Good day. Welcome to The Indian Hotels Company Limited Q4 and FY 2020 earnings call being hosted by Mr. Puneet Chhatwal , Managing Director and CEO, IHCL, and Mr. Giridhar Sanjeevi, EVP and CFO, IHCL. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. At this time, I would like to turn the conference over to Mr. Puneet Chhatwal . Please go ahead, sir.
Good afternoon, everyone. I'm here as always with my colleague, Giridhar Sanjeevi, to walk you through the key highlights of the year 2019/2020 as well as Q4 of 2019/2020. When we look back, although it did not happen in Q4, I think we cannot ignore the fact that Brand Finance recognized Taj as the strongest brand of the nation in all categories. Together with Tata brand remaining as the most valued brand category, I think this is a very good space to be in for a brand from a hotel industry, which has been severely affected due to the pandemic. Also, it makes us feel very, very proud that our Taj has made it as the nation's strongest brand.
When we move to a kind of rewind of the year gone by, we will see that some of the key milestones achieved were we reached the portfolio size of 200 hotels, of which 158 were operational till we started having the lockdown. 60 new hotels were signed in the last two years. In the last year alone, we signed 29 more, totaling almost 3,000 rooms. We opened 70 new hotels in the last two years, and last year we fulfilled the promise of opening 12 properties, one property a month. The size of management contract portfolio grew from 32% to 42% over the period of two and a half years. The number of rooms increased from 18,000 to 25,000. While 18,000, that's when we announced our journey of Aspiration 2022, the number of hotels increased from 160 to 200 in this period.
Moving forward on the highlights of restructuring our portfolio, as I already mentioned, we delivered 12 openings. We had a consolidated presence in Goa, which is a key market for us by the addition of Cidade de Goa last year, as well as Taj Hotel & Convention Centre, unfortunately open for almost less than a month. Together, it gave us 500 additional rooms in one of our key profitable markets. We added another palace after many years, the Taj Fateh Prakash Palace, making us a formidable force in the city of Udaipur together with the Taj Aravali. We have three properties, one for May, and now with Taj Fateh Prakash Palace it's at might in a palace environment together with the romantic Lake Palace. Very important, we repositioned the Ginger brand, as most of you would know. Ginger reached a key milestone of 50 operational hotels.
As I've consistently said, this is a brand to watch. Unfortunately, like any other brand, any other hotel business, this also got hit in March very negatively because of the COVID. Otherwise, we had much more better news in store for Ginger. We signed 20 new hotels, and you will see that in that, 13 were Ginger-branded properties. Actually, if you look at a single brand in India last year, Ginger had the highest share of signings of new contracts to its system. Improving on that, we consolidated Indian Hotels' presence in the Northeast. We always say Northeast is there where Africa was 15, 20 years ago. It's a market ready to boom in the next few years.
Now after a very good success of Guwahati, where we are present, and also with the Ginger in Agartala, we added hotels in Shillong, Gangtok, and Tawang in Arunachal Pradesh. We also got the Intimation of Disapproval, the IoD as they call it, which means basically a kind of an approval to start building a 371-key flagship Ginger in Santacruz on the property that we own, which was belonging to the old flight kitchen of the TajSATS business. We even had a record year for growth, both in terms of signing and in terms of opening. We have always constantly communicated, one of the key values that needs to be unleashed is the values in our brands and also trying to make our brands pure. The result you have already seen for the Taj brand.
Also the same year we came up with the rebranding of TajSATS. We came up with the rebranding of The Chambers, Khazana. We introduced a new brand like amã Stays & Trails. We introduced a new brand in the salon business called niú & náu , and several food and beverage brands, including the one in partnership with AB InBev, for which we have also got the required permits. Within four weeks, the first brewpub under the brand that we have jointly developed with AB InBev will be going live in the city of Bangalore at the Taj on the MG Road. These brands have been drivers of our top line, and a lot of these brands have been carefully chosen because they are significant margin drivers.
These are not brands that have been chosen because they just create the buzz around our mainstream brands like the Taj or Vivanta, but also in themselves, they are brands like reimagining The Chambers. Why? Because The Chambers' margin contribution is as high as 80%. Same is the story with some of the microbrewery brand, which I told you. This brewery brand has a very high margin contribution versus any other food and beverage restaurant. Also amã Stays & Trails, we have no investment. These are existing bungalows and guest houses of Tata Coffee or of other individual owner, reaching very quickly. I think this year it will have at least before the end of December, 25 operational amãs. These are all adding value to our portfolio of brands and helping us drive our market share.
Moving on, some of the campaigns that also assisted us, and you must have seen, especially in the month of February and the first week of March, was our campaign on Taj, Like Always and Like Never Before. It had an offline reach of almost 4 million, social media reach of 2.5 million. We used displays and search to get to several millions in terms of our reach. This brand really helped us in driving our market share. That all, these kind of activities resulted in what we're going to show you now is our results for the full year. If we move on to the next slide, which is if you see the revenue came in flat, and this revenue came in flat because by 15th, 20th of February, the growth had started slowing down. Actually, our memories tend to be short.
We can tend to blame everything just on COVID because it is such a major impact on our business and shutting down of properties. The slowdown had started a bit earlier, which is reflected in the GDP numbers for the full year, and that all did not come in end of February or March. Growth in the GDP had been constantly slowing down from the Q1 of last year.
Although our revenue growth was flat, our EBITDA still grew by 20%, our EBITDA margin grew by 400 basis points, and our PAT had a growth of 34%, which is when Giridhar takes over from me on the details, when he will take you through, you'll see what kind of an impact we had alone in the month of March and how much it drove us into the negative territory versus where we were almost in year-to-date December or year-to-date February. When we look at the details here, you see that especially in the last four years or so, the revenue growth is only around 10%, but our EBITDA growth and EBITDA margin growth is very phenomenal, I think. That is mainly because of the change in our business model, which we have been communicating.
The revenue growth, if we get rid of properties that we own that are loss leaders and reduce the debt with it, the revenue goes down. When we add to the management fee business, the management fee business is only added as management fees and not the revenue of those 10. That part of the growth slows down. What it really helps to achieve is the margin expansion, which we have done. If you look at the last three years, we've consistently grown from INR 700 odd crores to INR 1,100 crores in EBITDA, from 17% EBITDA margin to almost 24% EBITDA margin, from a PBT of INR 162 to more than doubling it to INR 355, and a profit after tax at a 3.5 times increase from INR 101 to INR 354 crores. Moving on, some of the key initiatives that we had announced in Aspiration 2022.
This is important because we are exactly today halfway through the Aspiration 2022, which was launched middle of February 2018 when we did our capital market day, invited all of you and announced what we were going to do. The five key pillars of Aspiration 2022 was restructuring growth. We said we will grow by 15 hotels per year. If I look at only last 2 years, we added 50. If you look at the restructuring of portfolio owned and managed, we said we wanted to have a 50/50 balance at the end of 2022. We have already reached a 42% managed portfolio. When we said we'll reimagine excellence in being the most iconic and most profitable hospitality company, we were awarded the strongest brand across all sectors, and I don't think you can be more iconic than that.
