Kamat Hotels (India) Limited (KAMATHOTEL) Earnings Call Transcript & Summary

Okay. Let's begin. Thank you, everybody, and good evening, everyone. Once again, a very warm welcome to you all. My name is Anuj Sonpal, I'm the CEO of Valorem Advisors. And we represent the Investor Relations of Kamat Hotels India Limited. Firstly, on behalf of the company, I would like to thank you all for participating in this event. I'd also like to thank the management for giving us this opportunity to host them for the Valorem CXO meet. As you know, the Valorem CXO meet is a first of its kind analyst meet event series, and our intention with these virtual CXO meets is to take advantage of technology platforms like this by reaching out to a wider audience and to create a better understanding and bring awareness about our client company's fundamental business, provide insights into their specific industry, financials and future growth strategies. The format of this analyst meet will be primarily in a Q&A interview format, where I will start off by asking the management some broad-level questions, and then move on to questions from the participants. Please note that if you have any questions to ask the management, you can use the Q&A button at the bottom of your screen, to post your questions, which I will ask on your behalf to the management. Before we begin, let me mention a short cautionary statement. Some of the statements made in today's meeting may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made by and information currently available to management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. Let me now introduce you to the management participating with us in today's meet. We firstly have with us Mr. Vishal Vithal Kamat. He's the Executive Director of the company. He's a true leader and has taken the company's 70-year legacy to new heights. He has more than 15 years of experience in the hospitality sector. A strategic thinking and commitment to excellence have guided Kamat Hotels to deleverage the balance sheet and entered into the new era of growth or expansion. We also have Mr. Smita Nanda. She is the Chief Financial Officer of the company. Mrs. Nanda has more than 27 years of experience as a professional in various fields, she has expertise in financial restructuring, fund management and corporate compliance. Now let's begin with our question session.

My first question is for, of course, Vishal ji. Vishal ji, could you start by giving a brief history and background about the company to some of our audience who are probably looking at the company for the first time and maybe take us to the journey of the company so far.

Thank you, Anuj ji, for having us here. Smita and myself and also, we are represented by our young dynamic company secretary, Mr. Nikhil, who is always there, as you can see behind the scenes. So I'm grateful to you for having us rather than you being thankful for we being on your show. And more so, I'm grateful to all the people who have logged in right now and will log in subsequently. So thank you all for taking out time and listening to us and giving us this opportunity. Kamat Hotels has basically been in the industry, I'm a fourth-generation entrepreneur. I'm very lucky, at that fourth generation, normally, they say, the first makes, the second preserves, and the third ends up destroying. But luckily, the ethos of Kamat is strong, and we have, me and my family is now the fourth generation, my wife and me. After my father, my grandfather and great grandfather. So we started off from humble roots, which is basically a simple South Indian joints. And from there evolved into small lodgings. From there, my father took the great jump of making the first 4-star hotel in our family of The Kamats Plaza, which some of you may know, most of you may not because it's for the older generation. And it was a heydays may hit. Then one fine day as he wanted to evolve further, he broke it entirely down and created what many of you all know is the Orchid Hotel, which is Asia's first 5-star environmentally sensitive, with a pioneering in the field of hospitality to have this kind of winning accolades across the world for its environmental sustainable hospitality. So it is not just a pioneer in India, but in the globe, it is recognized as one. So taking Orchid forward. And then I joined my father in our business in the hospitality. And I am proud to be a part of Kamat Hotels India Limited. So that's a very brief journey from South Indian to Orchid Hotel. Primarily, what do I do? Primarily, I look after our Kamat Hotels India Limited, which is my whole and sole focus in terms of growing our brands. As you can see behind me, we have some fantastic brands. The Orchid. We have the IRA by Orchid. We have the Fort JadhavGADH, which is a unique Maratha Heritage Hotel in Maharashtra. We also have various other properties such as Lotus Konark, Lotus Goa, by the way, Lotus Goa is being upgraded to Orchid. So we have a -- we have Lotus Murud. So we have a host of properties spread across multi-states, and many more to come in the days ahead. Thank you.

Thank you, Vishal ji. Actually, that takes me to my next question. Could you talk to us a little bit about the various hotels and the presence that the company has today across the different brands that you talked about? And also talk a little bit about the expansion plans and growth of new properties that we are venturing to in the coming quarters or years?

So we have The Orchid Hotel, which is our flagship brand. We own the Mumbai -- we own Orchid brand in India. And we have 372-room Orchid Mumbai. We also have IRA by Orchid, which we run in Andheri near the domestic airport is The Orchid. At the international airport is IRA by Orchid, which is a 200-room property. This is 372 rooms. Then in Pune, we have over 9 acres of fantastic property, again, which is a 410-room hotel, but is doing, touch wood, so well. We will be adding some more rooms there also, aspiring towards the 500 figure because our expertise lie in MICE, which is meetings, incentives, conferences, exhibitions. Though I replace the word, people use this as a MICE in this way. But I think for India, the right MICE is marriage, incentives, conferences and exhibitions, more than meetings. In India, marriage is more important than your conference. [Foreign Language]. So marriages are very emotional and an important factor now in hospitality, just as it is for our Indian society. So Orchid Hotels do a lot of events, a lot of MICE. We also have a fantastic presence in Odisha. We have an IRA by Orchid in Bhubaneshwar. We have a Lotus resort in Konark. We have a hotel which is Mahodadhi Palace, which is being upgraded along with an additional Orchid hotel coming over there. So that's how we have a spread in Shimla, Manali, that's how we're in Himachal. We are shortly opening in the next few months in Chandigarh, with the Orchid in Chandigarh, again, a very beautiful luxury property in Chandigarh. Then in a similar fashion, we have across various places, the whole list of places where we are and many more we are coming. I tell you the ones we are coming also, like I mentioned, Chandigarh, we are opening up in HITEC City in Hyderabad in the next few months. We also are opening in Bhavnagar, like we have in Jamnagar. We have some more opportunities coming in Gujarat, but I only mentioned on your show, the firmed ones, the ones which we have signed up, rather than hypothetical. So Bhavnagar is there. Dehradun, again, a landmark location and a beautiful state. So Dehradun is basically where we are, but that will take almost a year. Then we are opening in Gwalior, which will open up by the end of this year, this year as in '25, this whole year is over. We're as good as happy new year [Foreign Language]. And, touch wood, the hospitality industry has had a very happy new year. So I can't complain. So this 2025 December. And then Pune also, like I mentioned, we are there and there are some other locations also. So we are also, by the way, in Ayodhya, in UP, in Ayodhya. We have IRA by Orchid, touch wood, doing very well. While I said in one other of my interview [Foreign Language] politics has not affected anyone, whatever the dream to go to Ayodhya and experience that, that is still robust and strong. So touch wood, people have been going there, and we are very lucky to be there at this juncture. Similarly, we are also in Noida, in UP. We've just opened IRA by Orchid in Sector 62 at Noida just opposite the Cognizant and other IT offices. So it's an excellent location again. So touch wood, yes, it started from day 1, and it has been doing well because of the location. So we are very choosy about [indiscernible]. We focus a lot about qualitative approach and a qualitative growth rather than just one down expansion because it's very easy to grow, but it's also very easy to spoil your name. So you have to be very, very careful. So that we are able to continue the same impression that people have of us, that we are quality oriented, we are family-oriented and we are doing that in that same manner.

