Chalet Hotels Limited (CHALET) Earnings Call Transcript & Summary

Welcome to the Quarter 3 FY '21 Performance Call for Chalet Hotels Limited. We have with us Mr. Sanjay Sethi, Managing Director and CEO; and Mr. Milind Wadekar, our Interim CFO, to take you through the performance and respond to your queries. Let me make the usual disclaimer on forward-looking statements. Kindly refer to our presentation for the details of the same. I hand over the line to Mr. Sethi to share his opening remarks.

Thank you, Ruchi. Good morning, ladies and gentlemen, and thank you for joining us for our quarterly earnings call for Q3 FY '21. Our performance presentation has already been made available on our website and on the stock exchanges, and I hope you've had a chance to go through the same. Over the last few months, there have been several positive developments from the vaccine to the general state of the economy with special pace pickup in the last few weeks. Government of India has successfully administered well over 5 million doses of -- to health care and essential workers as the Phase 1 of the drive picks up. And across the globe, this number has crossed the 124 million vaccinations mark. Both very good numbers, better than what was expected 18 months back. The average daily new case count in India has dropped to circa 12,000 cases per day with improved recovery rates, and these numbers are trending in the right direction. There seems to be some form of herd immunity settling in India. A recent sero survey in Delhi indicated 1 in 5 residents have developed antibodies to the virus. Mumbai numbers are expected to be better. With this backdrop, we are witnessing improved public sentiment and confidence as increasing numbers of domestic and global companies are scaling up operations and have commenced some form of work travel, though cautiously. Project-based travel has already picked up. The same can be seen as the domestic air traffic load is constantly growing. For the quarter, October and December, domestic air traffic grew by 113% as against the previous quarter. The Finance Minister last week presented a strong budget targeting economic revival with special focus on infra spend, higher FDI and insurance, bad banks to manage NPAs and stable tax regime generating further tailwinds for our sector. Several state governments have been lifting restrictions in a staggered manner across the country, which all bodes well for the hotel business across travel, F&B and MICE. We continue to work with the government on furthering the cause of travel and hospitality industry. In fact, the state government of Maharashtra has taken some bold steps to alleviate the pains of the industry. And through multiple meetings with the honorable Tourism Minister, we have been able to get the following: We were able to get the opening up of the restaurants and banquets sometime in October, when we were really struggling at a point of time on the F&B side; we've got a 3-month waiver on corporate tax for hotels that housed doctors under the kindness package. We got a 6-month waiver on excise fee; and finally, the much sought industry [ rate ] benefits for electricity, water and property tax, something that we've been chasing since 1999. This will become effective 1st April of this year. With Maharashtra as a benchmark, we're working for similar initiatives being rolled out in Karnataka and Telangana, and we have some progress in both states already. On the business front, we have clocked a strong sequential improvement across our portfolio. On a consolidated basis, we have recorded a positive EBITDA of INR 169 million for the 3 months ending December 31, 2020, led by improved revenues and key initiatives on the cost front. The hospitality business revenues grew by 74%, sequentially on improved occupancies from 19% in September to 26% in October, 33% in November and 39% in December. The RevPAR also saw 105% growth from September to December, as given in Slide 6 of our presentation, driven by the increased focus on [ long-stay ], large corporate bookings, [ film crew ] and project-based business. We also had very good success with the staycation part of this business. With a 337% jump in F&B revenues in September to December, food and beverage division's share has improved to 42% within the segment and the quarter's revenues from a 26% in second quarter. This was an outcome of easing of restrictions in F&B by the state government in Maharashtra, and Telangana and Karnataka, increased social functions and creative revenue streams by the hotels. We are getting weekly updates on extension of timings of our restaurants, bars and banquet facilities, and reduced restrictions on persons for banqueting functions. Thus building confidence on ending this financial year on a better note for F&B. On the cost front, I'm happy to share we have successfully maintained approximately 50% reduction in fixed cost for this year thus far. And back by exhaustive cost control measures undertaken since the beginning of the year. We have also been able to get 74% reduction in our variable cost. You may refer to Slide 9 of our investor presentation for more details. Significant part of the fixed cost savings is likely to be permanent in nature. For example, our staff room to room ratio as of December 2020 was 0.73 employees per room against 1.18 in December of 2019. This will see some increase as hotel occupancies scale up. We expect this to be around 0.9 employees per room mark in stable business scenario, including contract employees. Payroll costs are now 28% of revenue versus 64% in Q1. Working on the core principle of effective operations and cost management, we have fortified the centralization of business functions. We concluded centralization of the finance department for all hotels run by Marriott for Chalet. We've also concluded outsourcing of the laundry of 2 large hotels in Mumbai at Sahar and Powai. On the retail and commercial portfolio side, the rentals for the assets continued to be unaffected in this quarter with -- and provide steady cash flow. On retail front, for example, we are seeing pickup in footfalls in Inorbit Mall in Bangalore. For The ORB at Sahar, which has been lagging in pickup due to the pandemic, driven by the fact that we had restaurants over there, we are currently restrategizing the space for a potential commercial office. We envisage a higher demand for grade A office assets in the market providing stable rental yield for our business. The idea being that we restrategized wherever we see trouble. And right now, we see a strong opportunity on office space. We've already had initial inquiries which are strong. Quick update on our project pipelines. As discussed in the last call, we started work on the 2 commercial development sites at Renaissance complex in Powai, in Mumbai and the Marriott complex in Whitefield, Bangalore, a cumulative 1.2 million square foot of leasable office space. The work is progressing at full pace, and these assets are ready to be -- are expected to be revenue-generating by FY '23 for Powai -- by end of FY '23 for Powai and end of FY '22 for the Bengaluru assets. The lobby renovation at Renaissance has been completed. The new lobby has been operational since early January 2021. We've had excellent feedback on the renovated lobby. The [ balance revenue ] renovation of the hotel will be undertaken in phases. We are currently reviewing demand dynamics for the Hyderabad market and assessing the same for opening the new hotel. The pending work on site is expected to take approximately 5 months for completion from the restart date. Similarly the need for commissioning additional [ 88 rooms ] that Novotel will be reviewed on an ongoing basis and executed at opportune time. Given the current occupancy trends at Novotel Pune, we may take an early call on taking this forward because the hotel is already back to between 65% and 70% occupancies. The 2 new hotel development at W -- of W at Powai, Mumbai and Hyatt at Airoli where the work is yet to commence have been put on hold until we have more clarity on pace of demand before we commit capital to these projects. Ladies and gentlemen, the past year has been a learning curve for all of us. I think we are coming out as better and more efficient company. I'm optimistic of improved visibility on the business environment in the coming months and normalcy to return shortly thereafter. I also believe that the moment the foreign travel, business travel visas get committed, there will be pent-up demand and a lot of travel will begin, especially to the hotels in Mumbai, Hyderabad and Bangalore. I now hand over to Milind to take you through some of the key numbers for the quarter.

