuta — Whole-Time Director
Thank you. Thank you, Steve. Good morning, everyone. Hi, I am Nikhil Bhuta, Director of EFC India Limited. I would like to extend a warm welcome to all of you for joining our earnings conference call today. We greatly value your ongoing interest and support in our company.
In today’s call, we will review our financial and operational performance [Technical Issues] 30th September 2024. We will also highlight key strategic decisions made by our group and share our outlook going forward.
For quarter two, EFC India Limited has achieved impressive financial results with consolidated revenue reaching approximately INR171.08 crores and an EBITDA of around INR84 crores and PAT of INR36.56 crore. For half year ended 30th September, 2024 EFC India Limited has achieved impressive financial results with consolidated revenue reaching approximately INR276.36 crores and EBITDA of around INR133.59 crores and PAT of INR52.33 crores. These results underscore our resilience, strategic focus and the management’s unwavering commitment to driving the company’s growth.
The segmental breakdown reveals that the rental segment generated approximately INR89.20 crores, accounting for about 54% of our total revenue. In comparison, the D&B, the Design and Build business, contributed INR77.24 crores, representing approximately 46% of the total revenue till 30th September, 2024.
At EFC, we create synergies through our dynamic workspaces under the brand EFC, Sprint and Bigbox. Additionally, we offer exquisite furniture through Ek Design Industries Limited and provide meticulous interior designing services on a turnkey basis under our company, WhiteHills Interior Limited.
Starting from the managed office business sector, we have significantly enhanced our capacity in this quarter by increasing the leasehold area by around 175,000 square feet adding over 3,600 seats across four centers in four existing cities. We have set a strong foothold in eight cities in India, covering about 2.4 million square feet under management. We have now total 61 sites under our management across these eight cities in India. The total seat capacity has crossed 50,000 mark.
In addition to the concluded transactions, D&B division has got an additional order book of more than INR70 crores in their hands. One of the largest deal wins that the D&B has successfully secured during this quarter is a contract with TCS of INR18 crores plus. In the furniture and — furniture manufacturing division, we have successfully completed our first ever order post our commencement of commercial production on 20th September. This order book is strong and the furniture division is poised to achieve much better in the coming quarters.
Operator
Sorry to interrupt, sir. Could you please come closer to the mic and speak?
Nikhil Dilipbhai Bhuta — Whole-Time Director
Sure. With this, I thank you all and I now open the forum for a question-and-answer session. Steve, you can please open the forum.
Questions and Answers:
Operator
Thank you very much, Sir. [Operator Instructions] The first question is from the line of Sahil Sharma from Columbus Capital. Please go ahead.
Sahil Sharma
First of all, I’d like to congratulate the management. It’s quite remarkable performance, like especially the Board meeting for results was for five hours from 9:00 PM to 2:00 AM and then to attend the conference call at 9:30 AM, it clearly shows your dedication to the business and it’s reflecting in the fantastic performance in our best ever revenue and profits and most importantly, the cash flows, which have really improved in the first half.
Nikhil Dilipbhai Bhuta
Yes, thank you. Thank you so much, Sahil.
Sahil Sharma
Yes. So my first question is, sir, first of all, I wanted to understand the seasonality in the margins, just to understand why it is that our margins are typically the lowest in Q1 and then highest in H2, Q3 and Q4, and how is it tied to the business development cycle through the year?
Nikhil Dilipbhai Bhuta
Sure, Mr. Sahil. First of all, thank you very much and thank you for joining the call. With regards to your specific question, I would like to explain to you that the first quarter is the quarter where generally, all our — for that particular financial year, the new sites that we kind of have identified, those will add new seats for the Company, will get under construction during this period. These are the sites which we are taking from the landlord or leasehold rights and then obviously, we will do a fit-out at those sites and then they will come under development.
So, generally, if you see in the first quarter, the expenses, because all the standard expenses, maybe except for the rentals, would be on the higher side because the sites will not have come for occupation and they will come for occupation during the latter half of the year — the latter half of the quarter and then if you look at those seats, they will come for full occupation in the forthcoming quarters.