In terms of reengineering profitability, our EBITDA margin expansion, we have given a guidance of 800 basis points, but we achieved 700, of course, with a little bit help from the change in the accounting standard. But even if we were to discount that, we would still have 350 to 400 basis points Growth in EBITDA margin despite COVID impact, which you will see in March. Our ambition and aspiration was to bring down our net debt to EBITDA to less than two, and we finished the year at 1.69. Moving on, I think we need to now address the COVID challenge. This unprecedented issue has been a challenge for not just India but globally for the hospitality, tourism, and airline industry. There is an estimated loss of $2.1 trillion in terms of the top line.
There are 75 million jobs at risk, there is a fall in global aviation revenues by $252 billion. The global economy is expected to contract by -6. Can be anybody's guess. It could be even -10 or even a number higher than that, depending on which economist one talks to. When we further move on, based on these numbers to the Indian travel and hospitality sector, the loss is estimated at INR 10 lakh crores with 38 million jobs at risk and up to 25% impact on international travel. India's estimated GDP growth is supposed to be contracting to -3.2. I was on a webinar yesterday or day before where one of the former economists or advisor to the government actually expected a much larger number, which was more than twice that what is shown here.
Every week somebody or the other comes up with a new forecast. I think definitely there is going to be a contraction in GDP, which has a very strong correlation with our business. After getting all this information and after having had the experience of exactly three months today, the international borders were shut down on the 11th of March because all visas for travelers coming were canceled. People on OCI card holders were also stopped as of the 13th of March and today being the 10th of June, it's really three months into this. We decided to turn our strategy that said, "Okay, we have already achieved maybe 70% of our goals of Aspiration 2022.
This is not the time for looking only midterm and what we're going to do in 2022, rather to address the issues now." We came up with what we call R.E.S.E.T. 2020, and as of next quarter, we will give you new targets on what we think would be our aspiration going forward. Just for the sake of clarity, I would like to repeat that very loud and clear, all our targets will be enhanced. They will not be corrected downwards. Rather, they will only be corrected upwards because we have a very strong belief as management in the future of our industry, and we don't see this as a permanent problem. Rather, under the famous saying that this too shall pass, the question is only when, in three months or six months or nine months.
This too shall pass, and that's why we need to press the button of R.E.S.E.T. Our R.E.S.E.T. response to COVID-19 is based on revenue growth. We will be announcing seven key revenue initiatives. One was already launched yesterday or day before in Karnataka and Kerala where the hotels are open. It's based on a concept of drive-cation. It's called the 4D experience. That is dream, drive, discover, and delight. You dream, then you get into a car, you drive, you discover a new destination around your place, three to five hours driving distance, and you delight yourself. Similarly, we have lined up a number of initiatives, including new lines of revenue.
I think it would be prudent to mention in this call that within a week from now, we will also be launching our own home delivery business under a new brand with our own app, which was a long time desire to do something in our business also on the digital side. On a state-of-the-art app. You'll all get to read about it, but all have to be patient for a week. There are several such initiatives to the effect of the top seven of ours, which are meant to compensate for the loss in revenue or better said, the loss in EBITDA or in PAT, which is definitely the case for us and for the entire global hotel industry in the Q1 of this financial year.
On top of that, we are also coming up with strategies for new corporate leisure wedding and MICE businesses across different states. We will have new business based on this app will also be taken as shops into hotels and gourmet shops in key city center locations where they have large footfalls like at The President in Cuffe Parade or The Ambassador in Delhi, which is Pandara Road, Golf Links, all that catchment area. As an example, something which we launched on 10th of April, Hospitality at Home initiative, has proven to be very successful. This was just delivering hampers or people coming to pick up three different kinds of hampers have given us some kind of incremental revenue, which was not existing before.
Some of these initiatives which are already launched and some that will be launched over the next 4 to 6 weeks, depending on the opening, are all ready. We are ready to go with it. Our focus will be definitely on one of the initiatives we launched last year, which is a very big success for us, was driving Chambers membership. The Chambers in its absolutely new look, feel, and design is being launched at the Mansingh in Delhi. It is delayed by 3, 4 months for obvious reasons, for COVID, because the hotel is shut, and also it got delayed because of the air pollution issues Delhi had when Supreme Court of India ruling made all construction stop for several weeks in the NCR region.
The Chambers will be launched at the Mansingh by September of this year at the latest, hopefully by October, which gives us clear 6 months in the rest of the year. The same will be the case in London. The Chambers will be entering the London market, and we think this gives a definite great positioning for a private club brand that only we have, and that will be our competitive advantage going forward. Moving on to the excellence initiatives. I think you all know we have launched the Tajness – A Commitment ReStrengthened. These are initiatives built around the new normal, as they call it, the health, the safety standard, the standards of food production, the food delivery, the food service, but also excellence in what we do, excellence in our values.
Our values stem out of the three-letter TAJ, which is trust, awareness, and joy. The trust of the community is with us because we have supplied 2 million meals in this time through the assistance of Taj Public Service Welfare Trust, to the doctors, to the medical fraternity, to the migrant workers, and also hosted so many medical room nights. Approximately 25,000+ room nights have been hosted by us and also subsidized by Taj Public Service Welfare Trust. I think this is something extraordinary. Now I come to one which you all like to hear the most. Of course, I think revenue is very important, but it is very important is our initiative on spend optimization. When I talk about spend optimization, we need to make sure that 50% operations have been shut down. Mostly operations were shut down, and there is a staggered opening.
50% of our hotels across the portfolio were closed. All were used only as active quarantine centers as of mid- to end of May. Post relaxation of lockdown, we have put a plan for the staggered opening in place. The factors considered for the staggered opening is obviously different in every state. It depends on the rules and regulations of the state, and also the country, because we also have hotels outside of India. The second is obviously the profitability of the hotels in terms of steady state EBITDA margins. The third, because if you have multiple hotels in the same city, we have to look at the chance of which one drive the maximum margins or which one helps you to keep the cost best under control.
The third is a threshold occupancy level for hotels to be profitable or stabilize or to break even, and ability to synergize within a city and maximize business potential, as well as in these difficult times, maintaining owner relations and having understanding of the limitations of the owners on cash flows, as every owner is not in the same financial position. Moving on further from this too, it comes to the spend optimization initiatives. I think we go through a historical phase in our company where we have embarked already since a year and a half or so, which most of the analysts have been open to and told, and the investors also. We've been working on the organizational and payroll optimization since a year and a half, and now that has accelerated.
If you look at our corporate overhead as a percentage of revenue, it has continuously declined despite the normal inflationary increases in payroll expenses. I think we will now see a more significant change in the corporate overhead, but also in the operations of the hotels. As we have so many openings of hotels, we have the possibility to redeploy people. I always say yes, cost cut also comes on top if people were to be taking pay cuts, but ideally you redeploy because all those measures are temporary. Whereas if you effectively reset the cost base, reset the manning base, reset the number of executive base, reset based on the branding and the portfolio that you have, that has a longer-term impact. When the business comes back, you have reset your cost base for a much healthier future tomorrow.
