Ladies and gentlemen, good day and welcome to Q2 and H1 FY 2027 earnings conference call of SAMHI Hotels Limited. This conference call will contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listener mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star and zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ashish Jakhanwala, MD and CEO of SAMHI Hotels Limited. Thank you, and over to you, sir.
Thank you so much. Good morning, everyone, and welcome to SAMHI Hotels Quarter two Financial Year 2027 earnings call. Thank you for taking time to join us today. I am joined by my colleagues, including our CFO, Rajat Mehra. We also have our investor relation partner, Strategic Growth Advisors, also on the call. We have uploaded our Quarter two and H1 FY 2027 financial results and investor presentation on the exchanges and on our website, and I hope everyone had a chance to go through them. I will start the call today by covering our performance strategy and pipeline, and then I will request Rajat to take you through the financial statements, and subsequent to that, we will close with an outlook before we open for questions. Let me start with the headlines. Our same-store revenue grew by 12.6%. This is ahead of our long-term guidance of 9%-11%.
RevPAR growth for the same-store hotels was up about 14%, and in this quarter, it was driven 9% by average rate and about 3.6 percentage points in occupancy. For the quarter, our hotels ran at a 78.6% occupancy, up from 75% a year ago. We have now seen six months of near 80% occupancy levels, demonstrating strength of our markets and our products. On 37% of nights in the quarter, our portfolio was above 90% occupancy, effectively sold out. A year ago, that figure was 32%. More compressed nights give our revenue manager more pricing power. Even though we have a high inflation environment with fuel prices and impact of currency depreciation on imports, yet our business delivered 60% flow-through in the reported quarter before accounting for loss of input tax credit. About 80% of the room nights we sold this quarter were to domestic travelers.
Much of that demand is created locally by the offices, GCCs, and industrial parks around our hotels. The office data supports this. Bangalore and Hyderabad, our two largest markets, together absorbed about 7.9 million sq ft of office space on net basis this quarter alone, against 5.1 million sq ft a year ago. Hyderabad alone more than doubled from 1.6 million to 3.8 million sq ft of net absorption in a quarter. Every one of those sq ft became room nights, meetings, and dinners in our micro-markets over the next several years. While the airline data shows declining passenger traffic for the quarter over previous year, this is not a demand issue. With higher fuel prices, several routes are rationalized, and this is compressing the supply. In terms of pipeline, while the base business compounds, we are building the next leg of growth.
Our secured pipeline adds about 1,670 rooms and moves another 473 rooms up market through rebranding. By FY 2030, we expect upper and upper upscale to rise from 42% of our income to about 60%. This is important because if you see the last six months, the EBITDA performance of our upscale hotel was almost 800 basis points ahead of the broader portfolio. As we move the portfolio from 42% upscale to 60% upscale, it has a material impact on our reported EBITDA margins. I will give you some update on specific projects, starting off with a 170-room W Hotel in HITEC City, Hyderabad. We believe it is a landmark asset in our pipeline, and now it is in the final stretches. MEP, facade, fit-outs, all streams are making good progress. We remain on track to open in Q2 FY 2028.
W will be one of the highest-rated products in our portfolio, along with Courtyard by Marriott Bangalore, in one of India's deepest office markets. On a stabilized basis, we expect it to add about 10% to our FY 2027 income base at margins above our portfolio average, given our existing Marriott clustering in Hyderabad and no impact of GST regulation change, given most, if not all, rooms will be sold above INR 7,500 rate threshold. The next is the Westin and Tribute Portfolio, Whitefield, Bangalore, with 142 existing operating rooms and 220 rooms being added. The existing 142-room Trinity Hotel is being renovated in phases into a Tribute Portfolio by Marriott. The Westin tower site has moved from excavation in Q1 to basement construction in Q2, and each quarter, you will see the building slabs being added at a rapid pace.
We are very bullish about the performance of this combined 370-room upscale hotel in a very strong market. The other upscale hotel at Ingka Centres, Noida, with 162 rooms, is also making great progress. The hotel is a part of 2.5 million square feet of mixed-use development with direct access to retail and offices. It is in a long-term variable lease, so our upfront capital during construction is limited. The project is now at second floor slab and making rapid progress. Moving to RARE India, integration work for the pilot is at final stages, and they are targeted to go live on the Outdoor Collection by Marriott Bonvoy in this coming December. This gives RARE partners a global distribution they will benefit from.
For SAMHI and RARE, it is a fee-led platform that needs very little capital and will start adding to our year-over-year revenue and EBITDA growth starting quarter one FY 2028. The excitement of this platform is that with efforts to keep adding hotels to this platform each year, we create a strong layer of non-same store growth without material capital expenditure. I will now hand over to Rajat for the financials.
