Q1 19/20

Aug 5, 2019

Good day, and welcome to The Indian Hotels Company Limited's Q1 FY 2020 earnings call being hosted by Mr. Puneet Chhatwal, MD and CEO, IHCL, and Mr. Giridhar Sanjeevi, EVP and CFO, IHCL. As a reminder, all participant lines will be in the listen only mode, and 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 and then 0 on your touchtone phone. Please note that this conference is being recorded. At this time, I would like to turn the conference over to Mr. Puneet Chhatwal, MD and CEO. Please go ahead, sir. A very good afternoon to everyone. Many thanks for joining this call. I'm here with Giridhar Sanjeevi, my colleague, and the CFO of IHCL. We'll walk you through some macroeconomic factors, where we stand in our aspirations to execution of our strategy, the Aspiration 2022, followed by our financial results for the Q1 of 2019. When we really look at the industry trends, we cannot ignore the macroeconomic trends. I think it would be fair to say that there has been a continuous slowdown in the GDP growth, especially in the last few quarters. As we said on the last call, since 15th of March till end of May, we did witness a kind of stagnation or absolute flat levels in revenue. However, June and July witnessed a very good pickup for us, and that a good June helped to mitigate a weak April, and the month of May came at an average. So all in all, it is not a very high growth environment that we witnessed in the last quarter. As things stand today, as we speak with you, we are not seeing a very high growth environment or a very positive environment, I would say, from a macroeconomic perspective, both at a global level as well as at the domestic level. Having said that, we still believe in the projection of India becoming a 5 plus trillion economy by 2023, which is enabled through a lot of factors which speak especially for India, where a majority of our portfolio is, more than 85% of our portfolio is in India, that we will continue to see a positive long-term outlook, which is based on the development of infrastructure, development of tourism destinations, ease of doing business, improvement in employment and employment generation, as well as we come out of the financial crisis of some of the finance sector. I think we are going to witness positive growth. The headwinds have included some impact of elections on the occupancies. There has been a holdback in discretionary spend, as I already mentioned, especially in the month of April and May. The airfares had skyrocketed for some time, but they have now come down to a more stabilized level. We were all a bit more optimistic on getting some relief from the budget on the GST level, which currently anything above EUR 100 subjects us to 28% GST. Unfortunately, there was no relief on that front. Also we were expecting higher demand than supply in the first quarter. The headwinds is one story, but we also witnessed some tailwinds. There are an increasing number of foreign tourists coming in to India, despite the warning which has been issued recently by U.K. and Germany. There is an improvement in domestic demand, especially in the leisure sector. The middle class continues to rise, and there is a continuity in the policy. If there has not been a positive change, there has also not been some kind of a negative surprise that we have got some addition of some new taxes related to tourism, related to overnights in the hotel business. There is a tremendous opportunity still for conversions, which means existing assets which might want to convert to one of our brands on our brandscape. On the aspiration to execution, we have always shared this pyramid since we launched our Aspiration 2022 strategy. That is our growth of EBITDA margin of 8% over the business cycle, that we will add 15 new projects to our pipeline every year, and we'll have a balanced portfolio for that 50% portfolio based on management contracts and 50% which would be owned or leased. I think in the very first year, we were able to meet or exceed even on all the parameters. As far as Q1 is concerned, we have been able to continue on that journey. I would say we have had five quarters of growth into our Aspiration 2022 journey, the way we have communicated following our capital market day in February of 2018. When it comes to our branding strategy, one of the key deviations, as you keep hearing, is we have moved from a branded house where everything was branded one or the other way around Taj brand, to a house of brands. One of the strategies of management is to focus on each of these businesses, treat them as businesses, and have them work on their own profitability and cut the name Taj where it could destroy the value of Taj brand. I think as we move forward into this journey, you will hear more and more about new brands that are added in, like the Ama on the Plantation Trail business, a change in the perception of TajSATS, as you see with the new logo, the relaunch of Chambers after 45 years, the repositioning of the Ginger brand, followed by the repositioning of Vivanta, up-gradation of 17 properties under Vivanta brand to the Taj brand, and similarly, on scaling up most of our very well-known F&B brands and F&B businesses as we continue on this journey. When it comes to our momentum on new signings, last year we had signed 22 contracts. In the first quarter of this year, we added seven more, which is a very good number for quarter one. We feel that our target of doing at least 15 a year is very much reachable. We'll continue to work on strategic and margin-enhancing