Royal Orchid Hotels Limited (ROHLTD) Earnings Call Transcript & Summary

Ladies and gentlemen, on behalf of Kaptiva Consulting Investor Relations team, I welcome you all to the Q1 FY '27 Post Conference Call of Royal Orchid Hotels Limited. On the call from the management, we have with us Mr. Chander K. Baljee, Chairman and Managing Director; Mr. Arjun Baljee, President; Mr. Keshav Baljee, Executive Director; and Mr. Amit Jaiswal, Chief Financial Officer. As a disclaimer, I would like to inform all of you that this call may contain forward-looking statements, which may involve risks and uncertainties. Also, this is a reminder that this call is being recorded. I would now request the management to detail us about the business performance highlights for the period ended June 2026, the growth perspective and the vision for the coming year, post which we will open the floor for Q&A. Over to the management team.

Good evening, ladies and gentlemen. On behalf of the Board and the entire leadership team at Royal Orchid Hotels Limited, I extend a warm welcome to all of you to this investor presentation on the financial results for the first quarter ended 30th June 2026. We appreciate your continued interest and support, and we share the performance highlights and progress that we are making on our growth agenda. Key performance snapshot. Q1 delivered strong top line momentum. Consolidated revenue rose 36% year-on-year to about INR 107 crores from INR 79 crores in the corresponding quarter last year. Total revenue stood higher at INR 115 crores. This growth is attributable to our new hotel Iconica, which had become operational last financial year. EBITDA grew faster than revenue rising 39% year-on-year to approximately INR 33 crores, which is the EBITDA margin expanding modestly to approximately 30.7% from 30%. However, the net profit declined to around INR 6.4 crores versus INR 10.9 crores last year. The diversion between robust operating performance and lower reported PAT reflects higher financial costs, depreciation including Ind AS impacts and ongoing ramp-up of newer properties, particularly our larger leased assets. We view the underlying operating trends as healthy and consistent with our expansion phase. Strategic progress, we continue to exit our high -- our asset-light growth model. The portfolio has expanded further with the digital hotels and keys added during the quarter. We added 5 hotels with 237 keys during this quarter. We have 50-plus hotels signed, which will be opening in the next 18 to 24 months. We are working hard and remain focused on Vision 2030 targets of scaling to a significantly larger network of hotels and keys across India and select neighboring market, driven primarily by management contracts, franchising and selective revenue share arrangements. Occupancy and average room rents in our key operating hotel, and managed properties have held up, supported by domestic leisure and corporate demand. New openings and pipeline conversion are progressing as planned. Looking ahead, we remain confident in the medium-term outlook. India's hospitality sector continues to benefit from rising domestic travel, improving infrastructure and growing demand in both leisure and business segments. Our emphasis on operational excellence, brands sector across the Genta and related portfolio. We're also looking at disciplined capital allocation position as well to convert the current growth investments into stronger profitability and better ROCE in the coming quarters. The detailed financial statement, segment wise performance and operational metrics are available on the investor presentation and results filing. Hope you all had a chance to go through the same in detail. We are happy to take your questions now. Thank you once again for joining us today. We look forward to a constructive discussion.

[Operator Instructions] We'll take the first question from Anubhav Jain.

My question is that premiumization of ROHLTD Iconica, what's the plan? And how will that over the time, include the yield?

Let me take that question. So if you look at what we've tried to do with Iconic as a separate brand in the premium upper upscale segment, the intention was very clear that how do you create a family of brands starting from the value priced at set by agenda going all the way up as with every other hotel company. What we propose to do going forward is we're signing hotels in the upper upscale category, right, by using Iconica as the growth driver there. We also have the opportunity, right, of premiumization where within our own Royal Orchid Hotels. If you look at it, we've got about 1,000 keys in the 5-star category between owned, leased and joint venture. Those 2 are, as you know, are being upgraded and have been upgraded to yield better ADRs in the time to come.

We will take the next question from Surbhi Mishra.

