Ladies and gentlemen, good day and welcome to the Lemon Tree Hotels Limited Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference 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 Q1 FY 2025 earnings conference call. We have with us today Mr. Patanjali Keswani, Chairman and Managing Director, and Mr. Kapil Sharma, Chief Financial Officer of the company. We'll begin the call with brief opening remarks from the management, following which we'll open the forum 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, and good afternoon, everyone, and thank you for joining us on the call. I'll be covering the business highlights and financial performance for Q1 2025. Post it, we'll open the forum for your questions and suggestions. Due to the high seasonality of the hotel industry, I would request everybody to consider year-on-year performance rather than quarter-on-quarter. In Q1, despite the headwinds faced by the hotel sector due to the election process and the extreme heat wave, Lemon Tree recorded its highest-ever revenue at INR 268.4 crore. Revenue grew over 19% compared to Q1 FY 2024, while the EBITDA grew 8% year-on-year, translating into a net EBITDA margin of 43%, which decreased 4.56 percentage points over Q1 2024. Of this fall in EBITDA margin year-on-year of about 4.6%, about 50% was due to one-off increase in investments in renovation and digital transformation. Q1 2025 also recorded a gross ARR of INR 5,686, which increased 9% year-on-year. The occupancy for the quarter stood at 66.6%, which decreased 0.66 basis points year-on-year. This translated into a RevPAR of INR 3,788, which increased 4% year-on-year. As I had stated in earlier calls, the decrease in EBITDA margin year-on-year was owing to planned increases in investments in renovation above that spent in Q1 2024, as well as investments in digital capabilities, expansion of our business development and sales teams, and an overall annual payroll increase. The Keys portfolio EBITDA margin decreased by about 10 percentage points year-on-year due to an increase in renovation expenses over Q1 2024, which was actually a 100% increase. During the quarter, 25% of the total Keys portfolio was shut for renovation, which impacted the ability of the Keys portfolio to increase occupancy, which decreased 148 basis points year-on-year. With demand growth expected to exceed supply growth in the next few years, accompanied by structural tailwinds that India is currently witnessing, this significant investment in renovation will allow us to better position our hotels going forward to capture superior pricing and positioning, and position Lemon Tree as the brand of choice in the mid-market segment. Fees from managed and franchise contracts from third-party hotels stood at INR 12.5 crore, up 21% from INR 10.5 crore in the previous year's same quarter. Total management fees for Lemon Tree were up 22% at INR 29.1 crore, compared to 22% less in Q1 2024. During the quarter, we signed three new management and franchise contracts, which added 187 rooms to our pipeline, and operationalized four hotels, which added 331 rooms. As of 30 June 2024, the inventory for the group stands at 107 operational hotels with 10,125 rooms, and our pipeline comprises an additional 4,000 rooms. Going forward, we are confident of the company's ability to sustain this growth in the coming quarters by focusing on the following growth levers: the continuing stabilization of Aurika Mumbai, which has already turned EBITDA positive. Accelerated growth in our management and franchise contract with a proportionate increase in fee income. Timely completion of renovation activities in the own portfolio to further improve ARRs and occupancy. Please note that the increased investment in CapEx and renovation expenses will continue into FY 2026. Until the full portfolio of owned hotels will be fully renovated, hence renovation expenses will drop to 1.5%-1.6% of revenue. Continued efforts under our digital transformation exercise with BCG, which involves strengthening our sales processes, revenue management, and loyalty program. With this, I've come to the end of my prepared remarks, but before I ask the moderator to open this forum for any questions, I thought I would, you know, I was briefed by our investor advisors about some questions that we had observed, so I thought I would give a kind of extempore explanation of what is going on. Seeing any business, I think the management has to take a view and certainly a view and prediction. So, you know, when I talk about a structural uptick, a change, I reflect back on China and Indonesia in the 2006 and 2007 period when their GDP per household was roughly the same as India's today. And what happened in the next six years then was a massive increase in SUV car sales, a massive increase in four-lane highways, a massive increase in runways and airports, a massive increase in airline seats, and just let it turn to a 22%-25% CAGR growth in mid-market hotel room demand over the next six years. So we felt, you know, we would prefer to bite the bullet. I'll explain what I mean by this and take some short-term pain for what we anticipate will be long-term gain if we get future ready to move. Now, when I look at Lemon Tree, one year before COVID, we had less than 4,000 operating owned rooms, and these owned hotels had potentially high value and were actually not renovated subsequent to that 2018-2019 period in last year because we obviously didn't have the money, and we were focusing on rebuilding the businesses. Now, I remember I met a global CEO of one of the top three hotel companies, and I had asked him that, "What is your biggest pain point today?" And he had said, "Renovation," because, of course, that company had hotels owned by others, and getting them to invest money to renovate was his biggest pain point. So we took a call that we would identify two sets of hotels, those which were old hotels with potentially high value and RevPAR and occupancy, renovate the rooms, the food and beverage, and banquets. When I say renovate, I don't mean a traditional renovation; I mean a reinvention to new standards like our new Lemon Tree Premiers, Bombay, and Poona, reflect. Although it would lead to a large amount of inventory shutting down in summer this year, we took a call that specifically in the very high-demand markets of Delhi, Hyderabad, and Bangalore, where the hotels were 10 years or more old, we would invest a very large sum of money this year and shut the rooms and restaurants and, in fact, lobbies too, and renovate them completely so that by the end of next year, they would be fully ready for what I anticipate will be a structural shift starting to show very clearly in hotel room demand in India. Simultaneously Keys, which was a portfolio we acquired a few months