Packaging Films records highest ever quarterly revenue and EBIT; margin expands 610 bps YoY to 15.8%; investing in metallizer line to enhance specialty output.
Max Ventures & Industries Limited (MaxVIL), a part of India’s leading multi-business conglomerate, Max Group, operates across two core businesses of Real Estate in NCR and Specialty Packaging Films. MaxVIL announced its un-audited financial results for the third quarter ended 31stDecember 2020.
MaxVIL Q3FY21 Financial Highlights (YoY):
• Consolidated Revenue up 10% to Rs. 2,961 Mn
• Revenue from lease rental income of Max Towers up 19% to Rs. 50 Mn
• Revenue from packaging films business up 11% to Rs. 2,818 Mn
• Consolidated EBITDA up 50% to Rs. 494 Mn & Consolidated PBT up 348% to Rs. 247 Mn
• Consolidated PAT up 90% to Rs. 127 Mn
MaxVIL Business Updates
MaxVIL witnessed a strong business recovery in Q3FY21 in its commercial real estate business with the signing of leases with reputed companies. The packaging films business Max Speciality Films Ltd. (MSFL) recorded its highest ever quarterly revenue and EBIT and continued its margin expansion and growth momentum on the back of strong business fundamentals, recyclability and specialty products.
At Max Towers, the company recently signed a lease for ~80,000 Sq. Ft with Cyril Amarchand Mangaldas (CAM) – a leading Indian legal firm.The company has also signed lease with DBS Bank for ~7,300 Sq. Ft. Earlier in the third quarter of FY21, the company had leased 62,500 Sq. Ft. to Yes Bank.The total leased area at Max Towers now stands at ~4.7 Lk Sq. Ft. of the total net available leasable area of ~5.3 Lk Sq. Ft, implying an occupancy of ~90%. The leasable area attributable to Max Estates in Max Towers is now 94% leased.
MaxVIL also launched its Managed Office space business through its subsidiary Max Asset Services (MAS). The first Managed Office space offering, under the brand name ‘WorkWell Suites’, spanning 14,000 Sq. Ft. was launched at Max House Okhla Phase 1. MAS will provide complete managed office solutions and serviced office space to prospective tenants.
Max Estates’ second commercial complex Max House, which is ready for occupational so witnessed strong inquiries. The company anticipates being able to lease the building out within FY22. Work on Max House Okhla Phase 2 of the project is expected to be commenced in H1FY22.
Work on Max Estates’ third commercial offering – Max Square; a Grade A+ office space development with New York Life Insurance Company as a financial partner has also started. The company is expected to complete the project by Q4FY23. The distressed project – Delhi One,located strategically on the DND Flyway at South-Delhi – Noida border, which the company has bid for,as a part of the Insolvency and Bankruptcy Code process, is undergoing hearings at the National Company Law Tribunal after the Committee of Creditors vote in favour of Max Estates.
The success of commercial office REITs in India clearly reflects confidence of institutional investors in attractiveness of commercial real estate as it continues to be an avenue for growth. It also reinforces that ‘Work from Office’ will be an integral part of workplace ecosystem on a sustainable basis including for IT/ITES companies who account for majority of underlying rental portfolio of the three listed CRE REITS in India.
MaxVIL’s packaging films subsidiary – MSFL continues to post uptick in performance in Q3FY21 on the back of strong demand. MSFL’s revenue for Q3FY21 stood at Rs. 2,818 Mn, up by 11% YoY. Its EBIT increased by 81% YoY to Rs. 446 Mn and EBIT Margins expanded by 610 bps YoY to 15.8% in Q3FY21 on account of stable realisations, benign raw material prices and higher volume contribution from more profitable value-added specialty films.
Overall, MaxVIL continues to have a strong balance sheet with comfortable Net Debt / Equity of 0.4x. Gross debt with that for packaging films business reduced by Rs. 740 Mn from Rs. 4,339 Mn in Mar-20 to Rs. 3,599 Mn as of Dec-20 on the back of strong free cash flow generation. Debt levels in Real Estate business is expected to be low as the company aims to partner with Institutional Investors as a part of its asset-light growth strategy.