I wanted to know your consolidated revenue grew 38.5% and EBITDA approximately 39.1% in Q1. How much of this growth came from the 37 new key added during the quarter? And what was it like for revenue and EBITDA growth of existing profile?

I'll take these questions, Surbhi. See, in the quarter, we have opened 237 rooms, 5 hotels, and they all are in managed and franchise model. So the number to that would be very, very negligible, okay? So because we only get the management fees of the franchisee fees from these hotels -- the median number comes from our LO hotels that is owned, leased and joint venture hotels. So the number from these 5 will be very, very negligible.

Okay. And can you tell me what is the revenue or growth occupancy and ARR movement for Q1?

See, as far as occupancies are concerned, we are at 70% in our GL hotels and at 60-odd percent, 60.8% at all the managed and franchisee portfolio. And as far as the ADR is concerned, last year, we were at an idea of INR 5,488 crores. This year, we are at an ADR of INR 6,233 in our JLL orders. And in managed hotel, our last year ADR in the same quarter was INR 4,031. And this year, it is INR 4,300.

Okay. One last question. with the current pipeline of signed and operational hotels, what should investors realistically think about as the sustainable revenue growth rate for the next 2 to 3 years? Will it be closer to 25% or 30%?

Keshav sir, would you like to take a go ahead.

You can go ahead.

Okay. So as far as the growth from these numbers are concerned, Okay. See, we are at 7,000-odd rooms, and we have signed 11,000-odd rooms with 50 orders coming up in next 12 to 24 months. Okay. Most of these hotels barring few 3 to 4 orders which are coming under the revenue share model, most of these hotels are under managed and franchisee model wherein we have not invested anything. So the growth from there will be in the managed segment. I've shown separately in my presentation what we learned from the managed segment. So there will be a substantial growth in the man segment. But we get a management fees from these hotels. So the revenue will grow definitely there. And as far as the gates concerned, in next 2 to 3 years once Iconica established itself because it just fairly a new model. So there you will see a substantial growth. But at this point of time, for 3 years down the line, giving a number will be little difficult, but there is definitely a growth in the company.

We'll take the next question from Rahul Bhangadia.

My question is not about this quarter. So just a generally broad this thing I ask especially in different forms before as well. Broadly, you have laid out your long-term plans very well. That has been well explained an asset-light model. All of that is good. But when does the -- when do we move our profitability line. When would you see it moving? Because 3 years back, we were also at INR 50 crores pad. This year also we end up somewhere there and thereabouts. We've moved from 4,000, 5,000 rooms to 8,000 to 10,000 rooms. When do we see the needle moving, sir, on the underlying fund? Because the valuation or anything else that the company can come under the function of the bottom line, I'm sure you guys are putting up so much effort in adding so many rooms, new brands, working so hard. I'm sure you look to that as well. So just a broad time line on when do you see it reflecting in the bottom line?

See, Rahul, I just put up this thing then probably I will request Mr. Arjun, sir, and Keshav, sir, to add to my reply. See, please understand 1 thing. We are at an ROCE of around 17%, 18%. Okay. because you are seeing flattish because we are in a shutting stage. The company is taking -- going to take a big leap but we are in a turning stage. Of course, you have a concern, and we also have a concern that how do we increase our profit and the profit looks flattish. But once things stabilizes itself, definitely, you will see a good growth in the company. That much I can -- I'm very sure about. And if you really look at the ROC, the deployment of the capital is done very, very intelligently. And ROCE of 17%, 18% is actually not bad. Of course, we are targeting an ROCE of 20-plus, okay, and which will happen in the next couple of -- 1 year or so once we have established, once Iconica gets stabilized itself because we have done funding there also. So definitely, you will see this thing. And probably I request Arjun sir or Keshav sir to add to it.