Thank you, Sanjay. Good morning, ladies and gentlemen. I hope everyone is healthy and safe. There has been an improvement in business sentiments and in personal and business travel over the past few months. Restrictions are being relaxed across several states, positive developments in budget and stable interest rate environment give us better visibility of normalcy. Let me give you some insights into our financial performance. Sequentially, Q3 FY '21, total income has grown by 43% to INR 916 million and EBITDA for the period [ higher ] by INR 139 million at INR 169 million as compared to Q2 FY '21. Led by our cost management initiatives, we have been EBITDA positive at entity level throughout the dynamic. At PAT level, that is post charges on depreciation and interest, for the company was negative of INR 310 million as against negative INR 427 million in quarter 2 of this year, a sequential improvement of INR 117 million. Hospitality. The hospitality segment contributed to 68% of total income of the company in Q3 FY '21. The revenue grew by 74% on sequential basis to INR 625 million, with positive EBITDA of INR 20 million for the quarter. Occupancy for the quarter averaged at 33% [ with a ] RevPar at 1,318 [ as against ] 1,007 in Q2 FY '21, a growth of 31%. Food and beverages division performance has picked up with contributions increasing to 42% of hospitality revenues. On the cost front, as mentioned by Sanjay, the company has achieved fixed cost reduction of approximately 50% as compared to previous years consistently since March 2020. The fixed cost for 9 months has been at average of INR 11 crores to INR 12 crores a month, and the fixed cost is expected to be largely static going forward. Variable costs have been down by 75% for the period. The variable cost's expected to rationalize as operations scale up. Total expenses for the quarter were lower by 57% as compared to the previous year and were higher by 30% as compared to Q2 FY '21 as operations scaled up. Retail and commercial. Steady rental income from commercial assets have kept the revenue and EBITDA from retail and commercial segment at INR 226 million and INR 168 million for the quarter, respectively. As mentioned by Sanjay, we are re-evaluating the strategy for The ORB at Sahar, Mumbai for potential office space and hedging the portfolio further. Nine months FY '21. For the first 9 months of the year, total income was at INR 2,147 million; total expenses for the period were at INR 1,944 million, a drop of 60% from the previous year same period; and EBITDA was at INR 202 million. [ Treasury ]. Net debt of the company as at December 31, 2020, were at 18,110 million as against 16,570 million. That is INR 1,811 crores against INR 1,657 crores. A total increase of INR 154 crores for the period. The CapEx spend during 9 months FY '21 was at INR 72 crores. Our cash burn, that is EBITDA less finance cost for Q3 FY '21 has been at INR 205 million, while for the year-to-date December 2020 has been at INR 966 million, led by product cash flow and working capital management. The average cost of rupee loan is now at 8.30%. And here, I would like to add that 52% of all rupee loans are sub 8% interest level. With the reduction in interest rate effective from 1st January 2021 by one of our lenders, average cost of rupee loan is expected to be in the range of 8.05% in the next quarter. I'm glad to additionally share that we have received in-principle approval from International Finance Corporation, IFC, for the term loan of approximately USD 50 million to USD 75 million subject to due diligence. We expect a sanction from HDFC Limited for INR 500 crores to INR 600 crores in next few days. These are expected to be utilized for CapEx and long-term working capital requirements of the company. We have cash and cash equivalents of INR 634 million as at December '20. Further, we have undrawn lines of credit of INR 1,403 million for general corporate purpose and INR 922 million for CapEx. For [indiscernible] there has been no new subscription from the promoter to 0% non-convertible redeemable preferred share for funding the outflows relating to the residential project. With this, we'll now open the floor to questions.