before COVID, we decided to also renovate. And in fact, as I mentioned earlier, 25% of the inventory has been shut, and I'm quite surprised and pleased that in spite of 25% of the inventory, the drop in occupancy is 1.5%. Alongside this, we also looked at all our uplift we needed to provide in maintenance, which is more CapEx-oriented, like the Keys portfolio needs a replacement of the entire air conditioning system across all 1,000 rooms. So putting all this together, what we felt is that if we invest enormously and take the pain of shutting down inventory, large amounts of inventory, we would have an entirely new growth by the end of financial year 2026, and then after that, we would go back to retail renovation, which is normally 1.5%, 1.6% of revenue. That was the first leg of our view towards monetizing this conviction two years out. The second was, so we said, you know, we need to digitally transform our company, and we focused on four legs, which is pricing, which is we created dynamic algorithms, which will now come into play in these new rooms. We created an entirely new sales system, which is entirely led by digital capability. We are now in the midst of completely reimagining our loyalty program and website with a very large element of mass-scale personalized offers. And this is all geared towards capturing 66% of our demand from the retail segment in the next two years. The third leg we focused on was on business development, and we increased the business development team by 4x. So this is actually all captured in the cost structure you are seeing, but the business development team grew from, you know, x people to 4x people. The next was focusing on how we would deliver execution, and that was obviously the talent. There were planned investments and increments in retention, in adding new people. For example, the sales team, we increased by 50% in the last three months. We also added 100 management trainees into the system. Basically, the perspective was that although these appear as offers, the way our management sees this is this new office is going to demonstrate our ability to juice the old CapEx that we have invested over the last 20 years in Lemon Tree Hotels, and that would enable us to achieve our stated target of exceeding a 20% ROCE from the next year itself. Last point is that all the free cash flow that we generate in summer has been going into renovation, but typically the free cash flow in winter is 2-2.5x of that, and that will go towards debt reduction. This is how we are looking at not only this year but the following year. Now I'll hand it over to you, Anoop, to open the forum to any questions that the listeners may have. Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask questions may press star and one on the touch-tone 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 questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from Karan Khanna from Ambit Capital. Please go ahead. Yeah, thanks for the opportunity. This is Karan Khanna. My first question, Patu, you spoke about, you know, 5%-12% price hikes in the last call. So barring this quarter, which got impacted because of multiple headwinds, how do you see the RevPAR growth for the portfolio excluding Aurika, and do you believe you can sustain this low to mid-teens RevPAR growth in FY 2025 and FY 2026? So I'll tell you, Karan, the point is already in this quarter because a certain amount of new rooms have come back into the inventory. We are doing 10% better ARR as a group and about 7% for same store, which is obviously an improvement over Q1. I suspect that when the first round of renovation is over, which will be by mid-September, going into peak season, this will obviously improve significantly. So the perspective I have is I would prefer to answer this question on a full year basis, and then I'm going to adhere to whatever you just said. Sure. So this awareness coming from Patu is, you know, slide number 12 of your investor presentation where you mentioned that for most of the market, room rate growth has been in the range of about 3%-7% except Mumbai, where the number was 9% because of Aurika Mumbai opening up. So to that extent, do we think that, say, in FY 2025, the rest of the nine months and potentially FY 2026, there is enough opportunity for you to really look at a double-digit RevPAR growth during both the years FY 2025 and FY 2026? FY 2025, I'm talking this year. See, FY 2026, I'm very confident because then the entire portfolio by the end of what is called summer will be fully renovated, more or less. There may be a few rooms still not done. This year, about half the rooms will be renovated. In fact, just to give you some numbers, you know, I think about 700-800 rooms were shut in Lemon Tree. Now, to get an idea of what I mean by this is about 500 rooms of the first 3,500 rooms of our company, the older one, were shut, which was 15% of the inventory. And when 15% are shut, and you know, as you start planning the next phase, the 15% remain shut because they are going to open, and another 10% are shut for a timely renovation. So I think 25% of the rooms are shut. We expect, and similarly, as I mentioned, Keys, 25% of the portfolio is shut, and we will continue to renovate this winter too so that we are able to renovate the entire portfolio by the end of next year. Now, the view is that once half the inventory, this renovated inventory comes back, we have found that there is a very positive customer response to these new rooms, especially in our old hotels, our old high-value hotels. So we will have an ability leveraging the new revenue management algorithms we have in place to reprice at least that half of the inventory to maybe INR 2,000 higher in the older inventory. So I do not see a problem with the RevPAR growth we are talking about. Sure. This is helpful. My second question is on the Aurika Mumbai Hotel. If you could talk about the ARR, the occupancy level, and the customer mix to understand this for Aurika during Q1, and by when do you expect to see this stabilizing? And as a follow-up, if I look at slide 12 of the presentation deck, can you help us understand the breakup of the performance of Aurika portfolio in Mumbai and outside Mumbai? And a clarification here, your Q1 FY 2024 presentation had slightly different numbers for the Aurika brand. So I wanted to understand why the disconnect, and if you can elaborate more on the Aurika Mumbai ramp-up. Okay, so Aurika in Q1 last year was only Udaipur. And this year is Udaipur and Mumbai. So you are seeing niche aggregates. In fact, Aurika in Q1 did 45.9%. Now, the reason it did this, which is around 300 rooms, is we started reducing the crew base, and our crew base dropped from 200+ in Q4 to about 115 in Q1, and in fact, we have now reduced further to 100 in Q2. Now, the