SAMHI Hotels Limited (SAMHI) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Q3 and 9M FY '26 Earnings Conference Call of SAMHI Hotels Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] I now hand the conference over to Mr. Ashish Jakhanwala, MD and CEO of SAMHI Hotels Limited. Thank you, and over to you, sir.

Thank you so much. Good morning, everyone, and welcome to SAMHI Hotels' Q3 FY '26 Earnings Call. Thank you for joining us today. I'm also joined by our CFO, Rajat Mehra; our VP and Head of Investments, Gyana Das; and Nakul Manaktala, SVP Investments. Our Investor Relations advisers, Strategic Growth Advisors, is also on the call. We have uploaded our Q3 FY '26 financial results and investor presentation on the stock exchanges and on our website, and I trust you've had a chance to review them. Let me begin with a brief overview of the quarter before Rajat takes you through the financial results. Quarter 3 FY '26 was a strong operating quarter for SAMHI, delivered in a period that saw external disruptions, including the largest Indian airline facing operational challenges during December. Despite this, the portfolio demonstrated resilience and pricing power. Same-store RevPAR grew by 13% year-on-year to INR 5,643. Total income growth was 16% Y-o-Y to INR 342 crores for the quarter. On an underlying basis, the EBITDA grew by 19% Y-o-Y, reflecting strong operating flow-throughs. However, changes in GST regulations impacted the margins, which moderated the reported EBITDA growth to 13.2% on a Y-o-Y basis. Even though there's a short-term impact of GST in part of our portfolio, we believe it will lead to greater sales volumes as hotels become more affordable, especially in the mid-scale segment and will offset any impact in the long term. Further, it is important to note that all of our new inventory being added is in upscale segment, which will remain largely unaffected by this change, but also benefit from marginally lower CapEx due to reduction in GST rates across several construction items. This performance reinforces the strength of our city-centric business travel portfolio spread across India's most resilient office market. For the past 9 months, office absorption across key markets remains very strong and has supported same-store revenue growth, significantly ahead of our long-term target, which we've always said is between 9% and 11% Y-o-Y. Now, let me briefly touch upon our key growth initiatives. The 170-room W Hyderabad continues to progress as planned. Design development is mostly completed and building modifications are underway. Mockup room will commence any time now. This is a marquee asset for SAMHI and will materially lift our ARR profile, both in Hyderabad and in the upscale segment. In Bangalore, the demolition and preconstruction activities for the 220 rooms Westin block in Whitefield Bangalore has commenced. This remains a fairly high conviction project in one of Bangalore's deepest commercial micro markets. Across the portfolio, we now have 4,900 rooms operational. We have incremental 1,900 rooms under development or rebranding, of which about 1,450 rooms is a net room addition. These projects will gradually shift our revenue mix towards upscale and upper upscale, which is currently 42% contribution to about 60% upon completion, improving long-term earnings quality. Besides this, we continue to have a very high-quality and actionable pipeline of opportunities to fuel our future growth and majority of it as of date are in form of capital-efficient variable leases that can be easily funded from our cash flows. With that, I'll now hand over to Rajat to walk you through the financial performance in more detail.

Thank you, Ashish. Good morning, everyone. Let me take you through the financial performance of Q3 FY '26. Total income for the quarter was INR 342 crores, up 16.2% on a year-on-year basis. Same-store asset income grew by circa 14% on a year-on-year basis. New opening, including Trinity Whitefield and the new Holiday Inn Express rooms in Kolkata and Greater Noida contributed to incremental revenue. This was partly offset by income loss from sold and discontinued assets, including Four Points Chennai and Sheraton Hyderabad commercial floors, which we have converted to 42 rooms. Consolidated EBITDA stood at INR 126 crores. Reported EBITDA grew by 13.2% on a year-on-year basis. Excluding the GST impact of circa INR 6.7 crores, EBITDA growth was 19.2% on a year-on-year basis. GST impact was mostly in our mid-scale portfolio, where a fair bit of our revenue actually comes from rooms being sold at less than INR 7,500. EBITDA margins were 36.9% as compared to 37.9% last year. This drop in margin attributed to the GST change of circa 200 basis points. Underlying operating costs and flow-through remained stable during the quarter. Our finance cost declined sharply to INR 40 crores versus INR 60 crores last year. The cash interest outflow is in the range of about INR 34 crores for the quarter. Balance cost in the finance cost represents non-cash and Ind-AS adjustments. Our profit after tax for the quarter was INR 48 crores. The PAT attributable to SAMHI shareholders is INR 39.6 crores, while the minority interest accounted for INR 8.5 crores. As on 31st of December 2025, our net debt stood at INR 1,450 crores. The average tenure of our facility is circa 12 years, which actually allows us a strong margin of safety in terms of our liquidity. The trailing 12-months EBITDA, excluding non-cash ESOP cost increased to INR 482 crores. Our net debt-to-EBITDA remains stable at 3x. Importantly, we continue to fund our growth CapEx through internal accruals with no material increase in the net leverage expected. With that, I hand over to Ashish.