And I can add to that. I think if you take the last couple of years, coming out of pandemic, et cetera. We kind of took a point of view that while we were asset light for a long time, we'd also like to be somewhat asset-light, right? So we are also putting in captious into revenue share and leases. And occasionally in some years back also, we purchased a partner stake, et cetera. So while we take these -- while we do a ramp up and you've seen a ramp-up in our revenue this year, right, it's a pretty large revenue ramp up compared to some years back, primarily because now we are doing revenue sharing properties as well. Now, when these properties get added, there obviously is an IDS effect, there's an initial ramp-up effect, there are costs associated, all that stuff. So I think this will be a definitely time for some investors who have been patient with us for some time. But I think the reason we are doing this is because we understand that not only should the number of keys grow, but so should the top line and also the bottom line in the cash profits, which are the most critical things to us. I believe all of these things will start to show in the numbers soon. But yes, there is 1 additional business model that has been added, Investors should be aware about it earlier when we added management contracts, it was a cost-less way of growing to some extent because there's very limited maintenance CapEx associated with adding new keys. But now, when we add keys in the revenue share and lease model, there is a cost associated. And with Ind AS, there was a slightly larger upfront loaded costs which, of course, we have explained in our investor relations as well the investor presentation as well. So that is just something that we do want to highlight to flag all investors that there is a slight change in the way when we go from asset light to asset, right, there is a slump change in our P&L as well. But as this -- as more hotels come onstream, you'll start to see a much higher growth in the bottom line as well just like how you see good growth this year in the top line.

And now 1 more thing I would like to add to Keshav sir replying. Please understand, last 2 quarters, we have been hit by 1 particular factor the change in the GST module, See, earlier, we used to charge above -- below 7,500 rates, we used to charge 12% GST, and we used to get the input credit, and we still set it off against our GST output. But now with the change in the regulation, definitely, the GST now output is 5% with our input. So we are getting an input loss. Let me substantiate this, that in this 1 quarter, there was a GST input loss for the entire company by INR 2.5 crores, which is a substantial number. We are trying to find out ways to mitigate this particular process and this particular cost, which has come and all of a sudden due to a change in the regulation has come. We are trying to find it out the way how do we mitigate this particular thing and probably we'll come out with a better solutions in time to come.

So just want to add 1 quick thing to all of them. 20% of our rooms contribute to 80% of the revenue. Okay. And until that was -- until very recently, the Royal Orchid hasn't really made a large investment in any asset to get to the heft of the top line. Iconica was the first such investment, and the hotel really came on stream in November. So we usually give it, say, a year of gestation as do you, and you've been kind enough to say that in the past, right, that about a year is what the hotel usually takes to turn the corner. And so we're hopeful on that. The other flip to add is that how does 1 obviously add assets to the company that are -- be it brownfield or ready assets, which are revenue and profit accretive to us. And that is something that we are doing very, very actively in our development pipeline, right, how do you add hotels that today, starting from the get-go, 1 can start seeing some form of traction, right? There's no real 6, 8 months of development cycle and then setting up the hotel cycle. So we want to try and shrink that, so ROCE goes up. So I think it's a question of time where you will -- a short time, right? And I thank you for your patience for, I think, a decade. But it's just a short while longer. And I think the corner is about to be turned.

So sir, the point is well taken, and Iconic actually gets the benefit of for another 2, 3 quarters. Benefit in the sense, we catch the time to turn it around and actually show some numbers. So the Iconica point is well taken, but even, let's say, Iconica and x of Ind AS, would you think that you were happy with the performance that has happened ex Iconica -- ex Ind As, I'm saying even those numbers haven't moved much. So any thoughts there?

Yes, I agree with your statement. I would not say that we are very happy -- we are trying to find out ways to move -- see our top line has grown, okay? There's no doubt about that. We are -- our operating margins have grown I have no concern. We are looking for finding -- we are looking at the ways how do we improve it further so that our PAT grows. We are in a little bad situation as far as the taxation also is concerned. If you really look at it, the cost of the tax is quite high. So we are trying to find out that we also so that our PAT improves. But your concern is also our concern, and we are definitely trying to work towards it.