way we looked at it is very simple. We needed to reduce our dependence on crew, and crew contracts, as you know, are long-term, so it's not that we can opportunistically reduce it every month. So we are not renewing some contracts because our expectation is that over the, you know, as I mentioned earlier, one must keep in mind that Aurika is the equivalent of three large hotels, three large hotels or two very large hotels of over 300 rooms. When I reflect back on the first Lemon Tree we opened in Bombay, which was 300 rooms, it took about 9 months to stabilize it. So really, to build up demand for a 670-room hotel, which is a new brand on top of it, will take, in my opinion, a year. So real results for Aurika will start coming out in Q3 and will flow into Q4. So my best guess is that you will have a clear idea of how Aurika performs by Q4. In Q1, it did 45.9% and a shade under INR 9,000 average rate. So if you take the retail average out, I don't have the numbers for Aurika Udaipur right here, but it will be, you know, so the portfolio did, what did the portfolio do? It did 46%, so you can say both were roughly similar. That is normal because in Udaipur, there is an extreme high seasonality. Winter is double of summer. Now, coming to Aurika going forward, there is some improvement in Q2. Again, as I said, it's off-season. We are really focused on building demand in three segments in Aurika. I am reasonably happy with the rate of growth of our corporate segment, which is an immediate sales calling issue, but the building of the retail segment, which is traditionally one of our strong points, needs more work in terms of how we market it and how we reach out to retail customers. As far as meetings and incentives conferences go, there is an uptake, but as you know, it has a very large convention space, and my expectation is that will really kick in from Q3 onwards. So on an aggregate basis, I expect that Aurika H2 will be, you know, maybe 2x or 2.5x what it will be in each one, and we'll have to wait and see how that plays out. Sure. And my last question is on the expenses side, and if I'm looking at the P&L, you know, the cost of food and beverages consumed, that's seen almost an INR 4 crore growth on a Y-o-Y basis, despite this quarter being relatively soft from a MICE perspective. And likewise, the power and fuel costs also have reached up higher. So if you could elaborate more on that, and that would be my last question. You are asking food and beverage costs. Well, it is food and beverage costs is what we expected it to be. But despite lesser MICE activities, gone up from INR 12 crore-I NR 16 crore. So you know. So you would take this off-screen otherwise, yeah. Well, our food costs normally, Karan, should be 29%-30%. If you look at traditionally, historically, Lemon Tree's food costs have been 29%-30% of revenue. If you have a very large amount of banquets, banquet food costs is typically 20%. And that lowers the average from, say, 30% depending on the amount of banquets you have. So as in when the MICE and banquets pick up, the food cost as a percentage of the total revenue drops. But we don't have significant banquets in Q1. There are some more in Q2, and then in Q3 and Q4, it keeps growing, and then the aggregate comes down to maybe 26%-27% for the year. Great. Great. This is helpful. Thank you and all the best. Thank you. Thank you. The next question is from the line of Archana Gude from IDBI Capital. Please go ahead. Hi sir, good evening and thank you for the opportunity. I have two questions. So firstly, given we will be renovating the Keys in the rest of FY 2025, I understand operating margins would be under pressure. I want the renovated inventory to operate with a higher price point. How should we look at the margin profile for next FY 2026 and FY 2027? Well, I gave a number that when the portfolio is fully renovated, we are expecting an additional of about INR 60 crore from Keys, which is, as you can see, a change from the current data. And the reason I am saying this is the first Keys we renovated was the Keys Poona, Keys Pimpri. What you will find is that although even as we speak, 30% of the inventory is shut, that means it is only a 70-room hotel. It is doing 100% occupancy at that 70 rooms, and it is doing an average rate 25% higher than pre-renovation. Of course, the expenses, unfortunately, the fixed expenses are still there, although the inventory has dropped by 30%, and the variable costs have reduced. But if I extrapolate on a more conservative basis to the rest of the portfolio, we expect that the increase in rate in the Keys portfolio, it is already, by the way, interestingly evident in Q2. You will find that on a gradual basis, it will go up 15% over, maybe even 20% over what it was peak over. And that is what we are focused on because that will have the maximum flow-through into the data. I hope that answers it, Archana. Right, sir. Right. And so on this Hyderabad and Bangalore market, this substantial decline in occupancy is because of the shutdown of the Keys inventory, or there is more to read in this? We have shut down enormous amounts of inventory in Hyderabad and Bangalore. Now, the most highest performing set of, say, Hyderabad was what is called HITEC City, where we have about a little under 400 rooms. Nearly 20% of this, in fact, maybe more of the inventory is shut. It is undergoing a complete reimagination. We had earlier renovated about, I think, 5%. So those new rooms are being received very well. Currently, 20% are shut. And that is part of the reason that you are finding a decline in occupancy because in Hyderabad, Monday, Tuesday, Wednesday, Thursday is when you normally go full. We had, you know, 20% less inventory. So at peak on Monday, Tuesday, Wednesday, Thursday, we were doing 80% occupancy rather than 100% last year. So that is why you see a dip there. As I said, it is temporary, and it is a question of having some short-term pain to ensure that we have significant long-term advantages in game. In Bangalore, the main reason is while we have shut down less inventory in the Lemon Tree, we have shut down a very large amount of inventory in the Keys portfolio. And that is what is reflecting. In fact, we recently opened about out of the 100 rooms we had shut in Keys Whitefield, we opened about 40 rooms. And now it is already going full with exploding about 60 rooms. It is going full. It is doing 160 rooms a day. There is an improvement in ARR. What you are seeing really, and I would urge everybody here to understand this very key point is what you are seeing is effectively, if I drew an analogy that if there is a manufacturing company that shuts down, you know, one out of its five lines when the demand is high on a Monday, Tuesday, Wednesday, Thursday, but with the intention of