assets. We'll continue to asset manage our portfolio, build very strong relationships with all our stakeholders, especially with our owners, so that they trust us with more and more properties. We'll continue to track this performance as we have communicated to all of you. On the shift in business mix, we are already seeing that the management contracts from the commencement of this journey, as we announced the results on 31st of March 2018, the management contracts contributed 32% of our portfolio. Today, it is up to 41%. Also the number of assets in our holding company as a percentage has declined to 20%. Not the number of assets have declined, which is the best proof of our hedging in the field of volatility. Also making sure that owned part of our portfolio is lesser in number versus the service part of our portfolio, which will help us to drive margins. When it comes to scaling up inventory in terms of openings, because signing is one thing, but opening is other. We opened, I would say, all three hotels that we said a hotel a month, in very key strategic destinations. We have the largest convention hotel now in Agra, which is added to the Tajview in Agra that already existed, which moves to the SeleQtions brand. On top of that, we had another hotel in Goa, the Cidade de Goa. On top of Cidade de Goa, within the next 12 months, as we have already announced, we will be opening the Taj with the convention center. Finally, a very nice Ginger property for pilgrimage tourism in the city of Dwarka. I think all three are very good openings, and all three in line with the strategy on assets that are not owned by IHCL. When it comes to our financial performance highlights, on a consolidated basis for Q1, our revenue increased by 6%, touching INR 1,057 crore. We checked on our data for almost 10 years, and in the last 10 years, never ever in Q1 we have hit INR 1,000 crore as revenue. Our EBITDA grew by 32%. This is the pre-change of the lease standard of the IND AS. It is at INR 166 crore is a 32% increase. Our margin expanded by over 300 basis points to 15.68%. We never ever did 12.63% or 15.68% margin before. 12.63% was the same quarter last year, which was already very good. The best in the previous 10 years, and now the 15.68 takes it a notch higher, which has been helped by certain monetization of assets about which we'll talk a bit later. There was a marginal decrease in our PAT. That is attributable to a one-off which we had last year in Q1 with an adjustment to a lease contract or to a management contract that we had for the hotel in Boston. On the new accounting rules under IND AS, of course, the EBITDA goes up and as these leases have to be because the lease payments go below the EBITDA line and the leases have to be capitalized, the depreciation as well as the interest expense becomes higher. Therefore, it has a negative impact in the short term on the PAT, which over longer term is obviously a neutral position. On the consolidated key indicators on revenue, which I just now said, there is no change on the revenue, but if we do it post IND AS, then the EBITDA rises, as I just explained, from 166 to INR 210 cr. The 32% increase that you see on the charts is based on 166 and not on 210, as it would not be a like-for-like comparison. On the profit before exceptional items and tax, you see the reversal that INR 37 cr, which would have been our pre-IND AS profit before exceptional items, reduces to 25 and the PAT reduces from 14 to INR 6 cr, which is a -8% or at the level of 14 and not at the level of INR 6 cr post this new accounting and lease standard. With that, I hand over to Mr. Sanjeevi to take you through the details of the financial performance. Thank you, Puneet. I think moving on to the financial performance, here is a very simple table which quantifies the impact of lease accounting. In a sense, what you see on this is that the operating expenses go down by INR 45 crores, which is really the lease cost going down. The depreciation and interest goes up by INR 17 crores and INR 39 crores respectively, therefore impacting the profit before exceptional items and tax by around INR 11 crores and profit after tax by INR 8 crores. That's the simple comparison of pre and post lease standard. These are the detailed P&Ls. I think what we see here is two, three messages on this slide. Number one is that the leverage has been maintained. While the revenue grew by 6%, the EBITDA grew by 32% and operating EBITDA grew by 16%, indicating significant leverage driven by cost savings as well, because the operating costs, the total expenditure grew by only 3% actually. The EBITDA margin grew by 3% and operating EBITDA margin grew by 1.32%. In terms of depreciation and amortization and finance costs, I just explained the impact of the lease standard. Exceptional items were marginal at INR two in relation for the current year. Provision for taxes were all okay. In terms of share of profit and loss in associates and JVs, the negative is effectively driven by TajSATS, where due to the loss of the business from Jet, I think there has been a loss there. Other than that, I think overall, there is no surprises in the P&L or unusual items in the P&L that we talk about. In terms of exceptional items, last year, as you know, we had a fair value of derivative contracts was about INR 50 crores negative, driven by rupee depreciation. This year, it was positive by INR 2 crores, and Boston lease modification income, which we had last year is not there this year. Therefore, the net change is about INR 6 crores