Thanks, Rajat. So in conclusion, quarter 3 FY '26 reinforces 3 key messages for SAMHI. The first is that while global headlines remains volatile, on-ground indicators in our core markets show a strong trend line driven by India's economic engine. Our portfolio continues to deliver strong, consistent operating performance and growth and can manage repeated event risk as we have seen in the last 9 months. And the last bit is that we have a strong growth pipeline and all the resources to deliver to achieve our targeted revenue of circa INR 3,000 crores by 2030. We will now open the floor for questions.

[Operator Instructions] The first question is from the line of Vikas Ahuja from Antique Stockbroking Limited.

My first question is, as we are already at the end of January, how is the current quarter shaping up? Does the momentum seen so far will continue? With the World Cup coming next month, do we anticipate any uptick from this event? Overall, just trying to understand, does momentum improve from here on? That's my first question.

Thank you, Vikas. So, yes, the business on books for February looks pretty strong. January is always slightly slow because of the year-end break. And this year, the 10th January extended to pretty much 15th January because of the pattern of school holidays in North, especially Delhi and all. But February looks extremely strong and not just because of the World Cup actually, Vikas. Generally, a lot of demand is getting compressed between now and end of January -- end of February and early March, so we do think that the momentum that we've seen in quarter 3 will actually continue in quarter 4.

Okay. And in terms of the net debt, I think it increased by INR 80 crores this quarter to INR 1,450 crores. Could you help us maybe break down how much of that increase was driven by CapEx and how much of that CapEx was offset by operating cash flow? Additionally, you had earlier guided for INR 300 crores of debt reduction from internal cash flows by 2030. Does this still hold on considering that we have announced incremental expansion during the last quarter?

So Vikas, largely, the minor change in the net debt was on account of Navi Mumbai, where we had to make a certain extension payments to the authorities. Two, we are anticipating some inward investment from GIC in the Bangalore project. So, there's always a bit of a mismatch in those 2 things. So, that INR 70 crores, INR 80 crores was largely on account of the Navi Mumbai payment. In terms of our long-term guidance, both on net debt and also on gross debt reduction continues to remain as is. I know there is incremental investment that we have committed to Navi Mumbai. But if you look at our investor presentations, which we've uploaded earlier, the cushion between our total cash accumulation and CapEx continues to be very comfortable. In addition to that, as we have demonstrated in the past, Vikas, we continue to seek opportunities for very, very limited asset recycling. So, I think we remain fairly comfortable and confident about continuing to achieve that number of debt reduction alongside maintaining the CapEx plan that we have put together.

And the removal of this input tax credit led to moderation in EBITDA, which we highlighted in the presentation by 200 basis points. Does this imply that over the next few quarters, EBITDA will grow at a slower pace than revenues? Or do we have levers to offset that in the near term? And also for FY '27, should the revenue growth largely mirror the RevPAR growth with only incremental additions given that most of our capacity expansion is expected to start from FY '28 as the HITEC City properties also expect likely to complete end of FY '27? And also, one lastly, one housekeeping question. Can we also -- possible to get our ADR growth number for this quarter?