So, obviously, the seasonality is relating to the way the development cycle happens, so that typically all our development for a particular financial year happens in quarter one and quarter two. Quarter two also, there is a substantial development but then also the benefit in quarter two becomes is that because there are quarter one sites which have become fully live, would become fully available for billing during the quarter two and whatever sites which have come up for development during the quarter two, they would be partially available naturally and this trend will keep increasing in the ongoing quarters, like, say quarter three and quarter four onwards.
So, I think it’s not about the seasonality rather but it’s about the way the development happens in each site and the way they come up for occupations and how the billing happens to them. So, the build-up happens over the quarters and accordingly, the profitability, income, everything builds up over the quarters basically.
Sahil Sharma
Understood, sir. Sir, my next question is I wanted to understand the general receivables cycle for all the segments which is rental, Design & Build and the furniture business, what we expect because we could see that the receivables have come down from INR120 crore in Q4 FY ’24 to INR60 crore now around in Q2 FY ’25 and it would be nice to understand the normal receivables cycle and also request, if possible, we could share the breakup for the receivables either now or in the next balance sheet update.
Nikhil Dilipbhai Bhuta
Sure, sure. I mean with regards to your request for sharing the breakup for receivables for all the different segments, we will definitely take that note and we will show that as an independent piece of information. With regards to the receivables cycle in general for all the three verticals, with regards to the vertical for rental business, the receivables are generally less than 30 days because what happens is, we generally receive the receivables in arrear and maximum the clients would pay you during the first half of the month and then a few clients would probably come a little later. So, I mean if you take out average, it is around 15 to 30 days maximum on the rental revenue side.
On account of the Design and Build division is concerned, Design and Build division, it runs around — average is about 90 days because what happens is, as we have discussed in past that from the date we get a contract and the date we fully execute the contract and the final payment is released to us, that period goes from 0 to roughly around 180 days. The day the PO is received, then the designs are approved, then we go into execution. Once executions are moving on, then there are running bills which are submitted and the running bills which are approved and then when the PMC or the client really approves the final work that has been delivered and then they process the balance retention money that they have kind of kept under the contract.
With regards to specifically your question about why the receivables was larger in the financial year ended 31st March, 2024, again, the major reason was that we have been doing this business for now close to two, two and half years and if you have seen that, it needs some time for us to establish ourselves in the business, create our own credibility, create our own standing so that we are able to serve now large customers like TCS and like Coforge of this world.
And earlier year, obviously, we had to — in order to remain relevant in the business, we were also taking contracts which were even smaller in size. When I say small, means that, which are around 10,000, 5,000 square feet development. Now, I am in a position that — considering the kind of work that I am able to kind of attract, I am in a position to do much better contract values where I am able to do more than 20,000, 25,000 square feet for contract.
So, what that means is that I have been dealing with much more organized players where the cash flows and the fund availability is much more organized than what is available with some of the unorganized players. It is not a question of non-recoverability, it is about just the timing and that kind of had made that recoverability, the cycle, increase a bit from 90 days to let’s say 120 days in the last financial year. But this financial year, there has been great improvement and as you can see in the results, and this trend will generally continue going forward.
With regards to the furniture division also, it’s a little too early to say, but typically, there also the receivables will remain between 60 days to 90 days. There is quite a bit of business that happens on an institutional level and that business, once a business happens with large institutions, you would appreciate that the receivables cycle, we would always prefer a minimum of 60 days and sometimes they go up to 90 days as well. So, that is where the entire receivables cycle works for us, Mr. Sahil.
Sahil Sharma
Understood, sir. Last question from my side.
Operator
Sorry to interrupt, Mr. Sahil. Could you please come back in the question queue for further questions?
Sahil Sharma
Sure, sure.
Operator
Okay. Thank you. [Operator Instructions] The next question is from the line of Manohar Rao Yadav, an individual investor. Please go ahead.
Manohar Rao Yadav
Hi, sir. Good morning on the wonderful set of results. My first question was, sir, I wanted to understand a little bit on the SM REIT side, sir, like now that we would list a subsidiary, and the owners would be the unit holders of the REIT, so, will the revenue recognition happen on the books of EFC or that revenue would directly go to the unit holders of REIT and we get the PAT and the margins increase? And also, is there any scope of recognizing the revenue from the furniture and D&B section because now the asset would be owned by the unit holders of the small REIT?
