EFC - Entrepreneurial Facilitation Centre

[garade]

Looks suspicious to me too. Intraday charts show very low liquidity but even with such big volumes on the minute chart prices have hardly moved. Effort without result.

Also, is it coincidence that two different trading firms trade the same stock at almost the same price and same volume on the same day?

[manhar]

@manhar

Larger trend is GCC, https://x.com/sanjeevsanyal/status/1897917025093087452

[UrsRafeek]

Midsize GCCs make a big impact | LinkedIn

[Sagnik_Karmakar]

[manhar]

Stock Picking Strategy That Made Him 50x RETURNS! | Ft. Samit Vartak | KwK #185

Very insightful from 44th minute, he spoke about the qualitative factors in APL apollo and EFC and the kind of similarity in the qualitative factors of these 2 promoters.

Also you would see few points which I mentioned way back in the thread that due to vertical integration you get huge cost advantage like you become largest AC buyers etc etc

@manhar

e) Having your own interior team helps in economy of scale. You start manufacturing furniture in bulk, you buy AC in bulk like EFC buys at 20-25% discount

Second he mentioned on importance of being a good capital allocator and asset light, So if you would go through the Q4 FY25 concall you would see umesh said “” Dhanda mere control mai hota hai pricing mere control mai hote hai, costing mere control mai hote hai""

Do here the entire con call for context

So generally in the MA model the capex is done by the landlord and there is profit sharing on the rentals. Who does this? somebody who does not have control over their rentals like AWFIS. Reson is they dont have confidence on their occupancy and you kind of what to de risk where you dont want to commit to fixed obligation to the landlord

What EFC does is a SL model where the capex is supposed to be done by EFC but despite being an SL model the capex is pushed on landlord now how do you compensate the landlord? Instead of market rentals you give them higher fixed rentals

Just see the difference one is not ready to commit on rentals and one is paying above market fixed rentals this can only be done with the kind of vertical integration you have + the confidence to maintain the occupancy at 90% + and on the contrary you become Asset light what Samith sir is mentioning

What is the Strategy going forward?
Going forward they are going to churn their capital in property so in Large REIT I will acquire property and sell it, so companies churn capital they will churn properties

And in the SM REIT I can directly do an IPO first and then acquire properties so 0 capital required apart form your mandatory contribution as per regulation

So this further de risks your business with full control on costing as there is no landlord

@nimish_garg

One thing which no one is talking is at what stage buisness is at -
-early adopter , growth stage (mid stage) and saturation
how much more growth is remaining for EFC or any other such co working space company

Actually if I tell you to tell me one PAN india furniture or D&B player for offices today you might find a hard time, I think there is a huge market gap and demand. D&B is a very regional/local business where you prefer to give business to people with local presence

Hence if a TCS wants to build in Pune they would have a saperate vendor list and if they want to build in Delhi they would have a saperate ventor list now what if they have a common vendor for PAN inda operation hence I think there is a market gap here

Also when I was speaking to Devex what they said is they do D&B work in only those states where they have local presence reason being is you need a registered company in that state to do that business so they were missing on huge business form states where they did not have presence

Being an Office provider you kind of by default have that presence of you business and team which can also be a benfit to give pan India services

hence furniture and D&B I believe have huge scope and market

[Krupa_Patel]

Hi Manhar,
what are your thoughts regarding the ROCE bandwidth of each vertical?

[Agni]

Both promoters getting a massive 5x salary increase is a bit too high.

Also, an additional approval for 100 Cr for DC&T Global Private Limited which needs to be monitored.

source: https://www.bseindia.com/xml-data/corpfiling/AttachLive/50cd0080-302f-4948-a235-40b9e4b63a08.pdf

[agathodaemon]

I wouldn’t be too concerned with the fixed salary hike, since it barely constitutes 2% of the annual revenues. But the performance incentive being 5+3% share of the net profit of the company is just crazy. To put things into perspective, when Bill Gates hired Steve Ballmer back in the 70s, Ballmer had a fixed salary of 50K USD and 10% of the profit growth share (not net profit). Even that was considered too expensive for a visionary like Ballmer inspite of the enormous profitability of Microsoft. This is a commodity business and nowhere even in the same universe as being another Microsoft.

Disc: Was tracking before, not tracking any longer due to convoluted subsidiary structures and misalignment with minority shareholder interests.

[Aloysius_De_Sa]

Very poor. Just taking 2025 profits, they would be entitled 11.28 Cr combined. This itself as a dividend yield would be 0.34%. They could have easily made the dividend yield 1% and their stake would guarantee them a similar amount while keeping the rest of the shareholders happy. This is On top of the 10 Cr in renumeration. Even if it does not pass, the intent is not good

[manhar]

FY24
Umesh kumar

Abhishek

FY25
Umesh

Abhishek

@Aloysius_De_Sa

Very poor. Just taking 2025 profits, they would be entitled 11.28 Cr combined. This itself as a dividend yield would be 0.34%

it is criminal to compare a FY26 salary to an FY25 PAT.

