CHALETNSEQ4 FY2021May 26, 2021 Chalet Hotels Limited
9,214words
67turns
9analyst exchanges
3executives
Management on call
Milind Wadekar
INTERIM CFO
Ruchi Rudra
INVESTOR RELATIONS
Key numbers — 40 extracted
3%
ed supply of vaccines is keeping the progress painfully slow. India has fully vaccinated around 3% of its population and another 11% of the population has received the first dose. To put things in
11%
the progress painfully slow. India has fully vaccinated around 3% of its population and another 11% of the population has received the first dose. To put things in perspective the global vaccinatio
5%
received the first dose. To put things in perspective the global vaccination status reports that 5% of the global population is now fully vaccinated. UK and U.S both key markets for Chalet are repo
30%
e global population is now fully vaccinated. UK and U.S both key markets for Chalet are reporting 30% and 37% fully vaccinated citizens respectively. UK is also targeting to remove all restrictions b
37%
population is now fully vaccinated. UK and U.S both key markets for Chalet are reporting 30% and 37% fully vaccinated citizens respectively. UK is also targeting to remove all restrictions by June 2
60%
re the second wave hit India domestic air traffic for the month of January to March had reached 60% of pre-COVID levels indicating a strong bounce back. According to a recent report by Hotelivate a
49%
strong bounce back. According to a recent report by Hotelivate average occupancy in India reached 49% in Q4 FY2021 as compared to 65% in pre-COVID levels, largely led by pent-up demand in the leisu
65%
a recent report by Hotelivate average occupancy in India reached 49% in Q4 FY2021 as compared to 65% in pre-COVID levels, largely led by pent-up demand in the leisure space and showcasing very impor
52.7%
tantly, the willingness to travel. The report has forecasted occupancies in India in FY2022 to be 52.7% and in FY2023 64.9% driven by demand recovery as well as muted growth of supply. For Chalet
64.9%
ess to travel. The report has forecasted occupancies in India in FY2022 to be 52.7% and in FY2023 64.9% driven by demand recovery as well as muted growth of supply. For Chalet Hotels the quarter s
Rs.1.02 billion
22. On the financial front for Chalet our Q4 revenues grew sequentially by 11% to approximately Rs.1.02 billion. On an operational basis our EBITDA grew by 11% to Rs.187 million; however, we had to account for
Rs.187 million
ally by 11% to approximately Rs.1.02 billion. On an operational basis our EBITDA grew by 11% to Rs.187 million; however, we had to account for loss of discontinued business at mall which is Rs.13 million and
Guidance — 20 items
“Room business across hotels was a mix of quarantine, BCP, airline crew, staycations, project related business travel and large group businesses like film shoots and IPL teams.”
“A short update on the project pipeline, except for the slowdown in the last few weeks two commercial development projects are progressing well.”
“The balance renovation of the hotel will be undertaken over the next few months.”
“We will right time the project to align with demand dynamics.”
“Similarly, the need for commissioning additional 88 rooms in Novotel will be reviewed on an ongoing basis and executed at an opportune time.”
“With the conversion of large part of the ORB at Sahar Mumbai to commercial office space we will be hedging the portfolio further.”
“There has been no new subscription from promoters on 0% Non Convertible Redeemable Preference Shares for funding the outflow relating to residential project at Koramangala during the period under discussion.”
“Just wanted to get your sense on how this will be spread out during the year?”
“May will be you know subdued depending on how the lockdowns move.”
“Given the Q1 performance of the hotels it is unlikely that we will be at 62% but like we do believe that the H2 will be strong.”
Risks & concerns — 13 flagged
A short update on the project pipeline, except for the slowdown in the last few weeks two commercial development projects are progressing well.
— Sanjay Sethi
We are grateful to the team at Chalet across all its properties and the Corporate Office who have worked tirelessly in these difficult times to continue to serve our guests with a smile.
— Sanjay Sethi
Late March onwards there was direct impact of second wave on the dine-in services of the hotels.
— Milind Wadekar
We of course have the benefit of hedging the risk in having investments in the commercial office spaces, which becomes a counter to leisure for now and it is giving us steady yields.
— Sanjay Sethi
The impact of four months the impact could be about 3 Crores.
— Sanjay Sethi
The vaccination drive is going to reduce the chances of any significant impact of the third wave, but our vaccination is slow, so from our perspective, how we are looking at is the following that we believe the current and next quarters are going to be subdued, current quarter more so.
— Sanjay Sethi
Clearly as I mentioned again in the opening statements that the two key countries that are critical for Chalet, US and UK have done very well on the vaccine front and they seem to be extremely confident that the population that is vaccinated is largely safe from any serious impact of COVID-19.
— Sanjay Sethi
We had a bit of a slowdown in last two, three weeks, slowdown in the sense the number of labor on the site is not as many, we had 600 people on site, right now 300, this impacted us may be for three, four weeks, but it is progressing well and to be on an account of this blip actually will be covered in the buffer that we had kept on announced dates of opening.
