Apeejay Surrendra Park Hotels Limited (PARKHOTELS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Earnings Conference Call of Apeejay Surrendra Park Hotels Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Devrishi Singh of CDR India. Thank you, and over to you, sir.

Thank you, Ziko. Good evening, everyone, and thank you for joining us on Apeejay Surrendra Park Hotels Q4 and FY '25 Earnings Conference Call. We have with us Ms. Priya Paul, Chairperson; Mr. Vijay Dewan, Managing Director; Mr. Atul Khosla, SVP Finance and Chief Financial Officer of the company; and Mr. Rabindra Basu, Director, Investor Relations. We will begin the call with opening remarks from the management, followed by an interactive Q&A 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 earnings presentation shared with you earlier. I would now like to invite Ms. Priya Paul to make her opening remarks. Thank you, and over to you, ma'am.

Thank you so much. Good evening, everyone. On behalf of the management team at Apeejay Surrendra Park Hotels, I would like to welcome you all to our earnings conference call. FY '25 has truly been a defining year in our journey, and this performance is a direct outcome of the passion and perseverance demonstrated by our outstanding teams across the country. Their commitment continues to drive our success and strengthen our leadership position in the upper upscale segment of India's hospitality landscape. This year also marked a key inflection point in our luxury strategy with the successful launches of high-end properties, The Lotus Palace Chettinad and Ran Baas, The Palace at Patiala, which have further elevated our brand positioning in the upscale luxury segment. Both hotels have already won numerous awards and accolades. In parallel, our teams have done a commendable job in advancing and securing new high-end projects such as Juhu, Mumbai and Kochi. There are other developments that are going to set to enhance our presence in strategic markets and contribute meaningfully in the near term. Our premium hospitality vision also extends beyond hotels to F&B, with Flurys now operating 102 outlets across formats. This growth reaffirms Flurys position as a beloved and scalable brand in India's evolving F&B landscape. The F&B landscape continues to be a strong differentiator for us with signature restaurants and bars across our properties continuing to attract robust customers. We continue to invest in curating experiences and creating new concepts that reinforce the Park Hotel's positioning as a culinary destination. The hospitality industry is really well placed to benefit from growth in both domestic and international travel. And we, at the Park Hotels and at Zone Hotels, are strongly positioned across the country to capitalize on this momentum. Government initiatives are playing a crucial role in fostering sectoral growth with investments in infrastructure, airport expansion and tourism-led policies, paving the way for long-term industry expansion. All our greenfield projects at Pune, Visakhapatnam, Kolkata, Navi Mumbai are progressing well and are at advanced stages of permissions, et cetera. You will be hearing more of this in the near future as we harness the growth opportunities in India. With the portfolio of exceptional brands and a strong commitment to innovative hospitality services, we continue to maintain a distinct competitive edge. Our focus remains on sustainable growth through our clear position as a boutique luxury provider in the upper upscale segment. Our vision of leadership through differentiation continues to be our guiding principle. Setting us apart and reinforcing our unique value proposition across India. I'm delighted that our Board has approved a median dividend of 50%, a reflection of our performance and our commitment to sharing our success with our partners. With this, I would like to hand over to Vijay Dewan, our Managing Director, who will take you through the detailed operation and financial highlights of Q4 FY '25. Thank you.