Thank you, Vishal ji. My next question is on the sector. You talked about importance of quality. So overall, the hospitality sector, as you also mentioned, has seen a remarkable growth over the last couple of years post COVID, especially. And with the industry-wide occupancy rates, ARRs reaching impressive levels. Could you share your insights on the industry's outlook for the coming years? Where do you see it going? How do you see it performing? So if you could share some insights -- some more insights, that would be good.

So I always share this simple thing that hospitality industry is not a generator. It is basically a very good indication of the mood of the economy. Because if today, people have money in their pockets and they're happy. If corporates are doing well and they are generating profits, they want more sales, then only will they end up spending on their dealers, will spend on trading for people. They will end up doing a success event or they will do a new product launch. So if hospitality is doing well, it means overall, the economy is doing well. And looking at how the current outlook has been and kind of initiatives that have been taken and especially after now the third-term government coming, the further pushing infrastructure, further pushing various things. The overall outlook seems quite positive because one of the main challenges which was on everyone's mind, which I think 2 times have been overcome by our government, which is commendable is geopolitical issues, which also were expected to affect overall industry. But I think our industry is so resilient that they were able to -- when I say our means, Indian industry, so resilient. that we will be able to overcome that and still continue the growth and still continue. And because of that, you see a reflection of that in hospitality. Today, weddings, there are no rooms available in Mumbai or rather than many other cities, why only Mumbai. There are so many places where people are going and saying [Foreign Language]. Price is not the issue. The main thing is that people wanting room. So this kind of demand has only been supportive because of the overall buoyant economy. And I think both in the personal side or I would say family side where people are spending as FIT, as families going for holidays or as corporates who are spending in terms of their own site.

Thank you, Vishal ji. Unfortunately, we lost your video for a little bit, but we were able to hear you at least. So hopefully, we will continue. But I think we can continue, your audio is thankfully all okay. Moving on to my next question Vishal ji.

I apologies, but network issue.

That's okay. I think as long as our audio is fine, I think we should be fine. So my next question is actually for Smita ma'am. Ma'am, coming to the financial performance of the company, you have obviously been with the company for a while, and we've seen a significant transformation in the company's balance sheet health. Can you help us understand how we have managed to reduce our debt? And also talk a little bit about how we're going to fund our expansion plans because we obviously have quite a few new hotels also being launched apart from upgradation of current hotels, while maintaining the balance sheet strength. If you could talk about that.

Yes. Thank you, Anuj, and welcome to all of you and on behalf of Kamat Hotels and Kamat Group, I will accept and congratulating as well as I'm welcoming all the viewers. Secondly, regarding the financials. Financials, you are asking and all that. Kamat Hotels India Limited from 2017 till 2023, we were struggling with our financials because of the past historical backlog, which we came out from that. And fortunately, we have restructured the whole, our debt in a very economical way or you can say, very aggressively, which we came out from that also through the NCD. And from NCD to now we are sitting in the normal banking route, we are coming through the banking route. According to this, for the future, we are looking only economical way to grow with organic way. You can say economical and organic way we want to grow over here.

So I think what Smita ji also means is through internal accruals, the company has been performing quite well in terms of generating a lot of cash surplus because of which it has been thanks to the efforts of Smita ji and team, we have had in 2012 around, you can say with all our backlogs, almost INR 1,000 crores worth of almost all put together, everything, various things, challenges, other things. And from there today, over a period of time, thanks to -- again, I always mention this, and I'll not fail to do this again, I'm grateful to all our bankers, ARCs, our advisers, our friends and well-wishers who help us in those difficult times. And what I mean by help is that, allowing us to be able to do our work, to be able to come out of that problem. And I'm, again, also grateful to our investors who came in '22, which is Alpha Alternatives and True North and SBI, who are still with us, by the way. They -- because once you forge a relationship, then if you are able and capable then the relationship lasts. And so I'm grateful, and because of that, from that thing, today, we will -- I think by this year ending, we will see at INR 120 crores. And lastly, I would like to thank the one who has the current INR 120 crore is Axis Bank who has this thing. And it's a 10.5% interest. And considering that the company is doing [Foreign Language].

INR 110 crores EBITDA and INR 120 crores loan.

So INR 110 crores EBITDA and INR 120 crores of loan, we will close at this year, apart from cash reserves by the year ending. So literally, our statement that this year, we will be net neutral. That also has happened, even though our EBITDA, we had expected to do more, but 2 hotels of ours did not come in. One was Dehradun and one was this Chandigarh. Both would have added a substantial at least INR 15 crore EBITDA additional minimum, minimum conservative. So we would have come in the INR 140 crores mark, which we have postponed for next year. But these figures are just figures. Ultimately, we want to do well, wherever and whatever market, whatever situation. So one is growing through internal accruals. We don't really require fundraising right now. We are not looking at any -- we are not -- we are looking at various opportunities, if there is anything. But until such time, as you know, fructify, they're not like -- but the main growth which we have right now is somewhat asset-light is your revenue share model, annual lease model. This model has been something which we've been growing with because of which the CapEx outflow which is required is very nominal. And I don't think that -- that's why we say we are generating the surplus also. So Smita ji will be sitting on a good amount of FD by March 31.