or so on the exceptional items. In addition to that, the gain on the sale of flats of INR 25 crores is reflected in the non-operating revenues, actually. In terms of the IHCL network revenue, both on domestic and international, I think what we see is that very clearly in a difficult quarter, we are focused in terms of growing room revenue. The domestic room revenue has grown by 4.2%. The international has done very well, 8.2%, driven by U.K. and U.S. primarily. In fact, what you will see is that the consolidated operating margin improvement is better than the standalone operating margin improvement driven by the performance of U.K. and U.S., actually. RevPAR was negative at -2.5, that is in line with what we have seen in industry. I think what we have seen is that while April was possibly the weakest month, I think May and June have subsequently improved. In fact, July has improved further, we are into a positive RevPAR territory in the month of July. F&B revenue was 1.6% in domestic. This is down again because of the banquets and MICE actually. Given the circumstances, I think this reflects the different efforts that we have taken to sort of make sure that the occupancies kind of go up and in a difficult rate environment, actually. On the international side, as I just said, U.K. and U.S. have driven the performance in terms of room revenue and RevPAR. On the standalone, very quickly, it was a 5% growth in top line to INR 608 crore, and EBITDA on a pre-IND AS basis went up by 24%, which included the sale of flats. Therefore, EBITDA was flat in terms as compared to the previous year. On a post-IND AS basis, it was INR 146 crore. In terms of profit before exceptional items and taxes, the pre-IND AS number went up to INR 41 crore from last year's INR 21 crore, and post-IND AS dropped marginally to INR 36 crore, driven by the new lease accounting. Profit after tax last year was a negative. This year, the pre-IND AS went up to INR 25 crore and post-IND AS, the impact was small in terms of a drop to INR 22 crore. Therefore, in terms of a growth in profit after tax, it has been good, driven also by the gain in the sale of flats, actually. This is a very quick summary of the IND AS impact on standalone P&L. While the operating expenses went down by INR 21 crores, depreciation and interest went up by INR 26 crores, reflecting a change of INR 5 crores in profit before exceptional items and taxes. In terms of the detailed P&Ls, what you see is that the growth in revenue was 1% and operating EBITDA grew by 4%. From a pure operations perspective, the leverage continued in terms of control on expenditure. As you can notice, the operating expenditure growth was only 1%. Depreciation and amortization, we've just spoken. Finance costs are broadly in line. Exceptional items, essentially the sale of flats and also there is no losses on the Forex side. That is on the exceptional items. On the debt position, I think the net debt at a consolidated level grew marginally from INR 1,925 crores to INR 1,975 crores. The net debt to EBITDA dropped from 2.11 to 2.07 on the consolidated side. I would say that overall, the net debt position was stable. What you will see on a post-IND AS basis, we have a lease liability of INR 1,937 crores, which is nothing but the conversion of the leases into the long-term lease liabilities. This is something which we have recognized. That's it on the financial performance, and we can move to Q&A. We have some questions which have come online, and I think why don't we take questions before we get onto questions which have been sent to us in writing. Should I open the audio questions, sir? Yes, please. Yes. Thank you. To participants, if you'd like to ask a question over the audio, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. A voice prompt on the phone line will indicate when your line is open. Please state your name before posing your question. Once again, please press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions. We will take our first audio question. Please go ahead. Hi, sir. This is Vikas from HSBC. I have two questions. Number one is, we have this Aspiration target of reaching 25% EBITDA by 2022. With this new lease accounting, can we expect it to be higher by at least 200, 300 basis points? Yeah. Let me answer that, Vikas. I think you have seen that the EBITDA margin has gone up by 3% because of the new lease standard. I think that 3% should remain is what we believe, because there is no reason to believe that that'll be lower than that. You should assume that it should go up by 3%. Yeah. Our aspiration would be more of 27%, 28% now than 25%. That's correct. That's correct, yeah. Okay. Secondly, sir, at the starting of the year, the expectation was more of a similar kind of growth, what we have achieved in FY 2019, around 10%. Now, with this slowdown, should we expect it to be more like a mid to low single digit? We think we can still achieve high single-digit growth on the back of strong second half? Thank you. Yeah. Yeah, Vikas. I think June and July were very good. We are just in the first few days of August. I personally believe that unless something happens that we are all unaware of in the next few months, normally, we should be able to drive close to similar level of growth as last year. Now, whether that comes through revenue growth, through cost optimization, through monetization of non-core assets, I think what we have communicated consistently is the job of the management is to navigate through all these headwinds using whatever we have in our tactical toolbox and keep moving forward, and that's something which we have committed to and will continue to deliver on. I understand that from your modeling perspective, you need to understand what numbers you should be factoring in. I think maybe I leave it to you to see how it is happening in the rest of the industry. We feel that any number which is north of 7% is very realistic for us because we are in the weakest part is Q1 and Q2. If we can drive around 6% top-line growth on an average in Q1 and Q2 and a higher growth in Q3 and Q4, the average should definitely come up north of 7%. This is without having the visibility of what will happen in October. As I mentioned during the presentation, there are some challenges that we see on a global front as well as on the domestic front. We are seeing this since one year. The U.S.