Thank you, Ms. Paul. Good evening, everyone, and a very warm welcome to all of you. We are absolutely delighted to have you with us on this earnings call. On behalf of my entire leadership team, I want to extend our sincere thanks for your unwavering support and belief in our journey ahead. Your confidence has powered our momentum. And today, we are excited to share not just results but real progress. We are deeply committed to creating long-term value and build a business that makes us all proud. FY '25 has been a standout year for Apeejay Surrendra Park Hotels in terms of growth, progress and success, made possible for the commitment and dedication of our teams. It gives me great pleasure to share that we closed the year on a strong note, backed by consistent performance across both our hospitality and F&B verticals. Over the year, we deepened our presence in our key business markets, sustained leadership in occupancy and RevPAR and advance several growth initiatives across owned and asset-light portfolio. We have executed several key initiatives during the year, laying a strong foundation for future growth. We opened 2 palace properties, the Lotus Palace Chettinad and Ran Baas, The Palace at Patiala. Both of which marked our entry into the heritage luxury segment and have been received very positively by our guests. We also undertook widespread renovations across our portfolio, including the refurbishment of nearly 100 rooms and the successful relaunch of our 4 F&B venues. These efforts are already contributing to ARR upliftment and enhance guest satisfaction. The Lotus Palace Chettinad recorded an ARR of 14,699 for the year, and Ran Baas, The Palace at Patiala recorded an occupancy of 42% with an ARR of 24,000 in Q4. The ARR at Ran Baas is likely to further go up as the hotel matures and stabilizes. Ran Bass, The Palace effective February of 2025 is now a member of Relais & Chateaux, world's leading collection of 580 luxury hotels and fine dining restaurants. Membership, marketing, branding under Relais & Chateaux, as you know, means luxury positioning and luxury pricing. Both The Palace hotels, as they stabilize in this year, will lead to higher ARR at the ASPHL level. Q4 '25 has been the best ever for us with revenue registering a strong double-digit growth of 16.3% on a Y-o-Y basis and an operating EBITDA rising by 21% on a Y-o-Y basis. PAT grew by 44.1%, reflecting strong demand trends across both business and leisure segments. We continue to retain our occupancy leadership, achieving India's highest occupancy of 92% and maintain our position as a market leader in RevPAR in the upper upscale segment. Our flagship properties in Kolkata achieved -- our flagship property actually in Calcutta achieved 100% occupancy, while Navi Mumbai and Chennai recorded strong momentum at 95% and 93%, respectively. New Delhi, Hyderabad and Bangalore also performed well, each recording occupancy in the range of 91%. This consistent performance reflects our sharp focus on guest experience, operational excellence and brand strength, reinforcing our leadership in RevPAR in the upper upscale segment. Both ARR and RevPAR increased by 13% in Q4 on a year-to-year basis, reflecting strong growth across our portfolios. Growth in our hotel business remains our primary goal, and this will remain so. We have recently signed a binding MOU for the acquisition of 60 service apartments under Zillion Hotels & Resorts at Juhu in Mumbai. This has an acquisition cost of INR 209 crores for 90% of the stake. We expect to close this transaction by the end of July during the course of the year, and we plan to convert these 60 service apartments into an 80-room hotel with a rooftop bar. This hotel is expected to open in July '26 and will be positioned in the ultra luxury boutique hotel segment. Mumbai is India's strongest market in terms of ARR, and opening of this hotel will add a minimum of INR 25 crores to INR 30 crores in the bottom line in the full year of operation of the company. We have also signed an MOU to acquire Malabar House at Fort Kochi, 17 rooms and Purity Hotel, 14 rooms at Lake Vembanad. The Malabar house is also a Relais & Chateaux hotel with a high ARR. These transactions are expected to close by July this year. Since these are running hotels, they will immediately add to our revenue and EBITDA. And the total cost for this acquisition is INR 60 crores, payable in a structured deal of INR 22 crores in FY '26 and INR 38 crores in FY '27. In addition to these acquisitions, we plan to add another 206 keys on the asset-light side of the model during the course of the year. This, the overall target on the asset-light side of the model remains at 500 keys every year. As on March 31, 2025, we have now 35 hotels with a total of 2,394 keys and our growth momentum continues in line with our multi-brand strategy. Our development pipeline remains robust. And over the next 5 years, we aim to more than double our total key count to 5,403 keys, including 880 keys across our own projects in Pune, EM Bypass Calcutta, Vizag, Navi Mumbai and Jaipur. These projects are progressing as planned with permissions and preparative work well underway. We expect to launch sales of 100 service apartments at Kolkata ahead of the festive season with expected annual cash generation of INR 100 crores every year over the next 3 years. These developments are being executed on our in-house land banks, enabling high capital efficiency and strong projected IRRs of 30% to 40%. Supported by healthy cash flows and apartment monetization, we expect to remain net cash positive throughout the development cycle, a key part of our business strategy. I'm happy to inform that we have also received a credit rating upgrade of A+ Stable from ICRA, earlier this year, further validating our disciplined capital management approach. Flurys, our iconic bakery and confectionery brand, crossed the 100 stores milestone this year and currently operates 103 outlets with a growing presence across formats. During FY '25, we opened 25 new outlets included -- including launches in Mumbai, Indore, Hyderabad, Kolkata, Bhubaneswar and Siliguri. We are on track to reach 200 stores by 2027, the centenary year of Flurys supported by a new central production facility planned in the NCR region, designed to propel growth in the whole of North India. Moving forward we plan to open more cafes, which would be more profitable to our business. We continue to target industry-leading margins in Flurys and have set an annual target at a benchmark target actually of INR 1 crore for mature cafes and restaurants under the Flurys format. Coming back to our financial -- current financial performance on a full year basis, that is FY '25, consolidated net revenues grew by 9.1% Y-on-Y to INR 653 crores compared to INR 592 crores in FY '24. EBITDA for the year stood at INR 226 crores, up from INR 205 crores in FY '24. Profit before tax rose significantly to INR 148 crores, marking a 67.1% Y-on-Y increase, while PAT stood at INR 84 crores, highest so far for our company compared to INR 69 crores in the previous year. These results show the strength of our business model, robust customer demand and our consistent focus on operational excellence. I would also like to once again highlight that the Board has approved the first ever dividend of 50%, a milestone event in the company's history. This reflects the strength of our balance sheet and the strong growth momentum, which we have achieved and underscores our commitment to sharing our success. Finally, our long-term strategy continues to be guided by the 3G framework of growth, governance and green. Sustainability remains embedded in our expansion plans with focus on water conservation, carbon efficiency and responsible waste management. I am pleased to announce that 4 of our hotels are now IGPC Green Certified. As we enter FY -- as we are in FY '26, we do so with optimism and strong momentum. The business fundamentals remain solid, and our development pipeline is progressing well, and our strategic roadmap is supported by a prudent capital structure and a disciplined execution. As I have highlighted in the previous call, we believe that the hospitality sector is entering a long-term super cycle and would unfold over the next decades. Additionally, in segments like spiritual tourism, weddings, MICE, wildlife tourism will play a key role in the sector's expansion plan. In the last earnings call, we had given a guidance of sustained double-digit growth, and we have delivered. For this year '25, '26, we are now confident to deliver high-teen growth both in terms of revenue as well in terms of EBITDA margin. Once again, I would like to extend my heart filled gratitude to our shareholders, our customers, our team members, well-wishers, friends and business partners for their continued trust and believe in us. Thank you.

[Operator Instructions] Our first question comes from the line of use Hussain Bharuchwala with Carnelian Capital. May I request you to use your handset, please.

Am I audible now?

Yes, but it's slightly muffled, sir.

Yes. So basically, we acquired an asset in Mumbai. I wanted to understand what's the rationale of acquiring an asset in Mumbai because we were never positioned in Mumbai. And now entering into Mumbai markets, so what is the long-term vision? What was the purpose of acquisition? And we were debt-free -- we almost turned debt free with this. And now with this acquisition, how we will see our balance sheet shaping up?

So the balance sheet, as you know, is firstly, very, very strong. The company is currently net cash positive. And we have, at the moment, mutual fund deposits of roughly INR 60 crores or so. INR 54 crores, they were at the end of March, and now they are ahead of INR 60 crores as of now. And I expect this to be at the INR 70 crore mark by the end of June. Very critically we have to understand that every year, we are producing an EBITDA margin of over INR 200 crores. So this should be relatively helping us in remaining positive. Yes, there may be some short-term requirement of funds, which may happen during the course of the process. Bombay has been the missing link in our growth plan because it has always been our objective to be present in all the metro cities of the country. And once we are there in Mumbai, it will create a much stronger network in terms of corporate business as well as in terms of leisure business, it will propel further -- all the corporate transactions will further propel our ARR and our overall growth.

So is it an existing or running hotel, which is currently there? What I understand it's an old hotel, which we have to revamp and restart. So won't it take much time than what we anticipate? What is your thought process on that?