Similarly, on heat, light, and power, I think we have been able to drive these costs significantly lower. In some places to one-third of the level it was there before. This is also an ongoing project, and it has accelerated now ongoing. Why? Because we picked up 19 hotels together with Siemens to do a kind of a study. Now why it has accelerated is certain states have been forthcoming. For example, Maharashtra has given both on the fixed and the variable cost based on the consumption, a reduction to the discounts and to the energy providers, which has been further given to us. Similarly on unnecessary repairs and maintenance expenses. Going forward, also on stores and supplies, nice to have versus what is necessary to have in the period of lockdown.
Advertisement and promotional expenses, Cleverly using digitization going forward, which is much cheaper, and as I already alluded to, administration expense and having cuts at all consulting levels, having cuts with all other people who work with us. With this spend optimization comes the next key, which we have as the effective asset management initiatives. I think this is also something which is a very lasting impact. As you have all known, we have been monetizing non-core assets like sale of apartments, sale of some kind of villa which we have never used for last 25 years, let's say in Pune. We have some kind of farmland, et cetera. Those initiatives will keep going on also this year. Also in our subsidiaries like OHL, we had the sale of hotels in Trivandrum and Vizag, and we used those proceeds of the sale to bring down the debt.
We'll continue to explore those opportunities at IHCL level also. This year we plan to definitely sell one or the other asset and take it on a manage back or on a lease back basis, and also minimization of lease cost. Wherever possible, we have entered into dialogue with the landlords and started getting reduction in leases. In some of those places, the leases have been reduced and have had a significant impact. In other places, we have to carefully check where we have the rights to do so based on the contracts we have, if there is a force majeure clause or not. If there is a force majeure clause that can be invoked, yes, we have the possibility to do so. Following on with the asset management initiative, we also have what I already alluded to, a part of our being thrift.
The T in the R.E.S.E.T. 2020 is for thrift and financial prudence initiatives, which is obviously, I said reduction in corporate overhead, which has gone down by almost 10% in the last two years, despite an increase in two years of almost 12%-13% in the staff cost. We have deferred a lot of renovations. We have been spending almost INR 400 crores on an average per annum on renovations and upgrading our portfolio. We were successful in upgrading a lot of our Vivanta properties to Taj and a lot of Gateway properties to the Vivanta level. Also in terms of raising credit lines, which is very important to have the liquidity, as none of us knows how long this crisis would last.
We have no intention of increasing debt and living out of debt, but we definitely need to have the liquidity and all the one-offs that we have will help us to keep reducing the debt as we have done before. I always give this example we tend to forget. If we just look at the renovation of Mansingh and we actuate the prepaid lease that we had made there, or the deposits that we had to give for the renewal of Lake Palace, or when we add up all these things, they have been done from the cash flow generated from the operations. We did not raise any debt and our EBITDA kept rising and that's how our net debt to EBITDA went down to 1.69.
Moving on from this slide, I think the best is I hand over now to my colleague, Giridhar Sanjeevi, to take you through the details of all our financial performance of Q4 and the full year 2019/2020.
Thank you. Thank you, Puneet. I move on to the financial numbers. If you look at the Q4, you saw the numbers that we declared. For Q4, we had a top line of INR 1,100 crores, and we had a profit after tax of INR 74 crores. What was important to highlight was the January, February, and the March impact of COVID. If you see what had happened up to the end of February, we were pretty much on kind of growing. Of course, this year there were impacts in terms of GDP growth slowing down and a whole bunch of other factors. Nevertheless, until the end of February, we did grow revenue by 2%, operating expenses grew by -4%, which means we had a positive EBIT leverage which resulted in margin expansion.
Finance costs were broadly in line in terms of what we saw, exceptional items of INR 53 crores represented some of the monetizations that we did in the month of March, which is all about the Fatehpur Villa land, which gave us the INR 145 crores profit after tax. March, of course, we saw the impact of COVID coming in after around March 16th, which did result in our revenues dropping by 48% as compared to the previous year. Operating expenses reacted less because we didn't have too much time in terms of reacting in terms of operating expenses, which gave us a loss of INR 37 crores, and rest of the lines were kind of consistent to that, and we had a profit after tax of INR 70 crores.
What this slide demonstrates is that till the end of February, we were broadly going in line with what we had planned, and March was the time when there was an impact. Go to the next slide. In terms of exceptional items, what is worth seeing is that beyond the sale of property, the Fatehpur Villa property, and the gain on sale of property of INR 6 crores for the sale of Ginger in Pondicherry. We also sold apartments. We also saw the depreciation of the dollar, which came up in the last quarter, which resulted in an INR 20 crore impact in terms of the mark to market. This is just a slide on the exceptional items for Q4.
If you look at the full year, basically, this is looking at YTD December and Q4, effectively, as we went into summary slide, the top line was flat at INR 4,000 crores. The EBITDA margin expansion suffered because operating expenses were down by -5%. Interest costs broadly stayed in line. Exceptional items constituted the sale of non-core assets, resulting in a profit after tax of INR 354 crores. While this is post-Ind AS, even on a pre-Ind AS basis, the PAT was INR 393 crores, which represented, on a post-Ind AS basis, a 406% margin expansion. Even on a pre-Ind AS basis, it represented +3.39%, which is what we had always communicated in terms of a secular growth in margins. Moving on. In terms of consolidated exceptional items, pretty much it's the same picture as we saw in the quarter.
I think you can see the full impact of the gain of sale of flats of INR 87 crores during the full year. Move on, please. I think what is very important to highlight is that ever since 2015/16 and then beyond, we have seen the very steady improvement. What is interesting to see is that while the top line moved from INR 4,123 crores to INR 4,596 crores, which is an improvement of approximately under 15%, I think the EBITDA grew from INR 652 crores to INR 1,100 crores, and the profit after tax went up from a loss of INR -230 crores to a profit after tax of INR 354 crores. Really speaking, it has been a very concerted effort in terms of working on the revenue levers, the cost levers, in terms of achieving these results completely. If I look at the standalone numbers.
Standalone numbers once again reflect a similar pattern, where again, we distinguish between what happened after the end of February and March separately for Q4. While we reported total revenues of INR 754 crores, we did see an operating cost of 8%, resulting in some leverage impact after February. There was a positive leverage of 10% in terms of EBITDA. The margin expansion clearly occurred up to the end of February, and profit after tax up to the end of February was about INR 145 crores. March clearly was a loss of INR 53 crores impacted by the drop in top line of 47%. Moving on. The standalone exceptional items, I think the only item to note is that as always, whatever is the cash loss that year incurs, we sort of provide for that in the standalone to ensure that the investment block does not get diluted.
