The Indian Hotels Company Limited (500850) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Indian Hotels Company Limited Earnings Conference Call for the Quarter ended 30th June 2026. On the call, we have with us Mr. Puneet Chhatwal, Managing Director and CEO, IHCL; and Mr. Ankur Dalwani, EVP and CFO, IHCL. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Puneet Chhatwal. Thank you, and over to you, Mr. Chhatwal.

Good evening, everyone, and thank you for joining our global conference call for Q1 '26, '27. We are pleased to inform you that we have continued our record performance for the 17th consecutive quarter, driven by sustained growth and strategic execution despite multiple macro headwinds. I will now outline the 10 key highlights of the quarter. #1, Taj rated again India's strongest brand across all sectors. We are extremely delighted to inform you all that Taj has once again been recognized as India's strongest brand across sectors for the fifth time consecutively by independent brand valuation consultancy brand finance. Taj has truly positioned itself as a crown jewel of India, and it continues to fly the flag high for Indian hospitality on the global stage. We are very grateful to our loyal patrons and dedicated colleagues who have played an integral role in making Taj the epitome of hospitality and luxury. Taj also gained 38% in brand value as per brand finance, reaching a number close to $900 million. #2, the key performance highlights of Q1. Our consolidated revenue grew 15% year-on-year to INR 2,419 crores. EBITDA grew 18% year-on-year to INR 753 crores, yielding EBITDA margin of 31.1%. Our bottom line grew by 21%, that is our patch to INR 358 crores. Hotel segment revenue and domestic RevPAR grew at 17% and 14%, respectively. It's a very important number because the hotel segment revenue obviously not only accounts for almost 90% of our business or 87% of our business, but this also demonstrates the solidity of the business fundamentals on both operating revenue as well as our core business. These revenue figures and increases had the backing of the strength of our brandscape, diversified portfolio, but more importantly, disciplined revenue management. On the stand-alone basis, we continue to deliver strong performance with revenues growing 18% year-on-year to INR 1,298 crores and EBITDA growing by 30% to INR 542 crores, yielding an EBITDA margin of 41.8%. Our stand-alone PAT margin stood at a healthy 38%. Our performance is not defined by a single year but sustained execution over time. Over the past 4 years, we have 4 years and 1 quarter actually now, so that comes to 17 quarters. we have delivered double-digit CAGR across revenue, EBITDA, PAT and RevPAR, underscoring the consistency of our performance and the structural strength of our business model. Building on this strong foundation and sustained momentum, we remain confident of delivering double-digit growth in the year ahead. And definitely, the way Q2 has started, it makes us optimistic about doing similar or even better performance on the top line in this quarter. #3, RevPAR growth across all brands on the back of strong domestic demand. The Indian hospitality sector witnessed multiple macro headwinds during the quarter. Geopolitical tensions in West Asia resulted in elevated fuel prices, leading to reductions in airline capacity and higher airfares. All this together moderated travel demand, particularly in certain international and long-haul corridors. This is also evident with the performance of Taj versus the hotel segment. Despite these challenges, however, domestic demand remained resilient. We delivered double-digit RevPAR growth across all our brands, demonstrating the resilience of our business model and the strength of our market positioning. Our continuous focus on operating efficiencies enabled us to sustain hotel segment margins at 32.6%. This was achieved despite an additional impact of approximately INR 15 crores relating to the ramp-up of our new asset in Frankfurt, which obviously includes preopening costs also and commissioning of the new Taj Size Kitchen in Noida outside of Delhi or Delhi and CR. #4, Asset management continues to drive growth for us. Our asset management strategy continues to be a key driver and value creator. During the last financial year, we completed major upgrades across several marquee hotels, including Taj palace, New Delhi, the President in Mumbai, Rataj Western in Bengaluru and Taj [indiscernible] with over 300 rooms renovated. These investments are now translating into stronger pricing power and improved operating performance across key markets. Given that a significant part of these renovations were undertaken in the first half of last year, we expect this momentum to continue in Q2. Another good example is starch gains in Vanadis with the new 100-room wing commissioned in March 2026, turned PBT positive in its very first quarter of operations. The expansion had drive a 44% year-on-year growth in