-China trade thing is not something which started yesterday or two months ago. It's been ongoing. A slowdown in India is not from now. It's been there since pre-Holi. We have mentioned that in the last call also. For us, it's more important to continue to gain market share, to optimize our cost and drive operational efficiency as well as operational excellence. Sure. Thank you. To participants, if you find your question has been answered, you may remove yourself from the queue by pressing star two. We will take our next question. Sir, this is Dipika from J.P. Morgan. Thank you for taking my question. Sir, you mentioned about the recent slight slowdown on the demand front. Would you primarily associated this with business travel, or would it be towards the leisure segment as well? I would say leisure segment has been very resilient, we cannot say. In the business segment, Mumbai has performed very well for us, whereas Delhi has not been that strong. It's normal because in an election year, pre-elections and post-elections, the government business, just the delegations or the heads of states coming in, that reduces significantly. We have done quite well on leisure. We have done quite well on long stays. I think there has been a reduction in corporate travel. On the transient also, we have done quite well. We have seen a slowdown on some corporate business and a little bit on the MICE, which is Meeting Incentives, Conventions and Events, and some form of business groups also. Generally, leisure is strong. Mumbai is strong. Kerala is still not becoming as strong as it used to be. Maldives has come back pretty strongly, but Sri Lanka is weak. It's a mixed bag. What has worked very well for us, definitely in Q1, is the performance in both U.S. and U.K. I think our U.S. properties and London hotel has done quite well, and they've continued to do well, especially London in July. Sir, coming to the U.S. properties, given the RevPAR improvement in that market, where would you think or project Pierre's loss reduction in this year? We have significantly improved on our cash profit, is kind of more than doubled among the three hotels, which is The Pierre, San Francisco, and London. Similar story on PBT side, similar story on the EBITDA side. I think all three hotels continue to perform very well. There are some headwinds that we are seeing also in the U.S. market on the RevPAR side. On the F&B business, The Pierre has done quite well. Also in San Francisco, our chef got the two Michelin stars, the only Indian restaurant on the Western Hemisphere to have two stars. That's also helped us in driving revenues in both hotels. Sir, one last question from my side. Any updates on the GIC platform in terms of any properties that you have identified to induct over there? Yeah. I think you answered yourself. We are in the process of identification of a list of seven to eight assets. One thing is very clear is our own assets, we do not think it is the right time to monetize on them because the timing has to be right when you buy or sell any asset, and we want to do it when the fundamentals are looking much stronger than in a rush to do it now. Similarly, we are looking at several distressed assets. Hopefully within the next three months, we will be able to announce at least one asset, if not two. Thank you so much. We will now take our next question. Yeah. Hi, sir. Sumanth here from Motilal Oswal. My question is regarding St. James. Talking about the better performance in international market, how is the performance of St. James in terms of the business is driven by the higher volume occupancy or increase in rate also? St. James has seen, I would say, combined a phenomenal quarter and a phenomenal July. I think the best July ever. For the quarter also, we have seen almost close to 90% occupancy at a very high rate. St. James and Buckingham Gate combined have done very well despite all the negative news on the market about U.K. and Brexit and all the political changes. I can only say, I think this hotel is very well established. It was renovated. We put the money at the right time into the property. It benefited both on the rate and on the occupancy side. We will continue to take this asset at a higher level by adding a few more services in there. This is a star performer for us. This year, I think it's the best performing hotel in our system for the first four months. Is it because of the inventory available this year in this quarter is higher than previous year? Sorry, room has gone for a renovation. The second is because of the ICC World Cup, the occupancy is higher. The two reason? You answered it yourself also this question. Right. It's absolutely right. We had last year rooms and renovation, but