LEMONTREENSEFebruary 20, 2023

Lemon Tree Hotels Limited

9,375words
125turns
11analyst exchanges
2executives
Management on call
Anoop Poojari
from CDR India. Thank you, and over to
Keswani to make his opening remarks. Patanjali Keswani
Good afternoo
Key numbers — 40 extracted
133 bps
orum for your questions and suggestions. lemon ree HOTELS Q3 FY23 occupancy increased by 133 bps and gross ARR increased by 17% over Q2 FY23. The total revenue for the quarter stood at INR 234.1
17%
ions. lemon ree HOTELS Q3 FY23 occupancy increased by 133 bps and gross ARR increased by 17% over Q2 FY23. The total revenue for the quarter stood at INR 234.1 crore, which is 19% over Q2
INR 234.1 crore
y 133 bps and gross ARR increased by 17% over Q2 FY23. The total revenue for the quarter stood at INR 234.1 crore, which is 19% over Q2 FY23 and 15% up versus Q3 FY20. The net EBITDA margin for the company in
19%
creased by 17% over Q2 FY23. The total revenue for the quarter stood at INR 234.1 crore, which is 19% over Q2 FY23 and 15% up versus Q3 FY20. The net EBITDA margin for the company in Q3 FY23 was in
15%
2 FY23. The total revenue for the quarter stood at INR 234.1 crore, which is 19% over Q2 FY23 and 15% up versus Q3 FY20. The net EBITDA margin for the company in Q3 FY23 was industry-leading at 54.
54.3%
15% up versus Q3 FY20. The net EBITDA margin for the company in Q3 FY23 was industry-leading at 54.3%, which is 648 bps above Q2 FY23 and 1,265 bps above Q3 FY20. The PAT for Q3 FY23 stands for INR 4
648 bps
FY20. The net EBITDA margin for the company in Q3 FY23 was industry-leading at 54.3%, which is 648 bps above Q2 FY23 and 1,265 bps above Q3 FY20. The PAT for Q3 FY23 stands for INR 48.6 crore, which i
1,265 bps
rgin for the company in Q3 FY23 was industry-leading at 54.3%, which is 648 bps above Q2 FY23 and 1,265 bps above Q3 FY20. The PAT for Q3 FY23 stands for INR 48.6 crore, which is 151% over Q2 FY23 and 338%
INR 48.6 crore
54.3%, which is 648 bps above Q2 FY23 and 1,265 bps above Q3 FY20. The PAT for Q3 FY23 stands for INR 48.6 crore, which is 151% over Q2 FY23 and 338% up versus Q3 FY20. Q3 FY23 has been the best ever quarter fo
151%
bove Q2 FY23 and 1,265 bps above Q3 FY20. The PAT for Q3 FY23 stands for INR 48.6 crore, which is 151% over Q2 FY23 and 338% up versus Q3 FY20. Q3 FY23 has been the best ever quarter for the company w
338%
bps above Q3 FY20. The PAT for Q3 FY23 stands for INR 48.6 crore, which is 151% over Q2 FY23 and 338% up versus Q3 FY20. Q3 FY23 has been the best ever quarter for the company with most key metrics
INR 25.1 crore
re in the pipeline in Q2 FY23. Our total fee from managed hotels in the 9 months of FY23 stood at INR 25.1 crore, which is 94% up versus the nine months of FY20. | would also like to mention that the opening da
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Guidance — 20 items
Patanjali Keswani
opening
“| will be covering the business highlights and the financial performance of Q3 & 9M FY23, post which we'll open the forum for your questions and suggestions.”
Patanjali Keswani
opening
“We are confident in the company's ability to sustain this growth even more in the coming quarters by focusing on the following growth levers: opening of Aurika, MIAL in Q3 next year; accelerated growth in our management and franchise portfolio with proportionate increase in fee-based income; further improvement in gross ARRs and occupancy for the LTH portfolio and a significant increase in ARR and occupancy in the Keys portfolio post renovations.”
