Ladies and gentlemen, good day, and welcome to the Lemon Tree Hotels Limited earnings conference call. As a reminder, all participants' lines will be in a listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note this conference call is being recorded. I now hand the conference over to Mr. Anoop Poojari from CDR India. Thank you, and over to you, sir. Thank you. Good afternoon, everyone, and thank you for joining us on Lemon Tree Hotels' Q4 and FY 2023 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, I 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. I would now request Mr. Keswani to make his opening remarks. Thank you, Anoop. Good afternoon, everyone. Thank you for joining us on the call. I will be covering the quarterly business highlights and financial performance for Q4 this FY 2023, and then, we will open the forum for discussion. FY 2023 has been the best year for Lemon Tree Hotels. As anticipated and in line with our initial guidance, we have more than doubled our total revenue versus 2022 and have maintained a more than 50% EBITDA margin for the full year. In FY 2023, our overall total revenue increased by 111% versus FY 2022 to INR 879 crore, with an EBITDA margin of 51.9%. Q4 FY 2023 was also the best quarter to date, with growth across all metrics. As I had mentioned in the last earnings call, after increasing our ARRs in Q3 versus Q2 2023, in Q4, we focused on building occupancy, which increased by 604 basis points versus Q3 and 1,259 basis points versus Q4 FY 2020. Gross ARR stood at INR 5,824, which increased by 2% versus Q3 and by 29% versus Q4 FY 2020. This translated into an improved RevPAR of INR 4,287, which increased by 11% versus Q3 FY 2023 and 55% versus Q4 FY 2020. In Q4 FY 2023 versus FY 2020, Lemon Tree Hotels' RevPAR grew by 55%, whereas according to the, according to STR, the branded hotel industry grew 41%. The net EBITDA margin for the company in Q4 2023 was industry-leading at 55.7%, which increased by 146 bp s versus Q3 and by 1,926 bp s versus Q4 FY2020. The PAT for Q4 FY2023 stood at INR 59 crores, which increased by 22% versus Q3 FY2023. In Q4 FY2020, we had a negative PAT of INR 19 crores. Our cash profits stood at INR 82.5 crores, which increased by 14% versus Q3 and by 845% versus Q4 2020. As of March 31st, 2023, our gross debt stood at INR 1,746 crores, and the overall average cost of borrowing stood at 9.08%, while the weighted average cost of borrowings for the full year was 8.38%. During the quarter, we signed nine new management contracts and franchise contracts, which add 538 new rooms to our pipeline. As of March 31st, 2023, our operational inventory comprised 88 hotels with 8,000, about 8,400 rooms, and our pipeline comprised of 42 hotels with about 3,300 rooms. This quarter onwards, we will also be reporting our total management fees received by Lemon Tree Hotels. In FY 2023, it was INR 104 crores, which increased by 54% versus FY 2020. To further explain, total management fees can be broken into three parts: the management fees that Carnation Hotels, which is our 100% subsidiary, receives from third-party hotel owners, the brand fees, which third-party hotel owners pay directly to Lemon Tree Hotels, and finally, the management and brand fees, which Fiore Hotels, which is our asset-owning joint venture with Dutch pension fund manager EPG, this management and brand fees is paid to Lemon Tree Hotels by the joint venture. For FY 2024, I will refrain from giving specific guidance other than saying that our growth, growth momentum is continuing, and that we will be investing significantly more than normal in renovating our hotels, especially the Keys portfolio, to catch up with the near absence of this during FY 2021 and 2022. This will increase our operating expenses by a further 2% - 2.5% on revenue basis for this year, but will position our hotels to capture better pricing and demand in H2 and in the following years. Finally, post-COVID and with the impending opening of our largest hotel, Aurika, Skycity in Mumbai, we would now like to share a roadmap for the next five years, which has been released alongside the earnings presentation, where we have set forth clear and highly achievable outcomes for the next five years, wherein we intend to deliver superior financial performance, lighten our portfolio, be debt-free, and lead, be a leader in digital and ESG. I would request everybody to look through that presentation, and on that note, I come to the end of my opening remarks, and would ask the moderator to open the forum for any questions that you may have. Thank you very much, sir. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question, may press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. To ask question, please press star one now. Take our first question from the line of Archana Gude from IDBI Capital. Please go ahead. Hi. Good afternoon, sir. Thank you for the opportunity and congrats on very robust numbers. Sir, three questions. Firstly, I do understand you said that you won't be giving any specific guidance. Still, how the trend is looking? And I heard your interview on CNBC, wherein you spoke about next two years to be, you know, better for the industry. So how we should look at it from top line and margin, point of view for Lemon Tree? See, what we are looking at is leveraging four separate, four separate revenue streams without significantly or in fact, without really increasing our costs. The first is, we will look at improving our occupancy and ARR in the portfolio of Lemon Tree Hotels and Red Fox Hotels. That is one lever we are looking at, which means really we are looking at increasing both the occupancy and the ARR in this portfolio. Then with the, now that we have started a large scale renovation, and that includes the Keys portfolio, we expect we will be able to command significantly higher ARRs and occupancies in the Keys portfolio, which, as you know, Archana, is about 18%-19% of our total portfolio. That will see a significant uptake from H2 this year. The third lever is management fees. We have very aggressively added hotels. In my presentation, you may have seen that we expect to close this year with over 10,500 operating rooms, which is a, you know, fairly large hike from the 8,400 rooms that we operate now. Now this increase, about 670 rooms will come from, from this Aurika in Mumbai, another, you know, 1,300-1,400 rooms will come from hotels under the management and franchise contract, which we will operationalize this year. So management fee income, we expect will see a significant hike this year and an even larger hike next year, as these hotels then start operating for the full year. We capture the fees for the full year rather than part year when we open it this year. So put together, and of course, the fourth is Aurika. So put together, what we see is across all the these four revenue streams, there should be increasing traction, and I reckon that by the next, by this year and by the following year, you will see a well, a material change in our revenue and EBITDAs. As you note, that we have said that we will look at maintaining the EBITDA margins at 50% at least. Right, sir. Sir, you would like to upgrade that 50%- 55% now, since there are too many growth levers for us now? Update you