Nirlon FY26: High occupancy, steady income and tough capital allocation questions

Nirlon Limited ended FY26 with what commercial real estate investors typically want to see first: near-full occupancy and highly predictable income. For Q4 FY26, the company reported total income of Rs 174.3 crore, EBITDA of Rs 135.7 crore and profit after tax of Rs 70.6 crore. For the full year, total income rose to Rs 683.3 crore and EBITDA to Rs 535.4 crore. Reported PAT increased sharply to Rs 346.0 crore.

Management also highlighted that the operating engine remains stable. Occupancy across Nirlon Knowledge Park in Goregaon and Nirlon House in Worli stood at 99.7% in Q4 FY26, and vacancy was about 8,000 square feet as of 31 March 2026.

That combination of high utilization and a largely annuity-like license fee base is visible in the margins. FY26 EBITDA margin was 78.36%. The model continues to generate strong cash flows. The presentation reported CFO of Rs 477.5 crore for FY26.

The business is largely one asset, executed in phases

Nirlon’s current identity is very different from its original manufacturing roots. Since 2006, the company has primarily been engaged in development and management of commercial and IT-ITES real estate. Its key asset is Nirlon Knowledge Park, an approximately 23-acre IT park in Goregaon (East), Mumbai, developed in phases from 2006 with Phase V completed in FY22. NKP has about 3.08 million square feet of chargeable area.

The second asset is Nirlon House in Worli, where the company holds 75% undivided interest in about 0.05 million square feet. In the earnings call, investors again asked about a potential transaction for Nirlon House. Management said there was nothing significant to report and pointed out that there are about 12 to 13 owners in the building, which can make any coordinated transaction time consuming.

From a revenue perspective, FY26 total income of Rs 683.3 crore was driven primarily by license fees of Rs 590.1 crore, along with other operating income of Rs 79.0 crore and other income of Rs 14.2 crore.

FY26 profit optics: one-time tax adjustment and a shift in regime

A key nuance in FY26 is that the headline PAT includes a one-time benefit. Management stated that FY26 profit after tax includes an adjustment of Rs 69.5 crore due to re-measurement of deferred tax liability, as the company chose to move to the new tax regime under Section 115BAA from Q2 FY26.

This matters because it changes how the year is read. While reported PAT growth was 59% year-on-year, management said the growth would have been 27% excluding this item.

The move to the new tax regime also fed into shareholder discussions around distribution policy. Management suggested that the shift could enable higher dividends in the near future, but positioned FY26 as a conservative and consistent start rather than an aggressive one-off.

Dividends, debt and the core investor debate

Nirlon’s board paid an interim dividend of Rs 15 per share for FY26 and proposed a final dividend of Rs 15 per share, taking the FY26 total to Rs 30 per share, subject to shareholder approval.

However, the Q&A was dominated by what the company should do with its cash and how to think about its leverage. Investors pointed to sizeable fixed deposits and questioned why cash was being parked at around 5.5% while the company continued to carry meaningful debt.

As of 31 March 2026, the company highlighted a total secured debt facility sanctioned by HSBC of Rs 1,230 crore, including an OD facility. Debt outstanding was stated as Rs 1,150 crore as of 31 December. CRISIL reaffirmed a CRISIL AA+/Stable rating on the facility.

Management did not commit to using cash for debt prepayment, stating there were no concrete plans. On repayment schedule clarity, management stated the next repayment is 5% in May 2027, followed by 5% every year for five years and then a bullet payment at the end.

Buybacks were also raised as a potentially more tax-efficient method of returning capital. Management stated that buyback was not being considered at this point in time, for various reasons.

In effect, FY26 left investors with two simultaneous truths. The operating performance is stable and cash generative, but the capital allocation framework remains intentionally non-committal on the call.

Lease expiries: quiet FY27, heavier resets from FY28 onward

With occupancy already near full, the next lever to raise income is re-leasing and resets on renewal. The presentation included a schedule of license area due for renewals or resets (as of 31 March 2026). It shows that FY27 is light, with only 3 thousand square feet due. The schedule becomes meaningful from FY28 onward: 326 thousand square feet in FY28, 572 thousand in FY29 and 612 thousand in FY30.

Management said there were not many renewals coming up in FY26-FY27, and that it was early for specific FY28 discussions. The company also emphasized operational focus, describing continuous efforts to maintain standards and improve the occupier experience, with the intent of encouraging renewals and supporting license fee realization.

What stood out in FY26

Nirlon’s FY26 can be summarized as a year of steady execution rather than expansion. Total income grew 5.9% and license fees rose 5.2% year-on-year. EBITDA remained extremely high in absolute terms at Rs 535.4 crore, although EBITDA margin slipped modestly due to expenses rising faster than income.

The more important investor conversation is now shifting toward how efficiently the company will deploy cash flows, given the combination of high occupancy, a largely built-out flagship campus and a significant term loan with a structured repayment profile.

For now, management’s stance is clear. It will prioritize maintaining NKP as an A-grade, sustainability-forward campus, keep dividends consistent rather than volatile, and disclose only when decisions on cash deployment, debt reduction or asset transactions become concrete.