really significantly improving that line with a much more high-value product, then obviously in the short term, you will see a negative. In a very quick period after that, I expect to catch up. That is what we are hoping for. Right, sir. I'm sure that answers. Thank you and all the best, sir. Thank you. The next question is from the line of Kunal Lakhan from CLSA. Please go ahead. Hi, good evening. Sir, I just wanted to understand what was the ARR ex of Aurika Mumbai in Q1? It was somewhere under about INR 8,900. No, that's Aurika Mumbai. What is the overall ARR for the group excluding Aurika Mumbai? Excluding Aurika Mumbai, I'll just tell you. INR 5,400. And something. Sorry, I didn't get that. INR 5,400. INR 5,400. And this is partly to do with the overall lower occupancy that we are seeing because of the renovation. Would that understanding be correct, or is there something else? Yeah, because I'll give you an example, Kunal. Even in Lemon Tree Premier Delhi and Red Fox Delhi, though fortunately you are not seeing it clearly, we have shut 80 rooms. And those two hotels, which we think can be totally juiced this winter, those two had fewer rooms. So when that mix changes, so you have not shut down the lower value room, you have shut down the higher value room, then the weighted average ARR reflects the new weightage. Right, so in the past, we had just hypothetically 100 lower value hotel rooms and 100 higher value hotel rooms, and now you have 90 lower value hotel rooms and 60 higher value hotel rooms. Then the weighted average reflects the lower ARR. Okay. Am I making sense to you? Yeah, I'm trying to corroborate that with your slide 11, wherein like, you know, where you've given the mix of the, you know, the category-wise rooms and, you know. Slide 11? No, no, no, I'm sorry. Let me go to that. Yeah, yeah. Yeah. So, but you know, what we are liking then is correct, yeah. What you are seeing is an aggregate. So, you know, remember this is across all the 5,100 rooms we had operation out of our 5,800 or 900. But the hotels that, for example, get a very high number of website booking, which is Hyderabad, Delhi, and Bangalore Whitefield rooms. Okay? Those hotels in other markets where you get a, you know, more corporates and less retail, those were open. So what you are seeing, unfortunately, is a, well, as a summary, is an aggregate. But if you just take into account that about 650 rooms were shut. And those rooms reflected a generally 60% of them reflected a higher rate and more retail. And since they were shut, we were unable on the high demand dates to actually, you know, offer those rooms. Sure, sure, sure. Okay, I'll give you another example. When we shut these hotels, we shut some restaurants. When you shut restaurants for renovation, because as I said, it is a complete reimagining of these hotels, the restaurants shifted into the banquets because obviously we have to continue providing food. When they shifted into the banquets, we lost banquet revenue. So you will find private rate revenue came down. So one flows into the other, but basically the broad point I'm making is that we've taken a fair amount of pain and we expect that that will demonstrate itself, the results in H2. Sure, understood. Also, you know, across these segments, if you can just give us some indication of, you know, how the rate differential is, like say, you know, corporates, airlines, travel trade, OTA, you know, the other ones. If you can give us some indication of how the rate differential is. Okay, so in commercial, the rate increase on an aggregate without Aurika Mumbai went up 5%. Subtotal including, because we were unable to take more group, I mean, private rate bookings and MICE bookings, we were able to, because we could turn away some business, we were able to reprice. So the average rate increase in private trade was 11%. Okay. So as a total, corporate went up 6%. Okay. And retail went up, well, OT remained flat, went up 8%. So now if I overlay that with Aurika, so this subtotal of this whole thing was about a 3%-3.5% hike in ARR. From INR 5,240 last year, it went to INR 5,416 this year. Sure, sure. If I overlay it with Aurika, then the increase was 8%. And the ARR became INR 5,688 from INR 5,240. Understood. Understood. Okay, on my second question was on, say, the after the whole renovation plays out, right, for the Keys portfolio, they say the INR 3,500 rate that you're seeing goes to what number, like, or grows by what number? Sorry? Minimum INR 4,500. Minimum INR 4,500, okay, so around like 30% jump overall. Yeah. You see, even our ability to reimagine has affected because while a large number of rooms are renovated, now the public areas and the restaurant is getting renovated, the restaurant has gone into the banquets. So there is this entire planning process. And even the occupancy levels would like normalize to say around 70% or? Kunal, it is doing 70%. We have only 70 rooms open and we are all going full. Understood. At a 25% higher rate. We don't have rooms there. Our restaurant is half the size of what it should be inside of 70% occupancy because the banquets are small there. Understood, understood. Thank you so much. My pleasure. Thank you. The next question is from Jinesh Joshi from Prabhudas Liladher. Please go ahead. Yeah, thanks for the opportunity. Sir, I have a question on Aurika Mumbai. You mentioned that the crew let rate has declined from about 200 rooms to about 100 rooms. And given the fact that it's a low-rate business, ideally, I mean, in an environment, we will let go of this kind of a business when we get the high-rate business, right? But if I look at your occupancy from 66% in the last quarter, if I heard you right, it has gone down to 46%. So I mean, why did we let go of this business when we were not getting some other high-rate business? No reason. While you take airline business, it's a year contract. So while you may get it in summer, you will regret it in winter. So it should tell you that we are far more, let's put it this way, we are far more confident about winter in this hotel. See, if I go back to our Lemon Tree Premier with 300 rooms here, in seven months from an opening occupancy of 40%, it went to 90%. It was fundamentally led by a massive pickup in retail demand month-on-month. So our view is that we are seeing signs of a similar trend line of retail for Aurika Mumbai. So if that happens, we feel that the right inventory to have is about 15% airline crew on an annualized basis, which is about 100 rooms. And we have a good pickup in corporate, which will continue. And now early signs of a good pickup in retail. So if this continues, then in the next 6-8 months, retail will, my expectation is retail will cost 200 rooms a day. Okay, corporate will cost 200 rooms. And then there will be the overlay