That's very encouraging to hear Smita ma'am and Kamat ji. Let's -- so I think I already see quite a few questions on the chat. So let's start taking questions from the participants. [Operator Instructions] So in terms of the first question -- the first question is for Mr. Gunit Singh. Since the company gives guidances, what is our outlook for FY '25 in terms of top line and bottom line? What should be the PAT margins considering lower interest costs? Once again, just to remind the management as well as participants, let's -- please use caution while any forward-looking statements. These guidances are primarily indicative in nature. So yes, Smita ma'am, if you would like to answer that?

Before Smita ma'am answers that, I'd like welcome him because he's one of our most keenly following and it takes a lot of active interest. Thank you, Mr. Singh for your support always. And always asking and being participating. So that's why we looked at each other because that's the name we know, we know familiar. So thank you for being here also today. Smita ji, please.

Anuj, can you please...

Yes, I'll repeat it. The question is based on the outlook for FY '25 top line, bottom line and broad PAT margins, considering lower interest cost?

Yes. FY '25 revenue would be going up to INR 350 crores to INR 360 crores. And PAT margin would be coming nearly about -- you want a percentage, you want the exact amount?

I think better to give -- let's give percentages, I don't want anybody shooting us for exact numbers.

Yes. So 15% to 16% is my PAT margin.

Okay. His follow-up question is EBITDA margins have fluctuated from 35% to as low as 17% over the past 5 to 6 quarters. So the new properties being onboarded, can we expect margins to be affected in coming quarters? Or what should be a steady state EBITDA margin?

There will not be steady state. It will keep fluctuating. It will -- because the thing is that when new properties are added, initially, there is a capital outflow or rather I'd say OpEx outflow, not capital, OpEx outflow. You end up spending more in marketing, you spend up with more people. You have a lot of travel happening. You have all these kinds of things, which basically we have in the OpEx part. If I was to do a project in -- from scratch, it's -- all these expenses could be capitalized. So it could look good, but the reality is that you have made that expenditure. So here, because we are in a lease and or a rev share model, we prefer to expense it out and let it be now itself because capitalizing it would not be appropriate, so we put it in the expenses for the time. So the good part is that next year, same time, this will not be the performance. Next year, same time, the performance would be way better because your overall, this thing, what do you call operations are settled down and done. So this is basically one big plus point, which is next year. But this year, the properties which we opened like Jamnagar, then Noida, which has just now opened, or when we talk about Sambhaji Nagar, or various other properties, whichever have opened, Sambhaji Nagar is a IRA by Orchid. So the challenge is there. Initially, there is an outflow cost, which, of course, gets recovered in the life cycle operation of the hotel. So this is why there was a dip because we have 3, 4 properties opening in one shot at a time. And that basically got -- now -- it will be now stabilized. So next year we do not have the same challenge. So that's why you find this. And secondly, because our overall baseline is small. I mean 4 new hotels have come on a baseline of 14. So about 14 -- so percentage-wise, it does kind of effect, So that's why you find a little fluctuation, which next year will not be there. So this is something to keep in mind.

And I think just to add, it would be better to view our company rather than a quarterly -- quarter-on-quarter basis, more on a year-on-year basis rather than quarter-on-quarter. Then the things would probably be slightly more normalized and less volatile. Next question comes, how does the company plan to reduce dependence from the Mumbai Airport Hotel which adds -- which is a significant revenue -- percentage of our revenue, as he believes that the new airport will open in Navi Mumbai and probably more competition will come there. So what reduction in occupancy do you expect because of this as well?

So we don't expect Navi Mumbai Airport to be competition to Mumbai Airport at all because Navi Mumbai Airport is actually not for Mumbaikars. Navi Mumbai Airport is going to be more attractive and a hub for Punekars, Thanekars, Navi Mumbaikars and all the people who find it extremely difficult or costly to enter into this city. Atal Setu might be a beautiful bridge, but it cost you INR 50 on a toll one-way. Now when you are taking a taxi and coming to Mumbai, and as the way a person from Pune would come today. Forget his own car, if he's traveling by hired taxi, suddenly, the cost of his goes up. But if he goes to Panvel Airport, which will be probably cheaper also because the landing rights might be lower comparatively to Mumbai. So it will definitely do well on its own as a stand-alone airport, and we're catering to a very large demography, which is not the Mumbai people. So one -- we have done our homework on that regard. That's why I'm sharing this info with you. That one, if it is actually an augmentor, and in fact, will help our business because it also, by the way, a fast track line, metro line from both the airports, being both owned by Adani. So obviously, it's in their favor also. And it's in the favor of the average transit passenger or the average citizen also. So this is basically one that there is no threat by new airport coming. But at the same time, a very prudent aspect is asked is that how are we reducing dependency, which has always been on our mind for quite some time. And for that, we are expanding aggressively in states apart from Maharashtra. Forget why only Mumbai, why should we depend only in the Pune-Mumbai belt, where today, 60% of our revenue comes from. So we are growing, and we have Shimla, Manali coming in. We have something more coming in Himachal. We have Chandigarh opening up. We have -- so demographic wise, we have some more properties coming in, Odisha also. So demographic-wise, we basically are moving outwards apart from -- of course, that doesn't mean we're ignoring Mumbai. If I get an opportunity, I'll still take one more property here. If it is something nice and interesting, but we also have a [Technical Difficulty] which is very correct and stated by him.

Let's take the next question from [ Rashmika ]. He's asking, can you provide some granular explanation on how your ARR -- how you plan to take your ARR up from -- you've guided to up to 7,500. So how do you plan to do this?