on? No. Earlier, we were talking about 50% EBITDA margin for us. Now since Q4, we had the EBITDA margin. Should that be the benchmark going ahead? No [uncertain] see the benchmark is the, remember, the H1 is always in revenue terms, you know, anywhere from 42%-45% of the annual revenue, whereas your costs are more or less fixed in this, and you know, well, your costs are allocated across the year. So the way to look at it is that EBITDAs in summer, whatever EBITDA margin we report, typically in winter, we do 10%, 15% better than that. That you would have seen in the past year, and that you can make safely assume for the future years. Sure, sir. Sir, on our Lemon Tree 2.0 guidance of 20,000+ rooms and 300+ hotels, how we should look, you know, brand-wide growth or some color or region-wide expansion? Any particular brand to take precedence or any particular market would you preference going ahead? So think of it this way: effectively, management contracts capture 1/6 of the EBITDA of a hotel. So basically, if I manage 600 rooms, I basically take the EBITDA of 100 rooms. Okay? Franchise, you normally take the EBITDA of one out of nine. You take about 10%, 11%, 12% of the EBITDA. In franchise, we normally, out of 900 rooms, capture the EBITDA of 100 rooms. Now, well, the issue with many hotels we looked at is that they are not coherent as far as product standards go with the Lemon Tree brand. So in that sense, Keys is a soft brand, which means really that we provide sales, marketing, distribution, brand, and we give certain standards which are more service-oriented to these asset owners. And therefore we, the way we look at it is most management contracts will be signed by Lemon Tree, and most franchise contracts will be signed by under the Keys brand. So while I cannot give you a breakdown, my broad expectation is that the rate of growth of franchise within the next year or two, since we've just started this, will start accelerating and will far exceed the rate of growth of the management business. Now when I look at our portfolio, in FY 2024, we will open roughly 1,600 rooms, 26 hotels under the managed/franchise route, and another 670 rooms of Oreca. So really, that is why I said we will end FY 2024 with at least 10,600 operational rooms, and about 115 operational hotels. Now up to the end of last financial year, the end of Q4, we had already signed another 1,000 rooms, which were due to open after FY 2024, and in FY 2024, we are reasonably sure we will sign another 1,500 rooms. So put together another 2,500 rooms to our portfolio, which is why I have shown on the first slide of our 25-year roadmap, that we will hit at least 13,000 rooms by the end of this year. And this should, you know, we have made fairly conservative estimates, that we'll add only 2,000 more rooms a year, and therefore cross 20,000 by 2028. So that's how we are looking at it. We will end this year, this FY 2024, with, you know, owned hotels will be only 54% of the portfolio. And if I include, signed hotels, then it will be 45% of the portfolio. Sir but is there any brand preference when we go for expansion for management contract, or it's like? No. You know, as for. See, we were earlier a little reactive, and we were letting owners reach out to us. Now that we have proactively set up a management, you know, two business development departments in management and franchise, it is not based on let's put it this way: It's not that we say we want more Keys franchise or more Lemon Tree management. We are open to both. We just want to expand the network and achieve some level of what we call dominating scale in the mid-market. So it would be either, whatever is suitable for the relevant hotel. Sure, sir. That answers. And sir lastly, if I may, how much is the capital expenditure left for Aurika, Mumbai? And llso, given that we are now focusing on renovation of Keys portfolio, how much would be the total CapEx for FY 2024 and 2025? So about 75% of the renovation expense will be within the OpEx, and therefore will be expensed before we get to net EBITDA. So when I said 2.5%, you know, of increase in revenue, I really said about 2.5%, INR 25 crore more we will spend than normal. So looking at it from that perspective, last year we spent about INR 20 crore, including CapEx. This year we will spend about INR 55 crore, of which about INR 40 crore will be, or INR 43 crore will be OpEx, and that will come pre-net EBITDA. In the CapEx sense, the CapEx will only be INR 10 crore, INR 11 crore. As far as Aurika, Mumbai, goes, we have accelerated the deployment of capital because we are going to open it, as I said, in October this year. So we closed it at how much? INR 575 crores? As of March 31st, it was INR 575 crores. When we have already deployed another, another INR 80 crores, INR 85 crores. So it is now about INR 650 crores. So that leaves about INR 300 crores for, you know, for opening that hotel. Sure, sir. Thank you so much, and all the best. Pleasure, Archana. Thank you. We take the next question from the line of Kaustubh Pawaskar from Sharekhan by BNP Paribas. Please go ahead. Yeah, good afternoon, sir. Thanks for giving me the opportunity, and congrats for good set of numbers. So my question is on the EBITDA margin front. So you just mentioned that you would be spending around 2.5% of, you know, additional on the renovation, which will be part of your OpEx. Normally, renovation happens during the first half of the year, largely in the quarter two, when it is a lean business period for you. So considering that, should we expect that in H1 FY24, your margins would be lower on YOY, despite the fact that we should expect, you know, better occupancies on YOY and ORR, the higher OpEx would lead to lower margins, and in the second half of the year, it should more or less, you know, normalize so that for full FY24, we'll be having similar kind of margins what we have actually in FY23? So without comparing it to H1 of FY 2023, let me just say that whatever margin we do show from Q1 and Q2 is going to be 2.5% less than what we would have done if we had not done this extensive level of renovation. Having said that, let me also add that we expect this to give us much better results in H2. So as a company, on a full year basis, the EBITDA margins will be 50% or more, number one. Number two, what the other thing that can affect our EBITDA margins is the opening of Aurika, Mumbai. Now when Aurika, Mumbai, opens, it will be opening in October, and October and up to middle of November is a very light period in India for demand because it includes Dussehra and Diwali, where more, many people do not travel. What we expect is in Q3, Aurika, Mumbai, you know, will will take time to stabilize, and stabilization will happen in Q4. As a result, on a standalone basis, Aurika, Mumbai's, EBITDA margins will certainly not be 50% and so on, especially when we launch the hotel. And therefore, that will act as while it will increase our revenue and our EBITDA, it will not be at the ratio of the other hotels, and therefore it will also have an impact on our EBITDA margins in Q3 and Q4 as a percentage. obviously, in absolute terms, it will be an addition to our EBITDA. Got your point, sir. Got your point. So FY 2024, so whatever benefit because of the renovation