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00:00So, we are going to be speaking about two interesting managements today.
00:03I'll start off with Saami Hotels.
00:04Now, Saami Hotels came out with its Q1 FY25 numbers.
00:07They reported a 31% of a revenue growth while the asset EBITDA in line with this was about
00:1331.7% growth.
00:14The margin stood at 37.7% as compared to 37.6% last year.
00:20Coming to the ESOP and one-time expenses, now they've gone down by about 75.2% at 4.4
00:25crore, but the net profit remained in the positive range at 4.2 crore as compared to
00:30a loss of 83.5 crore last year.
00:33But to discuss more on the Q1 FY25 performance and the outlook going forward, we are now
00:37joined in by Ashish Chakhanwala, the Chairman, Managing Director and Chief Executive Officer
00:42at Saami Hotels.
00:43Hello and welcome to the show, Mr. Ashish Chakhanwala.
00:47Thank you so much.
00:48So, my first question to you is on the Q1 FY25 number, we've seen a decent set of numbers
00:53over here, revenue 31% growth, EBITDA margins also excluding the ESOP expenses and the one-time
00:58expenses have remained major in line.
01:01I want to understand what's the trajectory going forward.
01:03You expect an improvement in the EBITDA numbers going forward as well.
01:07So, can you share your outlook on this and along with this, how has the quarter been
01:11for you?
01:12Thanks so much.
01:13So, let's break up the existing quarter so that we have a good base for the coming next
01:19few quarters.
01:20So, if you look at our room revenue, which is typically measured in terms of REF bar
01:24or revenue available per room, we saw a room revenue growth of about 13% on a year-on-year
01:29basis for comparable hotels, same set of hotels as we call it.
01:33Total revenue growth for the same store was about 7%.
01:37The reason why 13% revenue growth led to a 7% total growth was because this quarter was
01:42slightly weak in terms of food and beverage because of elections, so large groups, conferences,
01:46all of that got deferred.
01:48So, we actually had a great start in the quarter one with a 13% REF bar growth.
01:53That pretty much sets the tone, Anushi, for the rest of the year.
01:57We feel that maintaining a high single-digit to early double-digit revenue growth is what
02:02we would target and we should be satisfied with.
02:05And we have already started seeing that starting July, we've started seeing the revenue growth
02:09kind of ramping up to what we had achieved in quarter one.
02:12So, all in all, we feel that whatever REF bar growth we achieved in quarter one will
02:16start reflecting and being actually total revenue growth in the subsequent quarters.
02:21Well, that's fair to understand.
02:23But can you quantify in terms of EBITDA margins now, where do we see this number going forward
02:28for the overall of FY25?
02:30And even if in terms of revenue growth, now we are adding about 302 more rooms in Q3 of
02:36FY25.
02:37Along with that, there's some renovations and rebranding which is taking place.
02:40So, with the effects of all of these taking place in the second half of the year, what
02:44is the trajectory of the company in terms of its margins as well as its revenue growth?
02:50So, in terms of EBITDA margins, if you see, our stable portfolio did about 38.5% EBITDA
02:56margin.
02:57Overall reported slightly lesser because of the acquisition we had made last year, which
03:01was ACIC.
03:02ACIC has been showing tremendous margin improvement for the last four quarters post-acquisition.
03:09We feel that by the end of the year, our overall portfolio should be in the zip code of about
03:1340% EBITDA margin, largely happening because ACIC keeps correcting every quarter post-acquisition.
03:19So in terms of EBITDA margins, we think 40% is the zip code that we are targeting before
03:24we end the fiscal year.
03:25All right, that's fair.
03:27And now you mentioned a very interesting point about the REFPAR growth, which was at 13%.
03:31But if I go back a couple of quarters ago, the REFPAR growth has remained in the 15 to
03:3720% of range.
03:38So, from there on, now it is at 13%.
03:40Are we seeing this sustaining forward?
03:43Are we looking at the 13% number as the range going forward?
03:46Or what's the outlook over a year now?
03:49So I think if you take a three-year view, three to five-year view, we feel and we reiterate
03:54that anywhere between high single digits to early double digit is a very achievable and
04:00sustainable REFPAR growth target, not just in the short term, but in the longer term.
04:06All right.
04:07And now if I were to do a segmented breakup, now the upper upscale continues on this 21%
04:13of growth, while the mid-scale range of hotels has seen about a 4% growth.
04:16I want to understand what's the contrast over here, while one segment has shown a tremendous
04:22growth over here, the other one seems on a muted path.
04:24So is it because of the cities in which they are placed or what's the colour on this, if
04:30you can share?
04:31No, so thank you for giving part answer.
04:34It's not just that the segment is underperforming or outperforming.
04:38Each segment has a certain diversification or concentration in cities.
04:43What we've seen is that the big office markets like Bangalore, Hyderabad, Pune, Delhi, they
04:47have outperformed the rest of the cities in terms of REFPAR growth.
04:51And because all of our upscale hotels are in these core markets, you see a concentration
04:55of the growth being there.
04:56And a bunch of our mid-scale hotels are dispersed across markets like Nasik and Coimbatore and
05:02Vizag, which are not core office markets in India.
05:05And therefore, you've seen their REFPAR growth being relatively lower.
