• 6 months ago
Transcript
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.

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