So this is -- firstly, to explain this in detail, this is a -- these are 60 service apartments, which will be converted into roughly about 80 hotel rooms, and it will be positioned not as service apartment, but as an ultra-luxury boutique hotel in Juhu. So what is going to happen as far as this transaction is concerned, we are supposed to pay only INR 160 crores, during the course of the year for acquiring 76% of the stake. The balance, INR 44 crores to INR 45 crores is actually going to be paid in the following year after about a year. So the deal is being structured at INR 161 crores now and about INR 45 crores at the end of the year. What will happen is that with this structuring, it will help us in managing our cash flow. What is, again, very important is that this is an existing structure. We plan to upgrade this, renovate this, and it will take roughly about a year. So we should be able to launch this hotel, as I mentioned in my remarks, by July of next year. And it will add about definitely about INR 25 crores to INR 30 crores to our EBITDA in a full stabilized year of operation. Very critically here is that we have acquired this property, and it has a 60,000 square feet of built-up area in the prime location of Juhu. So the acquisition cost roughly is roughly below INR 40,000 a square foot. In this area, it is important to note that most of the properties are selling north of 60,000. 60,000 is a minimum. In fact, good properties in this area are in the range of 80,000 to 1 lakh square feet, and we have actually got a fantastic deal in the acquisition of Zillion Hotels & Resorts.

Okay. Got it. Got it. And that was the only question from my side. And I just wanted to -- one more point if I can add. Can you guide on the growth plans for next year? What type of rooms and orders that we will add? What would be the keys that will be added for the next year? And how do you see the growth next year if you can add?

So firstly, I'm going to only talk about the deals which we -- which are fully finalized. So in the next year, as far as the openings are concerned, actually, it's going to be -- in terms of our own property, it's going to be this property in Mumbai, which is going to open. But during the course of this year, in terms of our own property, we have 2 hotels opening, the Malabar Hotel in Fort Kochi and the Purity Hotel in Vembanad Lake, which is 31 rooms together, and it also has a houseboat. Both these properties -- firstly, the Malabar House is part of the Relais & Chateaux collection of hotels, and it is -- both the properties are both high-ARR projects, and they are going to significantly help in further resetting our ARR at this level. During the course of this year on the asset-light side of the model, we have so far signed deals for 206 keys, which should open in a phase-wise manner during the course of the year with openings at Gangtok, Patna, Katra and another property in Kolkata as well as Darjeeling. So on the asset-light side of the model, 206 rooms are going to open. And on the ownership side, we are going to have 31 rooms of Malabar House and Purity. And in addition to this, we have 9 room lease acquisition at Casa Antonio, Goa, which is also expected to open by H2 of this year. So a total of 246 keys will open this year. And as I said 70, 80 rooms for the Juhu property, and we remain committed to adding 500 rooms to our asset-light model every year. Also in terms of our development plans, they are all in place. Firstly, the work is about to start by before the festive season this year at our property in Kolkata, which is 250 rooms and about 70 service apartment. Is, as we have explained earlier, is a 6 lakh square feet development of 3 lakh square feet for hotel and 3 lakh square feet for the development of service apartments. And these service apartments are going to be sold in the market. And the selling process of these service apartments actually begins during the course -- during this year. And on a year-to-year basis, this property, the sale of the apartments is going to bring in INR 100 crores of cash flow to our balance sheet. And this is also a very, very significant part of our growth plan. In terms of Pune, we are at the environmental clearance stage. And once we get the clearance, hopefully, by the end of this month, the construction work is about to start. And similarly, at Visakhapatnam, which is a 100-room expansion plan, we are at the CRZ permission stage, which is virtually being granted, except for 1 or 2 queries. That also is expected by the end of this month. And there also, we are ready to start construction and deliver the project on time. And similarly, I'm very happy to report that there has been additional FSI now available for our property in Navi Mumbai. And instead of doing -- actually adding another 80 rooms, now we plan to add 180 rooms. And with the kind of demand emerging in the Navi Mumbai area, we plan to make Navi Mumbai as a 250-room hotel going forward over the next 4 years.

Our next question comes from the line of Naitik from NV Alpha Fund.

My first question is I just wanted to understand the service apartments in Kolkata that we're going to sell, is there going to be any effect on our P&L for the same?

Service apartments, it is not going to impact the P&L at this stage, it will -- because when we sell the apartments, firstly, they are sold in stages in terms of the development of the apartment. This is a 6 lakh square feet development. 3 lakh, as I explained, is kept for the development of the service apartments. Now service apartments in Calcutta or the rate in the area of EM Bypass should -- is roughly around INR 20,000 a square foot. This, on a 3-year basis, gives us a total revenue of INR 600 crores. EM Bypass development of service apartment is a joint development agreement with the Ambuja Neotia Group on 55%-45% revenue-sharing basis. 55% accruing to us and 45% to the Ambuja Neotia Group with complete cost being borne by the Ambuja Neotia Group. So if you do overall math of this business, the sale from the business would be roughly about -- sale of the apartments would be roughly INR 600 crores. So roughly INR 300 crores coming from -- to us and roughly about INR 300 crores going to the Ambuja Group. The INR 300 crores we get is going to be coming over a period of 3 years with INR 100 crores cash flow coming in, in each financial year. They will be booked -- once the service apartments are handed over to the buyers, then only they will be booked into the profit and loss statement because -- as per RERA guidelines. At the handover stage, it will impact the P&L, it will shoot up the P&L positions. But as far as the cash flow is concerned, we would be getting INR 100 crores every year.

In FY '29, we expect to add INR 200-plus crore due to the sale of the apartment in the profit, 300 minus about INR 80 for the share of a land, 50% cost of the share of the land. So expected addition to the profit will be about INR 200-plus crores in the profit -- FY '29.

Right. Got it, sir. Sir, my last question is, if you could give me the EBITDA margin actually made in Flurys for this year?

So Flurys, firstly, the Flurys business during the quarter 4 actually, the record revenue of -- record growth of 37% on a YTD basis. Flurys business for us grew by -- actually, it's just a reverse, sorry. The Flurys Q4 revenues grew by 34%. And on YTD basis, Flurys business grew by 37%. And we have recorded an EBITDA margin of 12% in the Flurys business for this year.

