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00:00 Let's get in Sanjay Sethi, MD and CEO to talk about his thoughts on the quarter and in the

00:05 year gone by maybe. But more importantly, what is the outlook ahead in the midst of what is a

00:11 good cycle for the hospitality segment. Sanjay, great having you, Neeraj here. Thanks for joining,

00:16 it's been a while. I hope all is well. How do you put the quarter into perspective, Sanjay?

00:22 Is this something that you had pencilled in or would you have believed that say for one or two

00:26 factors you could have done better? Hi Neeraj, a pleasure being back with you on the screen.

00:32 I think it's been a very good quarter. I'm not commenting on the gaps between

00:38 analysts and our numbers. Also, there are certain adjustments that need to be done for one-off

00:43 costs. Actually, adjusting for the one-off costs in the quarter, our EBITDA performance is 46.4%

00:53 which is an incredibly good performance. Our hospitality EBITDA margin stands at 47.5%

00:59 which again continues to be very strong. We've had 23% growth in revenue, 23% growth on adjusted

01:08 EBITDA and the path's up 2.25 times. On the hospitality front, our numbers are even more

01:18 encouraging with literally 47.5% quarterly performance for the year, EBITDA margin for the

01:27 year. This is supported by two, three things. One, of course, growth in the average room rates

01:35 and occupancies but more importantly, the cost structures continue to be well in place and

01:43 holding out extremely well despite very high occupancies in some of our hotels.

01:49 If we report 76% occupancy, it means for some days in a week, we are actually touching very

01:56 close to 100% occupancies in the hotels and we are able to hold the cost structures at very efficient

02:04 numbers. Our payroll cost, for example, for the quarter is sub 12% and for the year sub 13%

02:12 which by any yardstick is exceptional number and that is the largest operating cost that we have.

02:19 Going forward, we have two, three things that are playing out. One, of course, we've acquired a few

02:25 assets or added new assets to our portfolio in the last 12 to 14 months. They come into stability as

02:33 we go forward. We also got a large asset in the Duke's Retreat which is under major renovation

02:40 right now and that's going to sort of get opened out to our guests by end of this financial year

02:47 as a relaunch product with 145 rooms at the premium end. We've got two new hotels in the

02:56 pipeline. One hotel in Delhi which we signed as a franchise with the Taj at the Delhi airport

03:03 which is approximately between 370 and 400 rooms and that's going to be commissioned by end of FY26

03:10 we've got 280 room hotel that we signed as a franchise with the Hyatt Regency in Navi, Mumbai

03:17 which should be operational by FY27. In addition to that, we've got a strong pipeline on BD

03:26 activities which will add to our portfolio pipeline as we go forward. Besides hospitality,

03:33 we've got office assets. We've actually doubled the office portfolio over last year

03:38 from 1.2 million to 2.4 million and we've got another 800,000 square foot under development

03:44 early stage cycle right now but should be again ready by FY27. All of this creates an extremely

03:51 exciting next few years for Chalet Hotels and that combined with the market condition which

03:58 is extremely positive, high efficiencies that Chalet has been able to deliver and the growth

04:04 pipeline I think creates a very compelling opportunity for Chalet. Okay, I'll come to

04:11 those aspects in just moments from now but just a couple of clarifications that I wanted here.

04:16 You mentioned about some adjustments. So while you clocked in the highest hospitality EBITDA margin

04:22 at 47.5 or 47.8 percent, the fact that the reported margin is 43.7, you are saying it's because of an

04:28 adjustment that has happened. Say for that, the numbers could have been higher than the 43.7 percent.

04:35 Yes, so actually we had just one off cost for the capitalization of the project at Dukes

04:42 and Kodamangala inventory of 8.1 crores or 81 billion, sorry 81 million rupees

04:53 and if you adjust for that, we have a two percent point increase in our EBITDA margins.

04:59 I don't want to get into quarterly minutiae per se Sanjay but you reckon that this average number

05:06 of 45 odd percent or maybe slightly better is something that you would probably have as an

05:11 average for FY25 as well, you reckon that's a possibility? Yes, I believe that that's a strong

05:18 possibility. We've got one residential project in Bangalore. We need to keep that aside because

05:26 that has its own dynamics but besides that, I think we will comfortably hit the number that

05:32 we're speaking about 44-45 percent. Would there be more residential projects as well coming up?

