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First RIET in Indian retail consumption space...

Nexus Select Trust (NST) is the owner of India’s leading consumption centre platform, comprising 17 Grade-A best-in-class urban consumption centres with a total leasable area of 9.2 msf spread across 14 leading cities in India such as Delhi, Navi Mumbai, Bengaluru, Pune, Hyderabad, and Chennai. The NST’s portfolio is highly stabilized, with a committed occupancy of 96.2% and 5.7-year WALE (weighted average lease expiry) as of December 31, 2022. Their portfolio has a tenant base of 1,044 domestic and international brands with 2,893 stores as of 9MFY23.

* Consumption accounted for ~60% of India’s GDP in FY22 and has grown at 10% CAGR between CY14-21, led by strong tailwinds like young population, growing middle class, and rapid urbanisation.

* As one of the leading consumption centre platform in India (by completed area), NST’s portfolio is well-positioned to capitalise on strong consumption growth, powered by marquee tenant base and consumer outreach initiatives.

* Over the last four years, NST has leased 4.2 msf with addition of 408 new brands, achieved an average re-leasing spread of 19.2% on ~ 2.9 msf.

* The LTV (Loan to Value) is expected to reduce ~20% as a part of the net IPO proceeds will be utilised for debt reduction. This provides flexible headroom for future acquisitions. NST has acquired 17 malls in the last 7 years and aims to double acquisitions going forward.

* The current offering appears to be reasonable at a NAV (Net Asset Value) of Rs.18,310cr (as of Dec 31, 2022) with a current dividend yield of ~8%, which is higher than fixed deposits & G-sec.

* Considering the strong growth story in consumption space, healthy projected net operating income (NOI) growth of ~17% over FY24-26E, capital appreciation prospects, and healthy balance sheet with lower LTV ratio, we assign a “Subscribe” rating on a long term basis.

Purpose of IPO

The offer comprises of a fresh issue and an offer for sale. The fresh issue is of ?1,400cr out of which ?250cr would be used for partial or full repayment of certain financial loans of the Asset SPVs and the Investment Entity; ?1,050cr would be used for acquisition of stake and redemption of debt securities in certain Asset SPVs; and the balance would be used for general corporate purposes. The offer for sale is for ?1,800cr.

Key Risks

• A decline in footfalls may impact the business.

• Vulnerability to external factors including outbreak of pandemic.

• Possible increase in leverage due to future acquisitions.

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