We see ARR is basically a function of 2 things. One is the kind of product you have, whether it is a kind of product where people are wanting to come and spend there because then your product is a standalone demand. And then whether the price is worth or not by a consumer he will feel and he will come. So that is one part of how you have a certain ARR, but that may or may not affect your occupancy, okay? And the second one is when there is a market demand. And the market overall is busy, and it pushes overall the rates up. And that's again how your ARR comes, which is why basically H2 always has a better ARR than H1 for all the city hotels, business hotels, okay? So we are -- what we are doing in terms of actively focusing on our ARR, one is by giving better service and quality because of which a customer prefers you. So then if you are a little higher than your competitor or your neighbor, it doesn't bother. Secondly, having value add-ons. Today, our Orchid reward program, which gives them points, benefits, various things, is extremely popular. We have 8 lakh members, and we have a lot of repeat guests. In fact, I'm very happy to tell you that 1/3 of our business, 32% to be exact, is business from repeat customers. And this is, again, because we had taken a mobile number of every customer, and that is your membership number. And because of that, we now are able to know how much is the repeat business. So every time people come, they get points, they get benefits, they can upgrades, they get discounts. If you go to our normal website, it might be INR 100, you go to Orchid Hotel website, it might be INR 90 or INR 95. But if you go to the reward website, it is definitely even 10% lower than that. So our Orchid reward members, they get like 20%, 15% off the bar rate, which is not open to the average public. So one -- how do you become a member, once you stay in Orchid Hotels, okay, we make you a member. And then next time, you can use it. So, if you come through this channel and many people do, we have a very robust website figures compared to our peer set. So that's how we basically work on moving the ARR. Qualitative approach, value addition and then obviously, market-taking advantage, whatever we can, whenever we can. It is always that little [Foreign Language] on the top. Like right now, the whole city is sold out. There are conferences happening, events happening. Of course, so at 5%, 10%, which you sell at a higher rate, helps overall your marginally ARR come out.

His follow-up question is, what could be the replacement cost of the property owned by the company at Santa Cuz Royal Orchid if you were to sell it off today? What was the replacement cost of that?

Yes. Firstly, it's not Royal Orchid. It is The Orchid, and Royal Orchid lost the case, that did not open any more, and they've called Regenta . It's just that due to various reasons best known to them. They are insisted on continuing their company name. But if you see, all the properties are Regenta. So the Orchid Hotel replacement cost is up to whatever someone wants to replace it as, you can replace it to -- if I were to practically make the same thing back again, it would be around INR 2.5 crores a key. But if I don't do that, then it could -- and if someone wants to make it more lavish, he can make it whatever it wants. But on a practical purpose, if today I was to make the same thing identical back, identically same, it would cost around INR 2.5 crores a key.

Okay. His follow-up question is as per our presentation, we are adding 380 rooms in phases during FY '26. So FY '25, what will be the exact number of rooms that we will close it at, approximately?

That is this March?

Yes. By March end, what will be a number of keys that we will have?

From 1,600, we should be at around 1,800, I think, if I'm mistake not. Currently, we are 1,690. And Chandigarh opens 123. So we'll come to 1,690 plus 123, [Foreign Language], 1,810, 1820 that is immediately what I can think of. And if Hyderabad also, I forgot, so around 1,860.

Okay. All right. The next question is from Ashwini who's asking, what are your insights on the luxury and premium segment?

It's a very good segment. It's a very -- India has finally come and arrived to show that we also will not mind spending for luxury. We don't mind and we have the -- not only -- we always had the bandwidth, we didn't have the mindset. Unfortunately, it was sad that Indians would go to America and spend $100 on a Broadway Show but they would not spend INR 2,000 on a quality show in India. But thanks to various centers, like example, today, one of the things we, as a hotelier are also proud of and every Mumbaikar should be is like the Nita Ambani Center, where you have world-class quality productions and people paying world-class rates also. You are paying in dollar rates for a program, which is worth paying and you would pay a similar kind of, if not more abroad. So when you're getting abroad at home, then we should be wanting to pay for it. And I think that's what has happened in India. Quality cars, quality liquor, quality hotels, quality stay is more and more being accepted as a norm rather than earlier it was the exception. Today, I'm not saying that -- so premiumization in every segment. It's not about high cost. I would use a more simple stroke that if today, a person was buying X level of clothing, he doesn't mind going Y. So the premiumization in every segment is something which I think is the plus point for our economy and something to look at in the long term.

Next question from Pavan, what is the CapEx guidance for the next year and this year?

We gave that. We gave just now. What did you say? The CapEx guidance?

The CapEx guidance. How much are you going to spend this year and next year?

This year we're going to spend near about INR 30 crores, INR 35 crores.

INR 30 crores this year, we are spending on internal upgradation, INR 35 crores, you can take, because Goa Hotel has been completely redone from scratch, approximately, I think around INR 15 crores would be what we spent on Goa for 58 rooms. So it's quite reasonable when you look at it, that from scratch other than the building, every single thing over there, including all your plumbing, piping, electrical, which is the main cost. And we also upgraded and modernized it. So that's also an additional cost. So keeping that in mind, the kind of per key costs we've come to renovation is very attractive, considering like I said, it's including a swimming pool, which wasn't there before. We had a swimming pool, but it was part of a common facility. Now we have 2 pools. One is a common one. And our own private pool also, apart from which many other fancy features because, again, it's like a previous question, it's a very premium product. We expect a nice ARR there around INR 12,000 to INR 15,000. And it's also a hotel which is aimed towards a more mature audience. When I say mature because our properly is small, we are not able to cater to everyone. So we like families or groups or friends to come, but with kids who are not below 12. Below 12 are not allowed because we don't have the facility for them. It's not that Kamat's are family friendly, and we are known for a family thing. But I'd rather make a product to make somebody happy then make everyone unhappy. Because we don't have a play area. We don't have a swing area. We don't have a play room. We don't have a zone. But -- so what we have is something which is for the more mature audience. And today, above 12 children are no more children. They are adults. The way they behave, the way they think, the way they are exposed to the world. So we want that -- those kind of kids or -- who I would consider kids from 12 to 18, who will come and be able to enjoy along with their parents more as a young friend rather than as a child, which is 8-year-old or 6-year-old crying, throwing things, running around. So that -- we don't have that facility there. So that's how Orchid Goa, this is called Passaros. Passaros means birds in Portuguese. And the whole theme of the resort is the various beautiful birds of Goa. So it will be something interesting. So that's one CapEx and we're doing some CapEx in operations in other places also. Pune Orchid is there, we're upgrading it as we speak. So next year also, I think [Foreign Language] that will be max to max INR 30 crores, next year also because we are taking each of our properties, which have like example, let's say Nashik, for example. 2 years back, we took IRA by Orchid, Nashik, which was earlier called Kamfotel, and we upgraded into IRA by Orchid. And we spent INR 2.5 crores from internal accruals again, no borrowing. All this -- by the way, all this is without borrowing. So let me share with all of my friends that whatever expansion we've been doing and upgradation we are doing is all without borrowing. So this EBITDA, which we have of INR 100, INR 110, which we're saying, over and above that, this CapEx also is there. So you can appreciate that. Whatever we are doing is in a very structured and focused manner, in a very prudent way.