which we'll get from meetings, incentives, conferences. So this is a call that we took. And as I said, some calls have some short-term pain, and in a quarter, it may reflect negatively. But on an aggregate across the year, it should lead to an improvement in that. We've got that. And sir, given, I mean, in the call, a lot of decision has happened surrounding renovation, and we have given quite a few numbers. But I mean, just to understand it simplistically, out of 5,800-odd old rooms that we have, how many were shut in one piece because of renovation? So I think about 700. Okay. And do you expect this, do you expect this number to be at full potential? In the sense, the entire 5,800 rooms will be opened in 3Q or 4Q when we have the peak business time? Or because the renovation is an ongoing exercise, is what you have mentioned. So I just wanted to know whether this number will fall or will it continue? No, so let me, that's an important question. Thank you. I will explain it in detail. Routine renovation is, you know, you furnish the bathroom, you replace a few fixtures, you may or may not replace furniture, but you will definitely redo the fabrics, you will redo the curtains, you will relook at your lighting. And typically that's like, you know, a certain cost. And as I said, on an aggregate, since we like to refurbish slash renovate one sixth of our rooms in the inventory every year, we typically spend under 2% of the revenue, current revenue, on such type of renovation. Okay? But what we are doing is many of our old hotels, look at Lemon Tree Premier Delhi. It is 12 years old. If you look at Lemon Tree Premier Hyderabad, it is, I don't know, 13-14 years old. If you look at Lemon Tree Premier Bangalore, similar. If you look at Red Fox, the big ones, they are all very old hotels, and they have been going through routine renovation, which is this one, you know, 1.5%,1.8% of revenue. But once we opened the new Lemon Trees, which were in Kolkata, Mumbai, Poona, by comparison, the old ones were very old-fashioned and old design. So considering that we personally feel as a management that there will be an uptick in demand, a significant uptick due to structural shifts, we wanted to future-ready this company. So we took a call that now that we've opened the three new Lemon Tree Premiers, the old Lemon Tree Premiers should reflect a similar standard. So it's not a 1.8 type of thing. It is more of a 6% type of investment. And that is what you are seeing. It's not a renovation the way we describe renovation. It's a reinvention. I don't know which of you ever stay in a Lemon Tree, but those who have have told me that they cannot believe the difference. We are basically doing it to reprice and reposition ourselves as the preferred choice. We don't want to be, you know, a leading brand. We want to be the choice in the mid-market and upper mid-market segment. Got that. But sir, I was still looking out whether this number, I understand what you're trying to get into, but my question was basically, say for instance, in 1Q you mentioned that at peak 700 rooms were under renovation, if during 3Q, given the exercise which you are taking, if in 3Q, which is the peak period for you, even in that quarter, if 700 rooms are under renovation, then we are basically in a similar environment. So I just wanted to know whether that environment will improve or not. So let me explain that. When I say renovation, 1,500 rooms are new, which is the new Lemon Tree Premiers, Aurika Mumbai, and so on. So those don't need renovation. After 2 years, they will need their routine block. That leaves 4,400 rooms. 900 of those rooms are what is called Keys. Keys, we will continue renovating one block, summer, winter, whatever, and we will get them completely ready by next year. That leaves 3,500 rooms. We did about, if I remember right, about 250-300 rooms last year over 6 months, and that left about 3,400 rooms. What are we saying? We are saying that we would like to renovate most of these rooms by the end of next year. At any given time, 600-700 rooms will be shut. But it will not, and there is a typical renovation 1.5 months. We hope that in summer we are able to finish the lot. Again, next summer, and then we are a fully ready company. This also includes shutting down of restaurants and banquets and so on and so forth, and in some cases, additional facilities like gyms and so on. Got it. This is pretty much clear. Just one small clarification required. So when we report our occupancy, do we include the rooms that are shut into our base while calculating that number? Because essentially that rooms are not available for sale. So just wanted to clarify on that part. Reported on full inventory. If you reported on net inventory, then our occupancy is 10% higher than what we reported. Got it, sir. Got it. Thank you so much and all the best. Thank you. Thank you. Next question is from Meet Jain from Motilal Oswal. Please go ahead. I need one clarification. In terms of our EBITDA for Keys, you mentioned our EBITDA from Keys post-renovation will be INR 60 crore annually, and ARR will be at least INR 5,500. Yeah. Okay. That is correct. And the occupancy will be much higher because the occupancy of the Keys portfolio is also very low. Partly because of the fact that, of course, 25% of the inventory is shut. But we expect a double whammy of occupancy and rent. Understood. And also, we are expecting complete renovation of our entire room inventory by end of FY 2026. So FY 2027, you can see all the 5,800 rooms to be renovated and operating fully. We will see all 5,900 rooms as a new company. Okay. And last thing is, like you recently signed a management contract under the brand Aurika. So do we have a pipeline or a target, like how many Aurika brands are we looking, I mean, locations preferable or a type of greenfield or brownfield? Just a simple one that. See, right now we are about to, well, I don't want to give, it becomes forward looking, but there are other Aurikas in the pipeline. Okay. Thank you. Thank you for your time. Thank you. The next question is from Bharat Gian ani from Moneycontrol. Please go ahead. Yes, sir. Thank you for the opportunity. Given that you have highlighted a near-term pain because of, you know, rebranding or reinventing, as you pointed out. So any sense you could give what would be, what would, you know, overall revenue number for FY 2025 and FY 2026 and margin at the control level, given that, you know, you've highlighted renovation expenses, expanding the business development team, investment in technology. So can you give a ballpark estimate of how the, you know, consolidating number for FY 2025, FY 2026 and consolidating margin would look like? So you want clear guidance, sir? It's a ballpark would do because, like, you know, a lot of portfolios and a lot of the mix is different, as you said, that 60% of the high-end inventory is shut. So probably a ballpark guidance would be very helpful. So look, I, you know, the world is a very uncertain phase. What I can see is that earlier, somebody asked me that, will you do 15% RevPAR growth? And I didn't disagree. So I think what you should take from that is, last year we did INR 1,076 crore. 