[Operator Instructions] The first question is from the line of Aditya Bagul from Axis Capital.

Congratulations, Sanjay and Milind. I think a reasonably good performance in a really challenging time. Sanjay, my first question is to you. Just wanted to understand if you could give some texture in terms of our occupancy which is there in December and Jan. I see December was close to 40%, and Jan was 37%. So can you give us some texture as to what is the composition of this occupancy? What is the retail, business travel [ crew-wise ]. If you can just help us understand what is the composition there.

Sure Aditya. I also ended up being on mute. I hope you're doing well. Yes. So look, we've been seeing constant increase in occupancies, and it's almost weekly improvement now, which is a good sign. And I think it's 2 or 3 things coming into play. One, our ability to cater to the staycation segment has improved significantly. Number two -- because developed products to cater to that segment. Two, we continue to garner a significant part of the special purpose group business, the cruise line of business, the Vande Bharat business, et cetera, in various hotels. But more importantly, I think we now see corporate travel pickup, which is very, very encouraging for us. Both -- to begin with, it was project and corporate travel. We now see some individual travel also starting off. And just to give you a flavor of what's happening, and then I was looking at the top 5 corporates that are using us in the last few weeks at our various hotels. And I think this will be helpful for everyone so I'm going to take some time over this. So we -- for example, in [ 4 ] points, we see [ Reliance ], we see IKEA, we see IBA Particle, we see McKinsey all using our hotels. And these are just the top 4 or 5 [ people ] that I'm talking about. There are many more. And in January, just these top 5 have consumed about 1,000 room nights. And similarly, in quarter 3 gone by, we had similar sort of accounts with a couple of extras that were there. Westin Hyderabad in the quarter three for example, we saw DPP Aviation, BCG, Wells Fargo, Microsoft, MC Aviation come and use our hotel rooms. Similarly, at Sahar, we got Samsung, BCG, Netmagic, Accenture, McKinsey, all of them taking up rooms in our hotel. Novotel saw Mutual Automotive, NXP, Honda Motorcycles, Proctor & Gamble, Bajaj Alliance. Renaissance has seen HP, Applied Material, Alstom, Schneider, Cisco. So what I try to convey with this is that -- and then Bangalore Whitefield, and we see Novartis, Sun Mobility, GE, Nextgen, Winstron and Apple. Now, what I am trying to communicate with this is that there seems to be confidence building up on business travel. And a lot of this may be project-based business travel, but if project-based business travel is happening, at least the confidence in travel is happening. And individual travel will follow. As you know we are right now handicapped with a no-visa rule for business travelers from abroad, unless they are coming here for a specific project business in which case special visas are issued. And the moment that opens up, I think there will be an opening up of floodgates that will happen. But to sort of summarize the question that you asked, I think it's a mix of everything. Staycations continue to be strong. Project-based business continues to be strong. We are now seeing some small conferences happening at hotels, some amount of wedding groups, but all of it heading in the right direction.