Patanjali Keswani
opening
“We are optimistic that we will generate more cash in the coming quarters, allowing us to fund the Aurika, MIAL project through internal accruals.”
Patanjali Keswani
opening
“As we look forward, we aim to have around 30% of opportunity-deprived individuals in our team by FY26.”
Patanjali Keswani
qa
“For the full year, will be, say, 10% discount on the website or 15% or 20%, depending on the size of the account and where they use it.”
Patanjali Keswani
qa
“And what you will find is in Q4, broadly, | expect that we will do over 75% in the group occupancy, which means Lemon Tree will be at 80%, and the ARR will also be above what it was in Q3.”
Archana Gude
qa
“Sir, my second question is like when | look at our mix of inventory in terms of owned and managed currently stands at close to 60%, 40% respectively, so going forward, what number will be at comfort level?”
Archana Gude
qa
“And any guidance of incremental EBITDA margin due to this change in mix?”
Patanjali Keswani
qa
“Now the hotels that we have signed will open next year and the following year.”
Patanjali Keswani
qa
“So from the current 87 hotels, they will grow by 24 more hotels to 111 hotels by the end of FY25.”
Risks & concerns — 3 flagged
Basically, besides the IT sector, there's some impact on micro markets related to IT sector, but is there any other segment which is showing any signs of softness except for the step-downing of some of the customers from one segment to another, but is there any specific slowdown from any segment which is witnessed now?
— Prateek
| was just wondering whether are we seeing any risk of that playing out in Indian context as well?
— Rajiv Bharati
And | let go the bottom 10%, 15%, which is the lowest rate and this is how my retail segment ARR keeps growing, and I'm not seeing any slowdown in that in spite of inflation.
— Patanjali Keswani
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Q&A — 11 exchanges
Q
Sir, my first question was that we've seen a strong improvement in RevPAR versus pre-COVID, and there is also a mix in terms of the corporate segment going lower and the website segment growing higher. So is there a mixed element that is there, if you would just want to highlight that?
Patanjali Keswani
No. Well, if you look at our segment mix, if you compare it to Q3 FY22 and Q3 FY 23, in terms of room nights, actually, we did the same in room nights, but since the inventory has gone up, therefore, our percentage is a little down. So when we say that this year, we have done in the portfolio 67.6% actually, Lemon Tree did 71.4% and Keys did 50.6% in this quarter. And if you look at it from that perspective, then actually, we did the same number of room nights in Q3 FY20 as we did in Q3 FY23. What changed was that corporates were a little less and the retail segment was more. And from 61% and
Q
Congrats on very strong set of numbers. | have 2-3 questions, first one to follow up on what you discussed earlier. With this 24%, 25% increase in the gross ARR compared to the pre-COVID quarters, when the occupancy are still subdued. So is it fair to assume that the next leg of growth in sales would be from incremental occupancy rather than ARR? How we should look at it from the midterm perspective?
Patanjali Keswani
See, in H1, just when COVID got over, we decided to take our rates up, and we took them up about 20%. So when H1 got over, in H2, we took a further hike of 17%, 18%. So really, customers have seen 2 hikes within the space of 6 months. We tried to equalize it. Now the broad thought was that in October 1, we reprice. So we repriced and the focus was on getting the price up. That's why the occupancy was still a little muted. And that's why | said, if you look at the occupancy of the 2 hotel divisions, so to speak, Lemon Tree did an occupancy of 71.4% at INR 6,100 in Q3, okay. It was Keys which di
Q
Congrats on a good set of results. So firstly, regarding the transaction with APG Group, I'm just curious to understand how the 50% premium valuations were arrived at? If you would comment on the rationale as to how these numbers arrived at? And secondly, how you plan to fund this acquisition?