15% is another INR 170 crore. And I did not disagree, nor did I comment on it. So obviously, we should be north of INR 1,250 crore, number one. Number two is, we have said clearly that we will achieve 20% return on capital. Our total deployed capital is how much, including recalculating? About INR 4,500 crore? So what we are saying is, somewhere in the next year or two, we'll start trending to INR 900 crore net EBITDA. And that's what we will have to deliver to achieve what we have promised. At that stage, also keep in mind that our renovation expenses, which have had a big hit, and our digital transformation, which has had a second hit, will be subsumed and will reduce to normal, which means it will come down by maybe 4 percentage points. That means EBITDA will go up by 4. Actually, I would like to explain something. If you look at the drop in our EBITDA margin, it was 47.6% last year first quarter and 43% this year. So what dropped? 2.6% was the fall due to renovation and, or 2.5% was the fall due to renovation and our digital. Another 2.2% was due to fundamental increases in business development and sales and marketing and increments. So when you aggregate it, it is quite clear that when revenue picks up, this obviously as a percentage will start normalizing. And we will naturally move back to our 50% net EBITDA margins. And I'm very confident about that. So, you know, I understand that this as a one-off might seem a surprising number, but it is because there are one-off, large one-off expenses. And those are obviously something we expect to recover. So to add another point, I have publicly said that any renovation we do, our EBITDA period must be 2 years. So here's the point. If I invest INR 100 crore in renovation, then my expectation is my incremental EBITDA due to that renovation should be INR 50 crore more every year. And when I finish investing INR 200 crore, my EBITDA must increase by at least INR 100 crore, and that will be an ongoing increase in EBITDA. Okay, sir. Okay, sir. Thanks. Thank you. The next question is from the line of Rajiv Bharati. Please go ahead. Sorry, from? Rajiv Bharati from Nuvama. Good afternoon, sir. Thanks for the opportunity. Sir, I am on slide 12. So if I look at your, for example, Lemon Tree Premier and Lemon Tree Hotel, typically for getting an EBITDA of close to 50% plus, you need to clock something like a 70% plus kind of occupancy. Now, if I look at Aurika Hotels & Resorts, which is 46% occupancy, and still it is able to do 49% EBITDA, where we have Aurika Mumbai, which is a city hotel. So I'm not able to connect how, I mean, how does it work in the sense when it reaches at the 70%, what is the kind of EBITDA? 70%, it will do 70%. Keep in mind that Aurika earns a much higher average rate, but the cost structure is slightly more than an LTP. Actually, what we are trying to demonstrate is that it is possible to have a higher-priced hotel with a high EBITDA margin. If I recollect right, Aurika Mumbai in Q4, when it did 66% occupancy, what was their EBITDA? Just give me a moment, please, Rajiv. Thank you. No, no, not LTT. Aurika. It did 62% at 66. So at 70, it will be fundamentally go through. So it should do, you know, 70%. So, I mean, sorry, even if I take a Lemon Tree Premier, which is priced at, you know, in winter, is priced at over INR 8,000, what was the net EBITDA of Lemon Tree Premier? It was 64%. So our Lemon Tree Premiers, which are new, highly priced, and high occupancy, those 64%-66% EBITDA, which is what incidentally, Rajiv, we are trying to achieve with Hyderabad, Bangalore, and Delhi in the renovation. Sure, sir. Just that we have, I mean, in our entire network and seen the data for last past also, in season or off season, we have never reached this kind of 70% kind of number. So Aurika is, I mean, is a benchmark in itself that way, in terms of getting that kind of RevPAR. See, what we report is the aggregate. So Lemon Tree Premiers, there are two or three Lemon Tree Premiers, even incidentally, Lemon Tree Premier Delhi, in spite of having very old rooms, in Q4, what did we do? It did 71%. Sure. Happy to share it with you if you are ever in Delhi. What you are seeing is obviously these are hotel-level EBITDA. Below that is corporate expenses and other expenses. So that's why we've tried to bring our, you know, in season, you will find in season our net EBITDAs are in the mid-50s. Sure, sure, sir. And second question is on slide 11. So if we were to use, you know, backwork and calculate the rates per night, now this airline rate, which we are getting for Q1, is close to INR 6,900. Now, we have not seen this kind of rate across your portfolio of corporate airline trip travel and for the last, you know, 7, 8 quarters. This is just because you have let go of some low-yielding airline crew or, and this is just the high-yielding ones which are remaining with us? No, so there is more high-yielding because of the 100 rooms in Aurika Mumbai. We've also got some high-yielding crew in a couple of other hotels. But I would like to urge you to consider one thing. This is gross rates what you are seeing. And one impact of airline crew is transportation cost. So if I link it to that, the transportation cost in our company went up by about, I have the number here somewhere, it went up by INR 40 lakh-INR 50 lakh in that quarter. So, you know, while so the flow-through in that sense is less. Am I making sense to you? Yes, yes. So, for example, can you just talk about the flow-through across the, let's say, four channels, four or five channels what you have reported? Okay, so when we, like this year, let's assume we'll do 50% net EBITDA, which means at the hotel level we will do maybe 55%-56% net EBITDA, hotel level EBITDA. Now, this means really if I remove corporate and below-the-line expenses, this INR 45 that we are spending for every INR 100 of revenue at each hotel, roughly half is variable cost and half is fixed cost. Now, if I do INR 100 at a normal hotel, roughly INR 75 is room, INR 20 is food and beverage, and INR 5 is others. In the 5 that is others, we typically have a flow-through of 30%. In the INR 20 that is food and beverage, our flow-through, I would say, is 40%. So now 25% gives a flow-through of 35%, but the other 75% gives a flow-through of 75%. Am I making sense? Yes, but my question was on the slide 11. Typically, we have a flow-through of 75%-80%. Now, if I look at corporate, the