We had about INR 42 crores there. Other than that, it reflected the sale of property, including flats and the rate MTM on derivative contracts. Moving on, please. On a full year basis, the standalone numbers were also flat at INR 2,878 crores. EBITDA went up by 9%. EBITDA margins went up 2.56% on a post-Ind AS basis, and PAT went up to a historical high of INR 401. In fact, on a pre-Ind AS basis, the PAT was INR 418 crores. Even on a pre-Ind AS basis, the margin expansion was 208 basis points, which was completely in line with what we had talked about secular expansion. Go to the next.
On a full year basis, this does reflect the full year numbers where the revenues are flat, operating EBITDA margins went up, finance costs were broadly in line, exceptional items reflected the sale of property, Forex losses and the provision for PIF and profit after tax was INR 401 crores. You will see on the slide the exceptional items. The only point I want to highlight is that on PIF we actually improved. The INR -32 crores that you see in 2018/19 was after the Boston income of INR 46 crores. Therefore in the prior year, the loss on PIF was INR 78 crores, which came down to INR 69 crores, in terms of cash losses. There was a concerted improvement on the PIF position. In fact, on the international properties, which is U.K. and U.S. put together, our cash profit improved by $2 million or so.
Hence, I think overall our international portfolio did better as we have kind of always highlighted. Next, please. I want to spend a minute on some of these standalone revenue metrics actually. Once again, if you look at Q4, I think as we've always said in the last financial year, the RevPAR increase was influenced a lot by the occupancy and less by the ARR. Up to January, February for the Q4, the occupancies grew by about 1% or so. The ARR, they grew by 1.5%, giving us an almost flat RevPAR actually. March obviously was a different story. Occupancy dropped. We protected the ARR and that resulted in a RevPAR drop giving us the overall Q4 position and I think the strategy here has been just reversed. If you see after February, RevPAR was driven by occupancy while rates went down.
The moment the crisis hit us, we were able to sort of protect the ARRs as much as we could actually. In terms of room revenue, the room revenue growth was 3%. F&B revenue, they grew by 4% after February, and March, of course, was a different story. Move on. For the full year metrics, once again, we see that after February the occupancy grew by 2.1%. ARR was -2.3%, giving us just about a percent of the RevPAR. March, of course, as I said, the occupancies are impacted giving us the full year metrics. Room revenue grew by 3.5% up to February and F&B revenue grew by 1%, which was clearly impacted by March. Move on. In terms of this, we have discussed in the capital market day.
I think we continue to make efforts in terms of the different cost lines, whether it is raw material lines, fuel and power. Payroll cost, of course, changes because when the top line grows, you get an increase in payroll cost. Other expenditures also went down. Now as we go into reset, there will be much more work here, which will happen as Puneet has highlighted in terms of changing operating models and driving these even harder actually. Next slide, please. Monetizations. This continues to be part of strategy, which is the non-core monetization, whether it is land, residential apartments, simplification. I think all of those will continue. Last year, as you know, we totally monetized about INR 211 crore.
On the balance sheet and liquidity update, I think what is good is that I put up a slide in terms of the pre-COVID performance over the last five years. I think the balance sheet performance has also been significantly kind of under focused, where the net debt went down from INR 6.47 to INR 1.69, and the net debt to equity went down from 1.27 to 0.36. I think this is a key measure that we look at very closely and we will continue doing so actually. Go to the next. In terms of the net debt, the net debt at a consolidated level actually reduced and net debt at a standalone level also reduced.
You will notice that the liquidity went up here in both in standalone and consolidated, but that was because of the strategy in terms of ramping up liquidity as we saw the impact of COVID. The weighted average cost of debt all remained under control. We spoke about the net debt to equity and net debt. In terms of funding, I think the credibility of Indian Hotels has been very significant. In the month of March, we drew down the Kotak Mahindra and Axis Bank loan. I think what is incredible to see is that we were able to take advantage of the TLTRO operation that the RBI announced, the long-term repo operation.
At a time when people talk about the hospitality industry being impacted, we were able to draw unsecured credit lines worth INR 450 crores, which just speaks to volumes in terms of the credibility that we enjoy. The important thing to note is that we have not resorted to any short-term funding. The unsecured loans are a three-year maturity, and in terms of the other loans, the door-to-door maturity is six years. Our credit rating agencies have all been kind of reassured and borrowings are also covenant light. We continue to sort of make sure that we deal with the financial markets as far as liquidity is concerned in a sensible way. That's the right thing to do because we need to maintain the liquidity. We are also keeping a close watch on the net debt.
In fact, one of the things that Puneet said, the monetization will be an important lever that we want to use this year. Any monetization we do, we would like to repay some debt so that while we sort of ramp up liquidity to deal with the crisis, we will also be able to keep the balance sheet health simultaneously. That's really going to be our approach, actually. With this, I kind of come to the end of the presentation and happy to move into question and answer. Thank you.
Sure. Thank you, sir. Participants, if you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure the mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We will pause for just a moment to allow everyone an opportunity to signal for questions. I would also request everyone to state your name and the company they belong to before asking a question. We will now take our first question.
My question is post-COVID, what are the changes in the domestic market and international market in terms of business dynamics? What are the steps we have taken for the domestic and international market in cost side?
Shall I go, Giri, on this or?
Yes.
Sure.
Having you take first, yeah.
Sumanth, hope you are well and staying safe. The first is on the international, on the cost side. On the international, on the cost side, the San Francisco property, the New York property, and the London property are the ones which we own. The other contracts which we have are either management contracts or are in a joint venture. The good news in these very bad times is that in the U.S. and in the U.K., the government is bailing out the operators very heavily on the cost side. They are putting in the money. For example, in the U.K., up to 80% of your staff cost with a cap of GBP 2,500 on a monthly basis is being subsidized for a period of six months. That is one of the examples.
Second example, in U.K. is the property cost has been waived off for the full financial year. That alone, just the property cost in the U.K. for us with the Buckingham Gate and St. James' Court is almost GBP 2.5 million. There are things like this that are different market to market. We can do detail on an offline thing if you wanted a detail on a market-to-market basis. Where like Dubai, we have management contracts. The new hotel, which had just opened, we shut it down, which will reopen in September, October. We'll lose the management fee for the period that it is shut. We have to, as I said, have understanding from the owners, their cash flows also. We've kept only one hotel open, which has been there and is very well established in the market in Business Bay. That one is open.
Maldives, we are preparing for a reopening. Sri Lanka, we never shut down the properties, so they are now operating at a lower level. When it comes to on the staffing part of it, of course, there is a serious reduction on the contractual labor, which is labor of the contractor, because if you're not operating at 70%, 80% occupancy, you also need 50%, 60% less people to do the same work. There is a lot of that happening, both on the domestic front, but also on the international front, which I would say is on the Indian subcontinent, which is in or around India. When it comes to other costs, I think Mr. Sanjeevi showed you how over the years, not just because of pre-COVID or post-COVID, we have been taking measures to harmonize our cost to become more efficient and to increase our margin.
That journey is on and will continue, but actually in this COVID period, gets even accelerated. On the revenue initiatives side, on the domestic front, I think in any country today, the initial business will come back based on the domestic business. The revenue initiatives that you will hear that we are announcing, the seven initiatives of which two I already told you, they are all based on the domestic market growth. As we don't know whether international travel will start in September or October and that it will come back to its normal level maybe after January of next year. The reliance has to be on the domestic market, but it is also an opportunity. Why is it an opportunity? It is an opportunity for 26 million people who are traveling out of India. Those people are not able to travel.