Sahil Vachani, MD & CEO of MaxVIL said “Q3FY21 has been a strong quarter for our commercial real estate business while the packaging films business continues its robust performance.As the lockdown restrictions were eased during Q3, corporates are actively assessing their office space requirements. We are witnessing improved conversions from enquiries to actual leasing.The rapid pickup in leasing interest gives us the confidence to also lease out our second Grade A+ office project Max House soon, given its strategic location in South Delhi.
We believe the ongoing consolidation in Real Estate will continue to favour quality Grade A+ commercial developers with proven execution, strong balance sheet and access to institutional capital. With commencement of the Max Square project during Q3, we are expanding our footprint in Delhi-NCR commercial office market and moving swiftly towards becoming one of the top-Grade A+ commercial developers in this area. Towards this objective, we are actively scouting for greenfield and brownfield opportunities in Delhi-NCR with a positive bias for the high potential geography of Gurugram, while hoping for a timely and positive conclusion of IBC process for Delhi One.
Our packaging films business, MSFL continues its solid performance on the back of our value-added product strategy, move towards recyclability and stable raw material prices. COVID-19 has increased the consumer’s preference for packaged products as it minimizes the risk of infection and ensures healthy consumption. With specialised anti-bacterial products co-developed with leading FMCG companies, a stable demand and better product mix, we expect MSFL to continue the strong performance.”
Max Estates Limited (MEL)
Max Towers, Noida
• Total leased area at Max Towers stands at ~4.7 Lk Sq. Ft.; Leased area attributable to Max Estates stands at ~2.8 Lk Sq. Ft.
• Marquee Leases include ~80k Sq. Ft. to CAM, ~62.5k Sq. Ft. to Yes Bank and ~7.3k Sq. Ft. to DBS Bank.
• ~90% of the Max Towers is now leased; while leased area owned by Max Estates is now ~94% leased.
• Max Towers continue to lease at premium rentals as compared to its micro-market.
Max House, Okhla
• Strong leasing interest by corporates, expect to lease out entire Phase 1 office complex soon.
• Phase 2 of the project; of similar size to phase 1 will commence construction in H1FY22.
Max Square, Noida
• Work for Max Square commenced during Q3 and expected to be completed by Q4FY23.
• Max Square is planned to be a Grade A+ office project with F&B outlets and other amenities with a total leasable area of ~0.7 Mn Sq. Ft. with New York Life Insurance Company as a 49% partner in the project.
• Total cost of development is estimated to the tune of Rs. 400 crores comprising of Rs. 175 crores Equity & Rs. 225 crores in Debt – funding for which has been secured.
Max Asset Services Limited (MAS)
• MAS has leased 14k Sq. Ft. of space at Max House Okhla Phase 1 to start with its managed office services offering under the brand name ‘WorkWell Suites’.
• MAS will do the entire fit-out and lease it to prospective tenants as a complete managed office and facility serviced office space.
• Revenue for MAS in Q3FY21 stood at Rs. 27 Mn as compared to Rs. 20 Mn in Q3FY20, up by 33% YoY.
Max I. Limited
• Max I. continues to engage with promising Real Estate tech companies to enhance the experience at its existing projects.
Max Speciality Films Limited
• MSFL volumes increased by 6% YoY to 17,177 MT in Q3FY21. Focus continues to be on enhancing output ofvalue-added specialty products.
• Value-added specialty films contributed 45% to total Volumes in Q3FY21 vs. 42% in Q3FY20 and 44% in Q2FY21.
• Value-added specialty films contributed 54% to total MSFL Revenue in Q3FY21 vs. 50% in Q3FY20 and 52% in Q2FY21.
• Strong revenue & profitability in Q3FY21 is on account of better product mix, stable demand and cost optimization efforts undertaken by the company.
• One of the two metallizer lines under capex is expected to come online during Q4FY21 and will further enhance capabilities to improve output of value-added specialty films and better MSFL’s profitability going ahead.
• Average cost of debt for MSFL has reduced by 220 bps to 7.6% in Dec-20 from 9.8% in Mar-20.