Perfect. Yes, that's quite helpful. My second question is actually related to what you said recently. So in terms of the occupancy, if we try and [ bifurcate ] that across the segments that you provided in the PPT, Bangalore and Hyderabad continue to be under pressure. So is there something to [ lead ] into that, especially given a lot of IT guys are now transitioning into more of a structural work-from-home regime. Is there a cap to the occupancy that you see?

So look, in the recent [ months ], [indiscernible] I see Bangalore, for example, picking up on occupancies, and that's clearly an indication that people even in the IT industry, there is no other business there in Bangalore actually, and in our Whitefield area at least, are traveling now. And you -- remember that 70% of our business used to come from outside India [ earlier ]. The high 60s. And that's -- as I said, the moment the visas open up, I see a rush of business coming in. On the work-from-home front, yes, we -- there is a challenge. We've got the Mindspace business park around, it's in Hyderabad. The occupancies of that business park continue to be low. And the moment the people are back, we will see business come in again. And an indicator of us from our perspective is that the office spaces around Whitefield, Hyderabad, Powai are -- and even in Navi Mumbai are not getting vacated. Unlike the earlier assumption that there will be vacancies created because of work-from-home from office spaces, we don't see that happening around us, which means the corporates believe that they will need those spaces in the near future and they are holding on to them, and they will come back to work from office very soon.

Sure. That's helpful. Two quick questions from my end. One is, we have not seen any material renegotiations either from WPP or Accenture. Is my understanding correct?

No. Look -- so no renegotiations, except there was certain variable costs that we were charging Accenture, for example. Like there was a fixed cost that we charge them for tea, coffee service in their office not being used. There was a certain service cost that we were charging them. There were certain number of maintenance costs, or CAM charge that we were charging them. Now because those are not there anymore to that extent, we gave them some relief. And on the rooms that they're not using, we gave -- the variable part of it was given a small amount of relief. But that's really, really very small numbers. At the WPP, which is a larger number to work with, there is no rent relief that they sought. They sought relief on CAM charges, which we are happy to give out because we had reduced the cost there. And whatever the cost saving we had, we passed on to them. The other ask was to waive off the parking charges, which also we gave them for a certain period of time. But now from January onwards, both the parking charges and the CAM charges will be normalized.

Sure. That's helpful. One last question to Milind. Sir, can you just help me understand what is our debt repayment scheduled for '22 and '23?

See, our debt repayment for next 2 years will range between INR 250 crores to INR 275 crores. And for the next quarter, that is Q4 FY '21, it is INR 41 crores.

So sir, INR 41 crores for Q4 and INR 250 crores to INR 275 crores for '22 and '23. Is that correct?

That's right. That's right.

[Operator Instructions] The next question is from the line of Amandeep Singh from Ambit Capital.

Sir, will it be possible to give revenue contribution from the wedding segment during the quarter, given 3Q had a lot of wedding dates which has not been the case in the current quarter or it would be [ lesser revenue ]?

This is Sanjay here. So we will share that -- we don't have that ready data right now. We'll be happy to share that if it's possible in -- subsequent to the call. But just to give you a sense, we had about 250 social functions in Q3. So with a 90-day period, we roughly had about 3.5 or [ 3 or lower 3 ] functions a day in our hotels every day.

And how would be the bookings for the current quarter comparative to this?

January wasn't strong because January didn't have the auspicious days. But going forward, right up to June, we have -- there are several auspicious days. So we see that continue to pick up. And with the increasing number of people being allowed for weddings, it will only get better. [indiscernible] So we have Hyderabad and Bangalore, and we are on a special case-to-case basis, even Maharashtra giving approvals. But the organizers have to go and seek approval for that. And we expect that the next 2, 3 weeks' time, Maharashtra, too, will ease of that 50-people cap, their cap on the wedding functions.

So that was really helpful. And sir, on a like-for-like basis, when the quarterly revenue for the hospitality portfolio is back to pre-COVID, what will be the like-to-like quarterly EBITDA, which you would see because -- I mean, what I'm trying to understand is because of better efficiencies along with given by the Maharashtra government, how much your EBITDA would improve on a comparative basis? Will it be possible to quantify?

Amandeep, Milind here. See, we have internally analyzed expected reduction on the 3 major cost trades which is coming from this Maharashtra government notification. One is property tax. Another is water charges and major component is electricity. So electricity expenses are expected to reduce around 25% to 26% of our Maharashtra portfolio. And property tax and water charges somewhere in the range of 28% to 30%.

