Juniper Hotels Limited (JUNIPER) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Q1 FY '26 Earnings Conference Call of Juniper Hotels Limited hosted by MUFG Intime India Private Limited. We have with us today Mr. Arun Saraf, Chairman and Managing Director; Mr. Varun Saraf, Chief Executive Officer; and Mr. Tarun Jaitly, Chief Financial Officer. [Operator Instructions] Please note that this conference is being recorded. Certain statements disclosed in this presentation or that may be disclosed over this call may relate to company's growth prospects that are forward-looking statements within the meaning of applicable securities laws and regulations. These forward-looking statements are not the guarantees of future performance, and they are subject to known and unknown risks, which are beyond the control of the company. I now hand over the conference over to Mr. Arun Saraf. Thank you, and over to you, Mr. Saraf.

Thank you. Good evening, everyone, and thank you for joining us on today's call to discuss our financial results for the first quarter of fiscal 2026. I'm pleased to report that Juniper Hotels has delivered a resilient and good performance in Q1 FY '26. In the face of a quarter marred with sector headwinds as a result of Operation Sindoor in the Indian subcontinent during May. In spite of interim impact of Operation Sindoor, Juniper achieved highest ever Q1 revenue of INR 221 crores. Our results reflect not only the inherent strength of our premium portfolio, but also the effectiveness and our focus on improving operational efficiencies across our properties. This month of May saw significant disruptions in air travel, especially across Northern and Western India. Both domestic and international travel was impacted as with the temporary shutdown of approximately 30 airports across multiple states as well as cancellations of more than 200 flights. While demand has rebounded very quickly as things normalized. June saw another unfortunate aviation accident in Ahmedabad. Our prayers go out to all the victims and families of the airplane crash. Mumbai, Delhi and Ahmedabad experienced sharp cancellations of corporate and transient bookings and deferment of MICE events immediately after the Sindoor was launched. Travel advisories led multinational companies to postpone and relocate conferences, pushing citywide occupancies and rates down. However, the underlying demand continues to be strong in hospitality space, which has seen the ARRs continuing to grow on a year-on-year basis. Juniper portfolio also achieved a 9% growth in ARR over last year. Indian hospitality sector is currently benefiting from strong domestic demand and a favorable demographic shift towards higher income households, good infrastructure development and a policy of support by the government. As per industry reports, branded hotel supply is expected to grow at 8.4% CAGR through FY '28, while demand is projected to outpace this at 10.4% CAGR. In this context, the luxury and upper upscale segments where Juniper operates are expected to continue outperforming due to a persistent demand-supply gap. Ample headroom is there to sustain RevPAR growth across industry, providing continued tailwind to our pricing and profitability. It is also important for me to spend some time on walking you through our growth plans that have manifested into a robust pipeline of upcoming hotels. We have a clear and ambitious trajectory focused on doubling our key count to 4,000 by financial year '29. To elaborate more, Bangalore Phase 1 continues to be progressing very well on track to achieve the opening of hotel with 235 keys by end of Q4 financial year '26. That is by end of quarter four this financial year. We have already completed design phase of Bengaluru Phase 2, the additional rooms to be added to this existing hotel that we are now going to open in Q4 of '26. This expansion of 273 keys will make it one of a very large big box hotels in our portfolio. We have also completed the design work of Guwahati Hotel located Downtown Guwahati, and we set to add another 250 rooms to our portfolio. And we intend to initiate construction of 116 key Kaziranga project by September of this year. Juniper has also submitted bids for NCR and Bihar greenfield opportunities, which will be opened by August end. I hope that we will be able to be successful in these two bids, and they will become a significant part of our going forward growth trajectory. The ROFO integration process continues to make positive progress, and we remain confident of our timelines of integration in FY '27. This pipeline enables a step-up in growth every year till FY '30. Contemplating our strong underlying portfolio, which itself will continue to deliver steady compounded growth. Before I hand over to Tarun Jaitly, our CFO, let me sign off by reiterating that our disciplined financial management, strategic growth investments and unwavering commitment to service and excellence, position us well for the quarters ahead. I'm confident of achieving key growth goals as set out above and ensure a sustained value creation for all our stakeholders. Thank you.