— Sanjay Sethi
My question firstly relates to the mall which you have in Bengaluru given the current slowdown and closure have you been under renegotiation with your tenant out there and if so can you throw any colour which side it is progressing and how does it move?
— Amit Agarwal
From our perspective we get enough comfort from the backing of the promoters group, a very strong promoters group, so from that perspective we have no stress at all.
— Sanjay Sethi
Jeetu let me add here, I mean our incremental capex for office space we are expecting high teen returns so we are raising debt at 8-8.25% today and we are expecting a very high return so we want to use this uncertain time for building commercial assets.
— Milind Wadekar
That was recorded in our financial statements earlier because you take the earnings in the benefit of SEIS in the subsequent year and with the government taking some more time to come back on the final announcement, it was only prudent to write back that income in our books and on advise of our auditors we have written that back so the impact of that was Rs.12.3 Crores in this quarter and that is why our EBITDA numbers did go down by Rs.12 Crores odd.
— Sanjay Sethi
Just as a decision the Hotel Association of India SIHRA, FHRAI all of us are falling through the association to get this it is not just that it is a travel community, other exporters all of them are faced with the same challenge and once this gets announced then we might be able to put it back in the book depending on what the announcement is.
— Sanjay Sethi
Q&A — 9 exchanges
Q
Good morning, Sanjay, Milind Sir and the rest of the team. I hope all of you are doing safe and well. So my first question is in terms of our occupancy. We have seen 39% occupancies this quarter just wanted to understand some texture to this what was the numbers if you can give us a glide path as to what this was in January, February and March that would be helpful? In the same context some of the industry bodies as you mentioned are talking about a 55% for the occupancy level for FY2022. Just wanted to get your sense on how this will be spread out during the year? Does this mean a closer to 6
Sanjay Sethi
Thank you Aditya. Yes we are doing well. I hope you are too. To answer this whilst I did share the overall occupancies, for a month wise let me give you a flavor of how the occupancy stand out for the quarter between the cities. So the Mumbai region which includes the Renaissance Hotel, the Marriott Executive Apartments, the Four Point, Sheraton and the JW Marriott at Sahar had Q4 occupancy of 39%. Bengaluru which is a Marriott Whitefield had occupancy of 35%. Hyderabad was poor at 27% and Pune did occupancy of 63%. So this, sort of combined gives us an overall occupancy of 39%. As I mentioned
Q
There are two questions first on our fundraising side. So we had talked about fundraise of 500-600 crs of long-term fund. I am sure looking at our balance sheet and strength we must be looking to consolidate our position. If you can throw some light that what is the purpose of this fundraise and how we are looking to utilize this? Are you looking for some consolidation, some M&A happening?
Sanjay Sethi
Apologies for this but I could not hear the first question clearly or none of us could. Could you just repeat that please? Thank you. My first question is like we had talked about the fundraising of 500-600 crs of long term fund so I just wanted to understand what the purpose of this is fundraise? We are must be surely looking for a consolidation in our business given that this that is available outside in our industry so if you can throw some like there? We have taken enabling resolution for raising Rs.100 Crore preferential shares. Now this is for our one of the litigated Koramangala residen
Q
Thanks for the opportunity. Firstly in the Mindspace presentation they mentioned about rent commencement from leasing Hyderabad hotel to chalet 3Q FY2022 onwards but you are still evaluating the demand dynamics to recommence the balance work so in that context can you help us understand on what would be the exact arrangement here?
Sanjay Sethi
Thank you for the question. Yes there is a rent commencement date that was agreed between these two companies quite some time back and at some point of time the rent will start. The assessment that we are doing is what is the best case scenario do we open the hotel, pay the rent and incur losses or do we continue just paying the rent and not incur larger losses, so from that perspective we would like to pace it out take the right decision based on what is the best way forward for us. So the total rent for a year is roughly around 9 Crores and if we delay this you know by a quarter or so. The i
Q
Thank you for the opportunity. I have two questions; the first one is clearly the second wave has dented the expectation of recovery in FY2022 but internally how we are seeing when should we expect to move back to maybe you know pre-COVID level revenues and obviously you know the western countries are opening up and the chances of third wave looks bleak there but how we are looking at recovery in India any color around would be pretty helpful, I know partially you have already answered this in your opening statement but if anything you can add? My second question is if what our capex plans are
Sanjay Sethi
Thank you for these questions, Vikas. Let me answer the first one quickly. Colour on the future. As I said in the opening statement one thing you like to know there is no crystal ball available to any of us. Everything seemed to be going extremely well in the later part of the third quarter last year and the beginning of the fourth quarter this year and we were extremely positive that we are going to be out of the woods in the next three, four, or five year’s time, but on the second wave hit us. I have no knowledge. I cannot claim to have any knowledge on the medical front. People are predicti
Q
Thanks a lot for the opportunity. My question firstly relates to the mall which you have in Bengaluru given the current slowdown and closure have you been under renegotiation with your tenant out there and if so can you throw any colour which side it is progressing and how does it move? Question number two, how we were expecting F&B to do a much greater than what we have done in the fourth quarter when I look at the numbers, third quarter and quarter-on-quarter comparison I see F&B revenue, correct me if I am wrong, in third quarter was 26 Crores and fourth quarter, it was 27 Crores so not muc
Sanjay Sethi
Thank you, Amit for the question. I will answer the F&B part first and then Milind will take the Inorbit one. As I mentioned Mumbai went into lockdown late March, but restrictions and banquets and the worry on banquet and F&B given slightly earlier, so with our Mumbai hotels hit hard in March, we did not see the expected growth for the quarter because of the March impact and almost two-thirds of our inventory is between Mumbai and Pune. January and February has shown very healthy growth. Unfortunately we have the numbers in front of us somewhere may be I will give it out after Milind sort of c
Q
Sir, you have seen in Q4 there was an increase in employee cost, so as per your PPT payroll cost as a percentage our revenue increased from 28% in Q3 to 29%, right so that is number one, number two overall fixed cost reduction in FY2021, you have highlighted 50% so can you tell us what percentage of cost cutting is going to sustain over three to four years?