revenue while delivering an EBITDA margin of 40% in Q1. This underscores our ability to deploy capital in a disciplined manner [Audio Gap] existing assets and generate strong returns with a relatively short payback period. Moving forward to #5 is our portfolio growth. We continue to deliver industry-leading portfolio expansion [indiscernible] hotels signed and the 11 hotels opened in Q1 of this year. Notably, 17 of the 20 signings were under Gateway Ginger and 3 offline brands across new and emerging markets. This reflects our continued -- continuous focus on deepening our presence in high-growth markets through an asset-light expansion strategy. With 382 operational hotels and almost 265 hotels in the pipeline, our portfolio is now approaching the milestone of 650 hotels. As we stand today, we are at 645 figure, and we remain confident of closing this milestone during the current month itself. #6, management fee growth backed by new openings momentum. Our asset-light growth continues to translate into strong growth in management fees. During the quarter, management fee income grew by 26% to INR 168 crores from INR 133 crores in the corresponding period last year. This performance, despite temporary headwinds reinforces the resilience of our asset-light business model. When I say temporary headwinds, it's really all related to management fee income coming from our 3 hotels in Dubai and others in that part, Sri Lanka, Maldives, et cetera. Looking ahead, we remain confident of sustaining management fee growth at high teens CAGR, supported by a strong pipeline of hotel openings and incremental contributions from newly added hotels. #7, growth brands at an inflection point. We have segmented and positioned growth brands also as select service offering from ICL. And these brands comprise of ginger, human, Arma and Trade of life, and they continue to deliver very robust performance. consolidated revenue of Ginger stood at INR 183 crores, delivering 20% growth year-on-year with an EBITDA margin of 39%. Cuman has grown to 100-plus outlets across multiple formats. Arma stays and traces has reached a portfolio of 380-plus bundles with 196 in operation and Tree of life is now at 40-plus resource portfolio with 23 in operation. #8, new acquisitions contributing meaningfully. Our recent acquisitions are delivering on the strategic objectives strengthening our portfolio by creating new growth engines for the future. Following the completion of the Bridge acquisition in April this year, the portfolio of 11 operational hotels delivered revenue of INR 11 crores in the quarter, representing a growth of 42% year-on-year. With 4 additional hotels scheduled to open during the year, the business is well positioned to scale further. At Mansoon also continued its strong performance, delivered consolidated revenue of INR 19 crores in the quarter, up 19% year-on-year. During the quarter, we further strengthened the brand's growth pipeline with the signing of a managed wellness resort in Hyderabad reinforcing our leadership in the premium integrated wellness segment. These acquisitions complement our existing brand scape, diversify our revenue streams and further strengthened our long-term growth platform. #9, strong balance sheet with healthy cash reserves. Our balance sheet continues to be healthy with gross cash reserves of over INR 4,400 crores. This provides us with the flexibility to continue investing in brand and revenue-enhancing initiatives. These include hotel upgrades, expansions, greenfield developments and asset management opportunities, such as strengthening our marquee food and beverage conserve. Finally, #10, we go to Pata. staying aligned with our ESG plus plus initiative Parker. The journey towards our 2030 target remains absolutely on track. I now uses 41% energy from renewable sources and has installed over 350 EV charging stations across 170 locations in India. Continuing doing our journey of eliminating single plastic ICL has installed bottling plus at 88 tons and achieved 54% recycling of water used in the first quarter of this year. IHCL currently partners in operating 83 skill centers across 20 states in India. Since 2020, we have trained over 55,000 youth and are well on track to reach our goal of skilling 100,000-plus youth by 2030. Let me just close by giving some comments to the remainder of the year. As we look ahead, we remain confident of delivering what we have promised and guided for, which is double-digit revenue growth with sustained margins, strong cash generation and improved quality of earnings. With strong foundations in place, disciplined execution and a clear strategic direction. Indian Hotels Company is well positioned to continue creating long-term value for all stakeholders. Thank you, and we'll now be happy to take your questions.

[Operator Instructions] Please note that the conference call will end at 8 p.m. [Operator Instructions] Your first question comes from the line of Pratik Kumar with Jefferies.