that's not the only reason. It's the quality of renovation. See, the quality of renovation has come out well. The timing to market has come out well. If besides Wimbledon, you also have the World Cup Cricket, then of course, we are able to drive more traffic than any other hotel in London. Okay. The second thing, talking about U.S. business. In U.S. business, what was the key reason for the performance? Is it the cost rationalization or increase in rate also? I think in the U.S., the occupancies had reached a very high level, and it could only be driven by rate. The U.S. market is facing some kind of, as I just now mentioned, a little bit of headwind. In San Francisco, the hotel is smaller, so it's been more resilient on a RevPAR basis. It's done better than the year before. On The Pierre, it's more or less at the same level. The RevPAR is marginally higher, but not significantly higher than last year. Pierre has a huge banqueting space and food and beverage business, which they have been able to utilize more. The revenue driven in food and beverage is significantly higher at The Pierre in the first quarter. Okay. F&B has driven the profitability and the cost rationalization also? In the New York scenario, the F&B has more employees, and they are unionized. It's not a problem for us, but for all brands, all hotels in New York. If F&B has a better utilization, then it is good for the hotel and good for the P&L. Okay. Can you segregate the growth of U.S. and U.K. in terms of the realization growth and occupancy growth? The profit or. The RevPAR growth in U.S. has been around 5%, and F&B has been 13% in the first quarter. The U.K., the RevPAR growth has been very high, around 30%. F&B revenue is marginally lower because we are going to renovate there, and we have got a place vacated where we'll be putting in the new Chambers. Our business club you have read about the relaunch, which we'll be relaunching before Wimbledon starts next year. You said the RevPAR in St. James is 13%? 30. three, zero. 30. Can you segregate how is the occupancy improvement or ADR improvement in that? The occupancy, as you know, these numbers are a bit distorted because as you rightly said, Sumanth, last year, the rooms were under renovation, so occupancy went up by 20 percentage points, and the rate went up also. It's not a right comparison today because there was less inventory available. All in all, U.K. has been very positive, and F&B revenue double-digit growth in New York has been very positive. Thank you so much. We will now take our next question. Good evening, Puneet Giri. This is Satyam. My first question is on the numbers itself. In the quarter, the raw material cost seems to have driven a lot of the operating leverage. Raw material cost is down 6% YOY, though revenue at the consolidated level is up 4% YOY. Just wanted to understand some color on what really drove this cost reduction. Is it that some of the efficiency improvements that we have talked about in the past, those building blocks are actually falling in place, or is there any one-off here? No, there are no one-offs, Satyam. Thank you for the question. There are no one-offs in the raw material cost reduction. I think very clearly a lot of the efforts are coming through, and I think the other thing is that our banquets are lower. That also would have played a bit of a part here. Other than that, a lot of the efforts that we're taking in terms of raw material cost, which has actually come down by 4% during the quarter. In fact, cost per cover has come down by 4%, and overall raw material cost as a percentage of F&B revenue standalone has come down by 1%. As we have spoken earlier, Satyam, to the investors, we are doing a number of efforts in terms of whether it is the Accenture efforts or whether through our own internal efforts in terms of simplification of menus, in terms of menu costing. There's a whole bunch of efforts which is going in. We are quite pleased with the raw material cost reduction that we have achieved in Q1. Great. That's great to hear. The second question that I had was on the supply side. While overall supply growth environment continues to remain quite benign, I believe that in the Mumbai micro market next year, like FY 2021 could see quite a few hotels opening up in our space, in the luxury leisure, luxury upper upscale space. Are you worried about the coming supply in Mumbai? How do you view it? No, Satyam. Actually, I think it's very good that you indirectly asked this question. We are seeing a lot of growth in both the RevPAR as well as food and beverage revenue at the Land's End and at Santa Cruz. Santa Cruz is almost a RevPAR leader in the airport market, and Land's End is showing a phenomenal increase, and has had excellent four months behind it. Where there is some kind of worry is about the shift in general business since several years from South Mumbai to the Worli area, the BKC area. There is some change in the kind of demand, but we are working through it on the Mahal Palace. That has not much to do with the supply. That's number one. Number two, even if supply comes in, the Taj Mahal Palace tower is a monument. The Santa Cruz is maybe one of the best airport hotels in the world, and Taj Lands End has views, which I don't think every hotel can have in Mumbai. It's very well-positioned with the lawns, with the quality of the property, with the spread. With the view of the ceiling from The Chambers on the top, it's just got everything going for it. On behalf of management, I can say we are very, not only relaxed, but