We may be in the same storm but we all are not in the same boat. This perhaps is thedefining statement that best describes the scenario since a global pandemic ravaged theworld. It is a storm that refuses to ebb forcing the world to create or invent ways ofliving working and socialising within the persistent turmoil.
Nations communities and organizations are trying to discover the best ways of copingand eventually surviving. Every disruption creates opportunities for some and this one isno different. Countries where the pandemic started and peaked early are now on course toeconomic revival. In such nations factories have reopened and businesses are starting tobuzz. Some industries have benefited from the dramatic shift in consumer priorities. Manyessential services as well as e-commerce and OTT players have seen supernormal demand -our specialty packaging films business which is a critical supplier to food products andother fast-moving consumer goods being a case in point.
For most others it will be the adaptable and the nimble who will be able to recoverthe earliest and grow faster. That has been the guiding philosophy for us at MaxVIL as wenavigate our way through the current uncertainty. Till the lockdown started our corebusiness of commercial real estate operated through our fully owned subsidiary MaxEstates was showing both progress and promise. Our flagship office building Max Towershad strong leasing momentum with reputed global and Indian firms signing up to beoccupiers at lease rents which were at 25% premium to the micro-market. We were gratefulfor this vindication that the Indian commercial estate market is ready to progress to thenext stage of evolution with companies willing to pay for workplaces which have high buildquality and aesthetics are sustainable and environment-friendly being managed impeccablythrough high technology integration and provide a rich mix of recreation amenities andcommunity building activities. We love the simple term we have coined to describe suchfuture-ready workplaces - #Work Well.
Towards the end of FY20 our second office building Max House Phase 1 in SouthDelhi's thriving business district of Okhla was in the final stage of construction.Developed with the same mindset of Work Well it had a busy pipeline of prospectiveoccupiers. We were equally enthused with the land acquisition of our third office complexa 7 mln sq ft project on Noida Expressway which has emerged as the epicentre of Noida'sservice sector and residential growth. Convinced by our vision for commercial real estateand our operational capabilities New York Life our erstwhile Life Insurance JointVenture partner and currently the largest minority investor in MaxVIL signed on as a 49%partner for the project.
The current economic turmoil has brought in uncertainty amongst corporates both abouttheir growth prospects as well as their office space requirements. We expect it toadversely impact office space demand for the first two quarters of FY 21. This willhowever be balanced by a decrease in fresh supply due to strained financials ofdevelopers in Delhi-NCR our region of play. Resultantly rentals especially for Grade A+developer owned and managed offices should remain stable. Demand in the immediate futurewill be driven by occupiers shifting to competitively priced business districts thoseconsolidating multiple offices locations or some who aim to try the hub and spoke officemodel for reducing single location risk and to lower office commute time for theiremployees.
The current scenario is leading to well-run large organizations emerging stronger.Such companies' preference for hygienic well maintained Grade A workplaces will put us ina position of strength as office space demand revives. We have introduced a 'Zero Capex'solution for clients where we will take care of the design build as well as up-frontcapital expenditure of the fit-outs to cater to the current cash conservation mindset andto enable the hassle-free transition of the occupiers to their new office space.Additionally we have shifted to technology-enabled evaluation and sales journey in tunewith the changing buying behaviour. Enquiries have restarted for Max Towers and for MaxHouse which will be completed by August 2020.
An important enabler of our real estate differentiation is a subsidiary named Max AssetServices (MAS). It is responsible for flawless facility management of our existing andfuture office complexes driving property technology integration runningcommunity-building program for all occupiers and offering managed office spaces to thoseoccupiers who want to outsource all workspace creation and administrationresponsibilities. MAS is executing our current product offering innovations such as 'ZeroCapex solution' for customised furnished offices for which we expect high customerpreference in the near term. MAS has implemented a Five-S (Stay at Home StaggeringScreening Social Distancing and Sanitation) layer of protection at Max Towers to ensurehealth & safety of the occupants as they get back to the office.
We see many growth opportunities emerging in FY 21 and thereon due to the currentdisruption. We are keeping our powder dry and our financial partners engaged to capitalizeon attractive real estate opportunities as they materialize. Our intent over the nextthree to five years is to create an asset-light capital model backed by pedigreed platforminvestors and gain scale as a developer and operator of differentiated office spaces.
Our other business specialty packaging films operated as a 51:49 strategic venturewith leading Japanese conglomerate Toppan served as a perfect foil during the prolongedlockdown with increased demand for packaged food and other essential products. FY 20 wasthe year of revival with the supply overhang decreasing while FY 21 promises to be one ofsuperior revenue growth as well as contribution margin expansion. We expect the demand-supply situation to remain favourable in the near future and will continue our focus onincreasing the mix of innovative value-added and recyclable specialty films.
Our investment arm Max I. pivoted last year to become a real-tech startup accelerator.It is currently mentoring 5 startups in this space and may selectively invest small sumsin those which continue to show promise. It still retains both its past investments oneof which in e-commerce space continues to grow well while the other in the restaurantspace has currently been impacted by the lockdown.
Adversity is often a good teacher. The current one is equipping the team to hunkerdown strengthen their resolve manage costs and innovate operation models and serviceofferings. We are heartened to witness how all employees have collectively rallied to thecause and created stronger bonds even when they are interacting remotely. This to us isthe best indicator that we are well on way to build a resilient and worthy organizationwhich we and our shareholders should be proud of.
With all good wishes and gratitude for your support and confidence.
|Analjit Singh ||Sahil Vachani |
|Founder & Chairman ||Managing Director & CEO |