and Oreca, in terms of, you know, when it will have, will be, when it will be fully operationalized, the benefits would start kicking in from FY 2025, for fees as well, because of the innovation and Oreca would be fully operational. So you'll be having, you know, more better revenues and margins from that particular property. Is it right? Q4 may still surprise. Okay. Okay, got your point. And sir, my second question is on debt part. So when do we expect our debt to, you know, pick out, and we should start seeing, you know, some bit of reduction in debt, you know, maybe from FY 2025 or FY 2026? Any, any target or guidance on that front? See, I had given one guidance once, that we think that Lemon Tree Hotels standalone will be debt-free by 2026, FY 2026. In the very worst case, Fleur will be debt-free by FY, by two years later, by FY 2028. However, if we are trying to give in our five year roadmap an indication of how we expect Aurika to perform, and I have specifically mentioned it is a conservative estimate. So Aurika, in and of itself, has the ability to generate INR 600 crores-INR 700 crores of EBITDA after fees to Lemon Tree, in four years. My view is that you will start seeing significant debt reductions from next year. Okay. Okay. Thank you, sir. Thanks for the [audio distortion]. See, this, first term, is the peak of our CapEx. You have to keep in mind that we were deploying capital, enormous amounts of capital over the last eight or nine years. 40% was deployed and not CWIP till one year before COVID, another 40% one year before COVID, and the last 20% is this year. So from next year onwards, obviously, we have zero requirement for capital. We will only be looking at EBITDA as a way to replace, to reduce the debt. Absolutely. Thanks, thanks for the explanation and all the best for the future. Thank you. Thank you. Thank you. We take the next question from the line of Adhidev Chattopadhyay from ICICI Securities. Please go ahead. Yeah. Am I audible? Yes, you are audible. Yes, I are. Sir, yeah, I just wanted to, could you, sir, give us some sense for the EBITDA breakup for 2023? How much is non-Fleur and how much would be Fleur EBITDA breakup of the portfolio? When we say we do 450 crores, really, our EBITDA at the hotel level is is about 60 crores more. Yes. So about INR 510 crores. no, there is fees also transferred, no? Okay, fine. Yeah. Say about INR 550 crores. Now, I would say Lemon Tree on a standalone would be about INR 175 crore, and INR 375 crore would be Fleur, or INR 350 crore would be Fleur. There is, you know, when we report consolidated, A cancels B, which is why when we decided we would show this year the management fees that flow into Lemon Tree standalone, even from Fleur. As you may have seen in our five year roadmap, we try to show, you know, that we would be lightening our ownership of Fleur and progressively moving more and more towards a brand slash manager of hotels. So I'm asking Inder, can you do a breakdown of this in FY 2023 and let me know? Can I answer this in a little while, Adhidev, because we just have to calculate it. Yeah, sure, sir. Just wanted that, sir, to understand. Just follow up on the payout of the CCDs in the last quarter. So what is, so yeah [audio distortion] what is our share and APG stake now in Fleur Hotels? APG, now at 41%. Yeah, it is now at 42%. And it will come down to 41%, which was our shareholding pre-COVID. Okay, okay. Sir, just another question on, you had mentioned about the possible IPO or REIT InvIT listing for Fleur Hotels, subsequently, a few years down the line. So in terms of timing, like, what do you, because considering the market scenario, you mentioned INR 600 crore-INR 700 crores of EBITDA, right? For the Fleur portfolio or the Oreca portfolio, just to, if I'm not wrong, in your earlier comments. In a broad way. Look, We have a plan. Our plan is very simple. Irrespective of anything else, we feel without any extra, any other intervention, we will be in a position to be debt-free, in the next five years, irrespective of any external intervention. Now to come back to your earlier question, I've got exact numbers. So we did a total EBITDA of about INR 460 crores last year. Yeah. Our share of that EBITDA was INR 350 crores and APG share of the EBITDA was about INR 110 crores. Okay? So if I look at it from the perspective of your question, the EBITDA of Fleur was about INR 320 crores. INR 60 crores went as fees to Lemon Tree, and I'm giving you approximate numbers for a flavor. So net EBITDA of Fleur was about INR 260 crores. Lemon Tree's owned assets made INR 100 crores of EBITDA, net EBITDA. They did another INR 60 crores of fees from Fleur and another maybe under INR 40 crores of management fees. Therefore Lemon Tree did INR 200 crores, Fleur did INR 260 crores, and APG's share of that 260 crores was 110 crores. Does that answer the question? Yeah, sir. Broadly, it's a 75, 25 breakup, right? If I just look at Lemon Tree and APG share, right, if I look at it that, at the overall level. So now let's go forward. The in debt, the maximum debt is in Fleur. Yeah. If I look at it from the debt perspective, and say we have INR 1,700 odd crores of debt, about 70%-75% is in Fleur. Okay? So let's assume in a scenario that, sorry this Oreca opens. We expect that Oreca net of fees will be at least INR 150 crores of EBITDA. So the, the, where is that figure? So the, the earnings on a standstill basis, if we just went by INR 260 crores of EBITDA of Fleur today, we are sure that this will obviously go up fairly significantly with Oreca Mile and the increase of the current portfolio and the increase of the Keys portfolio. So put together, you know, when, if we look at listing it, the net EBITDA should be north of INR 500 crores. So if we list this company, hypothetically, and you can apply whatever multiple you want, we are going to be 59% shareholders. If we do a fresh issue of, say, 18% and come down to 51%, then 18% means really that's fresh money on a company that has an EBITDA north of INR 500 crores. We feel that in and of itself may be enough to write down the debt of Fleur. There are multiple levers. We have not, you know, started exploring those routes. Right now, we are saying on our existing portfolio, we will be debt free, even if we don't list Fleur. But obviously, we would like to list Fleur, we would like to reduce our ownership in Fleur, we would like to increase our fee-based income. So there is an entire plan, and that's the real plan, which I cannot share with you. You will just have to keep seeing it play out with the five-year plan that we have given out. We will do an annual report as to where we are in this five-year plan, so you see the path that we are following. Okay, sir. All this is very helpful. Yeah, thank you and all the best. Thank you. Thank you. We take the next question from the line of Tushar Sarda from Athena Investments. Please go ahead. Yeah, thanks. Thank you for the opportunity. Am I audible? Yeah, I couldn't hear your name. I'm sorry, can you repeat it? Yeah, I'm Tushar Sarda. Tushar, okay. Yeah. Thanks for the opportunity. I had two questions. One, you said that, you know, on Keys, you are going to spend money and bring them up to standard. If I remember in the past calls, you also were mentioning