The next question is from Rashmika, a follow-up is that if the ARRs go to 7,500, then what can be the EBITDA margins with the current EBITDA margins approximately at 30%. At 7,500 levels, what could be our EBITDA margin?

I would not like to speculate on that because it's more on a broad things. ARR will be high for -- if I'm giving a higher ARR, I have to spend better, I have to have better things. So it is very speculative. I will still go by our thumb rule, generally of anywhere between 35% -- our various hotels do anywhere between 30%, 45% depending on hotel-to-hotel. And cumulatively, what it comes to, that is basically the outcome.

Okay. Next question is with the wedding season, can you please let us know -- Vignesh asks, can you please let us know how the wedding season has panned out for us? How would be the occupancy for H2 versus H1? Obviously, this is speculative again, but approximately, what is your outlook in terms of occupancy rate for the second half of this year?

So the overall wedding season has been great. The wedding season has been fantastic for everybody, sorry, has been very good for overall because the [ saya ] days are here, the weather has also been very supportive. Unlike in H1, where it was extreme heat, supported and augmented by elections. The elections along with the heat was a dampener to some extent, to a great extent rather. And I think that was common in many of our industry peers. And even in our nonindustry [Foreign Language] allied industry like retail and others also, many of them affected in the first half. But in the second half, we find stability, peace, quiet, good weather. Weather is actually now become very nice and pleasant. So the wedding season has come in. Also, all the dates are matching and lining up for longer weekends or supporting that kind of stuff. So this year has been very good for the H2, and I think it will be robust in that regard.

Next question from Amaya. Are there any plans to expand the portfolio of heritage properties given the positive trend in this segment in India? Which potential markets or regions are we considering for this expansion?

So heritage is a lovely segment to be in. It's very glamorous in that sense, it's a lot of very charming segment, a lot of history, culture and you learn a lot, but it's limitedly profitable. If today, I was to say for Fort JadhavGADH vis-a-vis a similar-sized business hotel, it is not as attractive. It depends again on place to place and this thing. It is not as necessarily attractive. And also the undulations are higher, because it's a more leisure destination. So it's dependent on holidays. It's dependent on the weather. It depends on many things. So we are not -- If I was to looking at, if any good opportunity comes, we have evaluated some nice portfolios to look at. But it's not something I would actively look at as compared to business and leisure in terms of our regular resort, which is having a character like the Orchid Goa we just spoke about, having -- making a thematic experience, something different, but this is a commercial sense. Same way Lotus Konark, upgrading Lotus Konark, making it something more upscale. That's a commercial sense. But Mahodadhi Palace will have a certain limitation over The Orchid Hotel that comes next to it. So that's why it's not necessary -- and we are very clear on how we want to grow. And this is not exactly something I'll chase, but if something interesting comes along which ticks our certain parameters, we will look at it.

Got you. Next question is from [ Rajiv Yadav ]. Is there any reason the company is focusing on small hotels of 50, 60 rooms vis-a-vis larger ones of 120, 150 room in Tier 2 cities?

So there 2, 3 challenges. One is that I'm not making my own. I am getting an opportunity to be in a place where otherwise on my own, I would not like to put my money because obviously, land cost, construction time, and there are various issues. So that's why I prefer to be able to take a place and do it. That is one. Secondly, we also must appreciate that as a brand, okay, as a company, rather and as a family, more importantly, we have only come out of our troubles in the last 2 years. Last 2 years is basically when we've come back as Kamats because we were written off. We were also -- various things were said, good eulogies passed already. And we have come back from the -- literally from the brink of losing it all. And thanks to my parents blessing, team that stood by us in this tough times, did many things, and that's how we were able to come out of it. So we have come back with a handicap. If today, Kamats were not in this handicap, our situation would be much different post pandemic because we'd also probably be in a different space. So we know these things. And if we don't acknowledge and appreciate these things, we will not be able to do justice to ourselves. So we have to basically part -- walk again. It's like after Ram brought Sita from Lanka, she still had to do [Foreign Language] again. So our time has come again that we have to make, again, friends who are listening and watching, again prove that are they the Kamats of the past? Will they be able to grow again? Are they going to be able to expand? When they expand, will they be profitable? Will they be prudent in terms of their finance? So I think systematically one by one by one, we are passing each box with our only thing that we can do is prove through time. So same thing over here also. I think that we will get larger hotels. We will get many hotels. There is going to cover a time when a lot of opportunity will come. When that time will be, I do not know because the industry is still going robustly. That time, the kind of small war chest, kitty and light balance sheet I'll have will give us a bigger flip. So it maybe after 3 years, maybe after 5 years, maybe after 10 years. But it is better to just as all my prudent shareholder, friends, as well as friends in the share market would know that it's better to always buy in the down and wait up. So right now, the market is hot. Let us grow based on what we see, do day trading and make little money rather than put it all now and suddenly have some kind of nonsense happen. So I would want to say that where we want to be, if we're getting an opportunity like Ayodhya, it's a 50-room hotel, yes, it's definitely, not considering our other hotels are so large. But today, I'd rather be in Ayodhya, have my presence there, than not be at all just because it's 50 rooms. So we have to pick and choose based on opportunity. We have to pick and choose based on what is our vision to be there, and systematically grow our portfolio. And at the right time, larger and larger hotels will come. I don't have to prove the ability that I can run 400-room hotel. It is already doing exceedingly well. And Orchid Mumbai also 372-room. IRA is a 200-room hotel. So [Foreign Language]. So we have to compete with other brands who are also there in the market, okay, some foreign, some Indian. So our time will come and we know that. And we have to keep doing what we're doing consistently like the tortoise rather than just run like the hare.