So just to add 1 more thing, Rahul, to help you and to add to Mr. Jaiswal's point. You see, when you look at the average hotel size that was signed up to, say, about 1.5 years to 2 years ago, right, with sub-50 keys. Now, today, you look at the hotels that we are signing, right, there are plus sub-80 going up to 100, 120 key management contracts as well. Now all of that helps. The second piece of the puzzle is -- I mean, obviously, 1 is larger hotel inventory or larger to key inventory per hotel is something that there's an active focus on. And the second component that we're actually focused on is the premiumization and increasing the average yield per hotel. That comes with larger hotels, more facilities, so on and so forth. So all of that is in very, very active plan that is, I guess, is about 1 year, 1.5 years ago, we set this in motion, and we're seeing the results with developers coming forward to us to sign interesting hotels that will add to a premiumization and be a better yield per asset.

Jaiswalji just 1 more thing, just a follow-up on your GST thing. So -- is it a fair thing to say that 2.5 years at you just mentioned, is the additional cost that you bore in the quarter, which Otherwise, you have expected -- and is that setting in the ITC column right now?

Yes. We have to write it up. I can't help it. I can't carry it forward. What ITC is not allowed I will have to write it off because my output does not permit me to take the ITC input because we are at 5% in the output tax, by output time below INR 7,500 rate on that. So we have been taken by surprise. We have done some representation to the government also. And we are also trying to find out ways how do we mitigate this particular cost.

We will take our next question from Harleen Kaur.

Sir, my first question is, EBITDA grew 39%, yet PAT declined 39%, while the Ind AS's accounting impact explains part of this, should investors now think of EBITDA or cash profit as the better measure of underlying economics of the business?

No, I think the investors should look at the non-Ind AS numbers. That is why we present our numbers in Ind AS and without Ind AS. So I think investors would look at non-India number because that shows the true picture of our business.

Okay, sir. Sir, what would Q1 FY '27 PAT have been approximately without this accounting impact?

INR 11.7 crores. No, no, no. I'm sorry. I'm sorry. I'll just tell you, INR 11.7 crores is the -- 1 second. So our -- as far as our PAT for the Q1 in FY '26 without Ind AS is concerned, it is INR 12 crores.

What about Q1 FY '27?

It is INR 9.8 crores.

Sir, what is the ROCE difference between an owned hotel and a managed total for Royal Orchid? And where do you see the optical mix?

See, managed hotel, we don't invest anything, okay? And we get a percentage of the top line and the operating margins. So without investment, we are getting some fees. But of course, we have to spend some money for running those hotels, okay? So we do that sales and marketing and all. Whereas own hotel, you invest heavily and then you get a return from that operating margins from that hotel. So this is both a different kind of business, rather I'll say.

Okay, sir. Sir, 1 last question. We are seeing the opportunity for premiumization of ROHL with Iconica. What's the plan? And how will that, over the time, improve yield?

So as Mr. Arjun Baljee said earlier that iconic is in the stage of streamlining the both thing and it takes a little time, the hotel is new. That is why for better understanding, we are publishing our results with Iconica and without Iconica so that the investors and analysts can understand the numbers better. So -- and once we grow that brand more, so the number will definitely change.

I just want to add to 1 thing. I think just to clarify what Mr. Jaiswal saying and Harleen to add to your question. We just opened a hotel in Baroda and add are called the Laxminarayana Palace. Now, it was intentionally branded with the iconic collection. It's not an iconic hotel, but it's not a Regent Hotel, either. It has to be something else. And we have a collection brand sitting there. The logic was to tell the customer that it is a Palace hotel, but it is in the upper upscale segment, okay? And that the connection between Bombay and the other hotels. The logic was so that the customer feels okay, hang on, you've got an upper upscale hotel in Bombay. This is of a similar vintage. And therefore, you can afford to charge a premium rate. You can afford to charge or do better services and all that. So in time, we will use the Iconica name selectively, but to try and get a better yield on assets that we, otherwise, would not have been able to.

We will take the next question from Renuka.

I had a couple of queries with regards to iconic -- so what has led to the decline in top line for Iconica this quarter? The reason I'm asking is because in Q4, the occupancy was cited at roughly 60-odd percent, and April, May run rate was given as 80%. So what has led to that sequential decline then from '24?