Thank you, sir. I'll walk you through some of the key highlights. The presentation has already been circulated, so I'll keep it short. The total income for the quarter stood at INR 227 crores, which is an 11% Y-o-Y increase, and this is in a quarter, mind you, where we saw this impact of Operation Sindoor. The important thing, the driver for the overall revenue growth has been ARRs, which have grown 9% Y-o-Y. And that just underlines the continued and inherent demand pull, that the sector continues to witness. Mumbai saw ARR rose by 13% in Q1, while Delhi ARR increased 9%. Importantly, the apartment ARR also increased 18% in Delhi and 24% in Mumbai. Mumbai, Ahmedabad and Lucknow outperformed their respective comp sets in ARR during the quarter, and they were the key drivers for this growth. On the occupancy side, overall occupancy grew 2% to 71% for the overall portfolio in Q1 despite the cancellations and demand impact because of the May events. The standard annuity business, which comprises the lease and the apartments increased to roughly INR 34 crores. We are seeing today the lease space occupancy at 85%, which also provides headroom for growth to increase the occupancy over the next few quarters. Juniper achieved a healthy growth of 5 percentage points in EBITDA in this quarter vis-a-vis the Q1 last year, translating into a 27% Y-o-Y growth in EBITDA to INR 86.4 crores. The key influences for this expansion in margins are, as I said, ARRs. Second is reduction in heat, light and power energy costs for us as the contribution of green energy rose in this quarter vis-a-vis the last quarter. Admin and general expenses fell from 12.5% of revenue to 11.5% and the reduction in R&M costs were roughly around INR 2.5 crores in absolute terms during Q1. The margin expansion could have been higher, but the limiting factors were the Operation Sindoor impact and also some amount of increase in consumables during the quarter. On the interest cost side, interest has fallen 21% Y-o-Y, reflecting our reduced debt. Our average cost of borrowing is today around 8.3%, and we expect it to soften further given what's happening in the benchmark rates in the sector. Juniper achieved a PBT before exceptional of INR 35 crores, which is a 167% growth Y-o-Y. I would like to note that there's an exceptional item, a provision of INR 17.1 crores in Q1 FY '26. This is on account of an incident in Bengaluru, fire incident in Bengaluru happened in April '25. And that is the provisional, provision that we have taken during the quarter. We expect to receive further tranches from insurance claim. It's fully insured, and these provisions will be reversed as and when we continue to get the insurance claims over the next few quarters in this fiscal year. We maintain that Bengaluru hotel opening timelines continue to be, as Mr. Saraf also reiterated by the end of this fiscal year. We are continuing to, we are open to maintain that time line. And looking at the balance sheet, we continue to maintain a strong and healthy balance sheet with net bank debt to TTM EBITDA at around 1.3. And as communicated earlier, with a five-year outlook up to FY '30, we enjoy a significant headroom of INR 3,000 crores, which comes in from a mix of comfortable debt metrics, strong cash flow and cash deposits on hand today. With that, I would like to hand over the floor to the operator, and we are open for Q&A.

[Operator Instructions] The first question is from the line of Abhay Khaitan from Axis Capital.

I congratulate the team for very good numbers this quarter. So, my first question is on the ARR trend. So, while we saw that the luxury segment has seen a very strong ARR growth of around 12%, the upper-upscale and upscale segment have seen a 6% growth. So just wanted to understand if there are any particular hotels or segments where we are seeing some sort of slowdown? Or is it like a broad-based thing in this segment?

So, for the quarter that has gone by, the ARRs obviously have increased much more sharply in Delhi and Mumbai than possibly in Raipur and Hampi. But again, this is intermittent trend. There is no specific reason that I can attribute for a marginally lower growth compared to Delhi and Mumbai in ARR in the quarter gone by. There is no structural difference that we see that would cause that on an ongoing basis.

My second question is on the Grand Hyatt Mumbai in particular. So last year, around Q1 and Q2, we saw significant renovation work, and which caused the impact on occupancy. So, when can we expect to see that sort of incremental revenue sort of being coming in, whether we probably would be in Q2 and Q3? And if so happens, can you quantify how much would be the incremental revenue that we are looking at just based on the fact that the renovations work is over, and we expect full occupancy there?