Even if 10 million of them are captive for hotel business, at some point need to get out both on business and on leisure, at least within the country and take their families also out on a holiday. That's why this drive-cation could be an answer in the short term versus flying or taking train to a destination.
Yeah. Talking about the cost rationalization side, can you elaborate more on how fixed cost overall percentage term or variable cost percentage term reduced during this pandemic?
Can I answer that, Sumanth?
Yes.
Yeah.
Yeah. I think as I said, we should look at cost optimization on an overall basis because it is not just one line of cost alone. I can tell you that if I look forward to this Q1, as we are kind of looking at cost reduction on the domestic side, our cost reduction we expect it to be upwards of 40%. On the international side, we expect it to be upwards of 65%, actually. That's the overall cost reduction that we took in Q1. We are yet on some aspects of the cost, we are kind of deliberating in terms of how to do it the right way. Even without that, I would say that the kind of reduction. We will kind of talk about it more.
I would say that this is what we hope to achieve moving forward.
that 40 and 65% you are talking about, this is on overall basis or fixed cost basis?
Overall. Very overall.
Overall.
That's the-
Okay. when the international market-
Giri, if I may interrupt.
Yeah.
What this crisis has shown to us is a lot of fixed costs in a crisis can also become a variable cost.
Right.
Everything doesn't stay fixed.
Any expectation of opening St. James and US hotel?
Yeah. We think a slow opening in London is anybody's guess, either July or August.
Okay. Yeah. U.S.?
U.S., we don't know because at the moment, what is happening in U.S. is a bit risky. We have to take one step at a time. I don't want to give any kind of a misguiding answer. All this unrest in the U.S., and especially in Midwest, is very strong. You never know when it becomes out of control for New York. If it stabilizes, yes, we can open in New York.
Okay. January, February was.
San Francisco will be later. San Francisco will not be now. That state itself, they also have this federal system. Every state decides. California is a little bit more strict, so that will take a few more months to open.
Okay. Jan, Feb was worked out for St. James, right? Jan was. Okay. Also about U.S. business, how was the performance in Jan, Feb, or March?
Giri?
I think I don't have the exact numbers for Jan and Feb for U.S., but I think my sense is that. Can I take that offline? I don't have the exact numbers.
We can do that, Giri. I will answer. The Jan, Feb for U.S. was quite good, and so was it for U.K. also. It all started slowing down in the U.S. and U.K., 10 days before in India. It started 1st of March, was when we started seeing negative growth. I remember that very well because I was personally in London on those dates and we had a meeting where we discussed that. The pickup became negative.
Okay. Thank you so much, sir.
Thank you. We now take the next question.
Hi, sir. This is Dipika from JP Morgan. Hope everyone is doing well. I just had a question on the balance sheet. Given the recent capital raises, what would be your debt levels right now, and would you say that would be the peak debt for the year?
I think the net debt level is still okay. I think the net debt level from INR 1,857 crores or so has probably gone to INR 3,000 crores. I don't think the net debt has gone beyond this. In terms of target for the year, it's hard to say for the target at this point in time. I think a lot depends on how the recovery process starts. As I mentioned, Dipika, I think monetization continues to be a major plank of what we want to do this year. On the assumption that we are able to successfully monetize a meaningful sum, we will use it to manage the debt limits.
Got it. Sir, I don't know whether it's too premature, could you outline what would be your fixed expenses on a monthly or quarterly basis after the cost initiatives that have been taken?
I think in Q1 itself, I would say that we've faced whatever little is left out. I think the fixed costs would have gone down by at least around INR 35-40 crores at a minimum. I think that is what I would say at this point in time.
Sir-
As I said, this is what is estimated at this point in time on a monthly basis. We have not yet touched a number of other initiatives. Those will kind of increase that happening during the year.
Right. Sir, last question. On the payment for Sea Rock land, which you had to do, I think some portion this year. Would you be going forward with that?
Yes. I think the Sea Rock settlement it is very important for us to sort of take control of that. I think what so far we have done is that, we have not yet kind of completed it, but we do hope to complete it actually. Absolutely. I think in any case that payment is targeted for the end of 2021.
Got it. Thank you so much.
Thank you. We take the next question. Participant, your line is open. Please go ahead with the question. You're on mute. Please depress the unmute button. As there's no response, move to the next question.
Hello.
Please go ahead, sir.
Hi, I'm Kaustav Bhuna from Rare Enterprises. Just could you give us some more color on your domestic and international subsidies? How have they performed in FY 2020 over FY 2019 financially and operationally? Could you go into some major subsidies internationally and domestically and just explain that to us?
Yeah.
I feel like in FY 2020, your subsidy operational performance was better than FY 2019, right? There was a big jump, at least in the nine months of FY 2020. Could you explain where this is coming from?
I think if I look into what are the major subsidies, the biggest subsidy is Piem Hotels. The Piem Hotels continue to do well. Of course, I think domestic businesses were impacted in the month of March. I would say that Piem, and you will see that in the published numbers. I think for the full year number, Piem will probably do near INR 400 crores in terms of top line, which was -7% in terms of revenue. EBITDA was INR 2 crores. That is, EBITDA was -30%. That is because in Piem we also get a certain dividend from that company. I think you should factor in for that. Overall PAT was approximately INR 11 crores or so. On a like-for-like basis, without the extraordinary dividend that Piem received, I think was broadly fine.
In terms of Roots did a top line of INR 213 crores, which was a 3% up. I think in terms of EBITDA, it was in positive territory. INR 15 crores was EBITDA. PAT was impacted because of the effect of March, and we were not able to complete all the monetizations in the month of March. PAT was negative INR 9 crores, which was still an improvement from the previous year's PAT of -INR 15 crores. That is a sort of a good system, but second important subsidy. On the international side, very clearly between St. James' Court and U.S. business, there was an overall cash improvement of about $2 million or so. Therefore, the performance we continue to focus. U.K., of course, did very well in terms of the improvement in performance.
As far as U.S. is concerned, as I pointed out in my presentation, the losses came down. Therefore, on a cash profit base, cash impact basis, overall, there was a $4 million improvement actually. I would say that the international entity did well and the domestic entity performed in line with the Indian Hotels standard over in terms of the domestic market.
Okay, great. When you speak about simplifying your corporate structure and sale of non-core assets, just wanted to understand, what are you guys thinking is the next steps in simplifying your corporate structure? Are you focusing on simplifying the international portion first? What are the difficulties in doing this that you are facing? Also when it comes to sale of non-core assets, I am sure there are a lot of assets which you plan to sell, but there are probably some difficulties. It is not that easy to sell a hotel asset. Could you just speak a little bit about all that?