Yes. Congratulations on another quarter of consecution action again. My question is on demand trends -- following the disruption in middle East, the moderation in our bond in international travel. Clearly, domestic tourism has benefited. But are you like seeing noticeable shift in demand trends, particularly in misestimations also. Also, particularly because as 2 of the sector is even stronger. So shift of traffic from international geographies in markets, will they see even stronger actuation in second half of the year? That was my first question.

Yes. Pratik, thanks for the question. So I think we've given you city trends. And if you look at the City of trend, the leisure destinations have benefited relative to the business cities. They are in high 20%, 27%, 29% for Rajaan Goa. Our big city markets hotel actually run closer to low teens to mid-teens. So in general, domestic demand has been strong across the board, but particularly strong in the lead markets of Rajasthan and Goa, and that's what comes across in the city. So I think this trend is continuing in Q2. We are not seeing any softening of that trend. July for that matter is pacing quite well for us, and we expect to deliver a very strong future as well.

Yes. So my question was actually for 3Q and , which are generally the strongest quarters for the industry and yourself -- have you seen like any -- some of your customers were like what we're looking for marriages or events like outside India historically wanting to now incrementally do it in India?

I think the wedding dates usually decided in advance. So what you're suggesting is maybe last minute picks up for bidding to happen in 3, 4 months from now, right? Or for the remainder of the year. So there is -- 1 is a blessing and the other is -- the people who want to do weddings in our palaces, they book very much in advance. So it's like paleo meals, et cetera. So that we have not seen any big change in that trend. Having said that, it is true that with the appeal of the Honorable Prime Minister, a lot of people are refraining from doing business, I mean leisure or business or whatever outside of India and are preferring to stay on the domestic front. And maybe there is another reason that the demand continued to outpace supply in the first quarter of this year, a trend which we expect to continue definitely in this quarter. But Q3, Q4, we would also like to have an increase in foreign tourist arrivals. That will be good for our portfolio, but also for the country. So only domestic will, over long term is not good. So we will make all efforts to get our fair share like what we used to have in the past. And I still feel this is the single largest hidden upside that the sector is yet to witness. Now whether it happens this year and it starts happening next year that we can only say when we get close to September, October. The time for leisure, especially and including business delegations is much stronger October to March related to the weather in India.

Yes. Sure. My third question is on your catering business. So Arnd has recently started piloting unbundled economy sales on select routes were complementing impact excluded. Does that also impact yourself also, right? And is this something which is also paying on your business in this quarter?

Not in this quarter as much as because of the West Asia crisis, the flight disruptions, cancellations, but that said, as a business for several years has been growing and got more than 50% market share of all meals in there. But having said that, the Taj side is also going into institutional catering. So normal aviation-related business. And we believe that, that business vertical will grow fast and will help navigate through any kind of headwinds we might get on the airline business. It's maybe 3 or 6 months away from getting into a double-digit number on that -- on that segment, but once we start getting to double digit and it goes to 15% to 20%, and it's a very well structured operation and business, which optimizes the use of our flight kitchens and also drives the optimization of revenue.

Your next question comes from the line of Sumant Kumar with Motilal.

So in standalone, we have seen the employee cost has increased early 0.6%, okay, Y-o-Y and income. So what was the key reason why the lower increase in employee cost.

There were some reversal we got from labor report benefits, which is the last quarter. as a result of which we had a lower cost increase. Effectively, the normal payroll is are typically 7% to 8% and that has got we have [indiscernible].

Okay. Okay. And talking about the international business, we have seen that segment is not doing good. So can you talk on how is the demand scenario panning out and the outlook for that?

International segment, we were a bit not fortunate in the last -- we spent GBP 17 million in London to do a new lobby in San James, a new bar, a new cigar lunch, Whiskey launch, doubling of the chambers. So a lot of workforce done. It was delayed by 3, 4 months because of supply chain disruptions. It's all complete, all operational as of this month and is very well received. Same thing happened in New York. We had pipe burst in the month of February, March, which put 49 rooms of the order, of course, we got some amount as business interruption insurance, but it doesn't do full just this. So half of those rooms are expected to come back in the next 2, 3 months. And the others will be completely butted in renovated. So all in all, I would say if we take out this San Francisco is coming back strong. [indiscernible] in has been very robust for us for the last few years. by the occupancy is back in the business that had the business, the total revenues, maybe like 80% and in that is Rubiales, but the under a lot of pressure is the leisure part which is on a sorting on the com is watch the revenue used to have. And -- so hopefully, they will also recover there is a direct correlation between Dubai and the West Asia prices. It also had an impact on our international business in modes because a lot of traffic in Boise, Sri Lanka including in London, and fund is routed through amperes and delineate people are psychologically afraid of going to that reason, they will not connect all there. So -- so we have some of these challenges which we need to navigate through. But all in all, everything has moved positively. And what we see in the first 3 weeks of July is also very positive development.