we are very upbeat about especially Lands End continuing to outperform the market. Thanks, Puneet. Giving everybody a run for its money. It's been continuously gaining market share. Great. That makes sense. The last question that I had was on if anything you can share on what has been the experience so far with your two brand experiments, one on the SeleQtions side. Now you have launched quite a few hotels with the SeleQtions brand. How has that impacted occupancies and pricing at that properties, if anything noticeable you have observed? Secondly, the same with the Ginger upgrade that you have done in Goa, for example. What has been the experience so far? The Ginger upgrade has led to a 30% growth in the room rate at the Ginger in Panjim. You know, Ginger was a well-established brand, so it's quite positive. On SeleQtions, I think we have to wait. We've just launched it. Brands are not built in a day. You have to give us at least six months to properly launch it and have it settled, and then another six months for them to run, and then we will have a like-for-like on how they are performing, how they're doing. More important than that is the confusion around the brand. At the end of the day, the backbone of our company is the Taj brand. The change that we have done is to make Taj brand more pure and more understandable than to have something, by Taj or for Taj or Taj President or this kind of confusion had to be taken out. That's been taken out. The second step is how we make SeleQtions a successful business model for the hotels that are in operation, but also make it an attractive value proposition for new ones to come and join in. I think we've just commenced that journey six weeks ago, and we should wait at least six months because we will not be able to do that wonders. On Ginger, we are continuing with the renovation program, and we are very encouraged with the customer feedback as well as the performance that we are seeing with the renovated hotel in Panjim. Great. All the best. Thank you. We will take our next question. Hi, sir. Good evening. This is Nihal from Edelweiss. My first question was on the domestic segment. It was positive that you highlighted that the market has improved in June, July. Looking at some of the indicators, I'm not sure if other than airfares, which have normalized, anything else has changed. If you could just highlight if there are any specific cities or segments which have contributed to this improvement and what gives you the confidence going forward? Okay. I think we answered it partially. Delhi in Q1 was slow. It's beginning to pick up, it's seen very good July. The volumes came very strong. August in Delhi has started quite well. The outlook for August in Delhi is good. Mumbai has been quite resilient, performing much better than last year. Kerala remains weak. Bangalore is okay. Chennai is, because of all the water crisis, was weak. Goa, the market was a bit weaker, we gained market share, we've had a good quarter for Goa. I think that's the main key markets that we are in. Unless I have missed out. Hyderabad is there, which was okay because Krishna underwent renovation last year, that's not an easy one to compare. What we are also seeing is very positive growth in Udaipur, especially with the new hotel that we opened in the Taj Aravali, which is off to a very good start. Both Shimla and Rishikesh are also off to a very good start for us. Now we have to make sure that Agra and Siddharth Goa, which we just opened, settle down quickly and get well integrated in our system and our distribution network. Sure, sir. Absolutely. Thank you so much. Just a second question on the GIC tie-ups. In the CapEx guidance that we're giving, are we factoring in any investment considering that we're not planning to put any property into the JV for this year? I don't know if that is correct, that we are not planning to put any property onto this platform. Did we say that? No. I think we said depending upon the timing. Depending on the timing. The first hotel we don't want, ideally an IHCL hotel, but we are looking at a few possibilities and I don't think we will have some extraordinary CapEx. When we do monetization, we think the one-off monetization will help us to provide our portion of equity for one or the other acquisition. Absolutely. Just to confirm, what is the CapEx number that we're looking at for FY 2020 again? We look at anything between INR 300 crore to INR 400 crore on a system-wide. It would be fair to assume that if our revenue, for example, is around INR 8,000 crore on a system-wide, not what we report. This includes all management contracts. 4%-5% of that revenue is approximately the CapEx number. Add to it 10% on some extraordinary thing that we are not aware of at the beginning of the year, which comes in every year. Sometimes it comes because of flooding, and sometimes it comes because of some other event that may happen. Any number around INR 400 crore to INR 450 crore is realistic, but on a system-wide basis. Absolutely. I get that. Thank you so much, sir, that answered my question. Which includes the revenue of management contracts. Sure, sir. Thank you so much. We will take our next question. Good evening, sir. This is Kaustubh Pawaskar from Sharekhan by BNP Paribas. Sir, just coming to the domestic market, you have mentioned that few of the markets are doing, or they have improved from what the levels of April, May was, and few markets are still underperforming. Considering this environment, can we expect room rentals to go up when the season