Thank you, Ashish. Good morning, everyone. I will take you through the P&L performance, the impact of the GST changes, and key balance sheet highlights. Our total income for Q2 FY 2027 stood at INR 342.7 crore, representing a year-on-year growth of 15.6%. Of the INR 45.6 crore increase in the asset income, INR 35.5 crore was contributed by the same store growth. New and acquired assets contributed remaining INR 10.1 crore, led by the Trinity Bangalore and the Holiday Inn Expresses at Greater Noida and Kolkata. Consolidated EBITDA increased by 12% year on year to INR 123.8 crore, with an EBITDA margin of 36.1%. Excluding approximately INR 10 crore impact of the changes in the GST regulation, which was not present in the base quarter of Q2 FY 2026, comparable EBITDA would have been approximately INR 133.8 crore.
This represent a year-on-year growth of 21.3% and a comparable EBITDA margin of approximately 39.1%.
As the change in the GST regulation became effective in late September of 2025, the base quarter from Q3 FY 2026 onwards already reflects this impact. Beginning the next quarter, no GST-related adjustment will be required as the reported EBITDA will converge with the comparable EBITDA. The finance cost declined by 10.3% year on year to INR 38.3 crore, reflecting lower interest costs and improved credit profile. The depreciation for the quarter stood at INR 32 crore. Profit before tax and exceptional item increased by 39.9% year on year to INR 53.4 crore. During the quarter, we also recognized an exceptional gain of INR 3.9 crore from the sale of non-core land parcel at Kusul. The tax expense was INR 16.2 crore, was largely deferred tax and non-cash in nature.
Following the recognition of deferred tax asset in FY 2026, this asset is now being utilized as the company generates full profit.
Please note that in Q4 FY 2026, we recognized deferred tax asset in our P&L. We expect similar recognition in Q4 FY 2027 as well, which will have a positive impact on our reported numbers. PAT for the quarter stood at INR 41.1 crore, of which INR 33.5 crore was contributed or attributed to SAMHI shareholder. The year-on-year decline in the reported PAT was entirely attributed to the high base of Q2 FY 2026, which included exceptional gains of INR 84.1 crore arising from reversal of impairment on Navi Mumbai asset and sale of Caspia Delhi. Profit before tax and exceptional item for H1 FY 2027 increased by 35.4% to INR 86.2 crore, while the PAT stood at INR 66 crore. Excluding the one-time exception in Q2 FY 2026, our PAT for Q2 FY 2027 grew by approximately 137%, which is more than double as against the same quarter last year.
Turning to the balance sheet, the net debt stood at INR 1,458 crore as on September 2026, representing a reduction of INR 35 crore from June, despite continuous investment in our growth pipeline. Capital work in progress increased to INR 219 crore from INR 139 crore in March, primarily reflecting ongoing investment in W Hyderabad and the Westin in Bangalore. Net debt to the trailing 12-month EBITDA stood at 3.1x . After adjusting for capital deployed in the growth project, the ratio was 2.2 times. Our credit rating remains strong at A+. Our effective interest rate is approximately 7.8%, which is around 300 basis point lower than at the time of our IPO. Following the recent increase in RBI's repo rate, we expect the overall cost of borrowing to increase gradually. Free cash from the quarter was approximately INR 83 crore after the cash interest payment of INR 35 crore.
The cash and cash equivalents stood at INR 279 crore at the end of the quarter. With this, let me hand over to Ashish.
Thank you, Rajat. I will pick up two points from Rajat’s commentary. One is on net debt and the other is on the finance cost. On the net debt, we have made a commitment to take it down to 2.5x in the long term. The direction that we see as of now makes us believe that we will get into at least a two handle, either by the end of this fiscal year or early next year, which will keep us ahead of our schedule to make sure that the balance sheet is at a stable state. The second important point is on financing cost, and I think we have always prepared the interest rate environment to remain slightly volatile, which means that we can never take comfort at a point of time.
Even if the repo rates go up, let's say we have seen one round of increase, even if they continue to increase for next two more rounds, we see insignificant impact on our overall performance and earnings, also because we have the ability to refinance. Most of our financing has no refinancing expenses. The second is that we have the ability to use our free cash more efficiently, to effectively kind of control the overall absolute finance cost. While we are watching out for those particular areas, we are not really worried about the impact of that on our earnings for this year and for the next year. Let me now close with the second half. I think we expect a good quarter three and quarter four, which would be the strongest quarters of the year. Bangalore, Hyderabad, Delhi have a heavy calendar of marquee events.
In Bangalore, we have Aero India, DCC India Expo, AI India Expo, Digital Manufacturing Expo, and the CAHO Diagnostic Con. In Hyderabad, we have events like BioAsia, Kisan Agri Show, India Pharma Expo. In Delhi NCR, we have Bharat Mobility, Auto Expo, India Art Fair, and Medical Fair. We are just mentioning a few of the many events which are lined up in all the key cities. These events will compress demand across our micro-markets, and compressed nights are where our pricing power is greatest, as you saw with sold-out nights this quarter. Also, unlike previous years, where due to certain one-offs, we saw a dip in quarter four EBITDA over quarter three, we now expect each subsequent quarter to be in the previous one. I am also pleased to publish our first sustainability report this quarter, which sets the baseline against which we will hold ourselves to account.