Well said, Vishal ji. So next question is on Rashmika again. What are the future expansions, are all future expansions are asset light based on either lease base or profit share? Can you provide some information on your profit share arrangement with the property owners and/or what is the lease arrangements?

No, this is depending upon the opportunities how we are getting and how we are going ahead with the things. Second thing is the location as well as -- just now Vishal sir told about the location, then the dynamics of the market, according to the positioning of the property. This is completely in the sync of everything, we will get it. Whatever that things will come up, we will choose. And it's very important that the ethos of the -- ethos should match with us. The lessor or who is the owner or whoever it is, the management companies or operational way or revenue share basis or lease basis, whichever way, the very important thing that whatever our ethos are there, our culture is there should be matched with the other party also. So basically, all these dynamics need to be matched or it should we get along with each other, then only it could be possible.

Whatever someone wants to give their asset, some people are there, they are risk averse. [Foreign Language] So that will be your MG and rev share. And last one is basically where we say, I'm not really that keen. I like your property. But if you want, I'm not going to give you an MG also. I will just give you a rev share. And there are people who don't mind all 3, because if they have faith, they will go for number 3. If they have faith, what they want little insurance, they'll go for number 2. If there are no faith, [Foreign Language], so all 3 other options. So it's [Technical Difficulty] appetite or his thinking, what is our desire to take a location whether we really want it or not want it, but it matches, it falls into 1 of the 3. And the fourth one is management, sorry. I forgot. The fourth one being management. where he says that [Foreign Language] So that is the -- again, so these 4 things have to match. 1 of the 4 which fits them, we go ahead. We are most averse to 4, which is management. The reason being that management may -- unfortunately, many of the hotel owners who are there, it's like to hire a driver and then you're teaching him only to drive. Then why don't you only drive and save the money, but you don't want to do that. So many a times, the owners mentality is not necessarily in sync, especially, smaller hotels. So unless the hotels of a good size, like example, our Toyam Orchid, The Orchid Toyam is basically in Pune. Fantastic orders, very supportive. Yes, there's no harm in them asking questions, okay? They must ask questions. We are ultimately the asset only in charge. We are not the owners of their asset. So it's our duty to respond to queries. Like we are today responding to all your queries. But at the same time, after responding to your queries, please don't then try to force guide us because we know what it is. And that's how basically we have some good owners also in management who are part of us. But that's because we have taken the owner first and then the property. Not the property first and then the owner. [Foreign Language] Owner, I can work with him. He looks like a kind of guy -- because it's basically 1 contract is for 15 years. So we are talking about almost a marriage. My marriage is 15 years. Many people, marriage don't last that long. So you have to be very careful that is that person's mindset and wavelength and fundamentally ethos matching. Because many people want to do shortcut. Now they want to do some cash business or GST [Foreign Language]. So that's how it is. I think Smita answered that way.

The next question is, are there any plans to enter into stand-alone F&B, like restaurant QSR space so as to leverage the legacy and strong brand name that Kamat has?

That's a really good question, whoever asked that question. So we do have certain stand-alone outlets, which are part of our portfolio. There is a beautiful -- the Konark Sun Temple, there is a beautiful museum cum interpretation center of the Konark Sun Temple done by IOCL. And because of our Lotus Konark doing exceedingly well, along with Bhubaneshwar, our IRA by Orchid, IOCL was very keen that they gave us to run this, and they wanted us particularly because Konark is -- while it's a popular destination, it's still a rural area. So to give that kind of finesse quality where VVVIP movements are coming is very low. So they wanted us to do it and we did it. So there's a beautiful Vithal Kamat restaurant over there, which is part of this Kamats. And then we also have one more standalone outlet, which is actually was not a stand-alone. It was part of the hotel, which is basically Mahodadhi Palace that is still there at Puri. So while we don't have intentions to directly have standalone outlets, okay? Because our focus and our strength lies more on hotels. If there is particular something like this, which has an opportunity, which is a win-win, we do consider. So these are the 2 exceptions, which are there. So it's a good question, actually. But actively going and doing some stand-alone restaurants is not exactly the focus.

Okay. Next question is from Prashant. Should the current up-cycle be used to make existing portfolio more robust that has increased occupancies and sweat existing assets or should current up-cycle be used to expand our portfolio by adding more keys? What's the plan to increase ROEs and ROCEs? How will the same increase if we continuously spend on expansion?

See sweating of assets should be done otherwise also. It is not that in upcycle we will sweat, and in downcycle we relax the asset. You have to sweat it whether it's down or up. Taking out the best value from your asset is fundamentally our main role. So I don't agree that I'll sweat it in up-cycle or I'll relax an up-cycle or vice versa. So sweating is a constant endeavor of ours, okay? Now coming to the expansion part, as I already mentioned, you have to be very prudent in your expansion as rightly or maybe not mentioned, but in boom time, you have to be double careful in your expansion. And in downtime, you can be quite liberal with your expansion. Because when you are down -- when the market is down and you have money and you are going to pick up things, as long as you have the holding power of a few years, there is bound to be an up cycle. It is but natural that one fine day, what we are enjoying right now will come down. When it will come down, we don't know. But the law of nature is what goes up has to come down. It may be after 3 years, 5 years, 10 years, I don't know. But it will come down. So when that comes down that time in what position we are, we have to see based on that. So sweating of assets is a continuous thing. We are doing it even now. There is no reason for us to sit back and kick up our heels because we have -- we are not that type. [Foreign Language] and side-by-side prudent expansion [Foreign Language].