flow-through is 85%. So the rate may be lower, but the flow-through is higher because we have no other expenses on it. On airlines, the flow-through is less because we see it. Okay. On airlines, the flow-through is less by perhaps 10 percentage points because of transportation inclusive laundry and so on. In private trade, the flow-through may be less because of commissions we pay to travel agents. In OTAs, the flow-through will be less because we give commissions to the online travel agents. In lemontree.com, the flow-through will be maximum because it is the cheapest channel. And in other slash advertisements, it will be similar to lemontreehotels.com. So if I look at the slide you are referring to, corporate will be second highest, lemon tree and other FITs will be highest, travel trade will be next, and travel trade and online travel agents roughly similar, and airline will be the least. Sure. That all comes out. All the best. Thank you. Thank you. Thank you. The next question is from Anuj Upadhyay from Investec. Please go ahead. I can't, I'm sorry, I cannot hear you. The next question is from Anuj Upadhyay from Investec. Yeah, thanks for the opportunity, sir. Can I elaborate on our debt repayment plan schedule going ahead based on the anticipated future cash flow, considering the fact, you know, we will be having significant expenses towards the renovations over the next two years at least? See, I'll give you a simple example. Our free cash flow is, say, INR 50 crore every quarter, at least INR 50 crore in the summer. That, as I said, is going into renovation. In winter, it is normally two, two and a half times that. So last year, if I remember right, our free cash flow was INR 300 crore, and I think the summer was less than INR 100 crore, the rest was in winter. So what I said earlier was, Anuj, that the winter free cash flow will all go to paying debt down. Next year, summer, again, we will invest in renovation. Hopefully, our income will be higher because Aurika will be stable. So we should have something left over next summer to write down debt. Following winter, it will all go towards debt write down. So the broad statement I had given was that in the next 4 years, and I said it last year, we should be close to debt being zero, which means really we are in a position we feel to write down our debt over portions. What I also mentioned is that if we take Fleur public, 90% of our debt resides in Fleur. So as and when we take Fleur public, should it be earlier than this, then naturally our debt will become zero in [audio distortion] That helps. Thank you. Thank you. The next question is from Prateek Kumar from Jefferies. Please go ahead. Yeah, greetings, sir. Thanks for the opportunity. My question is on, you said about like there's some improvement in trends of ARR, like 10% in Q2 versus a lower number in prior quarters on a same-store basis. So this trend, is it like sort of pan-India for the hotels, or is it like specific segments which are seeing recovery, like MICE segment, which was like sort of under pressure last quarter, or a marriage segment, or like what would you attribute the improvement in the Q2? And my related question is, I would say overall pricing includes Q2. Okay, so all segments would have improved maybe to that extent. Yes. Okay. And now, more like generic questions, most of the other company types of questions are answered. A generic question like, does the hotel industry, I mean, we have seen like sort of very strong years, like past two, three years. In FY 2025, we had like sort of a slow start. The Q2 also was like sort of relatively slow. So does the hotel industry like sort of, is it feeling the pinch that maybe the growth may not be like as strong as we are like sort of foreseeing six months back in the past growth, or we remain as bullish as we were like six months back on next two to four years kind of growth trajectory for the industry? See, the traditional view on the hotel industry has been cyclical. So when supply growth is more than demand growth, then over a period of time, we have seen because of operating leverage, hotels drop prices. When this auto-corrects because return on hotel assets reduces, then supply growth reduces and demand growth continues at a circular level based on the economy, and then prices pick up as demand picks up, and that was the normal cycle. Now, when I look at India demand, by the way, it is nowhere near top of cycle even in the last two years. Very exceptionally, after COVID, in a very fragmented industry, the entire hotel sector took its prices up without waiting for an increase in demand. There was a one-off of leisure travel, revenge travel, and so on and so forth, but that was not obviously sustainable, and we have now gone back to reverting to mean. But what I do see is that there is about a 10% growth in demand every year, and I can use airline demand growth as a proxy, and supply growth will be 6% as per what all the consulting firms inform us. So naturally, we are in the midst of moving towards a top of cycle, though we are not there yet. Once you hit top of cycle, all bets go up because dynamic pricing takes over, and you sell the room as high as a customer is willing to take it. But what I am interested in, that is the cycle. What I am interested in is the high-frequency indicators, which show a change, a likely change in demand across a very large cohort of Indians who are earlier not consuming branded hotel rooms. For example, the current consumers of hotel rooms in India, in our estimate, are people where the average household income is north of INR 25 lakh-INR 30 lakh. There are only 6 million such households in India. But if I look overlay with the GDP growth, and I do some level of segmentation and demographic, my best guess is that this 6 million will hit 30 million in the next 5-6 years. Simply because the median income going from INR 3,000 bucks to INR 3,500, INR 4,000 bucks, or INR 2,800 to INR 3,500 to iNR 3,800, the number of people who move into this sigma limit of the bell curve grows 5x. So it's not a large number. I am just saying that instead of 6 million, there will be 30 million, but 30 million still will be 10% of Indian households or 20% of the 1,000 households. That is exactly what happened in China, in Indonesia, is playing out right now in Vietnam, and I am hopeful that that is what will happen in India sometime in the next 2-4 years. So that is a hockey stick change in demand. In China, demand grew from that period on when it was roughly similar to India and Indonesia too, at 22%-25% CAGR growth in demand. So it was a hockey stick. What were the high-frequency indicators that started showing up early? Growth in airline traffic, growth in airports, growth in aircraft. Imagine the number of aircraft in order are 3x of