No, I think our simplification strategy has been very consistent. I think we have far too many legal entities. I think, therefore we need to sort of start simplifying the complex legal entity structure. What we have been able to achieve so far are some of the simpler ones. Like last year, we sort of simplified the Taj Madras Flight Kitchen which was standing separately away from TajSATS to kind of ensure that TajSATS takes over. There was another company called Taj Enterprises which had, again, significant other shareholding. We kind of once again changed it. Therefore, in terms of shareholding patterns that historically there have been multiple shareholders in some of these companies, we are simplifying that. That is number one. As far as the bigger legal entity structures are concerned, do we need all these different legal entities?
I think the reality is that as far as Piem and Benares and other hotels are concerned, some of these are listed, as you can imagine, like Benares, and in companies like Piem, we have partners who are significant shareholders. My ideal solution is that can we just merge all of these into Indian Hotels and give them shares in Indian Hotels. That probably is the best solution. With partners there, it is not the simplest solution. I do believe that the present crisis is putting different stresses on different companies, and maybe that creates an opportunity for some of these mergers that we talk about. I think that is one part of it. On the international side, about four years ago, we have clearly simplified in terms of making sure that all international companies come under our best subsidiary, which is IHOCO BV actually.
I think no immediate plans in terms of restructuring we have planned, but I think let's see how that goes forward actually. Simplification continues to be an important part of our strategy. As far as the monetization is concerned, I think what we have tried to do is that number one has been clearly non-core assets like residential apartments where our employees used to stay. That is where we had maximum success. We have sold more than I think this year we made a profit of some INR 87 million, some INR 100 million of sale has happened. Next, we looked at lands which we have not used, like whether it is the Bandra land in Pune or even development of the Ginger building in, what do you say, hotel that we are talking about in Bombay. That's also a form of making good use of land assets.
The third, of course, is the sale of hotel assets. So far we've only done two, which is part of Orient Hotel, which is in Visakhapatnam and the Trivandrum hotel, which was used to reduce debt there. Fourth is that are there hotels in the Indian Hotels system that we can dispose of? Of course, yes. We do also have the platform with GIC where we're trying to see if we can monetize some assets through that platform. That work continues. Clearly, you're right that monetization continues as a key objective. Of course, we have to be sensible because we are not trying to undersell any asset. I think while from a balancing strategy as Dipika has asked, how do you manage? What is your target rate and things like that?
Monetization will be an important part of strategy to sort of manage the balance sheet. We are certainly not intending to undersell the asset section. Therefore, we will continue to pursue it with all the discipline that goes with it.
Okay. Thanks for that. Thanks for explaining that. Just what's happening with the Sea Rock hotel? Once you complete that process of buying out the partner who holds that 15% remaining portion, environmental clearance-wise, there was some hold on that land, right? What's next after that?
Yeah. I think you are absolutely correct. I think we wanted to take charge of our destiny and therefore we want to buy out a partner and take 100% control of that and cut out some of the litigations that have been associated with it. Clearly speaking, there are three levels of approvals that we are pursuing. One is the CRZ, the second is the CEC, and third is the IoD, which we are trying to eliminate. Our sense is that I think there is a much greater understanding with the government in terms of supporting it. Therefore, we believe that over the next couple of years, we should be able to make significant headway. I think we have also discussed in the past that we are trying to create an alternate access from under the Worli Sea Link access direct to Taj Lands End.
That also in principle, the government is supportive. My sense is over the next couple of years, we do hope to sort of make significant progress on these approvals. We will keep you posted. It's been a long and hard journey on this actually.
I don't know. Is there anything else you want to add, Sunny, on this?
No, just that we are very close to finding a solution. The transaction value is so high that we have to be told that we're doing the right thing.
Yeah.
We have a lot of history on this one. We have to settle one step, and the next step, and the next step, and the next step, and we're almost now coming to the end of it in terms of solving it, the 15% you mentioned, and acquiring that. We have to go and get the permissions to build. I think it's becoming an opportune time. The timing works now in our favor, which worked against us in maybe the last 10, 15 years.
Great. Just if you don't mind, last question. Just if you've done some survey, or if you have this data. In your domestic hotels, if you take all your hotels in India, would you know on average how much % of your client base is international? How many people are traveling from international destinations to come and stay in your domestic hotels?
Sure. Sure, we can. It's a good question, actually. We don't mind at all. It's a question which has several answers. Let me try. Giri, shall I go and try and attempt it?
Yes.
We have different brands in different market positionings. If we look at a Ginger branding, almost 99% of the business is domestic. When we come to a Vivanta level of branding, I would say almost 80%-85% of the people visiting those properties is domestic. When we get to the SeleQtions, I think it is a mixed bag, and it's a very small portfolio, only 12 to 15 hotels, so it is not so impactful. When it comes to Taj, the numbers remain the same. Just the international improves from 20 to 25, and then you are on the domestic front at 75. When it comes to the palaces that we have, there the international and the tourism-driven business versus only business, and MICE, and weddings becomes almost 50%. The palaces are not that large in size.
I think international business is very important for us because it is high-paying. That's how it gets to those percentages, but it's not the biggest volume driver for us. The volume driver still remains in India, your domestic MICE business, your domestic wedding business, the domestic business and the leisure segments which drive occupancies and rates. That is why the growth of domestic business or the rebound of domestic for India is far more important, versus if India was, let's say, a country like Greece or south of Spain or south of Italy, et cetera.
Okay, great. Thank you so much. Yes. Thank you so much for answering these questions.
Thank you. We now take our next question.
Hello.
Yes. Please go ahead.
Yeah. Hi. This is Amandeep Singh from Ambit Capital. Thanks for the opportunity. Sir, firstly, can you help us understand your industry outlook across domestic, international business and leisure, including MICE, and how would be the recovery across these segments?
I think we did answer this question in various forms. We think domestic is the one which is going to come back faster. International will only come back through the international travel or the repatriation flights, bringing back non-resident Indians back to India. Now, if they are holding another passport or another card, then they are also counted as international when we count the traffic coming in. In the short term, in the next three to four months, we don't see international travel coming back that strongly. Once we do our Q1 call, I think the visibility will be higher to give that answer. The domestic business, wherever the markets are opening up, we are seeing that business is reviving faster than we thought six weeks ago.
Including in small things like if the hotels were given the permission to sell or get rid of their liquor stock because there is an expiry date for beer, et cetera. It went faster than anybody would have thought is possible. At a lower margin because you can only sell it at a MRP. The sales actually started happening. We started this Hospitality at Home selling hampers, and it worked more than we thought it would work. This is the thing that domestic is stronger and domestic is far more important, and those potential travelers, as I said, who are not able to travel abroad are also stuck here. I'm sure they will need to get out, whether they go to Goa or Kerala or Bangalore or Rajasthan. That is the one which will come back faster.
Also because some countries might put in, like we have different states saying different things. Some countries might put in protocol for quarantine that people might be discouraged to travel to international destinations.
Sure, sir. That's helpful. As a follow-up to this, how do you expect ARRs to pan out, given the higher share of quarantine travelers currently and companies' dependence on the luxury segment?