Nikhil Dilipbhai Bhuta
Yes, Mr. Manohar, thank you so much and thank you for joining. With regards to the REIT that you are referring to, first of all, as you may know that SM REIT that we are forming and registering right now with the SEBI, so all the assets that will be acquired at the SM REIT, they would be independent and they would not be having any direct link to the assets that our Company owns. So, what would happen is that means that we will be adding new assets to this under the REIT and these new assets will be managed by us as the manager to the REIT. Since under the SM REIT, the concept of sponsor and manager has been merged, we, as also the sponsor and the manager, we are supposed to contribute 5% of the total requirement of the fund for acquiring those assets that we would acquire under the SM REIT.
Now, out of the total assets that we have acquired, the revenue would definitely go to the SM REIT and it will be registered under the books in the SM REIT, but the management fees will come to us, which would obviously be somewhere equivalent to the kind of margins that we are making under EFC. You got to appreciate that obviously, since the assets is owned by the REIT, then the assets revenue will also go to the REIT, but as far as we are concerned, we will be — and to ensure complete transparency, we did want to create a structure where the asset is leased to us and then we manage and then we pay only the rental to the REIT. So, the way the structure is created that the entire revenue transparently needs to go to the REIT.
At EFC, from an EFC standpoint, the asset under management will increase because earlier if I am managing — let’s say, right now, I’m managing 2.4 million square feet under REIT, let’s say we have acquired another 50,000 square feet or another 100,000 square feet, that will be added to the overall asset under management and it will add to my bottom line, because the bottom line would remain almost the same for the services that we offer to the REIT. With regards to our dividend from the REIT, it would obviously proportionate to the investment that we make to the REIT, which will be 5% as a company that we are going to meet. So, that is how the structure would work.
With regards to the D&B division and the furniture division, both these divisions can separately and obviously will contribute in development of the assets whenever and wherever so required. Generally, because under the REIT, we will have to take already a rental deal generating asset, that means that those assets would already be furnished and those assets would already be kind of occupied with the right type of furniture, but yes, obviously, the asset would require repair, maintenance, asset would require refurbishments, asset would require replacement of the old and new age furniture and that would obviously be provided on a competitive basis by our other divisions to the REIT. I guess I have kind of answered your question, Mr. Manohar.
Manohar Rao Yadav
Yeah, my second and last question, sir, is when I see the industry, sir, I see most of the competitors working under the managed aggregation model, where the landlord is a part of the occupancy. They get based on the occupancy because they are doing the capex. But I see our Company very unique here because majority of our properties are on a straight lead model, where we are giving them a fixed rental. So, prima facie, the managed aggregation looks to be a more safer model because the downside is protected. So, why we as a company have strategically decided to do the straight lead model instead of the managed aggregation model?
Nikhil Dilipbhai Bhuta
Yes. So, Mr. Manohar, as I said, I mean, most of the companies typically in our industry would work on a straight lead model. The revenue share model is not very — something which is prevalent. Yes, there are a few companies which are in the market today and they are obviously working on the revenue share model and we can also work on that model, but we have in part used such models and have faced certain kind of difficulties which — primarily the difference of working styles, difference of expectations from the landlord and giving away larger share of revenue to the landlord in compared to the amount of risk that we are taking.
You got to appreciate, Mr. Manohar, that — let us say, even if I am doing under a managed aggregation model, I am supposed to commit contractually to the landlord, number one. I am supposed to commit a minimum fees to the landlord, minimum guarantee amount to the landlord. So, what difference I am making is that a bit of delta, which is, let’s say, hypothetically, I am giving an example to you that, let’s say, a particular property is going to cost you INR100 rental. Under the managed aggregation, you might be in a position to commit, let’s say, INR60, INR70 as a minimum guarantee and balance INR30, INR35 as an upside, which would come later and that INR30, INR35 would not be the fixed amount. It would be as a percentage of your revenue or your profitability. That would make the actual cost of your property going up from INR100 to INR125. Because, naturally, a landlord with whom you are sharing the risk and now he is bearing the risk, he is not going to give you at the same price at which he would have otherwise given on a straight lease.
So, it is a two-edged sword. If we don’t have confidence on the market, we don’t understand the market, we don’t understand the micro-market where we perform or where we operate, then it is better that we go for revenue share and even account for this little bit of risk that we are taking. Because, at the end of the day, when you are doing an entry, you are anyway doing a contractual commitment to the landlord. It is not a case that one fine day, you can just simply say to the landlord that, okay, fine, sorry, I am not able to fill the place, and I am leaving.