Kapil Sharma
As | just mentioned that this is as per the current valuation of Fleur Hotels, which is done by the merchant banker. And based on that, whatever changes have happened because you know the valuation as of June 2020 of the company and even if you look at from the industry perspective was much lower at that point of time. And now industry has come back very much on the business side and the kind of performance you have seen, especially this is the first quarter post COVID, which is a season quarter, Q3, which performance you have just seen. So based on this and further projections, which are gene
Q
So my question is, except Mumbai and Pune, where we have seen a better than pre-pandemic occupancy, other key markets like Delhi, Gurugram and Hyderabad lemon ree HOTELS and Bengaluru, we are still lower than pre-pandemic occupancy rate. So can we expect in the coming quarter, the occupancy will reach the pre-pandemic level? And what are the key reasons for that, the occupancy going to the pre-pandemic level?
Patanjali Keswani
In Q3 FY20, we did 71%. In Q3 FY23, we did 68%, about 3%, 3.5% down or nearly 4% down. But we took the ARR up by 24%. What | told you is that this was a work in progress. Please wait to see a stable performance because we've taken prices up by nearly 40% in the space of 9 months; first in April and then again in October and then marginally in January also. So if -- let me assume we get to 75% occupancy in Q4 at a higher ARR than Q3 FY23, | think that will answer your question. Yes. So what about the Keys hotel? The occupancy is still at the lower side. Yes. Because Keys, what you are seeing in
Q
Sir, | just wanted to confirm that this 75% occupancy you're talking about in Q4 that is against this 68% in Q3, right, sir?
Patanjali Keswani
I'm talking about the group, including Keys, the overall occupancy. Yes, overall occupancy, which you reported at 67.6% in Q3 will be going to 60 -- 75% in Q4? Yes, about 75%. lemon ree HOTELS Yes. And you are also talking about increasing ARR in almost all in the last 3 categories that is Keys as well as Red Fox, etcetera, and that is where you were also talking about the price sensitiveness. So why -- and the fact that the prices are already up 20%, 30% in last 3 years, why are you taking such an aggressive stance in terms of pricing? Because we think we can get that price. We think the prod
Q
Yes. So sir, basically, we'll exit this year probably on a high in terms of pricing and factoring in the seasonality, which you mentioned for Q1 and Q2 thereafter, for FY24 basis, we should still be like higher by like close to double digit in terms of ARR year-on-year in FY24 versus FY23?
Patanjali Keswani
Let me put it this way. We will do better than 20% higher revenue in FY24 over FY23 and our net EBITDA margin will be above the net EBITDA margin of FY 23. lemontree HOTELS Okay. So the 20% higher revenues and margins higher than this year, okay. Yes. So basically, I'm saying our PAT will be 40%, 50% higher. Right. Right. And on occupancies and demand, one small question. Basically, besides the IT sector, there's some impact on micro markets related to IT sector, but is there any other segment which is showing any signs of softness except for the step-downing of some of the customers from one
Q
Sir, my first question was on Keys. You mentioned you're doing some renovation to get this portfolio going. So just to understand if the issue is with the markets there and the demand in those markets or the issue is with the kind of product that we have.
Patanjali Keswani
Actually, it is 3 problems. In certain markets, the issue is that the market itself is down, but we are not even able to get our fair share in that market because the product is even more down. So we feel that if we spend, say, a lakh a room in those markets, we'll be able to bring the product back, and it may not take the ARR up, but it will take the occupancy up. So in those hotels, it's an occupancy strategy, like Kerala, 2 hotels in Kerala and a hotel in Ludhiana, which is 350 rooms put together and partly in Visakhapatnam, where we have another 100 rooms. In the other 2 markets, which is
Q
No, as per FEMA regulation, whenever you do a transaction, you have to get a current valuation done at the time of the transaction. So it would depend on what valuation comes at if there is any further transaction. lemontree HOTELS Rajiv Bharati And is it possible to provide ARR assumption for Aurika MIAL which you have taken ,
Patanjali Keswani
| have said INR 12,500 in the first stable year, which will be obviously FY25. But we are pretty confident we'll stabilize if we open it in October, October and November will be very low months because of Diwali now moving into November in this year and Dussehra being in October. So during that period, people generally don't travel, whether it's -- definitely not for business reasons. So that is why you will see this year in this last 9 months, in October, we only did 54%, which was actually low because we had also repriced. So our thought is that Aurika had earlier given a guidance would do I
Q
Sir, | wanted to know what was the retail and corporate contribution in Q3? If possible.