Sir, it's a good question. I think, again, this is a very important factor for our industry, as we all know through it, like all of you do, is the second half of the year, October to March. We are expecting ARRs to bounce back in this period. Now it's the time you take any business you get. If you're getting to open the hotel because you're taking on quarantine or you're hosting medical workers, you just do it because it reduces your suffering. As long as it is above your taking care of your cost and you're not out of pocket, you are fine. That's what not only us, almost all hotel companies are following the same.
Fair enough, sir. Lastly, can you guide us with your CapEx plans for next two, three years, if possible?
Two, three years we can't say. The only good news is I will let Mr. Sanjeevi answer the second half of the question, which is what we are doing is the necessary CapEx. We have to finish, for example, The Connaught in Delhi, which is only one month it needs to finish. We will do that. The second is on the Mans ingh. We are renovating Mans ingh. We will have that also. Third is things that we have started, like we have started building a microbrewery pub in Bangalore. We'll finish it and we will open it next month.
Yeah.
Sanjeevi?
That's right. I think we are focused on what is the most important at this point of time. Everything else has been kind of deferred until we get better clarity. Clearly, at this point of time, cash conservation is critical. I don't think we'll be able to answer for two, three years because clearly if the business recovers, what we have deferred will go back. Like for example, kitchen in the Taj Santacruz, when we see better visibility on cash, then at this point of time, of course, projects like that even though they're strategically important, they're kind of deferred. I think we'll be very prudent in terms of how we sort of spend money on renovations.
Sure, sir. Thank you. That's all from my side and all the very best.
Thank you.
Thank you, sir. We now take our next question.
Hi. This is Achales from HDFC. I had couple of questions. First of all, I wanted to understand, as you rightly said, you are in cash conservation mode and of course, our uncertainty is too high. What drove you to still go ahead with the dividend payment? That was a bit unclear. If you could please help on why you decided to go ahead with the dividend payment.
Dividend payment. I think you're saying why we declared the dividend. Is that what you're asking?
Yeah, exactly. What was it that drove you to still announce the dividend payment when most of the companies are cutting the dividend because the-
Yeah, no, I think if I answer that question, I think last year, we have retail shareholders and while I can't talk in terms of the future numbers, I think very clearly this year, given the COVID impact and the current financial year, there is going to be a significant impact on our P&L. Therefore, we thought that it is unfair for retail shareholders not to get the reduced dividend this year and maybe minimal dividend in the next year. We just felt that it is only fair that we kind of maintain the same dividend of 50% that we announced. This year, as you know, there is no dividend distribution tax. While it took away last year cash of INR 71 crores, this year the cash outflow is about INR 59 crores.
I think in the overall scheme of things, I think it's very difficult to sort of look at every expense and say, "Was this good or bad?" I think we have to take a balanced call on what is the right way of approaching business, actually. We genuinely felt that this is the right thing to do for the shareholders, especially the retail shareholders, actually. I think it's okay, fine. Even if we had reduced dividend, we may have saved maybe INR 10 crore, INR 20 crore. That's all. Nothing more than that.
Right. Fair enough. The other thing I also want to understand, you have given the NCD commitments for the next two years, which ranges about INR 40 billion. How are you planning to meet those commitments? I mean, are you going to finance them? How are you planning to meet those commitments? Because at the moment, I think you need to finance those, right? I mean, how are you planning to do that?
What commitments? What commitments you said?
NCDs. Non-convertible debentures you have. I mean, how-
Yeah
you can do that about
Yeah, which is fine. Those payments are coming up next year. As I said, we are very prudent in terms of how we are approaching the financial markets for liquidity. We enjoy tremendous trust and reputation with the market. We are pursuing a monetization strategy. At this point in time, if you ask me, I think we will be fine in terms of being able to meet the commitments next year. I don't think there's an issue at all.
Right. Okay. In terms of cost, you outlined how you try to cut costs and of course, most of the hotels are closed until you have cut down the cost significantly. As you start reopening those hotels, the costs will start coming. How do you see how the cost would evolve? Because if you have more costs than 6%, then probably even if you open some hotels, you will have to bear some more costs. Do you think that profitability would suffer in the next few months as you open the business, or do you think actually, no, that's not the case? Secondly, how your cost structure would look like once your business is open fully you must have reduced some of the costs or there must have been some structural decline in the cost.
How your cost structure would look like once your business opens completely?
Yeah. I think thank you for this question. I think as I take it, we are making substantial progress in terms of cost saving. We are looking at it, as I told you, even in the dividend question. It is not one line of cost in terms of the comment on what we are doing. It's about in the aggregate, the way we are approaching all the different cost we work. I think some of the structural changes we do is something which is ongoing. It is not something which will be achieved in three months time. I think the COVID has given us an opportunity to restructure. We already started it under Aspiration and that work continues. My request is that we will be able to give you a better update every quarter in terms of the progress we are making.
I've already outlined to you some of the kinds of cost saving that we're expecting in our domestic and international presence. When we meet next at the end of Q1, we'll be able to say what more are we doing. I think we will have to take it one step at a time in a very sensible fashion. I don't think we can take major reactions in terms of cost reduction then.
Right. Okay. The last question, if you could please comment on. I just wanted to understand, now you have given a target that you'll be opening 15 hotels every year. Would you be focusing more on the Ginger brand or if you could please give a bit of a sense in terms of how the mix would look like.
Yeah.
I think we did not say we will. We said when we started the Aspiration 2022 that we will add 15 hotels to our pipeline every year, which is possible because we have so many signed contracts that we end up opening also around 15 going forward. Definitely in terms of number of hotels the Ginger brand would be definitely ahead. Up till now it has been the Taj and Vivanta and SeleQtions. Going forward, in number of hotels it will be Ginger, but in number of rooms it will not be Ginger, as Ginger could be smaller properties, 60, 80, 120 rooms. Because in that business model you can still make money in a smaller set of property. So there are two large Gingers we have envisaged.
One we have announced, one we have not yet announced, which we are not allowed to at the moment as it's in a confidentiality phase. The one which we have announced is the Santacruz, and it will take three years to get built and open. That's a 371 room one. The other, the average size of Ginger, if we can achieve above 100 rooms is very good. Yes, number of hotels because you can have a Ginger, you can have 20, 30 Ginger properties in Mumbai itself. That's the kind of branding and I always give example of some other chains in some other big cities of the world. They have sometimes more than 100 hotels among their different brands in one city alone.
Of course, India is not in that life cycle phase in its economy, if others can have 100, we can have 10, 15, 20 but different sizes in different areas of the town.
Perfect. Thank you so much.
The total number of rooms will not exceed, let's say, Taj Mahal Palace Tower plus Taj Lands End plus Taj Santacruz. Those three hotels put together, the three Taj put together would be equal to maybe 10 or 12 Ginger hotels.
Right. Okay. Thank you so much.
Shall we take one last question, please? Then, of course, we can happily converse offline. One last question, please.
Okay. Sure, sir. We take our last question for today. Participant, your line is open. Please go ahead.
Hi, this is Vinod here. Am I audible?
Yes, of course.