So, if you look at the commercials, you look at the contractual terms, in our opinion, yes, one can argue that there is a minimum guarantee, but there is a delta, which is, we are covering by way of revenue share, but then on the other hand, I would definitely like to bring it out to them that, that delta is hurting where to the Company because then it is taking away your margin. Because if your cost increases substantially on the rental side because of the managed aggregation model and the profit-sharing model, then your profitability at bottom would certainly significantly decrease because there is no other place for doing the efficiency building and operational efficiency would be totally [Indecipherable] where you can control those costs.
So, I think that is what one has to appreciate, and we are confident of this model. We have been working with this model for more than 10 years now. Our sales teams and our marketing team is strong enough to be able to maintain an average occupancy of around 90%. And we strongly believe that we only take or add as much seats or properties that we feel that we will be able to continue to occupy them and sell them with a 90% plus occupancy and lastly, most importantly, as you know, more than 65% to 70% of the business is with big corporates, large corporates, which kind of are committed for a longer duration, so that my risk, which I am exposing myself with the landlord, is getting equally taken care by these large contracts where I have a five-year contract with three-year lock-ins and four-year lock-ins. I hope I have tried to kind of explain…
Manohar Rao Yadav
Yeah. Thank you sir, and again congratulations on results. Thank you very much.
Nikhil Dilipbhai Bhuta
Thank you so much. Thank you.
Operator
The next question is from the line of Yash from Stallion Asset. Please go ahead.
Yash Gandhi
Hi. Thanks for the opportunity. I just wanted to understand, so, I think in your balance sheet, you have got INR247 crores of loans for first half and in your current assets. I just wanted to understand what is that?
Nikhil Dilipbhai Bhuta
Yeah. So, the loan is primarily that we have taken to acquire the properties that has been acquired by the Company. So, we have taken lease rental discounting facilities and the term loan facilities from the bank to acquire the properties. So, what has happened is that — what this means is that, right now, let’s say, if I am paying rental to the — when we see opportunity where the EMIs become equivalent to the amount of rent which I am paying, plus/minus here and there a bit, then we try to kind of acquire those property on our books through a lease rental discounting.
Because what happens is that at least here, if I keep paying the rental, I am not building an asset. Here, by paying the EMI, instead of paying the rental, I am actually building an asset on my book. That makes our company’s — the balance sheet stronger, that makes our company’s ability to withstand any downside stronger. Because when you own those centers yourself, your ability to manage them and your ability to stand in the difficult times becomes much better.
So, those loans are primarily towards — you may know that there are four floors that we own at Marisoft IT Park in Pune, and there is — which is about 100,000 square feet and then we have acquired 43,000 [Phonetic] square feet in Wakadewadi, Pune recently as we announced in past, as always, higher 80,000 square feet has been acquired, so, under this lease rental discounting model and that is largely the loan that is — which is there on the books of the company.
Yash Gandhi
Got it, got it. And I think in the last call, we have mentioned that, our guidance is INR350 crores — INR350 crores for the year. So, you would like to revise the guidance, given the strong performance that we have got in first half?
Nikhil Dilipbhai Bhuta
INR350 crores on account of the rental you are talking or on account of the overall performance you are referring to?
Yash Gandhi
No, I think this was for the rental, but you can tell me if you have any plans for the overall, including both the businesses.
Nikhil Dilipbhai Bhuta
No, I think the business is doing really good and the way the trends are and it has been in the past also that quarter-on-quarter, the business is really performing and the order books are on hand for both the divisions, the D&B and for the Furniture division and on the Rental division, as you know, it is pretty linear. So, the business is doing well with the seats getting added, seats coming up for occupancy. The business is growing, and it will continue to grow in a similar fashion. I mean, in terms of guidance, yes, we do stand by that we will be able to achieve around 70,000 seats by end of this year and we will be able to achieve at least, if not more, 100% improvement in our performance in the WhiteHills division as well. And naturally, in the furniture manufacturing business, this is the first year. So, we are certainly looking forward that we — I mean, we kind of capitalize and really build the business. The way the factory looks — In fact, if you look at the factory, the way it is built and the way the entire infrastructure has come up, we are really hoping that it will deliver whatever all our expectations have been over the years.