starts, maybe in the month of October when you normally take room rental increase? Can we expect to see 4%-5%, which was the guidance you gave earlier? I think we gave a RevPAR guidance. We definitely expect a healthy increase in RevPAR, especially from the month of October. Most of you analysts, you always ask the same question on a guidance on rate. The problem we have is the visibility is getting lesser and lesser in terms of when we look at how we started the year with April, May, then sudden turnaround in June, July. August is, as I said, off to a good start, but we are still in a bit of a volatile situation. Normally, whatever improvement you get in Q1 and Q2, 1.5 times that improvement should be doable in Q3 and Q4. If the improvement is 5% in first half of the year, the second half should get you at least 7.5%. If it's 4%, then it should get you a 6% in the second half. I think that's the only thing we can say at this point of time. All right, sir. I think it would be prudent to look at RevPAR more than only the rate. Why? As a growth company, as we start to open more and more hotels, either we will start sharing with you on a like-for-like and a not like-for-like growth, but when the hotels are ramping up, they will not achieve their stabilized positioning. The more new hotels we add, the more diluted the RevPAR number would be. Exactly, because occupancy is also one of the component of the RevPAR, and the demand outlook as of now, it remains uncertain. As you said that we are not getting the visibility. Considering that, the RevPAR, either the occupancies would be better, the new hotels would be contributing more, or the realizations would be better. I guess all these three components would help you to grow by seven odd % this year. Is it a right understanding? Correct. On the room revenue side, but on food and beverage, we expect a higher number going forward. Right, sir. Last financial year, we did 10% growth also on food and beverage. I think that's quite a strong number. Our ambition will be to drive towards those kind of numbers. As I said, as of now, as a growing company, it will become difficult because hotels will be new openings take time. The occupancy when you start is lower versus when it is stabilized. Right, sir. Got your point, sir. Sir, on the CapEx, you mentioned that INR 300-400 crores kind of a CapEx you would be looking at. Will this CapEx would be funded through internal accruals? Yeah, like we have done every year. In the revenues, you always take, as I said, 4%-5% of the total revenue is considered as a CapEx number on an average. Okay. In terms of debt reduction, can we expect something this year to happen, any substantial debt reduction? Substantial, I don't know, but I let Mr. Sanjeevi answer. He has just unwound a swap, so why don't you say? Yeah. What we have done is that, I think you know that we had these two swaps, the four swaps that existed, one maturing in 2019 and one maturing in 2021. About roughly three, four weeks ago, three weeks ago or so, we unwound the swaps which were due for maturity in December. We saw the rupee strong enough and the premiums not being strong, therefore, we were able to unwind. That actually allows us to book a gain as compared to the mark-to-market that we had taken earlier. Therefore, that took away about INR 120 crores or so. That is at a gross debt level. In terms of overall net debt reduction, I think this year, what we intend to do is that from cash from operations and renovations will largely be kind of square each other off. With success in monetization, let's see how much we do in monetizations. The plan is that any monetization we do, we'll use it towards debt reduction. I think without monetization, I think net debt will largely be at similar levels. Depending upon how much we do monetizations, the net debt could go down. Okay. Thank you. We will take our next question. Hi, Puneet. Shalin Desai from UBS. Hi. On my put set of number, I must say this considering challenging environment and seasonally it's one of the weakest quarter. Can you give me some color on the seven contracts that you have signed this quarter? Sorry, could you repeat the question, Shalin? Can you give me some color on the seven contracts that you have signed, seven hotel properties that you have signed, right? What kind of properties are they? Like Ginger, Taj? It's a mixed bag. We have a Vivanta, we have a Ginger, we have a few Taj properties. If you want me to name them, then one is obviously Agra, which we signed and opened, 240 rooms. Okay. A very significant one for us, which will also open sometime next year, as it's a brownfield that's in Ahmedabad, around 300 keys as a Taj. We have a Vivanta in Greater Noida, which is also important for us because we were missing a property in Greater Noida. We are doing another 110 keys in Gorakhpur, which is again a Vivanta. A Ginger conversion in Dwarka, which we showed to you around 100 keys. It's 98, to be precise. A new Ginger to be built in Amravati, but that will take five years to come, or at least a minimum of four years. One more was in Jaipur, Jagatpura. That's also a Vivanta. Sorry, the Jaipur Jagatpura would be under our SeleQtions, complementing the Devi Ratn, which will open in a few months in Jaipur, which will also open under the SeleQtions plan. I think those are the seven contracts we signed, and the ones we opened was Siddharth Goa; Agra, which was signed and opened; and Dwarka, which was signed and opened in the same quarter. That is the importance of conversions. When you