05:08So if instead of the segment, if you were to look at cities in our portfolio, we've
05:13seen Hyderabad leading the pack, Bangalore leading the pack at about 17% REFPAR growth.
05:16Hyderabad, Pune would be in the zip code of 16, NCR at about 10%.
05:20And then of course, then it starts tapering down into other markets.
05:23So it's more how cities have performed in terms of REFPAR growth.
05:27And that shouldn't be a surprise, right?
05:29If you see almost 65-70% of new office absorption happens in those four or five key markets.
05:34And that's been a big driver for demand for lodging services.
05:38So it's all about the cities and mid-scale just tends to get a little muted because of
05:42the fact it's got presence in broader markets.
05:45Okay.
05:46So the concentration remains on city level growth as compared to the segment level as
05:50you've mentioned.
05:51Absolutely.
05:52Yeah.
05:53So now if I were to look at the net debt to EBITDA figure, now this has come down tremendously
05:55with the IPO proceeds, of course, which have taken place last year, 8.8x number last year.
06:02Comparing that with this quarter, we've seen this going down to 4.9x, same as last quarter.
06:07But now I want to understand on the way ahead, you aim this number to come down to 3.5x.
06:13So what levers have you put in place to ensure that there is a further reduction that we
06:17are seeing place in the net debt over here?
06:19See, really, there are really two levers for net debt to EBITDA.
06:23One is EBITDA and the other is how we reduce the debt.
06:26We are seeing the business producing reasonable amount of free cash.
06:30Our own estimate is that for FY25, we remain fairly comfortable in the range of 225 to
06:35250 crores of free cash before any material capital expenditure or acquisition.
06:40That means our net debt goes down by that much.
06:43At the same time, you've seen our EBITDA growth being extremely, extremely humbling, you know,
06:47and we expect to maintain a very high EBITDA growth during the course of the current year.
06:51So combined effect of a very high growth in EBITDA, and of course, the free cash that's
06:57building in the company, you know, helps us achieve the targeted net debt to EBITDA number.
07:02In addition to that, it's worthwhile to mention that even the growth opportunities that we are
07:08pursuing or what we have pursued over the last decade, you've seen that they are largely
07:12acquisition led, we don't do greenfield development per se.
07:15And therefore, if at all we invest any incremental capital in acquisitions, it actually leads to a
07:21very quick turnaround of that capex into revenue in EBITDA.
07:24Therefore, any capex that we deploy, unlike a greenfield development, tends to actually
07:28help our cause of deleveraging the balance sheet sooner than later, right?
07:33So it's really multiple levers that we have put in force.
07:35We remain fairly convinced as to where our balance sheet is headed.
07:39And it gives us the flexibility now to look at growing the business.
07:43Okay, well, that was insightful.
07:45Now, a final question to you is about the pipeline of opportunities that we are looking
07:49at for the next one, two years.
07:50Of course, in the second half, we are seeing a lot of it taking place.
07:53But what's the way forward over here?
07:55Are we planning to add more geographies?
07:57What's the course of which hotels are we targeting?
08:00Is it in the upper upscale segment also going forward?
08:03And also about the F&B mix, are we planning to increase our F&B mix also as we move forward?
08:09So I think we look at opportunities in really two buckets.
08:13One is internal and the other is external.
08:15We have a very good pipeline of internal growth opportunities.
08:19One you have mentioned, which is opening in the next two months, which is 302-odd rooms.
08:23In addition to that, we have incremental inventory being added in our hotel in Pune,
08:28our hotel in Hyderabad, and our hotel in Chennai.
08:31All of this is well within the control of the company.
08:33The most of the investment in the asset has already been incurred.
08:36It's about implementing additional inventory.
08:39In addition to that, we are looking at some pipeline.
08:43And that pipeline, as I mentioned earlier, is a combination of acquisitions and turnaround,
08:47something we've done for the last decade.
08:49But also some long-term variabilities, which tend to be very capital efficient.
08:53I'll hesitate to use the word asset light, but they're very capital efficient.
08:58So we continue to look at those opportunities.
09:00In terms of geographical selection, I think our numbers have taught us and further
09:06kind of reinforce the belief that we feel that the best use of capital continues to be in
09:10core markets, where we feel that for the next several years,
09:14the expansion of the economic activity reflected in the growth of the office and the aviation
09:19market will make sure that there's adequate margin for safety for us to deploy capital.
09:23So it will be within the markets that we operate in right now.
09:27At this point of time, we don't expect diversification of markets beyond the core cities.
09:32In terms of segment, we have a pretty balanced approach.
09:37About 50% of our income comes from upper upscale, upscale assets.
09:42On a year-on-year basis, you may see some variation because acquisition is a very
09:46opportunistic business.
09:48But in the long term, we expect to maintain a balance between our upscale and a broader
09:53mid-scale portfolio.
09:54Coming to your last bit, which is on food and beverage, that's a very interesting question.
09:59What we have realized is that a bunch of our assets, especially in the upscale space,
10:04they have tremendous opportunity of us improving our market share in the food and beverage
10:10segment.
10:10And that's where a lot of our CAPEX is going to help ensure that we increase our F&B income.
10:15Right.
10:15Thank you so much, Mr. Ashish, for giving us those insights.
10:18And the focus remains on the upscale.