Okay. Next question is from Rajiv Yadav. In the existing hotels, which other hotels have scope for expansion for rooms and how many rooms can be added?

So we have some expansion scope in Konark, not much 15, 20 rooms. We're trying to see that. We try -- Pune, we've mentioned already. So it depends on that. But these are all incremental. [Foreign Language] This will not be as interesting as having a couple of more flags. Because, again, as someone has before asked that how are you deleveraging yourself. So if today already Orchid Pune has 410 rooms and if it becomes even 500, is not interesting as compared to a 100-room property stand-alone coming about somewhere else. So that's something which we need to see.

Next question is by Rahul Agarwal. How much lease rental do we pay annually for our leased properties currently on an annual basis? What have we signed up for some of our newer properties.

Annual basis is coming INR 28 crores.

INR 28 crores. It comes on an annual basis, our entire lease.

Okay. Next question is with the 380 rooms getting added in FY '26 in phases, what will be the revenue potential in FY '26 and FY '27? Sorry, the revenue potential with the 380-rooms being added, what will be the revenue potential in FY '26 and FY '27 with the addition of new rooms?

We can expect '26 and '27, INR 60 crores in '26 and up to INR 90 crores in '27, FY '27.

The next question is, so I think a few people want to understand the debt restructuring that took place and the shareholding that we -- this thing, so if you could just spend a couple of minutes on this aspect as to how we restructure the debt, et cetera.

Simple, sir, that we had to basically come out of our ARCs. We had finished our ARC time, okay? Or it was coming to the end, not finished, rather, just coming to the end. And this was basically INR 400 crores or total our loan. INR 596 crores. [Foreign Language].

So total ARC debt was almost all INR 596 crores, and this was excluding of the interest. We have taken advantage of the COVID and our lenders have supported also, basically, all the ARCs also supported because our industry was the, one of the biggest industry or only industry you can say which suffer a lot because of this COVID. So they understood that why we are -- how we are coming out and how. So they have given us a haircut almost of INR 190 crores of haircut, we got it in the ARC front. And accordingly, we have restructured the whole thing once again. We got the NCDs through the Alpha Alternative, SBI. And we have paid off on stroke to all our ARCs. Some of them amount almost INR 60 crores, INR 70 crores, we have credit to the internal accruals. So accordingly, we have closed our ARC chapter and the new chapter began with the NCDs. That is also we have paid -- 1/3 of the amount we have paid, INR 100-odd crores we have paid through the internal accruals and rest of that INR 200 crores or rest of the INR 100 crores, we have taken from the Axis Bank.

So to be fair, basically, it was calculated gamble taken by Alpha Alternative along with SBI and True North coming in during COVID, to be able to retire all these people. And for that, basically, company gave 10% warrants also as part of this thing, [Foreign Language]. So basically, in [Foreign Language] so basically coming to what I was telling you was, at that time, they took a gamble, an educated gamble or I would say, a guess or a study or a conviction, whatever they did after spending time with us. And it was in during COVID that they did this because of which we were able to have this happen and then things turned. So this -- all the situation today in hindsight, everyone wonders because in the hindsight, everyone looks a genius. But in reality, while you are in that thing and so much thing going on, one of our hotels, which is IRA by Orchid was a COVID center, when Orchid Mumbai also was part of the Vande Bharat and we had various other challenges. It was a very difficult time. So at that time when they came in, they had that foresight, conviction or whatever you'd like to call it, and that's how basically the lenders [Technical Difficulty] we also have parted from our equity to our new partners, and they are also happy. And we are out of all the problems -- our shareholders and we are also happy.

Sure. Next question is, can you please also speak on competition, especially in the core markets that we operate in.

What does that question mean actually?

What are the other competing hotels in the market that we operate in? And how does it impact us?

No. Competition can come from anywhere. There is the tea and coffee, which is -- within the tea, there is a competition, what type of tea, then there's a substitute competition, which is tea and coffee or then there is a non-hot versus cold segment or versus hot segment, cold drink versus tea. To talk about competition like this is very vague for me. It's not the right thing to say about because my competition is -- see, if my competition is bad, I'm not here to improve him. If he is good, I'm here to beat him. So I have to see the market and I have to see based on where I am and what I want to be. Sometimes I do not want to compete with anyone [Technical Difficulty] but his reasons of success may not be in sync with my thoughts. If I'm Kamat Restaurant, which is serving fantastic pure vegetarian food. And if next to me is biryani and kebab joint who is serving non-veg, I may not want to compete with that segment. So I need to know who I am. We are very clear who we are. We're very clear who we want to attract. And based on that, it lies our focus and our competition.

Next question is, in IRA, Orchid, Bhubaneshwar. Why does Kamat Hotels buy -- why don't you buy the promoter stake as it would probably benefit and the company and rerate the company. That's Rajiv Yadav's questions. So is there any reason why we have not bought it?