05:36 No, this is a one-off historical project that was with us for the last eight-nine years. We're

05:41 completing that and sort of completing and heading over and getting out. Got it. The exit ARRs,

05:48 Sanjay, much higher than the console ARRs for FY24, right? I mean and you had about 17 percent

05:55 ARR growth in FY24 as well. Can we expect an encore of sorts because if I look at the exit ARRs,

06:01 they are about 15 odd percent or maybe around that level or 10 percent higher than the average

06:07 ARRs any which ways? No, so look what happens is typically in our business and it's common for

06:13 hospitality industry in India, Q3 and Q4 are stronger than Q1 and Q2. Q4 being stronger than

06:20 Q3. So the exit ARRs at the end of the year will always look a lot more healthier than the blended

06:27 ARRs for the year but year-on-year quarter-on-quarter growth is also pretty much on the cards. Yeah,

06:32 but you've shown 17 percent growth in ARRs in FY24, right, over FY23. So you reckon further

06:39 growth can continue because I did hear you say that the industry environment does look positive

06:43 for now. Yeah, so demand continues to outpace supply which should lead to both occupancy and

06:50 rate growth. From our perspective, 17 percent ADR growth last year was a very healthy growth.

06:59 This year will come off a higher base to work off but we still expect reasonably good ADR growths.

07:05 Okay, but putting a number might be difficult. We try not, we don't give numbers. Fair call. Sanjay,

07:15 you have two things weaved into one. You've spoken of optimal leverage in your balance

07:23 sheet in the presentation that you've given. You've pared down debt via the fundraise that

07:27 you've done as well and at the same instance you're talking about a 1500 crore CAPEX plan

07:33 in the next two years. So tell us about how leverage would shape up as an average for FY25

07:40 maybe and is this CAPEX that you're talking about front-ended over the next two years or back-ended?

07:47 So I think it's fairly evenly balanced out because we've got two or three large projects underway

07:54 right now. From a debt perspective, look, even at the QIP raise we were in a very comfortable

08:04 situation on the debt. We were actually going to start dropping our debt number very rapidly

08:11 from the year after next just purely on account of internal accruals that we were going to have

08:16 and also a lot of the capital work and project that has been going on is now fructifying into

08:21 cash flows and hitting the P&Ls and therefore I think we're in a very good space. This reduction

08:30 of debt has basically created a stronger balance sheet creating headroom for growth

08:35 for us for future M&A activities. Okay, okay, fair call. Future M&A. Anything on the anvil? I mean

08:48 I would reckon you're constantly on the lookout but is there something in the near term on the

08:53 anvil? We acquired two assets in the last 15 months, the deep-sewered tree in Donabla which

09:02 is 80 rooms we expanded to 154. Then we acquired the courtyard by Marriott in Aravalli which is

09:08 158 room hotel which has six acres of unutilized land which we can expand on. We also added

09:16 greenfield projects into the portfolio so we'll continue to grow. Some of the

09:19 growth opportunities will come through greenfields so therefore you need to acquire

09:24 land to grow and some of the opportunities will come through brownfield acquisitions.

09:29 Okay, one last thing. Typically these are about four or five year cycles. We are probably two

09:36 years into this. Is this slightly different from the past cycles in terms of the longevity?

09:42 What is your feeling about it at this point of time? As things stand now, we do see this as a

09:48 slightly extended up cycle. Given the favorable demand and supply arbitrage that we have which

09:55 is expected to continue for the next three, four years, we see no reason why the cycle will not

10:00 continue to be on an aggressive path of growth for the next three, four years. Okay, well Sanjay

10:06 Sethi, good year, good quarter as well even if slightly below estimates but thank you so much

10:11 for taking the time out and joining us. We of course account for the estimates or the

10:15 one-offs as you mentioned when we write about this but thanks for your time today.

Chalet Hotels Development Plan For FY25 | NDTV Profit

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