And this would be without considering rent. So rent would below this 12%?

Yes, it will be below this. Absolutely, you're right. So Flurys business is being currently operated. Let me explain to you. We have 103 outlets with a very recent opening in the last few days in Gangtok. Actually, we were at 102 outlets, as mentioned earlier. So what happens is that out of the 100 outlets we have about 51% on 3 outlets. 51% are in the kiosk format at the moment, and 10% is in the restaurant format. And the balance 39% is in the cafe format. Going forward, we plan to -- we have -- as we understand this business better -- and this is the fastest growing business in the country, growing by about 19% to 20% on an annualized basis. And we have understood this now that the cafe business is more profitable. So we are going to be changing the mix of this business from higher kiosk to cafes as we go forward, and we'll make all efforts to see that it becomes further profitable. The F&B business, as we are seeing in the -- on an all-India basis, these margins, which we are producing for this business, remain industry-leading margins.

Right sir, is it possible to give the pre-Ind AS margin number for the full year for Flurys?

Atul?

Post rental, the margins should be around 8% to 9%.

Sir, my next question is if you could give the number for management contracts, the revenue that we did for the full year '25?

Management contract full year is INR 15 crores.

So important thing about the management side of the business, as Mr. Khosla mentioned, the business has grown from INR 12 crores to INR 15 crores there has been a fantastic increase of 24% in this business. And this business is very crucial to us because the -- it has a flow-through of roughly -- should have a flow-through of about 70%. So far, we have achieved 64%, 65% of flow-through. So as we move forward, this business will continue to grow at this rate and -- or even a faster rate. And we need to -- we will be further enhancing the flow-through from this business.

Right. So my last question is regarding the acquisition we did in Juhu. So if you could give us the expected ARR, occupancy and revenue potential that we are expecting from this property, that would be very helpful.

So firstly, let's look at the Mumbai market. It is really short in supply in terms of rooms. For your information, the Mumbai market has only 16,100 rooms compared to Delhi, which is also running short on supply. Delhi has about 16,200 rooms. What is very important to note is that over the next 5 years in Mumbai, only 1,800 rooms are going to be coming into the city of Mumbai as per the last report of Hotelivate and also supported by the [ HTL ] industry report. So Mumbai is actually going to have very, very limited supply. And more importantly, there is virtually no supply coming in into this area of Juhu. Juhu -- no supply is expected in the Juhu area over the next 5 years. And Juhu also -- Bombay operates in various micro markets, and Juhu ARRs at the moment are in the range of 20,000 to 25,000. So 1 to 2 years -- 1 year down the line, we also expect -- and with no supply coming in and particularly the 1,800 rooms are coming outside the Juhu area, we expect our ARR also to be in a similar range of 20% to 25%. And the Park's biggest advantage is that it never falters in terms of its occupancy. We have always achieved for all our hotels consistently over the last 10 years, over 90% occupancy. And with this huge demand/supply imbalance and specifically in the Juhu area, we expect very high occupancy and very high ARRs. That is why we are confident of delivering INR 25 crores to INR 34-odd crores in terms of the EBITDA margin. We are also very strong in managing night clubs and bars and this hotel is going to have a fantastic rooftop bar. And this bar is going to be overlooking from the rooftop, one could see the sea, and it's going to be -- it's going to make a very big difference to the top line of this hotel. And one of our biggest strengths is in running night clubs and bars, apart from having India's leading occupancy.

Right. Right, sir. So any kind of number in terms of revenue that we are looking at? I understand that INR 25 crores, INR 30 crores in terms of bottom line, you would be expecting this new acquisition would add to us.

So Bombay is going to, very clearly the -- because of high ARR, I'm expecting that the margin in this would be around 45% mark. So roughly about INR 70 crores to INR 80 crores should be the top line, which we have planned and consistently growing thereon.

Right. And sir, if I look at your next year's sort of guidance, double-digit revenue guidance, most of it -- is it safe to assume most of it is going to come from ARR growth only?

No. Firstly, growth -- firstly, in the last quarter, we -- I specifically made this guidance that we will achieve double-digit growth, and we have actually exceeded expectations by giving a 16% growth on the top line in Q4. We expect not only double-digit growth, as I mentioned, it's going to be a high-teen double-digit growth, both on the revenue side as well as on the EBITDA side. And we are very, very confident about it. But let me also give a slight amount of caution that it is going to be at a YTD basis we will achieve this high-teen growth. There is a certain amount of pressure, which is in Q1 of this year, not -- but for reasons, which are related to geopolitical tensions in the month of April. And our participation our war in -- our successful war in -- against Pakistan in May, and we are proud that we could defeat them, but that has had some sort of an impact on the growth. But the most important thing is that despite all this -- despite some sort of disruption in the North, we continue to be at the double-digit mark. So at the moment, at the end of May, I'm happy to report that our growth rate continues to be 12% at the moment, and we expect further improvement in our business in the month of June. So there has been a little bit of pressure in the month of May, but that is for the geopolitical reasons. But it is -- everything is back in line, and we expect good results in the quarter. But I am very confident to deliver on a YTD basis, high teen double-digit growth, which will come from the hotel side as well as the growth in our Flurys business.

Our next question comes from the line of Archana Gude with IDBI Capital.

Congratulations for the very good set of Q4 and FY '25 earnings. Two questions. Firstly, on the top line, you spoke about maybe the higher teens growth for FY '26. With these kind of numbers, so what kind of sustainable operating margins we should consider for FY '26, given that on Y-o-Y, the margins are slightly subdued for FY '25, but since the new hotels what we opened in FY '25, should have higher RevPAR than the last year and that should reflecting the better operating margins for FY '26?

Firstly, thank you, Archana, for this great question. And thank you for being with us over the years. So thank you so much. The important part is that, firstly, you mentioned that there has been a slight reduction in our EBITDA margin by roughly about 1%. But don't forget that this always happens when you launch new properties and you launch so many outlets of bakery and confectionery and cafes. So the each -- these two launches are very premium luxury segment launches, where -- which will pay high dividends as we go along as these properties mature and they stabilize. So there have been launch costs, there have been advertising costs. So for that reason, primarily, we can say that there has been slight reduction in the operating margin. But as we go forward, I'm very confident that not only we will deliver high-teen growth on the revenue side as well as on the EBITDA side, but we will be working to improving our margins from at least 100 to 200 basis points, not -- setting aside the 1% dip which we have had in Q4.