Yash Gandhi
Okay got it. Thank you.
Nikhil Dilipbhai Bhuta
Thank you.
Operator
The next question is from the line of Vineet [Phonetic] from KRIIS PMS. Please go ahead.
Vineet
Hello?
Nikhil Dilipbhai Bhuta
Yes, Mr. Vineet.
Vineet
Sir, my question is with respect to the guidance. Like, just now you told that you will be reaching 70,000 seats by the end of this year, right? In the Q2, you are adding 3,000 seats. So, how are we planning in the next half of the year? Like, will we be adding 20,000 seats?
Nikhil Dilipbhai Bhuta
No, no. So, 3,000 seats is adding in the capacity this financial year — this quarter. And it is also going to get better because there are certain properties which have already been identified and one large property which is — a single property which is identified and which will come up for fit-out in the third quarter, it is going to have more than 5,600 seats in a single center. So, we have, a couple of such centers already identified. We have already reserved and booked, which is coming up for fit-out. So, we will certainly be able to — we already have the visibility and that is how we are talking that we will reach about 65,000 to 70,000 seats by the end of the year.
Obviously, all the 70,000 seats will not come up for occupation during the third and fourth quarter. They will come over the period. But what we are taking as guidance is that by the end of this financial year, as of 31st March 2025, we are expecting to touch this mark of anything between 65,000 to 70,000 seats and that is the guidance that we are still committed and stand by right now.
Vineet
Okay, okay, sounds great. My another question is with respect to the segment-wise economics. Like, can you explain me economics in individual segments and also for the furniture segment, can you tell me if we have any order book pipeline or how are we looking like? It’s been one month, right, one and a half months since it has got operational. So…
Nikhil Dilipbhai Bhuta
Correct, correct. It has been about a month now and the commercial production has started and obviously, the things are picking up. The team has really worked very hard to kind of deliver the first order within the first quarter itself and then they are also in the process of building up their order book into different business verticals that we are working on and the order book is certainly looking pretty promising and we are — as we have earlier mentioned, are targeting that we would achieve anything — I mean, the estimates and the projections that the sales teams have given is that we would definitely achieve anything around, INR60 crores to INR75 crores of revenue for the furniture division.
With regards to the margin that you are talking for the segments, both the rental and the D&B division, we have discussed in past that the rental division typically on a central level, we have a margin of about 3% and on a corporate level, it is about 25%. While in terms of the D&B division, average margins come around 70% to 80%. But, the division or the contracts where we have a lot of difficult work to be carried out, let’s say, where we are doing a contract for laboratories or research centers or any other contracts that are developing office infrastructure, which is pretty competitive, the margins improve significantly, which is more than around 24%, 25%. I mean this I am talking obviously the average numbers and that is what the broad margins are for both these verticals.
Vineet
Okay, okay. And with respect to the outlook that you shared, like 100% growth in D&B segment and what was your guidance with respect to this Rental segment?
Nikhil Dilipbhai Bhuta
So, Rental segment, as I have explained, that we are expecting anything about 65,000 to 70,000 seats. We would certainly maintain our seat rate at INR6,250 minimum per seat and, right now, as you know, that we already have 50,000 seats, so you are talking about 50,000 seats as already available for occupations for the entire next half at this rate, and the balance is another about 15,000 to 20,000 seats, which will get built up over the next six months time. So, on an average, let’s say, they will come for occupancy at about anything between 40% or so of the total seats, because on an average — because they will come up for occupancy over a period, right, over the next six months. So, that would be the broad number of seats that would get achieved and the rate that we are talking about is about — we will certainly maintain at least INR6,250 per seat and going forward, the rates would increase, because now, on average, rates per seat for the new seats getting added are on an increasing trend. So, yeah, that is the broad guideline.
Vineet
Okay. Thank you. Thank you for answering.
Nikhil Dilipbhai Bhuta
Welcome.
Operator
Thank you. The next question is from the line of Rahil Shah from Crown Capital. Please go ahead.
Rahil Shah
Hi, sir. Good morning. Sorry to press you again on this guidance thing. But I believe in the last quarter, you had said that you were looking to double your revenues in FY ’25. So, is it still intact for the company overall? And in quarter one, your margins dipped quite a lot to 45%, which you have improved to 50% in quarter two. We have also done around 55% to 56% in one of the last year quarters. So, can we expect the same going ahead as well?