So, a couple of them. One is on GST. So, see the GST impact will be visible for the short term. We do expect that overall reported numbers will kind of not show that from quarter 1, and that's just the adjustment to the base effect, Vikas. Don't forget last year first quarter was pretty terrible because of India Pakistan, the Ahmedabad Air India crash and all of that. So we think that there will be a 150 basis point, 200 basis point impact on margins because of GST in the short term. But yes, I think there are more than enough levers to start offsetting that, but it will take a quarter or 2 really. So that's on one. Two, second question was really around the next year FY '27. So, I think in FY '27 while there is no large opening, Vikas, but there's a lot of other levers that will come into play. The first really is that if you see, we were adding very small bunches of inventory this year. But having said that, all of that is now fully operational and will get full year benefit in next year. And some of the hotels like Sheraton, Hyderabad, which are clearly outperforming the averages are the hotels which are benefiting from almost a 20% inventory growth because of the new additions. So that -- the Trinity Hotel in Bangalore, which we had acquired last year, has really ramped up well. We expect that to start kind of outperforming through FY '27, the new rooms in Holiday Inn Express. So FY '27, we have reasonable levers to kind of add on top of same-store RevPAR revenue growth. That was your second question. Third question was in terms of your ADR occupancy. So, if you see same-store, the ADR growth was 15.9% Y-o-Y. The occupancy was stable at -- not stable. It was 73% had dropped about 1.6 percentage point. The total RevPAR growth, therefore, was ending up being about 13.3%, right? This is all same store. And we continue to believe that all operating parameters should only be reported on same store.

Sure. I get it. Many thanks and wish you luck for the next quarter too.

The next question is from the line of Jinesh Joshi from PL Capital.

Sir, my question again pertains to the GST impact. I mean, in response to the previous participant's question, you mentioned that there can be an impact of about 150 to 200 basis points in the next couple of quarters. I was just wondering whether a pass-through of this cost increase is possible or not, especially on the corporate side? I understand that typically, the negotiations happen on an annual basis. But given the loss of ITC credit, can we not renegotiate for a slightly better rate, at least on the corporate side? So your thoughts on that? And also on the retail side, I was just wondering whether a pass-through is possible or not? And if not, I mean, what are the challenges on that side?

Jinesh, very important question, actually. So, let's tell you the -- what's happened in the quarter. So, first of all, the pass-through is already happening. And if you see for the quarter when same-store grew at about 14%, and let me tell you, if we were to do an impact of the airline crisis in December, it was pretty, pretty substantial. Now if you look at the revenue growth in the mid-scale segment that we have shown on Page #15 of our presentation, actually, the mid-scale segment, which has the highest impact of GST also showed a revenue growth of 16% and 14%, respectively, right? Now, what will happen is, of course, the input tax credit loss will show in higher costs. But if you look at the total growth, is still pretty substantial in those 2 segments. So the alignment needs to happen in the reporting. The actual number continues to be, in our opinion, reasonably strong, especially given December was almost a 3-week wipe out. We are typically prepared for December to be a 10-day wipe out, but December almost became a 3-week wipe out because of the airline crisis, which started in the beginning and then continued because of the year-end/new year vacation and all of that, right? So, Jinesh, I think in quarter 4, February onwards, you'll start seeing a pretty back strong recovery to margins, but that's largely driven by revenue growth. So, yes, you're right, pass-through has already started happening because the revenues have started going up. But I cannot change the way the numbers are reported, which is even reflect in the cost line items.

Got that. And sir, on the corporate side, when do annual renegotiations typically happen? And if it is nearby, are we going to take into account this ITC loss, which will be there with us and then renegotiate for rates accordingly?

Answer is yes because the customer clearly understands that if he was paying INR 100 of room rate and INR 12 of tax earlier, there was INR 112 being paid by the customer Today, it's INR 105. So, if we account for a slight increase, he'll still be paying INR 112 or less than that. So as any contract is renegotiated, you will start seeing -- and Jinesh coming back, that actually helps increase demand because while we can increase the room rate, offset the cost impact, there is not really -- the real growth for customer will still be 7%, 8%, 9%, right? But more important, Jinesh, the nature of business is changing now, right? We all who underwrite hotel sector needs to prepare ourselves underwriting the sold-out dates versus rest of the year. And we are seeing the demand compressed between a few days every quarter. So let's say, last quarter, it was November and November would have contributed majority to the quarterly profits and growth. This quarter, it's going to be period starting from 20th January or 25th January till pretty much middle of March, right? And therefore, in those days, contracted rates play very little role because our ability to reprice hotels on a daily basis 3 times a day is very, very strong. So, hotels, which have an average rate of INR 13,000 are already priced for INR 20,000 in the month of February, Jinesh. So, I think the industry has changed the dependence on the locked-in RFP prices for the year and its impact on the average reported room rate is kind of diminishing every year. So, we are not worried. I think the demand is very strong. You will start seeing fairly quickly this whole cost being absorbed because we do feel that GST reduction is across the sectors and industries, which should help boost overall economic activity and give us the paybacks.