Sir, on this Flurys, a very robust guidance of adding 50 new outlets in FY '26 and taking the number to 150 plus, I mean that is very, very encouraging. Just on the margin side, sir, 12% what we achieved in FY '25, I'm sure with this focus of shifting the more to cafes from kiosks, that will add to your margin expansion. Plus, how do we envisage this number 12% taking to 15%, let's say, 2 to 3 years down the line? Because I think that's a very big lever for us as the company in terms of earnings growth as well as the company's value creation for the shareholders.

So firstly, what I have seen is that -- actually, in my opening remarks, I said that our first objective -- as we have understood, of course, and as we plan, our first objective is to see how do we get to at least INR 1 crore per store. Currently, if we look at the overall average, we are about roughly about 65 lakhs per store. And why is it 65 lakhs per store, is because we have -- because of the mix of the stores we have. So if we were to take this first towards more cafes and more restaurants but primarily more cafes, we will be hitting that target. So that will take us to a faster revenue growth model. In terms -- and also the margins, as we have seen because of high revenues in the cafes, are -- actually, the costs are well distributed. And as a result of this, the margins are going to improve because of that. So this -- the mere -- firstly, the shift from Kiosk to cafe is going to help in terms of improving of the revenues and with the improving of the revenue, the improving of the margin. And second is, of course, as we stabilize and as we mature, we will be constantly working to improve the efficiencies. This business also has certain amount of wastages, which are -- a lot of effort is now underway to reduce any kind of wastage. And reduction in wastages will also lead to improvement of margin.

Right, sir. Will say. And sir, lastly, if I can ask on book-to-bill question on the CapEx. So with this new acquisition plan for this FY '26 and that the capital expenditure of Flurys and the existing hotels, what kind of CapEx amount we should consider for FY'26?

Around -- roughly about INR 300 crores, but Atul will share with you the greater details of this.

See, in case of Zillion, we are putting a CapEx of INR 166 crores, which is the first tranche, and the normal CapEx is around INR 40 crores. And Flurys is about INR 25 crores, so about INR 65 crore this. 65 and 160, about 225. And another INR 80 crores to INR 100 crores will be on the project, so around INR 300 crores, INR 320 crores that is the normal spend -- this is spend for the CapEx this year. And out of which we have a mutual fund balance of, at present, about INR 65 crores. And plus this year, last year, EBITDA was 225. And this year, even if I put some high-teen growth also, so it will be -- I don't want to put -- place a number on that, but it will be about -- to high teens to around growth over the last year. So you will see it's fully covered in terms of financing, but we will be taking -- keeping as a matter of precaution, we will be keeping a line of credit available.

Our next question comes from the line of Vikas Ahuja from Antique Limited.

Am I audible?

Yes, you are Vikas.

My first question is, thanks for clarifying the war-related impact in May. Anything with this recent virus-led news any cancellation or any impacts we are witnessing around that front?

Could you repeat the question?

So I was saying that initially in the -- when last participant asked, you clarified the impact of war-led -- whatever you did talk about that growth in May is a little bit slower than it was earlier expected. Any impact you are seeing in terms of this virus-led news, which is going that the new variant -- a couple of new variants of COVID? Any kind of a cancellation or any impact we are seeing on that front?

So far, it has not impacted. It's not impacted the airline business and it is not impacted our business. But let me again tell you that as far as our hotel company is concerned that we have gone through a crisis in both '21 and '22 and during the COVID period also. Our objective was to give the best performance, and we had India's highest occupancy of 67% in year 1 of COVID and 72% in year 2 of COVID. So we -- even if things were to be not at the best, we would deliver the best results. But at the moment, there is no impact and we hope that it will have absolutely no impact because this is a variant and it's not an alarming situation. It's not being declared as an alarming virus so far. Yes, this will keep coming back. It came back in between also, and it did not impact our business. I do not expect or I cannot predict this on the whole. But as of now, I'm not seeing that it's going to have an impact.

My second question is, you just clarified on this Juhu hotel. So I think, maybe I missed it, but you did talk about that the bottom line is going to be north of 20% for this hotel during the normalized operation, so -- which means roughly it's going -- the acquisition is at single-digit EV/EBITDA on a full year basis once it's fully operational. Is that understanding correct? And just to follow-up to that. Our portfolio is pretty diversified across market, and now we are entering heavily into Mumbai also. So why do we think we should be available in all markets than just focusing on a couple of core markets, where we have more advantage? And just trying to understand why we are trying to be more and more diversified.

So Atul, would you like to take the question?

In terms of -- as you said, we expect about INR 25 crores of the EBITDA in case of Zillion. So INR 20 crores, INR 25-plus crores EBITDA. So INR [ 25 ] crores EBITDA, roughly, you are saying, yes, in terms of multiples, yes, 8 to 10 per -- single digit, about 8 to 9 is the multiple of acquisition.

So the acquisition is been looked at brought from the multiple point of view as well as we had to enter the city of Mumbai. So as far as the multiple is concerned, it is well in place. Actually, there is opportunity. I feel that once we have positioned it in the ultra-luxury segment and with virtually no supply coming in the Juhu area, there is no reason why this hotel will not give us roughly about INR 30 crores in terms of EBITDA. And that will fully justify our entry. And then don't forget that once you have entered the city of Mumbai and we have this entire metro city presence across all the 6 major metros, these are the key growth markets in the country. And this hotel at Juhu is also going to help the corporate tie-ups, and it will also help in terms of increasing ARRs further for the growth.

Just one final bookkeeping. You did explain that INR 300 crores would be the CapEx for FY '26. Is it possible to give us some rough idea of about FY '27 and '28 also? And how much would be maybe maintenance versus expansion CapEx? This is my last question.

So on an overall basis, I think over the next 5 years, our CapEx plan is roughly in the range of around INR 1,700 crores to INR 1,800 crores, depending upon existing and future acquisitions. But Atul will give you the breakup in greater detail.