Nikhil Dilipbhai Bhuta
In terms of target, yes. I mean, obviously, we are trying, pushing our best, and we are trying to achieve the targets which are set. As you can appreciate and understand that under the D&B and the furniture sector, not that 100% is in our control that we will be able to kind of replicate or achieve whatever is being set, targeted for. But yes, we can only commit to you about what order books on hand and we believe that with the order books on hand on every quarter, we will certainly be able to achieve very good results for the D&B sector and also, similarly, since the furniture sector has now become full-fledged operational for that sector as well. With regards to the rental, it is pretty linear, as I have explained in my previous discussions and going forward, you can certainly at least expect a full revenue for 50,000 seats, and obviously, partial revenue for the new 15,000 to 20,000 seats which are getting added. We are very aggressive. We are really working hard on the targets and hoping to achieve what has been set at the beginning of the year, sir.
Rahil Shah
Okay. And the manufacturing, the trading of furniture, how much is the — what percentage is it part of the revenue mix?
Nikhil Dilipbhai Bhuta
So, as of now, it is insignificant, as I said, because it started just on 28th September. But by end of this year, I believe it will certainly be around — at least if not more, but around 15% or so and year-on-year, it will definitely get improved and the target is that at least — all the three divisions would at least do an equal business of 33% each. But this financial year, I presume, based on the target and the estimates, the furniture, manufacturing division would contribute around 15% to the total turnover.
Rahil Shah
Okay, and lastly, the average rate per seat is what right now? And you were saying that you see a trend of increasing. So, by what percentage would that be at the end of the year?
Nikhil Dilipbhai Bhuta
So, if we are seeing the trend in the new centers that we are adding, the average rates are increasing beyond and around INR6,500 per square feet. But if you look at the average overall rate, it is remaining around INR6,250, because you understand that the previous seats which have been added were sold in and around this rate. So, the average still remains around INR6,250. But with the new seats getting added more and more, and they are getting sold at higher rates of INR6,500 upwards, we will be able to improve the seat rates hopefully by — at least when you take out the average, by end of this year.
Rahil Shah
Okay, okay. Got it, sir. Thank you and all the best.
Nikhil Dilipbhai Bhuta
Thank you.
Operator
The next question is from the line of Ankur Kumar from Alpha Capital. Please go ahead.
Ankur Kumar
Hello, sir. Thank you for taking question. Sir, I actually started following this company recently. I wanted to understand about the margin guidance for this year. As in, Q1 was a little softer on margin side and Q2 has bounced back. How should we look at the second half for this year and sir, next year also, if you can please comment?
Nikhil Dilipbhai Bhuta
So, as we have always maintained, sir, the quarter-on-quarter, the margins you will see different primarily because the building up of the seats and the building up of the margins on the business that we achieve on the other divisions like the D&B division and the furniture division. Once the seats are getting built up obviously and once all those seats are getting — coming for occupancy, the revenue and the better occupancy rate would give you better margins naturally. So, there is an incremental rate, which will obviously average out around, as I explained to you, on an annualized basis, at anything about 30% on the central level and 25% on the corporate level. But that is the kind of margins that one can really estimate and that is what our targets are always, that we estimate for a particular sector keeping in mind the day they come for occupancy and from that day to the — if you estimate on an annualized basis, then that is the kind of margin that you kind of work around.
As I have explained to you in my previous questions, that this betterment in the margins largely happens because the more seats have come for billing purpose, more seats have come for occupancy purpose for the entire quarter. Even if they come for billing purpose for, let’s say, only one month of the entire quarter, does not make too much of a significant difference in the margins, but once the seats come, so obviously all the seats which have developed in the previous quarter, which is operational in the previous quarter will come for full billing for the entire upcoming quarter. So, naturally, the upcoming quarter’s results will get better and better than the previous quarter from the rental revenue perspective.
But overall margin, as I have explained, if you look at it on an annualized basis, that is the kind of estimates and that is the kind of margins that we at least make our sales teams and our operational team to work at, which is about 30% on a central level and about 25% on a corporate level.
Ankur Kumar
Sorry, sir, but last year and in this first and second quarter, aren’t the margins like 40%, 45% range?