Right. So, in Q4 last fiscal was the first quarter when we saw the numbers of stabilization of Grand Hyatt, which continues in the current fiscal year. The only aberration is Q1 because of the Operation Sindoor that led to not only just the cancellations, but overall travel bans, and all the other events impacted Mumbai and Delhi markets, which see a lot of inbound and outbound traffic, and that has impacted this quarter from an occupancy standpoint. But that's not impacted the ARR despite the short-term occupancy impact. We will, and we are continuing to see month-on-month now the impact of stabilization of Grand Hyatt occupancy, and we will see the full benefit of it for this fiscal year as we had promised and communicated earlier.

Another question, if I may, regarding the foreign travel aspect. So as Mr. Saraf mentioned in his opening remarks as well that bulk of the demand is still coming from the domestic side. But are we seeing any improvement in the foreign travel yet? Or this quarter, again, because it was impacted by Operation Sindoor, we still are not seeing the incoming of foreign tourists?

So, we're seeing now the pickup post Operation Sindoor, obviously, there was impact. But if we see the past two months trend, I think we have come back to the normative levels of foreign versus local traffic at least across our portfolio.

So Q1 is relatively low on foreign travel coming in. If it's the leisure segment, which does affect our Delhi and a few other hotels, that usually happens in Q3, Q4, you may see an upside there. But as of now, as Tarun mentioned, it is at a stable state.

And just the last thing for me. So how has the July and August trended in terms of overall growth? Are we seeing the momentum being continued in the last two months as well?

Okay. So, I can share some numbers with you on ARRs, right? I mean, so if you look at the July ARRs in Delhi, for instance, we continue to see a 13% growth, 18% growth in Ahmedabad, Raipur, 5% plus Y-o-Y growth. So, I mean, those growth trends overall, we're continuing to see. On an overall basis, in July, our ARRs would have grown by roughly 6-odd percent Y-o-Y, but we intend that this would pick up momentum as we get into the next few months. And also, just to cap it up, the ARRs on apartments have also grown between 8% to 19% in Mumbai and Delhi, respectively.

Okay. And sorry, what is the number for Mumbai, Grand Hyatt?

8% apartment and residence is 19% in Delhi.

Okay. And the Grand Hyatt hotel by itself?

Grand Hyatt continues to see a couple of percentage points increase Y-o-Y on the ARRs.

[Operator Instructions] Next question is from the line of Sumant Kumar from Motilal Oswal.

So, can you talk about the MICE activity in the current month? And also, how is the forward booking So I'm talking about the MICE activity in the current month. How is the MICE activity and forward booking for that? Because of Operation Sindoor, we have seen a cancellation. Is there any spillover of the business to coming months? And also marriages have been rescheduled to the coming auspicious day. So how is the booking for that also?

So the display, so there were cancellations in May and June. I believe those businesses will be picked up going forward. Q3, Q4 business on books is very, very strong in the bigger cities. Even the smaller cities are doing very well. So in my opinion, the business that is, it's been displaced. It's not being canceled. And some events, some large MNCs, which did land up canceling, I believe they will reschedule. So I believe the MICE segment remains very strong, and that is one of our strengths at Juniper, and we will continue to play to that.

Can we expect the Q2 is the occupancy side, we can see improvement for Juniper and ARR also momentum is going to strengthen from Q1?

Yes. Compared to Q1, you will definitely see an improvement in terms of ARR as well as in terms of the numbers.

Okay. And the forward booking is also strong?

Yes. Forward bookings for Q3 look very, very strong.

And Q2? Compared to previous year, say, the forward booking percentage in Q2 FY '25, how is the Q2 FY '26 forward booking?

Also the same trend will continue. Compared to last year, Q2 will be better. You will see a growth.

Okay. And now coming to the foreign customer, how is the momentum compared to previous year so the current quarter?

So foreign travel was affect, I mean, let's, if you want to go back historically, in general, there is less foreign travel happening in terms of business, right? Domestic share as part of overall business has increased. Compared to Q1, I mean, Q4 of last year and Q1, there is a decline. I think the travel advisories did have an impact. Delhi did not have any major dignitary movements coming in, in May or June. So that did impact the foreign travel. But I do believe as things have stabilized, this will come back to a normalcy and it will continue to increase.

Next question is from the line of Lokesh Manik from Vallum Capital.

My question was on the tax charge. So Tarun, the deferred tax is at roughly INR 8 crores. Do we continue, expect this to continue going forward? Or does this go to zero now from the next quarter?