So Amandeep, we don't want to give exact numbers. Right now, that will be some forward-looking statements, but we -- this is the difference between industrial rates and commercial rates that we are sharing with you which is in public domain. But we will give you an indication of how these savings will pan out. As I said earlier, it is a long fought battle. It took us 22 years to get here. And grateful to the government of Maharashtra. Me and a couple of other industry colleagues have met the honorable tourism minister 4 times, and every time we met him, we managed to get something out for the industry from him. It's been a very, very fruitful engagement that we've had over the last 3 months. And there's more to come. We're still working on other stuff.

With the increasing focus on the domestic segment where the LNR that is locally negotiated rates are usually lower than the RFP for global accounts, will it be fair to assume that it would take much longer time to reach a pre-COVID ADR rates despite occupancies coming back due to the change in business rates?

So yes, as the segments change, we do expect that the ADRs will move around. But at some point in time and the occupancies do reach the 70 and beyond, we were at 75 pre-COVID. We don't see the mix changing too much. We do expect our foreign traffic mix to come back to more or less near-normal numbers. It may not happen as it's immediately after opening now, but over a couple of quarters, that will stabilize. At that point of time, I don't see a challenge on the ADR side. However, I think what we've done, and this is important for everyone to understand. This pandemic has sort of forced us to innovate and create new segments that become now segments available to us for good. And in our business, we already have -- always have peaks and troughs of occupancies, whether it's weekends and weekday variance, whether it's holiday season variance, whether it's summer and winter variance. Now we'll be able to leverage and revenue manage the new segments that have been created, blend them into the existing old segments and probably get far better revenue management in play and RevPARs in play.

[Operator Instructions] The next question is from the line of Amit Agarwal from Nirmal Bang.

The 2 questions which I have. Firstly, January, the time when you renegotiate with the corporates. So firstly, have you had [ done that ] and have there been any increases? What's the outcome of that? Secondly, coming to your points, you mentioned in your initial remarks about the CapEx on W Hotels being limited. So what exactly is the strategy going forward. I mean, the new hotels you plan for are kind of in complete shutdown mode? Or is there some kind of plan still on for it? What I want to understand is the strategy as you move ahead in the lower [indiscernible] yes.

So Amit, I'll take these questions. Regarding the rate negotiation. The cycle actually begins in September, October for the -- and the calendar year base is January to December. Look, it's been very, very uncertain times for everyone. I don't think the corporates have focused too much on rates. They have agreed, almost all of them have agreed to carry forward previous year's rates. So there is no downward negotiation as far as the global R&D accounts are concerned. So when they do come back, traveling as FITs, we expect the rates to be similar as pre-COVID times. On the LNR accounts, there -- yes -- because we've strengthened our focus on LNR accounts. There, obviously, there have been new negotiations that have happened. And we do expect those rates to be newly negotiated rates in a new environment. And therefore, there may be some movement on the rates. Overall, as I said earlier, once the stabilization of foreign business travel and domestic business travel happens in India, rates will be back to largely the pre-COVID numbers. And I don't see a variance. To address your question about strategy on the development pipeline, it's like this. We realized through the pandemic on 2 or 3 things have happened. One, we found retail to be extremely -- what should I say, volatile. And -- so from that perspective, especially restaurant retail business to be extremely volatile. So at ORB where we were proposing to have 28 restaurants, 16, 17 of them had already opened pre-COVID, we've seen a lot of stress over there with those owners who are on leases with us. And some of them may fall off. With that in mind and being agile to the situation, we have restrategized and there seems to be, in that location, a steady demand for A-grade office spaces. So we are now mixing up The ORB a mix of F&B and office spaces, thereby derisking the business for the future. The demand that we will have seen in the last 3 or 4 weeks since we took this call is very, very strong. The rental rates continue to be as per the market numbers pre-COVID. So we see no reason why we should not go down this path. On the hotels -- and the other 2 office assets that we are developing, the demand again in those 2 specific locations for grade A office space is very, very high. So therefore, we decided to recommit capital to those 2 assets. And we started work a few months back. We have got significant amount of people on site working towards finishing it as for the dates that I shared with you earlier. On the hotel side, we have 3 hotels, and I did cover this in my opening part of this conversation. There's a Hyderabad hotel, which was -- the structure was up, largely built, it's a Shell lease. And the fit outs had started. We're only 5 months from completion from the day we started work on site. We will review this in early March through an in-depth analysis of market demand 6 months later, for that category of hotel at the price points that we are looking at. And if that continues to be strong, we will start work in April and open it out by September. It will do 2 things for us. Number one, it will be -- create a beginning in this current coming financial year, add inventory. And secondly, it will give us an opportunity to bid for the next year's RFP rates, which, as I said, are done in September, October. So we'll be ready by January with RFP accounts in place. The other 2 hotels, such is the W in Powai and the Hyatt Regency in Airoli, we have not put shovels in the ground. Given the current demand situation, we are not in a rush today to commit capital to it. We will watch it very closely. My best case estimate is that we will probably start Airoli earlier than the W in Powai because we already had 773-room inventory in Powai. And we see Navi Mumbai is scaling up pretty rapidly with the 5G program, the airport work happening rapidly, the metro expansion happening rapidly and the Trans Harbour Link coming up very, very quickly. In addition to that, Mumbai and Pune corridor is getting built commercially and as a residential usage very, very rapidly. So with that strategy in mind, I think by middle of this calendar year, we take a call on Airoli and maybe start work 3, 4 months from then. But that all depends on what the call [indiscernible] W is an open discussion right now.