Patanjali Keswani
Retail and corporate contribution is there in a certain slide. | have it here, just hold on. Retail gave us 1,532 rooms, corporate gave us 1,300 rooms, airlines gave us 290 and travel trade, which is the leisure side, gave us 370 totalling to 3,440, which is 67.6%. Okay. So sir that means retail still a significant portion of your demand portfolio. Sir, | wanted to know that like the Gustavs and Roasters of the world that is coming up like in all these tourist places. So are you seeing that as a threat to your demand to for demand for your hotels in any way? lemon ree HOTELS | don't have any l
Q
Congratulations all around. You've answered most of my questions, but | have a question on -- | recently read a news report where you were quoted in a business today forum, where you said in 18 months, you'll expect ARRs to go up 100% almost. Is that base case, best case or whether you see that stabilizing -- maybe worst case?
Patanjali Keswani
If things continue like this, and I'm making 2 assumptions that inflation will come under control. And number 2 is that this war will go and that there will be regular foreign travel, which I'm hoping will happen from this October, but it may go to the next October. So yes, if that happens, prices will hit that level. Wow. Okay. So then is it fair to assume that obviously that if you're hitting low 50s in EBITDA, we could easily surpass 60% maybe? We did surpass it in 2005, '06 and '07. lemon ree HOTELS Excellent, sir. Okay. That's great sir, And secondly the question is with all the wellness
Q
Thank you, everybody, for your interest and support. We will continue to stay engaged. Please be in touch with our Investor Relations team or CDR India for any further details or discussions. | look forward to interacting with you soon. Thank you. Disclaimer: This is a transcription and may contain transcription errors. The transcript has been edited for clarity. The Company takes no responsibility of such errors, although an effort has been made to ensure high level of accuracy. lemontree HOTELS
Management
Speaking time
Patanjali Keswani
51
Moderator
12
Kapil Sharma
9
Aditya Damani
8
Sanjaya Satapathy
6
Prateek
6
Rajiv Bharati
6
Nihal Mahesh Jham
5
Karan Khanna
5
Sumant Kumar
5
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Opening remarks
Anoop Poojari
Good afternoon, everyone, and thank you for joining us on Lemon Tree Hotels Q3 & 9M FY23 earnings conference call. We have with us today Mr. Patanjali Keswani, Chairman and Managing Director; Mr. Kapil Sharma:, Chief Financial Officer; and Mr. Vikramjit Singh, President of the company. We would like to begin the call with brief opening remarks from the management, following which we'll have the forum open for an interactive question-and-answer session. Before we start, | would like to point out that some statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the results presentation that was shared with you earlier. | will now request Mr. Keswani to make his opening remarks.
Patanjali Keswani
Good afternoon, everyone, and thank you for joining us on the call. | will be covering the business highlights and the financial performance of Q3 & 9M FY23, post which we'll open the forum for your questions and suggestions. lemon ree HOTELS Q3 FY23 occupancy increased by 133 bps and gross ARR increased by 17% over Q2 FY23. The total revenue for the quarter stood at INR 234.1 crore, which is 19% over Q2 FY23 and 15% up versus Q3 FY20. The net EBITDA margin for the company in Q3 FY23 was industry-leading at 54.3%, which is 648 bps above Q2 FY23 and 1,265 bps above Q3 FY20. The PAT for Q3 FY23 stands for INR 48.6 crore, which is 151% over Q2 FY23 and 338% up versus Q3 FY20. Q3 FY23 has been the best ever quarter for the company with most key metrics such as gross ARR, total revenue, EBITDA, EBITDA margin percentage, PBT and PAT growing significantly. We are confident in the company's ability to sustain this growth even more in the coming quarters by focusing on the following growth leve
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