With that, we are happy to take your questions.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, please wait for a moment while the question queue is assembled. The first question is from the line of Karan Khanna from Ambit Capital. Please go ahead.
Yeah. Hi, Ashish. Hi, team. Thank you, and a very happy Diwali to everybody. Three quick questions. First is on Sriperumbudur, which was earlier proposed to be an extension of Fairfield, but will now be a separate Marriott hotel. How does this change the overall CapEx plan for the asset, and also the RevPAR assumptions and yield on cost versus what was expected earlier? Second one, Ashish, you just spoke about the MICE calendar for 2H across Bangalore, Hyderabad, and Delhi, but any particular trends on rate to call out, especially during these exhibition dates? Are we looking at more like 20% plus RevPAR growth during these dates or months? Maybe you can answer these first, and I will ask my third question later.
Okay, so I will take the MICE and the ARR first, Karan. Let us go from quarter one till now. Karan, something interesting happened in quarter one, and we can talk about our portfolio. We closed the quarter at near 80% occupancy, but in quarter one, the rate was rather sluggish, around 2% growth or so. Our understanding is that it was largely because of the crisis. The booking window had collapsed. With the collapse of the booking window, the revenue managers did not have the confidence to price an asset in advance because they were not seeing the business on books. We closed the quarter at 79%, 80%. In quarter two, we started seeing improvement in both booking windows, and I think a little bit of conviction about the fact that demand is there, it comes at the last moment.
What is happening with events, Karan, is that we have visibility of demand far before the event, so to say. That allows a better yielding of the asset. The second thing you have noticed in the last two to three months is on unaffected days, and an affected day for us is, I hate to say this, a holiday, a long weekend, or any sort of business interruption event. On a non-event day, the hotels are sold out, and the yielding is very strong, and I would say the total revenue growth is 20%, 24% to the right. Having said that does get normalized and moderated by the affected days, which could be long weekends, holidays, so on and so forth. I think we have delivered a 15% revenue growth overall portfolio, about 12.5% growth on same store.
This would have been slightly higher, Karan, but for the fact that in one of our large hotels, and we did mention it on quarter four call, we had a very low-rated catering business which has been stopped. I would have expected another, I would say, 50 basis point, 100 basis point impact of that. Otherwise, the same store growth is about 13.5% or so. I think that is not at risk as we go into quarter three and quarter four. If we get some really sold-out dates, we can yield it in high teens, but at least I would think that is pretty secure. In terms of Sriperumbudur, it is actually very interesting. It is a 155-room hotel. We are already at high 20s return on capital employed in that hotel at a rate of INR 8,500.
With the addition of the Marriott instead of just adding Fairfield rooms, first of all, we are adding about 134 rooms. We expect the CapEx to be in the zip code of about INR 160-odd crores, plus-minus. With that, we expect the total yield on cost to be in the zip code of approximately 17%. Yeah, about 15%-17%, largely because the existing hotel is already paid for the entire land cost, so there is really no land cost per se. It is a strong market. We have been the market leaders with the Fairfield for last several years. That Fairfield has been one of our most consistent performers, including through the COVID period. So we do expect that the additional capital will be deployed at about between 15%-17% return capital employed.
Sure. Ashish. Last two questions. One is on RARE. 1Q had 75 hotels with about 1,050 rooms, while 2Q mentions 70 hotels and 900 rooms. Is the reduction due to deliberate portfolio curation or is it owner exits? Second one is on Mumbai, with MIDC issuing the CC for Navi Mumbai hotels, can you recreate the timelines here for construction completion, and how are you thinking about the overall CapEx and RevPAR here, especially given the expected supply in the micro market over the next three to five years?
Perfect. On RARE, Karan, no significant changes, but we do see almost monthly shifts to the number of hotels. There is a strong pipeline of about 20, 25 hotels waiting to join. There is some portfolio rationalization that has happened in the last two, three months, but we expect the 70 numbers to be closer to 85 or 90 hotels, I would say, in the next five to six months. A bigger focus, Karan, would be how and when we can onboard part of these hotels on the Outdoor Collection, because there we think the fee income will start coming to RARE. As I said, we're going with the first lot end of December, and then we expect every month to keep adding hotels on RARE Outdoor Collection, which is where I think the fee engine will kick in.