So last question from my side if you allow. This is more on the overall demand-supply ratio. I understand from what I heard from other hoteliers that because of pandemic, there's a possibility that some of the branded room supply might have gone down. Firstly, do you agree with that? And secondly, are you -- do you expect that once normalization does happen, that will help through you -- that will help -- that will be in your favor? And on this [ point of sale ], if there are distressed assets in the market, are you biding for it?

Okay. Amit, I'll try and answer all those 3 questions you've asked me. On the room and demand-supply situation, yes, the expected new supply is expected to wean off. We know a specific projects that have dropped off. We know some projects, which are large in nature, they are now sort of hedging their risk by doing mixed-use like we have done in the past where they're putting in a combination of office and room supply. The office supply will create demand reduction and room supply will again be favorable for the industry. But -- and for the short term, both supply and demand have collapsed. But from a mid to long term, clearly, it is beneficial because supply doesn't come up overnight. It takes years to build supply out. And if some projects have dropped out or slowed down, their restart, the remobilization and then building it out and opening it up will take several years to come back. So for the next 4, 5 years, as demand comes back, this is certainly a favorable situation for everyone, including us. So the favorable part I have answered. What was the third question? On the -- distressed opportunities. Yes, we believe that there could be distressed opportunities in the market. They are not currently as strong as people think they are. For 2 or 3 reasons, people have taken advantage of the loan moratorium or the interest moratorium. Some of them are banking on the onetime loans restructuring. So there was capital available to people for 2, 3, 4 quarters. And largely, the bottom is -- of the barrel is being scraped out right now. But in 1, 2, 3 quarters, we do expect an increase in distressed assets in the market. We will keep our gunpowder dry and, of course, take prudent financial decisions when such opportunities arise.

[Operator Instructions] The next question is from the line of Aditya Bagul from Axis Capital Limited.

Two questions. First, just wanted to understand your interactions with other Marriott and [ IG ] affiliates. What are they seeing in terms of business travel, both domestically and for Asia Pac. If you can just talk about a little bit of [ reading between ] that, that is -- that would be helpful. And second, Milind, we talked about the loan sanctions from HDFC and IFC. I think the total amount will be INR 350 crores, INR 400-odd crores from IFC and about INR 500 crores from HDFC. If you can just indicate what would be the interest rates on that.

So Aditya, I'll take the first part of the question on the engagements with Marriott, Accor and a lot of other brands also. It's not just -- our engagements are not restricted to Marriott and Accor in terms of understanding what the market dynamics are. We've been discussing with people in -- from domestic brands also, [ Puneet ] and everyone else. See this -- I did read out the sort of companies that have started using our hotels. And I've only listed our top 5 accounts in the recent months and weeks at each of the hotels. There are many more, right? So business travel is happening. We see the demand picking up. 2, 3 things that we are looking at is which company has opened out their travel portal for their employees who travel, one. Two, which companies are the ones which are high-growth companies or industries which will need business travel to close deals, meet clients, train employees, et cetera. Three, we're looking at the mix of domestic and foreign companies. When I say domestic, I'm including MNCs based out of India, and there's a large number to be catered over there. And companies that traveling from outside into India. Looking at all of them and understanding what their future travel pattern is likely be. The general indication that we've got from MNCs in India and domestic companies that business travel is being open out as we speak now for their employees. So the travel portals have been opened up for them to apply for travel approvals. From the international companies, they are raring to come here. Unfortunately, the business visas haven't been opened up. And as soon as the business visas open up, and airlines are allowed to come in on a regular basis -- right now, there are only restricted users who use airlines, we see traffic picking up.