Hi, this is Vinod from FactSet. I know you are uncertain time. Does management have any sort of broad expectation about the recovery path for the year, both in terms of occupancy and day rates next 12 months, 15 months, how things could pan out. Based on that, I'm not fully going into that. Do we have any near-term debt payments in the next 12 months that is of concern to us?
Yeah. No, I think we have not yet kind of, there's not any guidance in terms of what will happen in the next year or so. I think we have just started seeing the opening up from the lockdown. As you explained, for us, October to March for the entire hotel industry is the critical period with about 65% of the business normally coming during this period. I think if we compare experience from China and if that pattern of recovery happens and we kind of come back to a reasonable level of recovery by October, I think it will be great. I guess maybe the next quarter's call will probably be much clearer in terms of how to see the patterns of recovery.
In terms of debt repayments, we only had one major debt repayment this year in the month of last month, in the month of April, over INR 200 crores, which we have repaid. There's no other major debt repayment we're expecting in the current year. We're fine. In many ways, as I said, we enjoy huge credibility with institutions, so our ability to refinance and raise debt of different maturities, as I said, we have no reliance on short-term debt, is kind of fine. We don't have concerns on our balance sheet and debt repayment capability at all at this point in time.
Please wait while you are joined to the event.
Then, of course, we can happily converse offline. One last question.
Okay. Sure, sir. We take our last question for today. Participant, your line is open. Please go ahead.
Hi, this is Vinod here. Am I audible?
Yes, of course.
Hi, this is Vinod from FactSet. I know these are uncertain times. Does management have any sort of broad expectation about the recovery path for the year, both in terms of occupancy and day rates next 12 months, 15 months, how things could pan out? Based on that, I'm not fully going into that. Do we have any near-term debt payments in the next 12 months that is of concern to us?
Yeah. No, I think we have not yet kind of, there's not any guidance in terms of what will happen in the next year or so. I think we have just started seeing the opening up from the lockdown. As you explained, for us, October to March for the entire hotel industry is the critical period with about 65% of the business normally coming during this period. I think if we compare experience from China and if that pattern of recovery happens and we kind of come back to a reasonable level of recovery by October, I think it will be great. I guess maybe the next quarter's call will probably be much clearer in terms of how to see the patterns of recovery.
In terms of debt repayments, we only had one major debt repayment this year in the month of last month, in the month of April, over INR 200 crore, which we have repaid. There's no other major debt repayment we're expecting in the current year. We're fine. In many ways, as I said, we enjoy huge credibility with institutions, so our ability to refinance and raise debt of different maturities, and as I said, we have no reliance on short-term debt, is kind of fine. We don't have concerns on our balance sheet and debt repayment capability at all at this point in time.
I have two small questions as well, if I may. A, based upon your reset cost program, what will be the EBITDA breakeven occupancy for you? Can I put cash breakeven EBITDA and interest cost put together? What will the cash breakeven occupancy rate for you?
Yeah. I think it's a great question, but I think that question can't be answered if your approach to cost reduction is kind of claim assisted. I think our approach to cost reduction is much more holistic in terms of occupancy because of the land. I think in general, I would say that maybe 50% occupancy is what we need to get, but we'll work on it. I think a lot depends on our recovery of business. I would say 50% cash breakeven is probably a fair number.
Right. Lastly, this management contract business, which was a great lever to pull up margins and growth and asset-light approach. Do you think that business will be under greater challenge than our native asset ownership business? The asset owners will have difficulty in cash flow. A, is there a risk of losing some of those properties that clearly may not come back so easily back to business? B,
Yeah
growing the inventory management business, can that be also a challenge?
Yeah.
I think
It's a very good question. Girish, why don't you go first, and then me last.
Yes. Of course.
It's an excellent question because this is exactly what will happen. Not just with us, but in the industry, it will happen. Bad times is a good test of the relationships, and as a part of a legacy hospitality company, as we mentioned before, we have to do the right things and not necessarily be the fastest. If our owners are not in ethical behavior with the employees or with other things and take unnecessary risks, it does spoil the relationship and maybe we have to walk away from each other, right? That's what happens if you have a third-party contract and you figure out a way.
Because of all the goodwill that has been generated around the Taj name becoming the nation's home since then, for all millions that we delivered for hosting the medical staff, for all the reasons that we have been in the television and newspaper news, there are a lot of people who will also want to partner with us because they have been satisfied with another brand. This will definitely happen. It's a consequence of such a market situation that the market is confronted with, we will not do anything that is not right. For example, it's a liability in terms of a company having valid agreement with another brand. We will not go and poach them unless they have terminated their relationship and today don't have a brand and are allowed to negotiate with us.
Only then we will do that, we hope the rest of the industry will respect the same with us. There is a natural and a normal consequence of this pandemic in an asset-light growth model, is that there will be some that we will lose and some that we will gain. As long as the gain is higher than the loss and it's more profitable and brand enhancing, then it can be even a good thing. Sorry, Giri, you can answer.
No, that's correct, actually. I think you answered it, Puneet. I think that's exactly the case. Of course, some owners, beyond ethics, as Puneet said, some of the single-property owners that we have their own challenges and leverage. I think some of those people will be at risk, and it is possible that we see not just for us but for the others, there could be more IBC-type cases on single-property ownership. We'll see. That also creates the other opportunity for our platform, seeing that this will be stress tests whether which will come up in the market give us opportunity to look at some acquisitions through the DAC platform as well. I think, yes, we will see some interesting changes in the next one year.
If I may, this F&B segment of yours, does that get damaged more structurally in the current environment? I mean, the revival may lag the revival in the room business. Is that a fair assumption to make?
No, I don't think so. In the short term, yes, because of the number of people allowed by the government for functions, mostly it's limited to 50. As we said, this too shall pass. It doesn't mean that there will be no weddings happening in six months or one year from now for more than 50 people or no meetings or no conventions. There is a life during COVID, then there will be a behavior pattern post-COVID, then there will be an era post-vaccine. I think we have to treat these phases differently. Of course, in the interim, that is affected. That is the truth. If we are able to launch this kind of home delivery and other food businesses, microbreweries, I think it is a new source of F&B income also.
It may not compensate for a 500, 1,000 people wedding, but it is a new line of business. When that business comes back, this will add on top and improve the F&B revenue. In the short term, both room revenue, F&B revenue, other revenue, everything has been affected negatively. Sorry, Giri.
No, that's correct. I think one other factor to note is that what we believe will happen is that the high-street restaurants will definitely suffer more in terms of the trust factor. I think, therefore, we believe that restaurants in the five-star hotels, the bigger hotels, would probably benefit because of the perceived trust in terms of social distancing and hygiene. I think that is all. That's all we have for today. That's all we have for today.
Thank you.
Thank you all for your time. In any case, our teams here stand as engaged with investors as we go forward. We'll be more than happy to do specific investor calls. In fact, some are already being set up in the next couple of weeks. Thank you all for your time actually.
Thank you, everyone. Thank you for joining. We can close the call now.
Yes. Bye.
Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect your lines.