Nikhil Dilipbhai Bhuta
So, as I said, for a particular quarter, there would be such kind of a situation. If you annualize the profitability for the last year, the average annual profit for the last year was — net profit, I’m saying, not the EBITDA level after taking case of interest, tax, depreciation, everything, the net profit was around 15.76% or around 15%, I mean, broadly. So, I mean, that is the kind of margins that you generally estimate from our businesses on a combined level, because we were offered through these three different verticals. So, I mean, like I said, the annualized margin would remain around this while on a quarter-to-quarter, there would be obviously difference in the margin depending upon the seats which have come up for occupancy, seats which have come up for billing.
Ankur Kumar
Got it, sir. So, you are saying about net profit margins and not EBITDA margins?
Nikhil Dilipbhai Bhuta
Yeah, so earlier, what I explained to you is not the EBITDA margins, the net profit margins remain around, let’s say, 17%, 18%, depending — on a rental business side, on an average, if you look at on a consolidated basis, it remains around 15% to16%.
Ankur Kumar
Got it, sir, Thank you and all the best.
Nikhil Dilipbhai Bhuta
Thank you.
Operator
The next question is from the line of Shreyansh [Phonetic] Jain from Electrum Capital. Please go ahead.
Shreyansh Jain
Hello. Am I audible?
Nikhil Dilipbhai Bhuta
Yes, please.
Shreyansh Jain
Yeah. Congratulations on a great set of numbers, sir. I have many questions. First one is regarding our Design and Build-out division team and the status of the merger that is pending and what was the basis of the valuation of the INR545 crores?
Nikhil Dilipbhai Bhuta
So, the merger status is that it is pending for an NOC from the SEBI as of now. We are expecting — I mean based on the discussions that have happened, there are no more clarifications, I guess, which is required. All the information and clarifications on the scheme have been submitted well. I mean, we are just following up very aggressively and rigorously and expecting any time soon.
With regards to the valuation, at that point of time, obviously, the valuation was derived based on the contracts in hand, based on the business insight and based on the projections that were created at that point of time, which were vetted by the registered valuer, a merchant banker. So, we’ve taken two reports, one from a merchant banker and one from a registered valuer and those reports were used as a base for creating the valuation for both the respective companies and arrived at the swap ratio.
Shreyansh Jain
Okay, and what is your team size in the D&B division?
Nikhil Dilipbhai Bhuta
The team size in the division is more than 40 people and that includes your architects, that includes your designers and also includes your sales teams part of it.
Shreyansh Jain
Okay, got it, sir. And second question, regarding Ek Design, our furniture division, why have you only invested 76%? And the investment of INR25 crore that was shared, I think, somewhere. Who did that and who owns the remaining 24%?
Nikhil Dilipbhai Bhuta
So, as of now, the Ek Design was an existing company, which was owned by young entrepreneurs who were already doing this furniture manufacturing business. They have an engineering background and they have been doing very well in their business, particularly on the residential side and on the hospitality sector side. And once we saw the opportunity — because we used them to source some of our furniture for our office infrastructure requirement and we saw the kind of margins that they were able to generate and we saw the kind of quality that they were able to generate and the time line they were able to convert the delivery to, so, we have acquired 76% from them and the initial capital which was invested was INR5 crore in the business. There was no secondary sales.
This was a primary investment which was made into the company to enhance their existing capacity. So, they were operating through a small manufacturing setup. That manufacturing setup was enhanced now to the three-acre land, three-acre area that we have now present at Fursungi and that 76% is acquired accordingly, the balance is owned by them and other stakeholders.
And with regards to the investment, the total investment including also the working capital was envisaged at about INR25 crore, but the capex which was invested is about INR5 crores to INR6 crores that has been invested by EFC India Limited, the major shareholder of the company.
Shreyansh Jain
Got it, Thank you so much, sir. All the best for future quarters.
Nikhil Dilipbhai Bhuta
Thank you. Thank you so much.
Operator
The next question is from the line of Krishna Shah from Ashika Stock Broking. Please go ahead.
Krishna Shah
Firstly, Mr. Nikhil, congratulations on great set of numbers. So I just wanted to understand the market at this point. What is the kind of competition? What are the kind of players that you are facing currently in the geography that you are present?