that these hotels are in cities which probably are not conducive for, you know, running, I mean, in terms of demand and ARR and all that. So where do we stand on that? Okay, good point, Tushar. Let me break this down into, this portfolio into two parts. Roughly 50% of the portfolio, about 450, 470 rooms are in locations where we feel we have a large, significant ability to juice them. So this includes Whitefield, Bangalore, where we have 222 rooms, Hosur Road, slash Electronic City in Bangalore, where we have 159 rooms. Pune, Pimpri, where there is about 100 rooms, and Visakhapatnam, where there is about 100 rooms. So if you add this up, this is actually, if you, I have added Visakhapatnam because that city is showing signs of high demand. This is nearly 60% of the portfolio. In this part of the portfolio, we will invest maybe INR 5 lakhs a room in order to bring it up, because we see that our payback in incremental EBITDA will be less than one year, just with this investment. That leaves the portfolio of 150 rooms in Cochin, 100 rooms in Trivandrum, and another 100 rooms in Ludhiana. Here, we will basically invest INR 1.5 lakhs a room, where our intent is to really bring them up to standards, because when we acquired this portfolio, it was just three months before key, before COVID, and we had certain plans to upgrade it, in fact, in the summer of 2020, which we could not do, obviously, because of COVID. We feel even with this marginal intervention to bring the, that brand up to what we would like to be minimum standard, we will be able to increase the EBITDA and occupancy there. But really, there will be a much larger opportunity in the earlier hotels and a smaller opportunity in these hotels. It is basically, we've done capital allocation and renovation on that basis. What do we expect? We expect we'll be able to increase the EBITDA of these hotels by a minimum of INR 40 crore once we renovate them. INR 40 crore, maybe even INR 50 crore. It depends on how Whitefield and Visakhapatnam play out. Okay. Okay, thanks. You've also answered my second question, because I was going to ask you on, CapEx in different, Keys Hotel, but you've already mentioned that. Thank you very much, and all the best. Thank you. Thank you. We take the next question from the line of Hitesh Arora from Unifi Capital. Please go ahead. I think my question was on Keys Hotel, which you answered. You just answered. Thanks. Thank you. We take the next question from the line of Sakshi Chhabra from Swan Investments. Please go ahead. Yeah. Hi, sir. Congratulations on a good set of numbers. Sir I wanted to understand that in the roadmap where you are saying that you're going to be only doing management contracts, are you also looking at adding any hotels on a lease or a revenue share model, or is it only going to be management and franchise? We are completely open to any format where, which does not require capital deployment. So really, lease is an intermediate. If you look at risk/reward trade-offs, ownership of assets is obviously the highest risk and highest reward. Franchise is the lowest risk and actually a fairly interesting reward. Management is low risk, relatively high reward. Lease is potentially, based on the kind of lease you sign, it is potentially, I would say, low lowish risk and potentially high reward. The downside of a lease contract is basically the amount of minimum guarantees that you give. Right. I think as a company, we are quite open to leases, but we would like leases to be more oriented towards revenue share because we have a certain cost structure we think we can monetize rather than minimum guarantees. So is there any percentage of additional rooms that you're looking at on the lease, on the revenue share model? Look, we told you, this is a question of what is available and whether we want what's, what is available. Sakshi, very difficult for me to answer. It is quite likely we will sign some hotels on lease, but as I said, when we do our sensitivity analysis, we will look at worst-case, worst case EBITDA and say that our committed lease rentals must be less than that, with some buffer built in. The way we think of lease is very simple, that in good times, we take 70% of the upside. In bad times, we may make, you know, only 5% because the balance is going to the asset owner. So it is a, in that sense, more volatile. Are you getting me? But also less risky. More volatile on earnings, but close to zero risk on capital deployment. Yeah, but going forward, I mean, higher amount of growth can come, if you go by the lease model rather than only on management contracts, right? I totally agree. It's not a one-size-fits-all, but typically, we would look at lease in markets, where we would, we would really, you know, perhaps look at putting up our own hotels if we had the capital. So that's where we would look at leasing an asset. Otherwise, we will only do management or franchise. Okay. All right. Sir, in terms of the renovation that you were talking about, how long, like, in the next six months, how many rooms would be renovated? Well, think of it this way: We have a three year renovation plan for Keys and for a bunch of our older hotels. Put together, they would be about, I would say about 3,500 rooms. So we plan to spend about INR 150 crores, about INR 50 crores each year, INR 50 crores, INR 55 crores. This renovation will happen in H1 of this year, next year, and probably a little less in in the following year. This is how we planned it, but a lot of the renovation of the public areas will happen this year besides rooms. Okay. So not particularly, you don't have a fixed number as to how many rooms you'll be doing in H1 of this year? No, it will be about 1,000 rooms. Okay, 1,000 rooms. And the rest will happen in the subsequent years? That is right, because the newer hotels don't really require renovation for another 3-4 years, and that will be what we call the routine renovation. You take Bombay, take Pune, take Calcutta, Udaipur, certainly Aurika, Mile, take Dehradun, and so on. These are, you know, over 1,000 rooms, which will not require renovation. So the balance, 3500- 4 000 rooms, we will renovate over the next four years. Okay, I got that. And sir, in terms of the franchise model, do you think that the hotels are ready for, I mean, the ones that you give out for franchise? What are the criteria that you look at? Because in a management contract, you still have a lot of control, right? But in a franchise, that doesn't happen. How do you make sure that they maintain the quality standards that Lemon Tree Hotels requires? Okat,you see, we've hired the top management team of Choice Hotels in October last year. Choice, as you may know, is the world's top two franchise operator. It's a U.S. company. Okay. The CEO, the head of franchise and legal, and the head of commercial and operations came on board. That's why we have started at an early stage, signing a few contracts, but here's the way we look at it. You are absolutely right, that in a franchise model, you have no control over the service, the experience your customers are getting in these franchise hotels. We have a three-step model. One is, before we sign a franchise, we give a minimum, what is called an improvement plan. It includes training, it