So we expect about the 850 keys to be added at the rate of INR 1.2 crores per annum. So roughly about INR 1,100 crores is the construction cost you can see for the -- these are for the Pune, I'm assuming. Pune 200 rooms, Mumbai 250 rooms, Vizag 100 rooms, EM Bypass 250 rooms and Jaipur 150 rooms. So these are the costs, out of which I will have -- we will have a -- from sale of proceeds of -- cash flow proceeds of EM Bypass INR 300 cores comes back. So we have about INR 800 crores as the greenfield project costs. In addition to this, we have Zillion, about INR 210 crores as the total cost for -- the total cost and out of -- plus renovation about INR 50 crores. So INR 250 crores to INR 260 crores is the Zillion cost, Mumbai. And Kochi is another INR 60 crores. So another, say, INR 310 crores gets added. So we have a -- plus, we have a operation CapEx INR 400 crore -- INR 40 crores per annum, which is about 200. And Flurys addition we expect in 5 years, INR 200 crores. So overall CapEx comes to about INR 1,600 crores. We expect an EBITDA on an average basis also, if I take -- is about INR 250 crores for 5 years, which will cover about INR 1,250 crores. Now INR 300 crores will be financed so -- through some lines of credit or internal surpluses. I've not assumed further growth in EBITDA. But -- in addition to this, important point is that as the Pune gets operational, and Pune gets operational in FY '28 -- financial year '27, '28, so -- and EM Bypass post next year to FY '29, Vizag FY '28, '29, it will be, again, be 6 months operation; these hotels will have a revenue, which is expected -- total revenue is about INR 500 crore addition in revenue because Pune will do 100. For -- EM Bypass is expected to total do INR 125 crore plus. Mumbai -- Navi Mumbai if it gets in FY '30, it should also do INR 125 crore plus revenue. Vizag will do about INR 75 crore revenue, and Jaipur another INR 80 crore revenue. Since this addition of -- which year-on-year basis, they keep on added, this INR 520 crores to INR 550 crores will also add another 45% of EBITDA margin because these all new additions in the market are the prime locations. And as per the industry experts, like we did at IPO also HTL, the expectation is ARRs in all these areas at present, due to demand supply drag and the positioning of the markets, is about 10,000 plus is the ARR average. So that's is where we think so -- there is further -- so I don't expect that we will remain net debt surplus only.

Our next question comes from the line of Vaibhav Muley with Yes Securities.

Congratulations on a strong set of numbers. I had a few questions on your broad strategy. So we have recently acquired some of the smaller properties in leisure segment, including 2 properties in Kochi and 1 in Goa. So I just wanted to understand the rationale behind this, given our major presence is into metro and Tier 1 cities, and we have limited presence into leisure. So why have we gone for a smaller-scale properties, where the operating leverage benefits are also limited? And going forward, are we expecting to do such smaller acquisitions in future and that too on the leisure side?

So presently, we are well positioned in the metro city as well as in the business cities across India. So the missing link for us was being present in leisure destinations. Currently, we are operating hotels in the leisure destinations also, but under the asset-light side of the model. We -- roughly in Goa itself, we have about 120-odd keys on the asset-light side of the model. And this is 100-year old Casa Antonio, which we are going to take on the lease, is a 100-year old Portuguese Villa, which is -- which has 9 keys and it's going to be very unique and very special. It is in Anjuna Beach and very close to Purple Martini, one of the famous bars in Goa. So this will be our first presence in Goa on the lease side of the model. And there is, again, very high potential in the leisure markets in India. Leisure business has a higher demand/supply mismatch at the moment in India over the next 5 years. If we were to look at the overall demand/supply mismatch in the country, demand is expected to grow at 10.6% and supply is expected to grow at about 8%. But critical thing is to see how this is in the top 8 cities as well as in the leisure destinations. So the leisure destinations has higher demand/supply mismatch of about 400 basis points. So it is -- we feel it is the right time to enter the leisure markets. And also, we have got these 2 properties which are in Cochin. Firstly, it further strengthens our position in the South. It creates a fantastic circuit for us in the south, being present in Hyderabad, Bangalore as well as being present in Chennai and Coimbatore. So it really strengthens our position as a brand in the South, both in the leisure segment now as well as in the business segment. So it will -- so the overall idea is to have hotels across not only in the business destination, but overall strategy, is to have a pan-India presence, so it's also part of that overall strategy. So we want to -- we are a leading player in the business segment at the moment, but we also want to become a strong and very differentiated players in the leisure segment as well as in the leisure segment in this destinations as we move forward. That's also part of our strategy.

Great, sir. Just a follow-up on this. What kind of ARRs do you expect for your Cochin property and Goa property and are the margins that these properties are expected to generate?

So margins in leisure destinations because these are going to be -- actually, firstly, the Malabar house. If you were to look at it, it's a fantastic property in Fort Kochi. And first thing is that it is a Relais & Chateaux hotel. And Relais & Chateaux hotels always, in terms of ARR, enjoy a premium than any other hotel in the city of where they are. So we expect this hotel has been doing ARRs of INR 20,000 -- in the range of INR 20,000. And in fact, the Purity hotel, which has 40 rooms -- 14 rooms, is, in fact, even better position in the Vembanad Lake. So I'm expecting -- as we get control and our management takes over, I'm expecting firstly, to retain these ARRs and then push them out further.

Got it, sir. And lastly, on your management contract side, you have already given guidance for 206 keys to be added in FY '26, but -- which is lower than your annual guidance of 500 keys to be added each year. So how do you plan to fill this gap? Or should we expect higher number of additions in FY '27?

It's a good question, Vaibhav. But most important is that currently -- these are current -- we have just entered '25, '26. And these are the current deals, which we have, which are fully -- and these are signed HMAs, that is hotel management agreement. There are many hotels, which are in the pipeline. There are hotels in the north, there are more hotels in the pipeline in Goa, there are hotels in South India as well, there are hotels which are under negotiations. So the target to deliver to our shareholders and investors remains 500, and we are very confident that we should be able to deliver numbers in and around that. So 500 is the YTD target. Currently, 206 are guaranteed to open as we sit in quarter 1. There is no reason that why more hotels are not going to be ready and taken over, some will get de-flagged from other brands and we'll take over, and there's no reason that we should not be able to do close to 500. 500 is the overall mark. So the strategy at the moment over the next 4 to 5 years, is that currently, we have about 999 keys, so let's say 1,000 keys at the moment in the asset-light side of the model. We plan to take it to 3,000 over the next 5 years. So there will be -- there's a full effort, there's a full development team, which is working on this, and their target is to deliver 500 and 600 rooms during the course of the year. 200 is signed-and-done deals for as of now.