Got that. Sir, one last question from my side. Our F&B revenue was up by about 9% in this quarter. And I guess in the previous quarters, we had mentioned that ballrooms are under renovation, especially at Hyderabad and Pune. And accordingly, we should expect some kind of a pickup happening on the F&B revenue side in second half of the year. But this 9% growth, when I compare it with our same-store RevPAR growth of about 13%, it is still lower. So just wanted to check on this part, whether those ballrooms are operational or not? And if yes, then why the F&B income still lagging?

So, a couple of clarifications. First of all, the ballrooms are operational in both the hotels; Hyatt Regency, Pune and Sheraton, Hyderabad. The same-store F&B growth was actually 10%, not 9%. The 9% is overall. And there is obviously incremental rooms that we've added in Holiday Inn Express and other portfolios. And 10% F&B growth is actually pretty decent. While rooms have really outperformed at 13.5%, 14% RevPAR, but 10% F&B growth Y-o-Y -- this used to be 6%, 7%, Jinesh, till last year. Now we have gotten to about 10% F&B growth Y-o-Y. So I think ballrooms are starting to show impact. And as they stabilize, I think you will continue to see that mirror close to double-digit Y-o-Y growth.

[Operator Instructions] The next question is from the line of Vaibhav Muley from Haitong Securities (sic) [ Yes Securities ].

So, first of all, congratulations for a good set of numbers, sir. My first question was regarding our upper upscale and upscale segment. So, we have seen a bit of an occupancy decline for this segment, particularly in this quarter. Any particular reason for that?

Generally, what happened in December, Vaibhav, the airline issues that we saw in December.

Okay. Only pertaining to that, there was a bit of a...

Yes, because upscale tends to have group movements and conferences and MICE. And obviously, such a significant airline disruption led to massive cancellations. So that's why the entire occupancy -- slight occupancy dip you saw was in the upscale, upper upscale segment.

Understood. And next on Trinity Bangalore, I understand Marriott had taken over operations for Trinity in August. And just wanted to understand how has been the performance post Marriott taking over? And since now Marriott is operating the property, do we plan to delay the overall renovations plan for Trinity?

So, Vaibhav, while the team pulls out the exact number changes, I'll answer the second part first. So, what we are doing in Trinity is doing -- so earlier, we were thinking of investing about -- the plan was to invest about INR 70 crores, INR 80 crores in full renovation for it to be converted to a part of the Tribute collection and managed by Marriott. What we've actually done is, we've done an interim renovation. So we've already spent about INR 7 crores in this hotel, largely towards Fire Life Safety and in technology. We are going to complete a very small refurb program between now and March end, which is about INR 23 crores, INR 24 crores. And with that, we think the hotel is extremely well positioned to kind of move up on its rate chart. In terms of its performance, if you see, in July '25, this hotel was doing a total revenue of about INR 1.8 crores a month with a rate of INR 5,900, occupancy of, let's say, 55%, 60%. We have moved that revenue in November, December to about almost circa INR 3 crores average per month. So we've done that 50% growth in revenue, a little bit more than 50% growth in revenue. And the rate is now sitting between INR 8,000 and INR 10,000 on a monthly basis in October, November, December and occupancy being around 50%. So while the occupancies has remained the same because of renovation, we have pushed the rate almost 2x of what it used to be prior to the Marriott management. And therefore, the resultant asset income has gone from INR 1.8 crores a month to almost, I would say, INR 2.5 crores to INR 3.5 crores a month. So, yes, there is a sizable impact. And as we complete the current ongoing refurbishment, which gets completed by end of March, the next fiscal year, this hotel should start seeing very strong consistent performance with no interruption for renovations for full FY '27.