I think if investor are smart enough then the total combined salary approved for FY26 is 10.2 cr and for this to be withing 5% the PAT has to be above 200cr. Also form the con call it looked they can do a 1000-1200cr top line this FY which lead to a PAT of 200-240cr

Moreover the performance incentives have been approved since FY24 in case anyone can help me find what have they drawn in FY24 and FY25 as performance incentive would be very helpful

[Aloysius_De_Sa]

What do you mean? It is a standard 5 cr plus performance fees for Umesh. So combined salary for 2026 should be 10.2 crores “plus” performance incentives that are neatly 10% of profits. Also I am aware that the performance incentives were there in the previous year, but with this, its on steroids

[vnktshb]

1. Managed Office Solutions: At 60K seats. Adding 22-25K seats in FY25. That is 37% growth
2. Design & Build (Turnkey Interiors Contracting): Order book visibility of INR 200 crores+, with expectation of 60–70% YoY growth
3. Furniture: Targeting 50–60% utilization of INR 275–300 crores capacity; new export orders expected to drive growth

Looks very compelling at 27.0x FY25 trailing P/E. Looks like a far better bet than Awfis at trailing P/E of 104x

Disclosure: Invested

[UrsRafeek]

While both has their own procs and Cons

1. EFC concentrated to Tier 1 where as Awfis diversified across tier 1 and 2 so margins of EFC is high obviously
2. Price to sales is where Awfis is almost double as much EFC thought Mcap is almost vary by 40%
3. Debt to equity EFCis 1.6 % where as Awfis 3.1
4. Awfis is trading at premium compared to EFC even at P/B Level.

[GrowthValueInvester]

Debt to Equity: is high because of Lease liability,Since Awfis has more assets so more debt
correct me if i am wrong !

[manhar]

Had written a mail to the management regarding explanation on the salary structure here is what they have put .

here is the copy to the mail
Gmail - salary clarification.pdf (398.6 KB)

[anjeshv4]

Well this looks good. The overhang on the stock because of the salary issue should lift now. The company should’ve been proactive in explaining the details of the salary structure rather than letting doubts crop up on the corporate governance. Thanks for taking up the issue.

[Agni]

Hi @manhar have you done any research on the recently listed Smarkworks. Prima facie the operating margins look better and the stock is trading at a cheaper Price / CFO and EV to EBITDA multiple.
I belive DevX is also coming up with an IPO and you have previously spoken with the management

[Madhosinghana]

Firstly - Thanks @manhar for introducing me to this script.

Writing this post to add my thoughts to a couple of queries raised on this thread, earlier on 26th feb and then by @Agni a few days ago.

Looking further into ratio analysis.

EV / EBITDA

1. The idea here is to look at what we need to pay, if we had the wherewithal to take this firm private (Enterprise value), and what is the return we can expect (EBITDA), and then comparing multiple players within the same domain.
2. Enterprise value = Market Cap + Liabilities (EV), but not for the ‘Other liabilities’ like the ‘Accounts payables’, etc.. Why? Because, we buy the business and then let it run as is.
3. The complexity arises because of IND AS 116.
4. If we were to also pay for the ‘Lease liabilities’, that means buying the ROU assets instead of leasing. But leasing is the most fundamental aspect of this business, foundational to the office leasing business.
5. Also, we can never be sure of the ROU asset, because the quantum here is dependent upon the lease duration. Lease can be 3 years, or it can be 10. And the ROU asset in both these cases would be dramatically different. Hence, the idea is to adjust EV for the ROU asset.
6. On the EBITDA side
   6a. Interest needs to be split between what is paid for the leasing business (core to the operations and hence should not be excluded from the returns profile) and what is paid against debt on the books. 6b. In case the firm asks the landlord to fund the interiors, the depreciation is on his books, while he charges higher rentals [e.g. Awfis / Smartworks / WeWork] vs. the depreciation on the books of the EFC itself. Hence, Depreciation should also not be removed while measuring the returns profile.
7. Hence, I think the [EV - ROU Asset] / [EBIT adjusted for Lease payments] reasonably helps us compare EFC against its competitors.
   7a. Please note that lease payments are part of the CFF, but for some firms it can be all over. e.g. Awfis has part of it expensed in the P&L ( variable lease payments ) and part of it in the CFF.
   7b. This is not perfect comparison. One argument that can be made against it is that EFC has part of the returns from Furniture business which should not be assigned similar multiples. Another can be that ikDesign depreciation is not accounted for here.

Price / CFO

1. Extrapolating this logic further, the metric can be [Price] / [CFO adjusted for lease payments]

Doing these adjustments indicate that the returns profile of EFC currently is superior to the peers, listed and unlisted, like Awfis, Smartworks, Indicube and WeWork.

Comments / Advice welcome.

[Agni]

Won’t it be better to calculate EV as Mcap + Borrowings - Lease liabilities - cash. Yes, I agree that EBITDAR or EBITDA - Rent would be a better way to look at EBITDA after reading up on the really confusing Ind-As rules on handling of lease liabilities.

Since, depreciation here is purely optical, it would be better to look at EV / EBITDAR for valuing these companies.

EFC is still the cheapest one looking at this metric:

	EBITDAR	Mcap	Borrowings-Lease liabilities	Cash	EV-lease	EV/EBITDAR
Awfis	181	4601	24	82	4543	25.1
Smartworks	172	4962	397	69	5290	30.7
Wework*	240	16179	219	192	16206	67.5
EFCIL	201	3439	231	141	3529	17.5

[Madhosinghana]

=> I am aligned with the modified EV formula.

=> Maybe I wouldn’t exclude depreciation. Because, the firm either pays higher rental or incurs higher depreciation charge. So, apple to apple, if I am looking at my earnings post incurring the expense of rentals for one firm, I would also incur the cost of depreciation to look at the earnings for the other firm.

Also, directionally, the picture remains consistent eitherways.