includes product improvements, so basically, fitting it into the Keys brand. Okay. Number two is we have an ongoing audit by third-party sources like TripAdvisor, MakeMyTrip, and there is a minimum, you know, marking, marks that you must get. Otherwise, you will be given a one-week notice. And if you do not, you know, make the necessary changes, you will be out of the network. Third is that we have what is called mystery audits, which are paid by the owner of the hotel, where we will, on a random basis, start auditing hotels in a cycle, so that we have also, you know, on-site eyes, with eyes, an assessment of the product and service. Okay, okay. That's very helpful, sir. And this, the franchise will be only for Keys hotels, not the other brands? No. Where we have some degree of confidence on the operator, he has hotel experience, he has asked us, so that's like a core brand franchise, where the owner asks us to help get the general manager, maybe the head of housekeeping and so on. Where we have closer eyes, we don't mind giving Lemon Tree, but there will be even stronger scrutiny in Lemon Tree than in Keys, in terms of the minimum net promoter score we need. Keys might be 3.5 on five, but Lemon Tree will be four on five. Okay. All right. Thank you. Thank you. We take the next question from the line of Jaiveer Shekhawat from Ambit Capital. Please go ahead. Sure. Thanks a lot. Good evening, Mr. [uncertain]. Firstly, on your CapEx, given that you're still left to incur almost INR 300 crores for the Oreca, do you expect any further delays in commissioning of the property beyond the October stated timeline? No. And do you expect that the run rate is likely to increase on the CapEx front? See, understand one thing here. CapEx, when I say CapEx, we have hit nearly INR 650 crores, we need INR 300 crores more. About INR 100 crores of this CapEx is not required to be paid when the hotel opens. There are performance guarantees, there are payment terms, et cetera. Really, this entire CapEx will continue, I mean, the payment will be made till maybe the end of the financial year, and a little bit, in fact, will go into the following year, because it's even more than six months of performance guarantee. So we really require about, I would say INR 250 crores. Okay? Maybe even less. We are working the numbers out. We will open this hotel, we are certain in October, and we expect this hotel to be EBITDA positive by you know, by mid-November, latest end November. So what we are not able to estimate, obviously, we have ranges, is exactly how quickly this hotel will stabilize. The only good news is that the Bombay hotel, which we, which we opened in the first full year of operation, really. In fact, even, if I remember right, we opened it in July, you know, about seven, six, seven months before COVID. By November, it was doing very well. Of course, then in March, it collapsed. When I look at Bombay in, say, Q4 or Q1 this year, let me give you an amazing thing. Bombay, in Q1 this year, has a higher occupancy than Q4 last year. It's amazing how it's doing! So Oreca, in our opinion, could be a showstopper for us. I've given very conservatively that we will do INR 170 crore in EBITDA, and that's guidance in the second year of operation. But I would not be at all surprised if we did both a better EBITDA in the first year of operation. So we'll have to wait and see. Sure, sure. And secondly, on Fleur itself, I mean, given the intentions of listing it over the next five years, on APG front, are they also looking to monetize stake, or will they look to still hold their stake post-listing as well, given, I mean, given the long association they've had with Lemon Tree as well? See, we've had conversations, but I cannot speak for them. A pension fund manager could, for example, look, once we list, we will be 51%. And there will be obviously multiple other shareholders. APG may lighten it's it's ownership. They may look for some yield return because it will be very significantly cash flow positive. you know, as you know, pension funds do look for yield, so I cannot speak for them. It will be, I presume, some combination of the two. Sure. Sure. That's helpful. Thank you a lot. Thank you. We take the next question from the line of Jinesh Joshi from Prabhudas Lilladher. Please go ahead. Yeah, thanks for the opportunity. I have a question on Oreca. I mean, you mentioned that it could be a showstopper for us. And given that the hotel is likely to be operational in October itself, so if you can just help me understand what are the micro-market dynamics in that particular area? Is there any new hotel or new supply which is coming up over there, which can potentially lead to any impact in ARR and our guidance, which we are kind of giving currently? Okay. Let me just give you some flavor, Dinesh, and it's just flavor. When we opened our hotel in Delhi, we opened a total inventory of 500 rooms in a market that was near the airport, and within one and a half years, there were 5,000 rooms in this micro market. Delhi is the second deepest market in India after Bombay. Within two years, the average occupancy in this micro market was 70% +. So that's flavor of a market which is not as good as Bombay. Now, we come to Bombay. We opened our hotel, as I said, in fact, part opened the hotel in July. It got fully operational, I think, in three months or three and a half months. It was a soft opening. Within three months, it was doing phenomenal occupancies. Not at very high rates, because we were trying to penetrate the market, but it was doing super well. Our current assessment, because we are now physically present in that market, is the Andheri Kurla market caters to demand from every possible segment: meetings, incentives, conferences, tourists, transit travelers, business travelers, long stays, and across multiple micro markets in North Bombay. So when you look at this market, when you look at Smith Travel Research report on it, and if you talk to any hotelier who has a hotel company that has assets in that market, you will find all supply has always been absorbed. We added 300 rooms, and in three months it was absorbed. Now we are adding 670 rooms, but if you look at passenger traffic, it has increased enormously there. So, you know, from the risk perspective, ultimately, you are asking me a question of what is the risk? We are very sanguine that this hotel will be, as I said, a showstopper for our company. You see, think of it simply: We did INR 450 crores EBITDA this year. We feel Oreca alone can be 40% of that. Got it. That was pretty much elaborative. I just have one follow-up question. I think in the opening remarks, you mentioned that you would will probably refrain from giving any guidance for FY 2024. But if I recollect properly, in the last earnings call, you had mentioned that you aim to grow revenues by about 20%, and our net EBITDA margins in FY 2024 will be higher than what it is in FY 2023. In FY 2023, we are already at 52 odd percent, and you also mentioned that we have some renovations lined up. Do you kind of still hold on to that guidance that our margins will be higher? And also, on the revenue side, if you can just throw some light. Yaar I can't give, as I said. Let me put it slightly differently to you. Oreca will