Aditya, let me clarify first. The sanction from IFCs, it is in-principle approval subject to due diligence. The indicative rate is 8% to 8.2%. And for HDFC loan, it is 8% to 8.5%.

Aditya, this is work in progress. We haven't closed it yet. We'll obviously try and push forward as soon as possible.

Sure. But cumulatively, over -- even if this happens over a period of the next 6 months, this is enough to fuel the CapEx requirements in the next 2 years and any repayments which will come through. So liquidity per se is not going to be a challenge is what I understand.

So in our case, we have never really had the liquidity challenge in the last 9, 10 months. If you recall, we did not even consider taking the interest moratorium. We have not pursued the onetime loan structuring. In fact, we didn't even, frankly, even looked at it because we didn't see the need for it. And an outcome of that is, we have been able to keep our credibility with the banks high, which has resulted in very good drop in interest rates.

Sure sir. Sanjay, just one last question. From the way we're looking at things today and through your management -- through commentaries that we've heard across the hoteliers, is it fair to assume that FY '23 will look very, very similar to what we saw in FY '20? Is that a fair assessment to make?

I don't give forward-looking numbers. But I think, yes, we will -- on an apple-to-apple basis, we will be similar, on similar numbers as far as revenues are concerned. You've got to keep in mind that 2 hotels will be added to the portfolio. Novotel, which were added in February of '20. And then the Hyderabad, which is likely to get added. Between them, they have almost over 400 rooms. And if we add the 88 rooms, close to 500 rooms added to that to the '20 numbers. In addition to that, there will be stabilization of the Sahar office asset, which was partially there in '20. And finally, we will be operational in Bangalore and almost operational in the Powai office building, which is 750,000 [ square foot leasable space ].

[Operator Instructions] The next question is from the line of Amit Jain from [ IvyCap Ventures Advisors ].

Just one quick question. I just want to understand your strategy when you are looking at the rentals. Are you looking at volume business as of now or improving the occupancy? Or you're happy keeping -- I guess, the average room rate has dropped from almost 8,000 to 4,000. And I was reading a report because of this price drops taken by 5-star hotels, almost -- or most of the 4-star hotels and 3-star hotels will be out of business if that was their average revenues. So what is the strategy you're foreseeing as now? Are you looking at higher occupancy, keeping the rates low? Or do you plan to step up rates and eventually, maybe be happy with like 40%, 45% of occupancy?

So it's like this. When you are in a situation like we've been in for the last 10 months, clearly, this strategy is to fill out rooms. Our business, as far as the room business is concerned, is perishable in nature. The crisis that we've seen has never been seen before, and the priority was to fill out rooms. Also what happened was the regular payment of business were not available at all. So what did you go to? You went to such different segments of business, group travel, large groups traveling in from outside India into India and staying for 2 week isolation purposes. Government has fixed those rates. We had doctors stay from BMC in our hotels. Those are obviously extremely low rates in the early part of the quarters. We had BCP, which is the business continuity plan from various companies staying at our hotels. So for 2 months in Hyderabad, we had almost what, 200, 250 rooms occupied by a couple of companies. Now these were people that have been put up in our hotels because our hotel is next to offices, so they could -- it is walking distance. So it's basically walk from hotel concept into office. And all these segments were clearly new segments, and therefore, they were negotiated afresh as individual negotiations as against annual accounts -- contracts. And in the recent days across the country, there's been a lot of hiring happening in various corporate houses, whether finance-driven or IT-driven corporate houses. And a lot of the new joinees, which used to earlier stay in the 3-, 2- and 4-star hotels, the companies prefer putting them up in 5-star hotels because of safety reasons and hygiene reasons. And as an outcome, they came to us. And they said, listen we will up the rate that we were paying earlier, say last year, but we still can only afford a certain amount. Will you take them? And it was our call at that point of time to whether fill -- take that at that rate and fill up the rooms. As long as it was from a margin perspective, value-accretive, we have taken business. The other thing I think I would like to add is, which is a significant movement is the food and beverage business. On food and beverage business, we've seen a very rapid jump, as I had said earlier. I mean our jump in F&B has gone up from September number of INR 27 million to INR 118 million in December. And that clearly indicates that F&B is going to pick up. This is without banquets really kicking in. This is largely restaurants and bars. So we see a significant move from stand-alone hotel or stand-alone restaurants to 5-star hotels for F&B also which again is a positive. A couple of other segments I want to share with you which are interesting. And then, again, become segments forever for us in the future during the valley period. Our segments like film shoots, for example, the -- our hotels are Powai has done quite a few film shoots, and some of them were very large [ margins ] in terms of invoicing. And then we've had special purpose sports groups like the Mumbai Indians and other cricketing groups staying with us pre-IPL. We now have another group staying at Four Point Sheraton from cricket. So all that's happening. As I said earlier, these are new segments getting developed, and they will only help top up old segments when business comes back to normal. So we see a strong future ahead.