current supply. Growth in number of runways, growth in four-lane highways, which doubled in the last 4 years with FY 2024. Growth in SUVs, which show an intent to travel outside the city. I will give you an interesting example. Time to travel from Delhi to Jaipur has dropped to three hours because of the highway or expressway. The number of travelers from Delhi to Jaipur has gone up 50% since then. So these are the indicators I'm kind of looking at, and that is what I am hopeful will play out. So I'm not playing for the cycle. Actually, I'm playing for the structural shift. Thank you, sir, for the detailed answer. Thank you. Thank you. Next question is from Jayesh Shah from OHM Portfolio Equi Research. Please go ahead. Hello, Mr. Keswani. Thanks for the opportunity. My first question is, if I've understood right, then 700 rooms are shut for renovation for the entire year, which means in the second half, we should be short by 700 rooms. Then you're still maintaining the annual guidance at INR 1,250 crore? No, I said clearly the shut. We renovate these rooms in 2.5 months. Okay. So in 6 months, we will renovate. Then in winter, we will close. Then next year, summer, we will renovate. And by then, all these roughly 3,000 rooms, we will renovate. Oh, so the renovation cycle will only be in the first half, but in the second half, the total inventory will be available. Absolutely. Okay. Okay. And a related question is, you know, you've talked about reviewing your own hotels. Now, do you see this problem also in your managed hotels? And how would you be grappling with that issue? Sure. I referred earlier, good point, to the global CEO who said his biggest problem was renovating the old hotels because the owners were not willing to do so. Right. So as it happened, we have accelerated the number of rooms we have in the managed portfolio. About 50% are new. Of the remaining 50%, roughly 2/3 are what I would call old and in need of renovation. Over the last few months, we have been in talks with multiple owners, and I would say that within 80% acceptance level, they will also be undergoing renovation. In fact, some are undergoing renovation as we speak. And we intend to renovate that part of the portfolio. Now, if that does not happen, we have obviously given them some time. We are quite clear that the hotels that do not meet our brand standards, especially now that we have such new hotels, we will churn out of the system. Okay. Okay. There are two consequences. One is if they agree to renovate, do they bear the expenses or does it really impact your management fee? For people who don't, and when you churn out, then does it mean that you would fall short on your 2030 guidance where you've talked of 25,000 rooms? Well, the guidance was not for 2030, it was for 2027. Oh, okay. My bad. Absolutely not. We have literally hundreds of inquiries at this moment. You know, the point is, Jayesh, unlike a traditional management company, which looks at cash flow, we look at longevity of cash flow. So one of the key clauses we have is just this: that you must renovate the hotels to our standards. And number two, you cannot exit once you sign a 15-year contract. And if you exit, the penalty is very onerous. Basically, you have to pay us the fees for the unexpired term of the contract. So this is like an international hotel company would do, like a Marriott, for example. So in the early stages of starting this third-party management business, we found a lot of pushback, but we adhered to it, which is why in the beginning it was a little slow. Now we are very clear. We do not bear a single cent in the renovation of any hotel. We charge fees to manage, and these fees are fixed and variable or on performance far on what we call basic fees and sales and reservation fees. Typically, our fees are about 8% of revenue. And if the hotel outperforms, then it can move up to 10% of revenue. Number two is, as far as the portfolio goes, there are not many hotel owners who have said no. In fact, a few have asked for some time because Q1 was a little weak, as you can imagine, for everybody. My instinct tells me all of them will go for renovation. I see. Which would basically be next summer because obviously in winter they won't renovate or want them to Renovate i n Q2, yeah. Okay. Okay. Secondly, coming back to your, and this is my last question, is for your FY 2027 guidance of 25,000 rooms. I recollect FY 2025, it was 20,000 rooms, including those in the pipeline. We are currently at, I think, at about 14,500. Right. Which means that, and I thought 50% of this was supposed to be owned. So you would still be looking to build a hotel for, say, 5,000 rooms? No, we would, what I said is 30% owned, 70% managed, which means 6,000 owned, 14,000 managed. Okay. So you're more or less there in terms of ownership. That is, tomorrow, clearly as a growth development asset-owning platform, then it is entirely possible that it may get into developing new hotels and acquiring hotels. So this was as is when we gave this 5-year vision plan 1 year ago. Right. And sir, the last question is what you have actually talked about. Instead of if, can I ask when for listing? When would you be ready for the launch? That's a decision for the Board and for our partner APG, but I would expect it to be sooner rather than later. Okay. Thank you very much. Thank you. Thank you. The next question is from Sanjay Kohli from Goldstone Capital. Please go ahead. Mr. Sanjay. Yeah, I'm available. Thank you. Thank you. Question on the company structure, any plans for rights issue? No. No new cost to the company substantially. We are cash positive and we can see that we can write down our debt. In fact, the big question for us will be as and when we list Fleur, we will be a debt-free cash accretive company. And so how will we deploy that cash? Will we start the dividend process? Will we redeploy? So I don't think there is any need for rights in Lemon Tree. If there was, it would have been during COVID, but we managed to avoid that. Okay, thanks. Because we have decent currency, so one would have thought, and you know, maybe it's an opportune time to have a rights issue, but thank you. Sanjay, barring another COVID, there will be no need. Hopefully there won't be another COVID issue. Thanks. Thank you. Thank you very much. That was the last question. I would now like to hand the conference back to the management team for closing comments. Yeah, so everybody, thank you so much for your patience and for listening in, and maybe to a little bit of rambling by me. Thank you for your interest and support. We 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 you after the Q2 results. Thank you very much. On behalf of Lemon Tree Hotels, that concludes this conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.