deflate so the way you should look at it is apple to apple, which is Lemon Tree as a group without Oreca Miles, because in Q3, that will deflate our EBITDA percentage, not the EBITDA number, but the EBITDA percentage. Okay? Because it will operate both at numerator and denominator. If I look broadly, what do you see if you look at our company? We, Oreca is a kind of a hotel that does, you know, INR 30 lakhs EBITDA per key. Lemon Tree Premier does anywhere from INR 15 lakhs-INR 16 lakhs a key. Lemon Tree does INR 10 lakhs-INR 11 lakhs a key. Red Fox does INR 7 lakhs-INR 8 lakhs a key, and Keys should do about what Red Fox does. If you add it together into inventory, you get a rough idea, you know, in a year, year and a half, what our EBITDA, what our EBITDA would look like. You get a picture of that, and the management fee income is a simple number. You simply look at the number of rooms we have operating, multiplied by the fee per room, and you get to an EBITDA, which is a very interesting number within the next two years. Got it. Thank you, and all the best. Thank you. Thank you. Take the next question from the line of Rajiv from Dam Capital. Please go ahead. Welcome, sir. Thanks for the opportunity. Sir, in the 50- I'm sorry to interrupt, Sir Rajiv, your audio is not very clear. Please use the handset and speak a little closer to the mic, sir. Thank you. Yeah. Is it better now? Yes, please go. Your current ownership in Fleur is 59%, and when you say that you'll be settling at 51%, is is there, is there [audio distortion] from the LT, Lemon Tree side as well, in that, or is largely due to the French? I'm sorry, I didn't get the question. Can you repeat it? Sir., your current ownership is, will be close to 59%, right? After you do the remaining buyback of CCPS. From there, you're saying that we will settle at 51% after, let's say, whatever route you choose to exit. In that, from 51%, from to 59%- 51%, is there an [audio distortion] from the LT side, which is planned here for this 14%, 14% dilution is largely, what is it? W e will not, see we will not need any cash. Actually, we will only be generating cash. We feel that on a standalone basis, Lemon Tree will be able to settle its own debt within the next two, two and a half years. There is no reason for us to do an offer for sale. This will be when I said we will come from 59%- 51% or 50.1% or whatever, it will be due to a fresh primary issue of capital. However, I think somebody, one of, one of the listeners asked a question. I cannot speak for APG. APG may also decide to do a small monetization if and when we list. So I cannot speak for that. Basically, what I'm saying is that we will do a primary issue of probably 15%, 17% that should hopefully take care of the entire debt of Fleur, after which Fleur will be a large cash-generating company, and so will Lemon Tree. One possibility is that in the next two, two and a half years, because if you notice, I have written by or before 2028, if market conditions are ripe and right, we will list Fleur, especially after Aurika, Mile starts showing the kind of results we expect it to, and in which case by, in the next 24 months, the whole group will be debt-free. Yeah. And in terms of, so just to get a size of the, like the ballroom in Aurika, Bombay to, you know, what is the competition in nearby area, to get a sense of what is the size of events you can cater to, what we have in the nearby vicinity? Right now, Lemon Tree Premier really competes with the Radisson. There are two Radissons. It competes with the Courtyard, and it competes, I think, with the Holiday Inn, and to some level, with The Leela. They are all similar in average rates. Okay? Which is, say, INR 8,000-INR 9,000. The higher-rated hotels are JW Marriott and ITC, and ITC Maratha. Really, we will be competing with them. The product, you see, what I intend to do is somewhere in October or November, once the hotel is open, I'm going to have a investor slash analyst meeting in that hotel, because I would like people to see what we mean about what, what Oreca is all about, and I think it will be quite an eye-opener. Yeah. And lastly, in terms of, for the journey we had so far, if you can quantify the number of hotels we have lost to competition, whichever has come for end of tenure, is there a number there? We have not lost any hotel. We have given up two hotels, one for brand standards and one because the owner went into a criminal case. I don't think we've lost any hotels that we have taken under management or franchise, except for two, as I said. One was a lease, and one was a franchise. Sure. And the length of the contracts which you are signing as of now, are they in the historical ballpark of 10 - 12 years, or they are getting longer or shorter because the competition is higher now? We do not sign any contract less than 10 years, and the average is, I think, closer to 15. Number two, we are very clear that we do not sign contracts for cash flow. We sign contracts for NPV of the management fees till the end of the contract. And since we make investments in time and effort and lend our brand, we are very clear that if you sign a management contract with us, you cannot terminate it. And if you terminate it, then, there is a very significant amount of penalty or catch-up on fees that you have to pay. In the Red Fox data what you share in terms of room count, there is one hotel which is on a KMG basis, and I think 111 rooms which are there. This is the criminal case hotel which you're talking about? Yeah. So we got into a court, I mean, we got into a case, there were a bunch of issues there. I don't want to go into specifics, but let's put it this way, that it was, for us, more than anything else, an ethics issue. Sure. It was not a financial decision as much as an ethics issue. Sure. Thanks a lot and all the best. Thank you. Thank you. We take the next question from the line of Jayesh Shah from OHM Portfolio Equity Research. Please go ahead. Hello, Mr. Keswani. Congratulations again for a grand result. My questions would again be more on the FY 2024 guidance, you know, it is less than a bit consistent in terms of what it means in overall terms. If I understand you correctly, there is going to be higher occupancy and perhaps higher prices on a YoY basis. If I break this up, on occupancy basis, do you think the industry will register a top line growth of, say, 15%-20%, or it go to be 10%-15%, and where would Le Méridien be? I'm asking for a broad range, not a specific number. I think for industry growth, I am the wrong person. Okay. As far as we are concerned, certainly we would like to be, you know, on a real basis, north of, I would say, you know, 14%-15%. This excludes Oreca. Right. And this would be a combination and an improvement of ARR and an improvement in occupancy. So really, RevPAR is what I would look at. And yes, we would target like those, around those numbers, if not more. Right. Occupancy and ARR together would give you around 15% top line growth on a like-to-like basis, not accounting for Oreca. And excluding management fee income. So we are talking own hotels which are operating. Right. Fair to say that the management fee income should also grow between 10% and 15%? That would be crazy underperformance. Okay. Got it. Got