sign, there is not such a gap of three years or four years when building a new hotel from the time of signing to the time of opening. That's one of our key ambitions to keep focusing on converting hotels to one of our brands going forward. Puneet, let me ask you, let me go to you on this question again. Any kind of property which you look for sign up, is it like at what stage? Is there a time frame? Like, it should be within three years or two years, be operational, something like that? If you said that. I wish it was like that. If you're doing leases, you can have a fixed date, fixed time, a fixed type of property. What happens is that when you are into management contract growth, it becomes very difficult, as in emerging markets, it's very difficult to say when exactly a hotel will open. It can take at a minimum three years to open a new built property. Correct. We are thinking of expediting a bit on the Ginger, because Ginger could be constructed on a module basis or on a prefab basis. That is something we are looking into. On the other brands, we have not reached that level of sophistication. Yeah. Just one more question, and I'll leave it to you if you like to answer. Considering you have seen a good reversal in June and July, can you put that in roughly number, like what ballpark, what kind of room rate increase or RevPAR increase or occupancy increase you have seen in June, July, vis-à-vis April, May? Anything, any sense, any color? Sure. Sure, Shalin. I think I can answer that. In terms of April clearly was our weakest month. I think what has happened is that in the month of July, we have actually hit a RevPAR growth of nearly 4%, which is on the standalone. On the network side, we hit about 5%. Whereas if you see the same numbers for Q1, I think it was negative. It was minus two and a half. Negative. Minus 2.5%. June, in fact, if you see, April was our weakest month. May improved. June turned positive both on RevPAR in standalone and network. July really has built on it. Hopefully, this is the developing trend in terms of recovery, actually. Sure. Thank you so much, and best of luck from my side. Thanks a lot. Thanks, Alim. We will take the next question. Sir, Deepika here again from JP Morgan. Just following up on the previous question. Did you mention that the standalone RevPAR growth was also negative two and a half in the June quarter? That's right. Okay. sir, if I had to look at your total pipeline of rooms right now after the addition in the June quarter, it would be north of around 6,000 rooms? That's correct. Okay. Thank you so much. We will take the last audio question. Pipeline. Sorry, Deepika. I think there is a correction I'm being prompted to say is around 4,500 rooms in the pipeline because we have opened a few big properties. It had reached around that number that you were saying, but in the interim, we have opened a few hotels. As I said Shimla, Rishikesh, Agra, Siddharth, Dwarka. It's quite a number of rooms that we have opened in the last four, five months. Hello? Yes. Hello. Yes, sir. Can you just provide some color on The Chambers business part? Like what is the current number of member base, what kind of sign-up fee do we charge, and annual recurring fee, and what kind of target member base that we are looking for on an annual basis? Which one? You're talking Chambers? Chambers business. The Chambers has been there for almost 45 years, and it has a member base of approximately 2,000 members. We have an annual fee, and then we have a sign-up fee. We will be trying to drive this business. I think we'd like to talk more about it in detail next time, as we have just relaunched The Chambers. After 45 years, we've changed the logo, we've changed the value proposition. Let us pick it up either offline or another day, as it's only 2 weeks since we have launched, and we'll have a better idea in a couple of months from now. Sure. Just some color. We want to maintain the exclusivity and not open this to anyone and everyone, as it's been a very exclusive and a very prestigious club. It was time to change the value proposition and take it to the next level, and that's what we are doing. Sure. Just some color feasible on the sign-up fee and the annual fee. Sorry, can't hear you. Could you speak up? Hello? The sign-up fee and the annual fee. Yes, sir. The sign-up fee is at INR 20 lakhs, and the annual fee is INR 3 lakhs. Yeah. Okay. Sir, the second question, what has been the reason for increase in our net debt excluding lease liability? I presume we should have Hello? Yeah. Hello. Sir, reason for increase. Yeah in net debt without lease liability, because I believe we should have, before CapEx, there should have been an operating cash profit of around INR 80-100 crore. Fair to assume that the CapEx has been higher than this amount? The CapEx in this quarter has been about what, INR 90 crores you were saying, yes? About INR 90 crores has been the CapEx. We have had dividend payments of around approximately INR 72 crores or so. Okay That must be driving it. Sure, sir. Thank you. Thanks a lot, and all the best. Thank you. I think we have hit 7:30, maybe we can take one last question before we close. Sir, there is no further audio question in the queue. Thank you. I would like to close this call by thanking all of you for participating and your questions. We look forward to talking to you more about our Q2 results on the next occasion. Thank you very much and have a good evening. Thank you. This concludes today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect your lines.