Nikhil Dilipbhai Bhuta
I mean the managed office as a co-working business is getting crowded as you may — can see now also. And with regards to the competition, yes, everybody has to create their own position in the market. Everybody has to create their own niche in the market. [Indecipherable]
Krishna Shah
Sorry, sir, there is some disturbance.
Nikhil Dilipbhai Bhuta
Yeah, I think, moderator, can you please take care of that? Yeah. So I was trying to say that in terms of competition, yes, the market is crowded, but the significant players are limited. As you could know that the players who are present there and who offers services across the major cities of the country are pretty limited. There are a lot of regional players and obviously they offer a lot of competition when it comes to profitability and scale. But as we have explained in the past that our MD’s vision is very clear that we need to create a larger catchment area. We need to work and operate at an efficiency where we are able to cater to the largest customer base that we can. And that makes us in a position where we are able to kind of sustain the kind of occupancy that we are
Referring to which is an average occupancy of 90%.
So our MD is very clear that at the end of the day, you are offering an office infrastructure to somebody as a solution. You are taking care of those assets on behalf of the businessman, enterprises, and we have to make it reasonable. We have to make it quality conscious, and we have to offer them the best set of combinations that we can offer on the pricing and on the quality. And that’s what we have been trying to do for all the years and that is where we keep working towards. And I think all these integrations are going to help us in a great way and that kind of puts us a little differently than the competition because in the market probably we are one of the — or maybe I can say proudly that we are the only one who has that integrated model. So, I think competition is there, it will remain. There is no business which will remain devoid of competition but one has to create their own positioning and that is what we are trying to achieve.
Krishna Shah
Got it, sir. Got it. My second question is in terms of the average area per site that we see has increased from 25,000 to 30,000 square feet in the last quarter to 35,000 and 40,000 in this quarter. So, does this mean that we are acquiring larger office spaces? And how does that affect our occupancy level, given we are looking at 90%? So, do we see any challenges in terms of leasing these out, the larger spaces?
Nikhil Dilipbhai Bhuta
Absolutely. Yes, I mean there are obviously benefits in acquiring the larger — the economy of scale that we are able to achieve. We are, yes, acquiring or rather acquiring leasehold rights over the larger area. There are a couple of reasons to it, if I can break it down. One is that we are now established in all those big cities very well. So, we understand the micro markets of each of these cities very well and so our confidence of selling or filling those spaces in those micro markets, in those cities, has gone up significantly. Our sales teams understand the psyche of that business, psyche of that market and the broker network that has been created, the marketing network that has been created.
So, we are now able to make use of getting a larger space, get better economy in sourcing the property because if you source a larger space, obviously, your ability to negotiate gets better, your ability to carry out the fit-out at the best price becomes better. So, that kind of helps you in doing a lot of efficiency building. On the other hand, your question about our ability to fill and our ability to maintain occupancy, so like I explained, and since we understand this market now very well with our presence there for a significant period of around — in almost each city for more than five years, we are able to understand the market pretty well and we are only kind of getting ourselves properties where — to micro markets which are doing very good and are likely to doing good for the next three to five years.
So, as you can appreciate, in each city, the micro markets also keeps shifting but that is an estimate and that is the kind of business call that every player in our business will have to take to understand that where the market is going to get saturated or rather focused it out of the entire city. So, I hope I have answered your question.
Operator
Sorry to interrupt. Ladies and gentlemen, due to time constraint, that was the last question for today’s conference call. I now hand the conference over to Mr. Nikhil Bhuta, Whole-Time director of EFC India Limited, for their closing comments.
Nikhil Dilipbhai Bhuta
First of all, thank you. Thank you everyone for joining this early morning call and we are really thankful for all of your continued support. We appreciate that your engagement with us is really helping us to — and encouraging us to do much better and better every quarter. As we move forward, we will be committed to driving growth and delivering value to all our shareholders.
Should you have any further questions, please don’t hesitate to reach out to us and have a great weekend and a great Diwali week in coming week and lots of good wishes and good health to all of you. Thank you so much.
Operator
Thank you, sir. Ladies and gentlemen, on behalf of EFC India Limited, That concludes today’s session. If there are any questions that have remained unanswered due to paucity of time, request you to kindly send us the same to compliance@efclimited.in. [Operator Closing Remarks]