it. So in that case, very simple math would be that your bottom line growth should exceed your top line growth, even after Oreca's interest depreciation and additional CapEx, OpEx that you want to write off. Got it. I would be a little careful saying that. If you want it to be disaggregated, let's put it this way, that if my EBITDA is, suppose my revenue is INR 100 and my EBITDA is 52%, and I have said quite clearly that we will be spending two and a half to three rupees more in terms of renovation. The cost, which used to be INR 47, INR 48 onINR 100, will obviously hit INR 50. Right. So the challenge for us now is, that if we want to hit a 50% EBITDA as a group, we have to make sure that we do better in the existing portfolio and the management scheme and through Keys to compensate for the deflation in margin percentage due to Oreca, while it's stabilizing. Got it. So the big jump in earnings and revenues and all will come in FY 2025? That would be due to Oreca and management fee. Right. I am not, you see, we, I gave a basically a, you're right, up to a two year roadmap, that Oreca, you know, should do INR 30 lakhs a key. LTP should be doing maybe INR 16 lakhs a key, LTH INR 11 lakhs, Red Fox INR 7 lakhs- INR 8 lakhs a key, INR 7 lakhs-INR 8 lakhs. You multiply it and look at management fee income increasing significantly, you get, as I said, and I use this word carefully, which is an interesting number. But that is what we expect to get to. Right. Right. Right. In terms of overall business, you still think that this is not the best year, as you said on TV, and you think we are not into the mid-cycle in terms of the hotel industry upstream? We are now somewhere in the mid-cycle. To me, India occupancy of 66%-67% is mid-cycle. If you go to top cycle, that is really 2004 - 2008, where India occupancy was 72% - 74%. When India occupancy crosses, well, market occupancy crosses 72%, 73%, typically, price goes up 20% and operating leverage starts playing in a significant way. So you know, let me give you an example of operating leverage. So if you go to our earnings presentation on a certain slide, I've forgotten the slide. Well, I have to look at it, just give me a moment. There is a slide where we showed our increase change. If you go to Slide six, this is how the hotel industry. Sorry, which slide? Slide six. Okay. Now if you look at it, we just talked about FY 2023 performance highlights. Now if you just look at the rate of growth of revenue from operations in Q3 2023 - Q4 2023, the revenue grew about INR 20 crore, the EBITDA grew INR 15 crore. Right. Right so, here is operating leverage playing out. My view is that going forward with the focus all hotel companies have on costs, as rates go up, see, rates will go. See, where will occupancy go? It is currently, say, 66%, 67%, it will go up another 10%. That will be, you know, variable cost improvement increase. The rate increase of 20%, which I expect will happen in the next 12 - 14 months, I expect that will flow straight through to the bottom line. And how do you look at industry? So we are a good exemplar of that. Just look at the full year, look at the Q4 performance of FY 2023 - Q4 of FY 2020 in the same slide. Our revenue went up INR 77 crores, but our EBITDA went up INR 78 crores. Yeah. Right. Right. That tells you that the cost structure has fundamentally changed. I know there has been a lot of skepticism among, you know, many people that, will this cost structure maintain? But if you see it quarter by quarter by quarter by quarter, I don't think there should be any doubt on it. Understood. I think that's abundantly clear, so thank you very much. That answers all my questions. Thank you. Thank you. We'll take our next question from the line of Himanshu Shah from Dolat Capital. Please go ahead. Hello? Hello? Yeah, please go ahead. Thank you. Thanks for the opportunity and congrats for good set of numbers. Can you just let us know for FY 2024, what proportion of rooms will be in the renovation? Yeah. Well listen, it will be over a 1,000 rooms. But we don't renovate all at one time. Our renovation schedule typically is that we rotate it over two months for six months. When I say 1,000 rooms or 1,200 rooms, it means at any given time, 400 rooms are shut across the entire group. Okay. The room renovation takes almost, two months or less than that? Two months. two months. Two months, okay. And this will be largely under Keys portfolio, the entire renovation or across brands, sir? Well, about 1/3 will be Key, maybe, about 35%-40%, and the balance will be the older Lemon Trees and Lemon Tree Premiers and Red Foxes. Sure, sir. Thanks. That is very helpful, and all the best. Thank you. Thank you. We take the next question from the line of Debotro Sinha from ICICI Securities. Please go ahead. Debotro Sinha, your line is unmuted. Please go and ask your question. Ueah, good afternoon, sir. Sir, congratulations on very good set of numbers. So if I see sequentially, like, our revenue has increased by 8.2% and our occupancy has increased by 600 basis points. So like, if I see the expenses, the cost of food and beverages has decreased by 2%, 1.9%. So could you shed some light on that? Yeah. What it means is the mix has changed. Our food cost on a weighted average basis is about 30%-31% of our food revenue. If you see food cost at, say, INR 30, you can safely assume the revenue was INR 100. NOw suppose from Q3 - Q4, the number of guests have remained more or less the same. Maybe, you know, from 69%, it has gone to 73%. Guests have gone up by 6%. The food revenue would have gone up by 6%, but the room revenue may have gone up by 15%. The weighted average may be 9%-10%, and the cost structure reflects it, because food has a much higher variable cost than rooms. Okay. That's the way to look at it. Okay. Okay. Thank you so much, sir. Thank you. We'll take the next question from the line of Nikhil Agarwal from VT Capital. Please go ahead. Hello. Good afternoon, sir, and thank you for the opportunity. I had a question on the CapEx. Like, last quarter, you had guided for INR 5 lakh per room and INR 1 lakh per room for 50% of the Keys portfolio. You've increased it to INR 6.5 lakh and INR 1.5 lakh. Is this only for Keys or is it for your full renovation plan of 3,500 rooms, which includes- Keys will be INR 5 lakhs for... Earlier it was for about 50% of the portfolio. Now it will be for closer to 60% of the portfolio, because Vizag is doing well, and that is about 10% of the inventory. So we are deploying capital or capital allocation is happening based on expected return when we increase it beyond INR 1.5 lakhs of Keys. Now to maintain, remember when we acquired Keys, it was a very old and tired brand. No investment had been done in it. So the, in the following two years, again, it became, in fact, even more tired, because obviously we did nothing with it. So to maintain what we consider minimum hygiene levels of brand standards, we will upgrade even Keys hotels in Cochin, in Trivandrum, and in Ludhiana. These, we feel by upgrading this, we will be able to increase the occupancy, but not the price very much. In the other cities, we are spending more because we think we will be able to increase both occupancy and ARR. Number two is in the balance portfolio, we