Our next question comes from the line of Anuj Kashyap with A3 Capital. May request that you use your handset, please, audio is slightly muffled, sir.

Am I audible now?

Yes, sir, please go ahead.

Congratulations for the good set of numbers. What I wanted to know was that what is the average time taken by a Flurys cafe to mature? And what is the sales growth of a mature cafe? Could you share that number, please?

So the average time, we actually are very prudent. We are also very, firstly, focused in terms of the selection of the outlets. We are very careful as to where we are opening the outlets, we are careful in terms of what kind of rentals we are ready to pay in terms of the locations. The locations are very -- are hand picked, like we have opened in [ Colaba ] at the Sea Palace Hotel, which is a location -- which is a prime location. Then we have opened, say, in BKC in the Crescenzo building, which is also a prime location. Likewise, we have opened in Malad, in the Inorbit Mall. And similarly, we opened now at the airports in both T1 and T2. So in T2, we are present at the moment in food court, which is a very big outlet of ours. And then we have just opened in T1, in the T1 arrival food court. And if you're from Mumbai and if you are arriving at T1 and if you go to the T1, it is one of the most fantastic outlets, again, we have opened in Mumbai. So the selection of the outlet is very important. These outlets, they do stabilize in 3 to 4 months time only. Some outlets, they take about 6 months to stabilize. The only thing is that when we are launching an outlet, yes, there are additional promotional costs and there are additional advertising costs. So -- but they do stabilize roughly in about 4 to 6 months' time.

And sir, what is the sales growth number of a mature store -- in the same-store like after...

I would give you those details. So Mumbai is a market which we are -- we have just entered. But in Calcutta, where we are having 67 outlets, we are having same-store growth of roughly in the range of 9% to 11%. So on an average about 10% we have achieved, which is very significant. And this is consistent. Post-COVID, we are seeing 9% to 11% consistent same-store growth. Reason is, of course, largely dependent on the kind of products we have and the kind of service and the kind of design. So there have been branding changes, there have been packaging changes and there have been design changes as we are going along. And all this is helping in same-store growth. Also, there is a lot of focus, which we are now having not only on the confectionery section, but also on the cafe, cafe side or the coffee side of the business. We have launched Flurys tea of our own -- under our own brand, and we have also launched Flurys coffee. And I would request you, urge you to try our new Flurys brand of coffee. It will really surprise you in terms of the aroma, the taste and the energy, which it will sort of give you. So it's absolutely fantastic. The beans are being, again, very carefully selected, particularly the Flurys coffee, gold beans are being -- are really special. And the coffee business -- coffee and tea business is now 19% of our business in the city of Bombay, and that is making a difference. I would be able to give you same-store growth numbers for Mumbai, since we just -- entered just less than a year ago or 1.5 years ago. We will be able to share with you possibly in the next earnings call. But in Calcutta, where the outlets have matured, the earnings growth, the same-store growth is in the range of 9% to 11%.

Thank you. Just for your information, I have tried Flurys tea, I have not tried the coffee yet. Congratulations and best of luck for the future.

Our next question is from the line of [ Viraj Swale ] with RR Investments. May I request you to unmute your line and go with the question. No, sir, may we request you to use your handset, please?

Congratulations on the great set of numbers. My first question would be the income...

Sorry to interrupt you, Mr. [ Viraj ], your line is not clear, sir. May we request you to use your handset in case you are a Bluetooth device.

Okay. Is it audible right now?

Yes, sir, this is better.

Congratulations on great set of numbers. And my first question would be that as you are seeing on the global scenario and in this scenario also that most of the biggest hotel brands in the world like Marriott, Hilton and Hyatt, all of these are -- like the main growth driver for them is the loyalty program that they offers. You go anywhere in the world, you'll find a Marriott or Hilton. So most of the clients like to stay at their hotels for the reward points. And even in the Indian scenario, there is ITC, there is Indian hotels, which offers loyalty points. So I wanted to understand that how is our loyalty programs of the Park performing? Like how much of our bookings happen from or loyal clients from our own website, if you have a number for that?

Okay. So the Park also has a loyalty program. And in this loyalty program, we are very close to 2 lakh members at the moment. It's called the Park Preferred Program. So actually, to be precise, we have, at the moment, 195,000 members. And this business is very, very critical to us. And the market mix, so it is divided into 3 categories or 3 tiers of memberships we have.

I understand it's the gold, diamond and other [ black ] memberships that number [indiscernible]. Sir, I just want to understand how much of our bookings happened from our loyalty programs. Like there are third-party websites, where most of the bookings happen in India. But I wonder, what is our mix of bookings, like the 60%, 80% of the bookings happened from our site?

No. So the booking breakdown is firstly like this. 3% of our business is actually coming through our brand website at the moment. That is for the year which has gone by. And roughly about 49% of our business is coming through online travel agents, and the balance is through our own sources.

Okay. Okay. And I wanted to understand that we are majorly focusing on Tier 1 cities. But if we see that in the past year also, most of the hotel deals that are happening in the country are happening in Tier 2 and Tier 3 cities, where most people are more moving towards -- traveling in new areas. So like what is our strategy for that? Like we are not very aggressive about it. We are mostly doing heavy CapEx in the metro cities for expanding the keys, but the regional play is getting a lot of momentum right now.