Just one follow-up question. The banquet revenues, where do you record it? Is it in the F&B or is it in the room or there is in another space...

No. Banquet revenue's always already recorded in the F&B revenue. See there are 2, 3 the things I do want to highlight here, I think it will be helpful for everyone. And when we do our revenue breakups as per the global and the acceptable uniform accounting system, the room revenue when it comes in and obviously netted off for taxes to the beginning of the GST. And then the total revenue that comes in, we take out meal credits. So if you included breakfast or lunch or dinner, there's an allocation for each of these. And we take that off, and we call that the net average room rate or net ADR. 99% of the global companies report net average room rate. We report it like that, too. If you report it a gross, then it adds to the room revenue. And therefore, can take your average room rate and RevPARs up. But we take out all our F&B revenue from the packages that we have and credited back to F&B. Within the F&B, the segments that we have are restaurants, cafés, coffee shops, bars, room service or in-room dining and banquets. Within the banquet segment, you've got socials, corporate division. In social we have weddings, we have birthday functions, any other parties that are thrown. And in corporate, you could have things like exhibitions, conferences, incentive meets, annual results, et cetera. But this is a quick overview Then we have other revenue segment, which is basically regular segments like spa, the travel desk, telephones, Internet and all of that comes into that [ segment ].

The next question is from the line of Amit Agarwal from Nirmal Bang.

I'm not sure this question has been asked. I just want to know your CapEx for FY '22 and FY '23. Secondly, I also wanted to know what is the state of the construction of those office spaces you're building out? When do we expect it to start operations? These are the questions.

So our CapEx for '22 will be somewhere in the range of INR 550 crores, followed up with CapEx of INR 275 crores for FY '23. And then we have normal repairs and maintenance CapEx of hotels.

They're small amount.

They're small amount. And we expect to commence operation in Bangalore commercial office by in FY '23.

End of '22, Bangalore will be completed and construction. And it will become rent yielding in beginning of FY '23.

And Powai? When is Powai expected?

Powai, FY '24 it should start -- it will become operational.

So this is conservative state scenarios. Right now, we are looking at December -- sorry, March '22. And for Powai, we are -- today as we stand, 2 months ahead of schedule. We may be able to improve that further and close, but I don't want to commit to that. So right now, in all our conversations, we are suggesting that you take beginning of -- commencement of rentals in the beginning of FY '24 for Powai.

And have you had -- have you been [ footing ] this space around if you have the interest of pre-leasing? Any pre-leasing which has been done for these spaces?

Yes. We've got a strong interest, both for all the sites. Obviously, it's too early. Typically, you start tying up closer to the end date because then you take the best rent yields. So we'll tie this up roughly around 5 or 6 months before completion of projects.

Sure. And just speaking on the maintenance expense. How much is the normal maintenance CapEx per year?

Actually it ranges between INR 25 crores to INR 30 crores a year.

This is for normalized not in a pandemic period? Normalized period?

[indiscernible] This year we are...

So our budget and our focus for next year is INR 12 crores.

Thank you very much. Ladies and gentlemen, that was the last question for today. I will now hand the conference over to Mr. Sanjay Sethi for closing comments.

Thank you so much, ladies and gentlemen, for joining us. We are -- just concluding remarks, we are a lot more confident than we were about 3 or 4 months back. I think one thing that's given us confidence is that the vaccine, which we're expecting rollouts to happen sometime in April, start getting rolled out in January. So in our old internal thinking, I we've got a 3-month head start on the vaccine front, which overall -- gives us an overall cost scenario. So we wish you well. Stay well, and we look forward to engaging with you as and when we get an opportunity to. Thank you.

Thank you very much. On behalf of Chalet Hotels Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.