Understood, sir. Just lastly, on our recently added inventory, including Kolkata, Whitefield Bangalore and now the Sheraton Hyderabad and Pune as well. So, how has been early demand trends in the new inventory? Has the full absorption happened?

Yes. So, I'll give you -- I mean, the impact in FY '26 is going to be small, but FY '27 is when they'll start really impacting. So, I'll give you one example for Whitefield Hotel. We were just checking those numbers earlier. And sometimes you have reporting anomalies. For instance, Whitefield is an existing operating hotel, so it's classified as a same store. And we suddenly realized that the total revenue growth is 15% in rooms, but the RevPAR growth is 13.5% and mathematically, it's incorrect. And when we dig deeper, we realized that Whitefield Hotel, because of those 56 rooms has seen a total revenue growth -- room revenue growth of almost 45%, right? So those 56 rooms being added to existing 160-room hotel, saw that hotel revenues jump by almost 45% because those rooms are slightly larger. Calcutta is stabilizing really well. It's interestingly, even though people don't talk a lot about Calcutta, it is a silent performer. That hotel is stabilizing quite adequately. Now the rate is -- we are actually now touching -- okay. Well, it was almost doing an occupancy of 62% in the first few -- if you see from July till December, the average occupancy is about 62.4%. The rate is almost upward of INR 4,000. It's almost touching INR 4,500. It has contributed almost INR 6 crores since opening to our top line. So, all the hotels are stabilizing really well. Sheraton Hyderabad has just gotten added, so you'll see the impact of that coming in February and March. And same for Hyatt Regency, Pune.

Understood. And sir, our expansion pipeline shows status of development is still into design stage for all of our planned greenfield projects. So, are you confident that you will be able to execute projects within 2 to 2.5 years to stick to the mentioned time line?

So if you see Slide #18, we'll take you through project by project. For instance, in W Hyderabad, the work is going on on-site. Actually, the mockup should be ready in the next few months. So, it's an existing building and which is being retrofitted to being converted to a W. In Courtyard, Pune, Tribute Bangalore Whitefield, Tribute Jaipur, which is where you're seeing a lot of design, design, design. These are existing hotels, right? So these existing hotels have to be taken through a renovation, which will start, let's say, in April or so. So the timeline between design and start of renovation and complete is not like a greenfield project, which is 12, 18 months. You start, the first phase comes -- first of all, if they start going into renovation in phases, they come back also in phases. So that's why you're seeing a lot of [ status ] being designed. Coming to Westin Bangalore, the Westin Bangalore, we will put it as construction when the -- effectively, the RCC starts getting casted, but the demolition of the existing building has been completed, site leveling has been done. We should start the siding shoring in the next month or so. So, there's active work in all of those sites. The only [ where ], where it is true design is actually One Financial District, Hyderabad and the Navi Mumbai project.

The next question is from the line of Ronak Porwal from Nuvama.

This is Rajiv here. Sir, I am on Slide 13 and 14. This is the same-store revenue. If I just [ take ] that and for this quarter, it is looking like the incremental margin on this revenue is close to 4%. But considering that we are -- we have grown RevPAR at 13-odd percent. And in the previous few quarters, we have seen this number shooting up to close to 60%. So, while the revenue is driven more by room revenue, I believe the flow-through should have been higher, right? Any thoughts on this? [Technical Difficulty]

Ladies and gentlemen, the management line has been disconnected. Please hold while we get them reconnected. Ladies and gentlemen, thank you for being on hold. The management has been reconnected. Thank you and over to the management.

Sorry. Rajiv, you are on the call. Can you start your question again?

Yes. So, I was talking about Slide 13 and 14, which is on the incremental revenue and incremental EBITDA. So, if I were to calculate incremental margin for this quarter, it is close to 44%. And considering that it is largely driven by room revenue, which has grown at a faster pace, the flow-through should have been higher, right? Because we have -- in the previous quarters, we have seen this number hovering close to 60% as well. So, your thoughts on why the flow-through is lower?

So, I think, Rajiv, a large part of that was the expected drop in revenues in December, and that's why the flow-through is only about 45%. You're right, the should be ideally about 55% to 60%.