It's a very good thing, and we have actually contemplated about it. But once at the right time, we will look at it because we have our now partners also with us. So right now, we don't intend to do any kind of corporate action. But if suppose in the future, there is, we will basically -- based on the overall things, see properly and then accordingly do. But it's a thing that has crossed our mind because our overall objective over the next many years is to systematically see and consolidate more into Kamat Hotels. To help Kamats Hotels grow, we recently did that while the reaction from some of our shareholders and others was not very positive, because we failed to at that time to explain what we are doing. I think it was not an intent issue that we know, but the market would not appreciate that intent issue, unless we explain them nicely. And the people who take the trouble and came and spoke to us, which obviously is the ones like some of the people on your show, who have been following us, they when they understood what we are saying, they appreciated and said, okay, we understand that this way. Like one of the properties we brought in is next to the Vadhavan Port, okay? It's very near the Vadhavan Port, which is going to be -- not going to be, already work has started. There is an airport, by the way, now announced also, very near our property, okay? It's a 16-acre land, which basically we want to bring into the company to be able to exploit and extract its real estate and business potential apart from its hospitality. So that's also there. So suddenly now, with Vadhavan being there, now people say, oh, [Foreign Language]. But we knew certain things and we want to bring it under, if I want to unlock the potential of the asset value, I need to be able to bring it under umbrella, which I can take more advantage of. So that's how basically we have certain things happening, some things which legacy cleanup is there, that also we've been doing over the last 15, 18 months, we have used a lot of our time cleaning up our balance sheet. A lot of the old comments if you compare to the new balance sheet is not there. All these things are because we have been working out to 10 years of challenges which were there. We needed to clear those things. So it has been a continuous process. That's why you find that when you said our balance sheet, look at our net worth. Our net shot out from negative INR 180 crores to today, I think almost INR 240 crores in just 3 years. Why is that happening? That's happening because of all the cleanups, because of all the removal of any liability, whether real or otherwise, but solving those things and finishing up. We had various BMC challenges, those were cleared. We had various which will not be running any more in our balance sheet. We had various other, so many things are there. Well, to put a point at that time, we are survival and making sure that the company survives was the main thing. So bankers were our main focus. Now our main focus is fantastic compliance and making a very lean balance sheet. I remember before the Lehman crisis, Warren Buffet -- not before the Lehman or after, but Warren Buffet were very nice -- this thing is there, one interview in which he said I had a choice between investing in 2 companies at that time. I had Lehman Brothers and I had Goldman Sachs. And I went with Goldman Sachs for only 1 reason, thinner balance sheet, lesser queries. So if a company is going to be neat, lean, clean and have limited stuff, that's basically what people want to know, right? I mean that's -- so that's what we aim to be.

Thank you, Vishal ji. Next question, what percentage of customers are business or family recreational for Orchid and IRA, respectively? Do we have this kind of a breakup?

We don't have exactly this kind of breakup. We have segments. So these would come in FIT. So if I was to break it up in a broad sense, just broad -- not going into hotel specific, we would say that 35% of our business comes from corporate, 20% -- 25% comes from online marketing sources. 10% comes from our own website, our own Orchid reward members 10% to 14%, okay? The rest is about 10%, 15% is from travel agent. Travel agent is different from online travel agent. Online travel agents are MakeMyTrip, Booking.com, x, y, z. Whereas travel agents would be Sita, Kuoni, the offline, what we call in traditional way, but they're travel agent. Then the balance is basically your FITs. So your FITs are basically free individual traveler if I have to use the technical jargon. But it just means that someone doesn't have a tie up with you, if he want to come and stay with you, he will be construed a FIT. And he basically was a family man or an individual man. And that's broadly the breakup.

Okay. I think we are running out of time, but maybe a couple of last questions. The Goa Orchid property is known as freehold, is shown as freehold. Is the land owned by the company?

Yes. That's why it showed as freehold.

Got it. And let's take 1 last final question. What's the breakup of the current debt? And what's the overall all-inclusive cost of debt? Will there be any additional funding requirements in the next 2, 3 years that will be raised through debt?

So the 100% debt is owned by Axis Bank, it is INR 120 crores and it is at 10.5% interest, and that's it. That's all the debt we have in our books.

And for the next 2, 3 years, are we going to fund things through taking additional debt or primarily [indiscernible]?

As we have already spelled out, we are generating a lot of cash. We are using that cash for our growth from internal sources only. So there is no need for us as on this date for us to even look at borrowing, okay? If any particular opportunity comes then we don't know. But today's outlook of at least the next 1 or 2 years, you ask me is that we will be sitting with cash surplus, which we will be keeping aside and because our debt is a routine debt now. It's a banking, it's a normal bank loan. So it will be paid off as per that. There is no hurry for us to prepay it. It's only 10.5%, okay? So we might as well continue doing what we're doing. And we can end on a better question than this one. This is a very boring one, actually.

Let's take one last maybe closing statement from you -- maybe some closing statements from you, Vishal ji. There was some unanswered questions, but I think we've run out of time, maybe closing statements from your side will be great.

If it is an interesting question [Foreign Language] I don't have a problem with the comfort of the question. But the question should be interesting.

One last question from you. Any message to -- you've obviously come from the last couple of years have been tough for the company. You all have come out of it with flying colors. Where do you see Kamat Hotels being in the next 3 to 5 years? Where do you see yourself going? Where do you see -- what is the broader longer-term vision that you have now?

Our basically vision is very clear that we would like to consistently be doing what we are doing, okay, in a very robust and prudent manner. I would not want to speculate, what will be my market cap, what will be my top line, what will be my EBITDA, how many rooms because if I get an opportunity, which makes sense to me, I know the lessons of my past is not going to come back because I have made sure that those things are there, and then even if today my 2,000 keys becomes 5,000 keys in 1 year also, I'm ready for that because we don't have a bandwidth issue. We have no bandwidth issue in terms of growth. What we do have is basically to make sure that we take prudent opportunity issue. Expanding and acquiring just for the sake of it will not be the right thing to do today. There might come a time when we will find a rapid expansion. So the thing is, one, patience, don't forget your past and keep enjoy doing what you are doing. If these 3 things are all there, I don't think my friends who are here with me will lose out in the long run. In the short run, I cannot promise you anything. Why? Because I'm not here to do magic. I don't want to do something for the heck of it for 1, 2 quarters and then third quarter [Foreign Language] no, but within 5 years, as we have already Kamat, we will be much, much, much 5 times bigger Kamat.

Fantastic. Thank you so much, Vishal ji and Smita ma'am. This has been a very insightful session. To all the participants who joined us today, thank you very much for joining us. I know there were quite a few questions that I was not able to answer or take up due to time restrictions. Please reach out to us, and we'd be able to -- happy to address some of these. Again, thank you, everybody, and thank you, management, for joining us.

Thank you so much, Anuj. Thank you all for listening. Thank you very much.