feel there is an enormous opportunity to increase pricing in Hyderabad, which you have seen results, how it is doing. We feel there is enormous opportunity in the two Delhi hotels, Lemon Tree Premier and Red Fox. We feel there is opportunity in Lemon Tree Electronics City and Lemon tree LTP, and Lemon Tree Premier Bangalore. So we have looked at each hotel, we have looked at the micro market, we have looked at demand, we have looked at how we feel we can reprice post renovation, and the entire capital allocation decision has been done on that basis. I can't take you through 40 odd hotels, but what I can tell you is, it is being done with some rational basis. And we expect that in all cases, any investment, the payback should be maximum 18 months, but normally 12 months of the increase of this investment. Got it. Sir, the INR 6.5 lakhs is for the full renovation plan, right? For the, it's for not only for Keys, it's for Keys plus the older hotels, right? No, no, it is not that much. It is as I said, it is about INR 53 crores-INR 54 crores for over 1,000 rooms. You average it out, it is less than that, it is closer to INR 5 lakhs. Okay. Got it, sir. Thank you so much. Thank you. A reminder to participants, if you wish to ask a question, please press star one now. We take the next question from the line of Ayush Dabas, an investor. Please go ahead. Hi, sir. Thank you for the opportunity. My question is on Delhi hotel. I'm looking at slide number 15 in the presentation. Your RevPAR from Q3 FY23 - Q4 FY23 is from INR 4,941 - INR 5,559. And I'm looking at the EBITDA number, which has gone down from 73% - 62%. So what would be the reason for that? Slide 15, Delhi? Yeah. Uh. The last quarter, the EBITDA was 73%, and now it's 62%, while the RevPAR has grown. I'm just looking at that. Which number did you get me? He's talking about quarter-on-quarter. This is our right [audio distortion], this is not what I [audio distortion], so range during the previous- Okay. So- Previous quarter. ..So, Just repeat the question, because I think it's only one data point is on slide 15. You are saying? For last quarter, quarter three, FY 2023, the RevPAR, as per your last presentation, was INR 4,941 for Delhi. That INR 4,941 has gone to INR 5,500 approximately- Yeah. ....while the ARR number has gone down from 73% EBITDA margin to 62% EBITDA margin. What is the answer to that? Is it some change in-... I'm sorry, I don't have the data. What you can do is drop me an email, we try and get back with specifics. I don't have it right here. Okay. Thank you. Fine. How do you see the outlook for Delhi, sir? Very good, especially now that we are renovating. So in Q3 last year, we started renovating some rooms. We renovated about, I think, about 30-40 rooms, about 10% of our inventory. We are planning to renovate about another 90 rooms this year in Lemon Tree Premier and another 80 rooms in Red Fox, and we feel we'll be able to capture a significant price hike while maintaining high levels of occupancy in these two hotels. The demand is very robust and sustainable. And sir, what do you see as a sustainable EBITDA margin for the Delhi hotel? See, these are a bit dark, Ayush. Delhi, my view is that, we should be in the early 60%s in Delhi, but if we manage to raise the price up significantly, then it might hit 65%. Okay. Thank you. Thank Thank you for that. That's the only question I have. Thank you. We take the next question from the line of Prashant Shivsagar from Unived Profit. Please go ahead. Yeah, good afternoon, sir. Just wanted to ask you about foreign tourist arrival in India. What is your expectation? When should they be... today, they are on the slightly lower side, but when will- I read some statistics that foreign tourist arrivals to India are still... See, when we talk about arrivals to India from foreign travel, foreigners, I think a large percentage is the Indian diaspora. So we are not speaking purely of what are called FTAs, which are Foreign Tourist Arrivals. I'm given to understand it is still less than 50% of pre-COVID. Correct. So- What is the reason? Yaar, I can't actually tell you, but I'm hoping that obviously in winter it will pick up. So even if the tourist arrivals to India from sub 50% go to, you know, sub 25%, in terms of drop, if there is only a catch-up to halfway levels, pricing will again go up by another 5%, 7%, or maybe even 10% for the branded sector. Because all foreign tourists, typically, 90% stay in branded hotels. So it will be a large number, and it will have a large impact, but I have no line of sight on when and how that will happen. As you, in one of your conference calls, you have said that the room rates may double if the foreign tourists really- Not double. I said over three, two, two and a half years, I said it will double, and I mean it, by the way. See it is already 30% up in one year. Okay. Over three years, why should it not double? Look, make it very simple. Our rates today, today if you look at Lemon Tree as a group, and you just go to the slide, if you go to slide 19, Lemon Tree excluding Keys, the ARR was INR 6,237 in Q4 2023. The same Lemon Tree, half of it, which was operational 14, 15 years ago, the ARR was INR 8,000. Why should there not be a catch-up? We are very cheap as a... I mean, luxury hotels are for $200, $250 here. A friend of mine, in the travel business told me in Europe now it is EUR 900 -EUR 1,000 per room, and we are at $250. So the runway is enormous. I understand, of course, that affordability is an issue. My view is broadly, India is at close to a tipping point. And one very interesting indicator is the increase in demand of mid-size SUVs. If you look at China and look at Taiwan, look at Indonesia, look at Malaysia, three years after mid-size SUVs took off, hotel demand took off. So I do see us at that tipping point. But for the room rates to really move, go double, increase sharply, is the foreign tourists' arrival will be an important criteria or it won't be? Let me give you a number here. Foreign tourists, in and of themselves, are about 3 million-3.5 million. I don't have the exact number, but it's roughly in that range. What is 3.5 million? It's 10,000 per day. Each of them stay for, you know, between 5-10 days. So if you look at it on the room night basis, it is like 30,000-50,000 room nights a day. Now if 80%, 90% of them are staying in branded hotels, then just take a simple number, that's 25,000 rooms over 175,000. It's a 15% improvement in occupancy. Now if occupancy goes up by 50%, I can guarantee you prices will go up by 30%. Okay. Okay, that answers my question. Thank you, sir. Thanks, sir. Thank you. Ladies and gentlemen, we have reached the end of the question and answer session. I'd now like to hand the conference over to the management for closing comments. Over to you, gentlemen. Well, thank you once again for your interest and support. We'll continue to stay engaged. Please be in touch with our investor relations team for any further details or discussions, and I look forward to interacting with all of you soon. Thank you very much, sir. Thank you, members of the management. Ladies and gentlemen, on behalf of Lemon Tree Hotels Limited, that concludes this conference. Thank you for joining with us. You may now disconnect your lines.