In the ad for tailwinds for India, which was a strong vesting some extent. -- it did impact some of our international belts. I think that's in the month, so segment below 17%. thank you.

[indiscernible].

Your next question comes from the line of Shaleen Kumar with UBS India.

And congratulations on a form. So paraquestions here. I was looking at our room revenue growth of 17% revenue is it -- is it because of the [indiscernible].

Yes, yes. So it's revenue growth is stronger than [indiscernible] It's all dependent on the Saras. So there are second half and banqueting business has been a bit muted because of the best Asian clients. The very important event what canceled in the month of May was Africa Summit, those cancelled like just a week before it was a board to convince and that had a big impact on renege business and content business in very [indiscernible]

So -- but sir, acres we both [indiscernible] That also means that our FMC growth will to come back as the fire date will come back and might even still come back, right? So what I'm saying that that will happen and thinly would be stronger and that should help further help us top line. Is that the right way of right?

Yes, that is true. It's particularly as the dates come in and also the bandwidth business, the [indiscernible] is a little bit of slowdown in the government might experiment. So a fall from the fine insist. I think that should start ticking up at the latter part of trade.

Got it. All right. And for the person as far as very strong, and I think the base is also decent for our 1Q, right?

I think agreement as far as base is not so strong. So should we expect even better than [indiscernible] So July is trending very strong. So I can say that to send a year on Q1, we see our -- and I think overall, Q2 on momentum should it over into Q2. So there is no very confident of achieving at least what we have located in Q1, and it's not using business given that there is no big negative. We should at least compete.

So sir, in that case, you have achieved 14.7% growth in 1Q or 2Q is doing well. You believe you can patent performance of the growth number that is also a for although not so strong. So that should also help you all the 3 is a bit stronger. There can be a case that you have a guidance of 12% to 14% for the full year. But at least in 3 quarters, you may do better than that. So is it fair to assume that you will somewhere close the year but the upfront of the guidance or the market.

I answer it on a lighter note [indiscernible] I think a lot of our renovation efforts, especially both within India and outside. So they are helping us in for, as I mentioned in my opening remarks that help us in Taj Palace to a great extent. And if this starts helping us out also in the London and in the second half of the year at the PS, then of course, we can expect better results than even now.

Sure. So how was London in July given summer and Indian cities and [indiscernible]

[indiscernible] is performing well, but last year, in July, we also had a very important delegation from Africa which gave us 6 extraordinary revenues. So if we are same level in London in July were marginally higher, we would be very increased because the base in July than last year was very high.

Got it. Got it. So you answered about the Goa and what has helped within Rajasthan like a strong performance?

So less disposal activity on performance under conservation parts.

We took over all in that contract is also with us now. it takes time to fill it up. It's a way for you beat judgment -- but there is no gentlemen is a page and Lake wireless, they are in vehicle for us in that place. And also, of course, other hotels in Rajasthan are also doing well. [indiscernible] for sure than innovation last year. So it did suffer a bit. So General is also back in [indiscernible].

Got it. just 1 accounting question. How will you be accounting for in complete revenue, right? And then the cost of the lease will be suborbital being up [indiscernible]?

Complete revenue by shirttail stock in September, it was again another project with delayed increased prebooking expense and increased our startup expense in [indiscernible] I have lived in the July, August and the last months, the way in holiday [indiscernible] but as temporary, we should see a very good performance. So of course, that's a very important thing that you mentioned, thanks for mentioning that. that Frankfurt will add up to our top line and our RevPAR and also profitability. After the hit we have taken in the reopening and will take also this month and next month.

As we covered Shantanu swing from negative to positive obviously contribution to margin that will start happening. And right now, the numbers already reflect the costs which we talked about.