So we'll, this time also, there's a reversal on the tax, deferred that we've taken of around INR 8.9 crores. As we get more profitable, you will see some amount of tax reversal that we have. At least for this year, there would be a marginal tax status that we would have. But we continue, as I said, we continue to have a large amount of tax shields which will help us go in the next couple of years.

So the amortization at INR 8 crores will roughly continue plus/minus INR 1 or INR 2 crores.

Yes, plus/minus... Yes, yes.

Next question is from the line of Raghav Malik from Jefferies.

Congrats on a good set of numbers. I had two questions. So the first one is on Grand Hyatt ARRs. I believe Mr. Jaitly mentioned just now for July and August, it is stacking a few percentage points higher versus last year. So is this more a function of the Mumbai market -- slow growth in the Mumbai market? Or is it more because of slower growth post reopening for some of the renovations that we have done? Like could you provide some more color on this, please?

So, no, it's not an impact or slow recovery from the renovation. I think we have the full inventory of Grand Hyatt, as I said, since Q4 last year. It's just that last, the quarter gone by, generally, the overall market has been a little slow. But I think given the context, we are continuing to see, as I said, a reasonably decent ARR growth, fairly healthy. And if I were to give you a number, let's take, for instance, the Q1 for Grand Hyatt, the ARR grew 13%, right? We kind of outpaced the comp set. Delhi, the ARR grew 9%, and we kind of outpaced the comp set there also. So, I think overall, while we will trend with what is happening on the broader market with a fresher product and higher share of transient and MICE business, we should, we are aiming to at least outperform our comp set in the key markets in which we operate.

Sure, sir. And also, occupancy for last year because of renovations would probably be much lower, right? So, if you look at RevPAR, maybe that would track significantly higher than ARRs in any case?

Yes. As you will go forward in the next few quarters, you will see Y-o-Y better RevPAR growth.

Sure. Understood. And the second question was on, so in your presentation, you mentioned this fourth upcoming assets beyond Kaziranga, Bangalore and Guwahati. So, could you provide some color on that? Any details there?

Yes. I would request Varun Saraf to answer the question.

So, in terms of our ongoing projects, Bangalore Phase 1, as I said as was mentioned, is, the work is ongoing. We expect to open that hotel in Q4 of FY '26. That's 235 rooms. During our last discussions, we had mentioned that Phase 2 for Bangalore would also get launched. We have launched it. The design process has been initiated, drawings have been complete. Approvals are underway. We do intend to start construction of that as well towards the end of this current year. That's 273 rooms. Followed by that is the Guwahati project, we own this land in Chartered hotels. It has been sitting there since the merger of the company. It is there. This hotel will also be built. It will be a luxury hotel with 250 rooms. We have started the design process. The Assam government has reached out to us to actually, as we were doing the Kaziranga hotel, they've asked us to initiate this project, and we are taking this at a fast pace. We have started the design process, drawing approvals have been submitted. And again, we will intend to start construction of this towards the end of the current year. So, these are two ongoing projects, Phase 2, Bangalore and Guwahati where design has commenced. Kaziranga design complete approvals received, construction will start in September of this year, which is in two months. So, we are waiting for the monsoons to get over and then we start the work there. So that's 116 rooms. So, these are the four actual projects in the company where the work is ongoing. And the others were the bids, which we have, I do not want to speak much about it because we're still waiting for the results to come out, but that's 500-odd rooms that we have bid for in two different locations.

Okay. So 500 rooms additionally, which are not, which were basically mentioned in the presentation as potential future additions that are coming?

So those are the 2,000 rooms that we have committed. If you do add these up, you will get the figure of 2,000 rooms.

Next question is from the line of Prashant Biyani from Elara Securities.

Congrats on good results. Tarun, sir, for July, you have mentioned on the ARR front, but how has occupancy been on a Y-o-Y basis in July?

So on a consolidated basis for the portfolio, we are between, we continue to see in July roughly around 2% to 3% point improvement in occupancy Y-o-Y across the portfolio.

Okay. And sir, can you share the occupancy number for GHM and Andaz has for Q1?

So for Q1, you said?

Yes, sir.

Okay. So Q1, we saw occupancy in Andaz and at around 72% and Grand Hyatt was 67%.