So you are absolutely right that India today is a very strongly emerging in tier -- and the hospitality business is strongly emerging in Tier 2 and Tier 3 towns. So most of our asset-light expansion is taking place in Tier 2 and Tier 3 cities. We have 2 brands at the moment in that category, Zone by The Park and Zone Connect by The Park. And the Zone brand of ours is a strong social catalyst brand, which is named for young contemporary Indians, who want to stay in contemporary boutique hotels at an affordable price. So we have seen -- and also it has that -- it is a brand which understands the contemporary global customer. It is always well connected. It is vibrant, energetic and it is always buzzing. It is a place which is to be seen. So we have this brand, which is there for Tier 2 and Tier 3. And as we get the right opportunity, we will invest in Tier 2 and Tier 3 cities. So this is a social catalyst brand, which is for the design-conscious and the value-conscious customers. It's beautifully designed. It's designed largely in-house with the contribution of our chairperson. And of course, we have Project Orange supporting the design work from London.

Okay. Sir, and another question would be that like when the IPO was release, we used most of our debt from the IPO money. And right now, we are mostly a debt-free company only, and the debt-to-equity ratio is way too low. So my question is that why are we not leveraging ourselves right now, like most of the companies in the hotel space right now are like taking more and more debt for higher ARR projects and expanding very aggressively, but we are taking a more slow stance in that. We have a very strong balance sheet on our books, the equity portion is high, but we are not taking a lot of that to expand more.

Firstly, I'll ask Atul to give you a detailed answer on this. My own take is that we have to, of course, get the property at the right price, and we have to be conscious of giving the right return to our shareholders. Property prices are at the highest and -- at the moment. And we have to be very careful in the selection of the property. I believe for our hotel to do exceptionally well in terms of its EBITDA numbers, it's very important that the cost of acquisition of the land should not exceed in Tier 2 and Tier 3 cities, more than 20% and typically in lean metro cities around maybe 25% to 30%. So we are looking for support here from the government to give us infrastructure status, give us increased FSI, when we are able to bring in investments. But the project, according to me, has to be first viable and the cost of the land has to be within the parameters of setting a hotel. The moment we will get a good deal, we will certainly be investing.

So I would further like to add on this that we are evaluating opportunities constantly. We have repaid all our debt post-IPO. So at present, we can leverage it, but we have projects on hand. And as we explained to you, we have about INR 1,500 crores of CapEx, including the recent acquisition. So that much INR 15 crores to INR 16 crores of acquisitions and project financing, which will be [ routed ] through internal accruals as well as some line of credit, which would be INR 200 crores of it roughly a line of credit. But we are in a growing phase with the EBITDA of roughly INR 250 crores per annum, so it will keep -- so that is self-financing fund. Second is as the new projects also come in, as they kick in, which from FY '28 and FY '29 and FY '30, they will add in about INR 525 crores of top line. It's a further addition of about 45% of EBITDA, which also gives us a further cash flow. So at present, we -- that is the another thing. Third thing is we have set up an internal target. If required, we will be evaluating the opportunity for growth like we have done at Zillion, but we would like to be within a debt by EBITDA of 2, and as we are -- which is viable and a bankable opportunity like, let's say, Zillion, if we said it's say like 8 to 9 forward EBITDA multiple. So that kind of opportunity we are looking. If we get an opportunity we are sitting, we will be leveraging but with the debt by EBITDA ratio of up to 2. And with sufficient EBITDA margins of INR 250 crores plus, we do will have a sufficient ground for acquisitions. So that is here, we will [ grow ]. But opportunity has to be there. In the growing market, you have to be very sure. We will not go overboard in terms of acquisition costs. We are very conscious of that effect.

Exactly that. We have a strong income statement, a strong balance sheet. Like we are covering most of our interest expansion. As we have a lot of room to take that, more opportunities will be arising. So here, I think, you will be working towards that.

Our next question is from Vaibhav Muley from Yes Securities.

Just a follow-up on Flurys. Can you just again share the average revenue rate? And how many of your current out of 103 stores that you have, how many are doing more than INR 1 crore -- near INR 1 crore revenue as of now?

So roughly, at the moment, more than INR 1 crore is just about 4 stores. The rest are in the average range of INR 50 lakhs plus. That's how the breakup is at the moment. But there is one store which we have, which is at Park Street in Kolkata. This store is from where we started in 1927. This store does revenues of about INR 12 crores in a year.

Wow. Okay, understood. So how many of the current portfolio do you expect over the next 1 year to across or get near the INR 1 crore mark?

So see, at the moment, we have only a limited number of cafes. A large number of stores are in the kiosk format. So it is the cafe format, which can be looked at and pushed upwards. So it will be about -- 20 odd of them we are working on, and we expect to convert them, moving up from INR 50 lakhs to INR 60 lakhs to how to make them go up to about INR 1 crore.

Got it. And any kiosks that you have shut down or any cafes that have shut down, underperforming ones in the last year?

I follow a very stringent policy. If we fail fast, we need to kill fast. But so far, we have been able to shut about 3 of our stores. And we constantly keep evaluating it. And as and when we feel that a store is not performing, we definitely take a quick decision and make an exit out of it.

Got it. And the guidance remains for 300 stores by 2027, right?

No. For 2027, it is our centenary year. We plan to add 50 stores every year. So our guidance for '27 is 200 stores.

Okay. And by when are you planning to get to 300? 50 stores each will continue for next 4 to 5 years?

No, it will continue as we keep moving forward. The challenge, of course, is that being an Indian brand to bring it at level with any international competitor. So if you were to look at Starbucks, they tend to open much more stores. So we need to beat them at the game.

Right. And revenue targets for FY '27, if you have any?

For Flurys, currently, the target is around INR 90 crores. But budgeting the result, of course, is very at variance, the budgets are always aggressive. So -- but I expect somewhere between INR 80 crores to INR 90 crores for sure, from Flurys business. The team actually surprised us by giving us even INR 100 crores. We are always pushing for that, but let's see.

As there are no further questions from the participants, I now hand over to the management for closing comments.

So from my side, I'd like to thank everyone for attending this call and showing interest in our brand and in our company, Apeejay Surrendra Park Hotels. I hope we have been able to answer all your questions. And should you need any further clarification or would you like to know more about our company, absolutely be free to reach out to us or to Rabindra Basu, our Director in Investor Relations or to CDR India, and we are all open for that. And thank you so much for taking time to join the call, and see you all at the next quarter.

Thank you all.

Thank you. On behalf of Apeejay Surrendra Park Hotels Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.