So encourage you to send a note to UBS to start using it and [indiscernible]

Yes. time my luck. -- last bit from my side, INR 4,000 crores of cash sitting on your books, right, and growing I know you have some plans but not complete. Anything else you are looking in terms of you in that?

We will use the cash -- we will keep evolving a strategic reserve and we will keep using the cash for projects, which capped very fast payback period where we get incentives, it land for a very long period of 3, 4, 5 of top line as lease on. these capital subsidies. And I don't know if you are aware that a lot of state governments have come up to 30% of the total project of subsidies. Effectively, if you get land at like long lease, and you get 30% capital subsidy, then the effective investing 50%, 55% on top of that, if you employ local people, a lot of states are inside that. making hotel investments, very good. It's not always easy to get those capital subsidiaries, but wherever possible and wherever we get, we can help us get in helping grwoth the supply and helping grow the employment, but the state also helps us by choosing them and their destination because it makes a lot of financial sense to use our cap.

Your next question comes from the line of Karan Khanna with Ambit Capital.

Two questions from my side. Firstly, Punit, in a recent broadcast with Sangli, -- you spoke about your aspirations to expand in Southeast Asia, including Banco, Singapore, Bali as well as markets like Switzerland, And towards the end of the interval, we also spoke about evaluating opportunities in international palaces and not necessarily acquisitions. Given that context, can you talk a bit more about these aspiration? And more importantly, how international landscape as is in terms of demand drivers contracts with asset owners or let's say, those in India. And more importantly, to capital late later deploying the international markets.

Very good. So our strategy has not changed. We will work on a capital-light model and not capital [indiscernible] but our strategy to start buying hotels, whether in Southeast Asia or in New York, I also think that as mentioned Switzerland also. But if there was like a said that it needs a renovation at date of $10 million. And we have booking 5 million, 50% of it or 60% of it anything related to the trend. We will do that. and drastically in all these markets with the exception of bank book or Baier, Singapore, Switzerland, another hotel in London order. These are institutional capital-driven markets where the return expectations of institutional investors on the output increase is around 5% to 6%, 7%. And we would is that in that kind of model with the revshare opportunity. So -- so that's definitely a part of the division because it's now that we get a hotel in Southeast Asia or we get a hotel in Switzerland. Ideally, we would have started with Switzerland and not to strength. But [indiscernible] so opportunistic also and want to spend money in buying assets because that's the return you get 3%, 4%, 5%, then all the metrics go forward site like that happened in the past. So from our past, we wouldn't be doing any such thing. And -- but we remain optimistic. We've also opened a launch. The first of the 3 lodges in Kruger National Park, 2 more will follow in 12 months' time. And we will at consider this kind of roots were in trying for 1 of the big benefits going forward in a trade shares. But there are strong flights to Frankfurt from India every day from almost several key set terms of lines to Frankfurt and. And here in all supply is direct to Ford. So that should be helped in getting the strategic there. People translating maybe in trying for going further to U.S. by decide over longer term to stay back a few days. So -- but it's still not size, right? So the land is an aorta is a very different thing like London, it's a very, very strong market, especially for [indiscernible]. So we'll keep our eye on that, but can't expect us to do for protection buckets in 1 year, maybe we go forward [indiscernible]. [indiscernible] for us, it will be 1 see time as we have to absorb this growth the language challenges, tax accountability is different absorb and then take the next 1 and the rights [indiscernible].

Sure. And I think in the same impact you believe the mention that as bakeware around 700 days. So just want to clarify, 700 days in the 450 is that you mentioned on Slide 22 or in a possibility of upside risk in terms of higher number of an asset. And on time line, if you could reiterate the timing for Tabanand 1 nation [indiscernible]?

2030, 2031 or on commissioned. It should -- there is some more going on something like this circumstances, which can -- it should start immediately with 450 is the right number to assume. If it becomes EUR 425 million, then it could be because we have put more days in the apartment, which -- as 6, 7, 8 days instead of the 2 or 3 plants. If it becomes more than just the way out that we put in most sudden apartments, then surplus [indiscernible] that finding, we have not done in yet. The excavation that complete like 95%, as this is on the slide. And now the building is events at some point, we will take that final decision once the designers are chosen I mean, designers means indeed desired on all the stage design becomes relevant in sales from lower fine to things will happen and so development works.