And the GST is actually -- our margins would have been -- our growth would have been 19%. Yes.

So, I think it's largely because of the December impact because December upscale kind of dropped from -- so what happens is that every hotel is prepped for a certain quarter in terms of the revenue buildup. And therefore, we saw a strong revenue buildup for the quarter. Accordingly, some of the adjustments to the operating structures, payroll and outsourced staff and all of that is done. But a sudden drop in revenues in the 2 weeks in December kind of made a slip on that flow-through, which typically should be in 55%, 60% and this quarter was 45%. So, you're absolutely right. There was a 10% slip in the flow-throughs.

Secondly, about your comment on, let's say, demand getting compressed in some particular dates, so what is -- I mean, what is the metric we should follow to just get a sense on, let's say, for the upcoming fiscal or the next fiscal, where -- how do we track this compression in the sense, dates? Any metric you track?

Yes. So, Rajiv, we track metrics. For instance, we have this demand compression graph where we say how many days in a year, the occupancy was in which band okay? So, let's say, how many days the occupancy was between -- thankfully, now there's no 0% to 30%. We had prepped it in the COVID time, so we had a graph of 0% to 30%, 30 to 50%, 50% to 70%, 70% to 90% and 90% plus, which is pretty much sold out, right? So, we do track across the portfolio and by hotel, what is that sort of demand compression that we are seeing? And also, how is the rate responding to those buckets? So, therefore, what was the average rate in the 70% to 90% bucket. And when the number of days the occupancy was above 90%, how did that rate move up and did we really yield those days. So, we are tracking that. We'll -- what we'll do is, Rajiv, we will in -- we used to put the [ semi-intel ] page. We will include that back where we'll show you this demand compression chart. So you can see what's happening this entire year...

No, this is just 3 quarters.

So, just show me this number. Yes. So, I'll give you an example. What's happening is for the last 3 quarters, if you see, the days the occupancy was upward of 90% is almost 30%. So, 30% of all days in the last 9 months across our entire portfolio, the occupancy was upwards of 90%. Incremental, 28% of the days, the occupancy was between 70% and 90%. So, if you add those together, you're almost at 50 -- 60-odd percent, 57% when the occupancy is upwards of 70%. And the other data that we need to see is how does the rate move. So, for instance, if the average rate between INR 70 to INR 90 bucket was INR 6,826, the same rate became INR 7,500 in the days the occupancy was about 90%. So, you can see how much you yield between 70%, 90% and 90%-plus, right? And if you talk about days when you're 50% to 70%, actually, the rate was only INR 6,000, right? So, you're moving from INR 6,000 to INR 7,500. So, we do track this demand compression trends across hotels and for the portfolio, which is what is showing us the fact that increasingly, it's about yielding that 1/3 of the year really well. And that creates the whole Y-o-Y growth, that creates the whole flow-throughs. All of that is a gift of that demand compression.

Yes. Just a follow-up on that. So, this shifting of bucket towards, let's say, higher yielding or where the demand is stronger, how far forward, let's say, the visibility we have in terms of giving confidence that FY '27 is looking stronger than FY '26 or I'll say, before that?

So, well, I can give you the secret sauce, but -- I can give you the recipe, but you can't get the sauce yourself, right? I think the answer lies in mapping holidays because they're very predictable, Rajiv. And you know today, you can map all the holidays on the graph. Increasingly, you have to account for certain event risk. Now the event could be different. Event could be India Pakistan or Ahmedabad or monsoons or an airline crisis or something, right? And what we are learning is, besides that mapping those holidays, you have to also map unknown events in different parts of the year and then layer up the positive events, the large group movements, the conferences, so on and so forth. I'll give you an example, Goa is going through a conference for oil and gas. I don't think one can find a room in Goa in the next 2 weeks or so. Similarly, when conferences happen in Bangalore, you can sell a room for INR 30,000, INR 35,000. So events are booked much in advance actually. So you have the ability to kind of map, I would think, 65% to 70% of how the demand compression will work. And the balance 30%, I hate to say this, is short lead where your revenue management team and your ops team needs to be really up on their feet to respond fairly quickly.