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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.

Samhi Hotels' Revenue Growth Outlook | NDTV Profit

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