Sanjay Sethi
I did allude to answer to this question earlier. I will try and answer it again. The fixed cost, a large percentage of the fixed cost reduction will continue in the coming years because the employee productivity numbers have improved significantly on the back of two, three exercises, one we have clustered some services. Number two, we have centralized certain services, number three, we have reassessed processes in systems and automated a few things to allow us to go with a lesser number of people. Now all this will continue and therefore we expect the productivity levels to be high for times t
Q
Thanks so much. We really appreciate this. Two questions, one more on micro question what is your total debt as of today and what is the plan on that, I mean how do you penetrate that forward over the next year or two?
Milind Wadekar
Out gross debt position as on date is Rs.1940 Crores to be reduced by cash and cash equivalent so we are at around Rs.1871 Crores or so and we have planned capex of around Rs.350 Crores for next year, so there will be some addition in debt in FY2022, but that depends on how capex pans out. Okay, understood and the second question, we hear lot of the moving parts on occupancy and ARRs and everything else is going on can you just take me through what is the thinking at the board level or the family level how do Ravi and Neel or how does the founder think about this business from a three, four ye
Q
Thanks, again. Just a quick followup, honestly I do not know what SEIS income. Can you just explain me what is SEIS income for?
Milind Wadekar
SEIS is Service Exports from India Scheme. We are entitled for 5% SEIS for net foreign exchange earnings for the year. So as an hotelier whenever we have foreign guest they pay us in foreign currency and that becomes our foreign exchange we have some foreign currency expenditure that is royalty or management fees what we pay to our operato rs so on the basis of net foreign exchange earning our entitlement is 5% for net foreign exchange earnings. For importing goods? Or you cannot buy the scripts. So just to expand that a little bit more the SEIS, final announcement by the Ministry, Government
Q
Thank you so much. Thank you everyone for your time. On behalf of the team at Chalet we would like to wish you good health and please stay safe. We look forward to engaging with you in the near future.
Opening remarks
Ruchi Rudra
Good Morning, ladies and gentlemen. Welcome to the Q4 FY2021 performance call for Chalet Hotels Limited. We have with us Mr. Sanjay Sethi, Managing Director and CEO and Mr. Milind Wadekar, our interim CFO to take you through the performance and respond to your queries. Let me make the usual disclaimer on forward-looking statements. Kindly refer to our presentation, which has been made available on the Stock Exchanges and on our website for the details of the same. I hand over the line to Mr Sethi to share his opening remarks.
Sanjay Sethi
Thank you Ruchi. Good morning ladies and gentlemen and thank you for joining us for our call for Q4 2021. We do sincerely hope that you and your dear ones are well in these trying times. Since our last interaction the second wave of the pandemic has hit the country harder than anticipated, impacting lives and livelihood and forcing various state governments to take semi to full lockdowns. While the country battles the virus again, the vaccination drive in India has been making slow but steady progress. All age groups over 18 are now allowed to take the vaccines. However, limited supply of vaccines is keeping the progress painfully slow. India has fully vaccinated around 3% of its population and another 11% of the population has received the first dose. To put things in perspective the global vaccination status reports that 5% of the global population is now fully vaccinated. UK and U.S both key markets for Chalet are reporting 30% and 37% fully vaccinated citizens respectively. UK is a
Milind Wadekar
Thank you Sanjay. Good morning ladies and gentlemen. As discussed by Sanjay the fourth quarter started on a strong note and we could see business performance improving month- on-month. With the second wave hitting in March and lockdowns imposed by various states across the country, we saw public sentiments weakening. As I elaborate on this let me give you some insights into our financial performance. Q4 FY2021 total income grew by 11% sequentially to Rs.1021 million. Q4 FY21 EBITDA from continuing operations is Rs.64 million as against Rs.169 million for previous quarter. The drop was on account of reversal of SEIS income of Rs.123 million for the previous year. Adjusting for this entry the EBITDA for Q4 is at 187 million a growth of 11% sequentially. For the quarter ended March 2021 we have accounted for a loss of 13 million from discontinued operations at Sahar Retail. The loss was largely on account of rebates given to existing retailers as we decided to repurpose the space and clos