On Navi Mumbai, I must say that we are rather pleased with the current progress in terms of A, approvals, B, in terms of design development. Having said that, it's too early to call out for changing the opening timeline, Karan. You know that in development in India, the whole disclaimer comes true. Whatever may go wrong will go wrong. I don't think we would like to reset optimism at this stage. What we can assure that we are very happy with the progress that we made so far. We're very confident that it is to what we thought it will be in terms of product configuration. We're getting about 658 odd rooms right now, split between Westin and Fairfield. In terms of CapEx, we've always guided the CapEx to be in the zip code of about INR 900 odd crores to INR 1,000 crore.
We are in line with that. We do expect to be on ground in terms of starting the work probably early fiscal year 2028. I think that's where Navi Mumbai is. I would reiterate, since you've asked me this question, Karan, that we are very happy with the progress we're making on Westin Bangalore, actually. Right? While this is a hotel which is more towards end of CY 2030, FY 2031, Westin Bangalore, we would love to take some of you to Bangalore probably around March, April, and you will be very happy to see that from a conversation to a perspective, it's actually a real building coming up to ground, right? After W Hyderabad, our biggest excitement is to open the Westin in Bangalore. Then of course, we have Ingka development in Noida, and then we have both the Chennai Sriperumbudur and Navi Mumbai.
Fair point, Ashish. Look forward. Thank you and all the best.
Thank you, Karan.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants of the conference, please limit your questions to two per participant. The next question is from the line of Jinesh Joshi from PL Capital. Please go ahead.
Yeah. Thanks for the opportunity. Sir, my first question is with respect to the GST meeting that happened in October 26. I think there were some recommendations to allow limited ITC benefit to hoteliers who are operating below the ARR of about INR 7,500. And given every quarter we are incurring a loss of about, I will not say a loss, but GST hit of about INR 8 crore-INR 10 crore. Can you maybe just update on this development with respect to either quantum or timelines if any?
Jinesh, I will let you take this up. See, the council meeting suggested that people who are in the same line of business are actually eligible to take the credit in case of a hotel which is being sold for less than INR 7,500. We are also waiting actually for the final print, but as far as our interpretation is, at least the same line of business should constitute the commission that is being paid to OTAs, right? Just taking the argument further, would these expenses that we are paying and we are losing the GST on that, would that also be covered? Unfortunately, the overall notification has still not been issued. We are waiting for that to come. We also understand there are various representation which is being made, and government is actually little positive towards looking at this and passing on those final benefits to the industry.
Jinesh, don't forget that you all have taken their interest through LTCG and STT. I don't think that first they will try and resolve that before they get to smaller things like GST and input tax.
Understood. Sir, my second question is with respect to W. If I heard you right, you mentioned that we are targeting an opening around Q4 by 2028. Now, given the fact that the fit-out is already under progress, and I think our earlier timelines, if I am not mistaken, were not Q4. Are we seeing any kind of a delay in approval, like the situation in Pune which we are facing right now?
Jinesh, the project will be completed end of Q4. We have built in some cushion because the local authorities had indicated that the fire inspection will only happen after the full building enclosure. Because of that, we are building certain contingencies. Also, our experience in Hyatt Regency Pune, where the approvals have taken inordinately long. The project will be largely completed by the end of the fiscal year. Any one of you is more than welcome to walk the site. We are just building contingencies to make sure that our estimates for FY 2028 are not disturbed at the last moment.
Understood. One last question from my side, maybe split into two sections. One is with respect to the commentary that was given in the opening with respect to DTA recognition that can happen in Q4. If I talk about Q4 FY 2026, that figure was about INR 330-odd crores, and even the quantum was very high. The commentary surrounding the recognition that will come through in Q4 of this fiscal was also there. Maybe if you can just quantify that figure, because that will have an impact on the reported PAT number. That is one. Secondly, sir, how should we think about the growth in RevPAR split between rate and occupancy in second half? Given, I think, in this quarter, we saw a growth of about 9% in rates, and overshoot of the flow-through, which is considerably better.
How to think about that split in second half, especially given your commentary surrounding a lot of events that are about to happen in Bangalore, Hyderabad, and Delhi? That is the last question from my side.
I will take up the second one, and I will ask Rajat to clarify on the total recognition of tax assets later. Jinesh, I think we would see a stronger Q3 and Q4. The only thing is that, you know, we are very reluctant to, so to say, give a forward guidance. Let us break it up. We have seen about a 14% RevPAR growth this quarter. We expect to maintain that growth through Q3 and Q4. Do not forget that we will have a Diwali week coming in November, and then we will have about a 15-20 days interruption around Christmas and New Year. I think Q4 will be much stronger because post-New Year vacation, till pretty much 31st of March, we see a home run. Last year, of course, it got interrupted by the Gulf crisis.
We have fingers crossed, no such things happen this year incrementally over what we have seen happen. Q4 may end up being much stronger, honestly. But I would think that all of us should continue to underwrite this 14%-15% growth, driven by about a 10%-11% growth in the rates and the balance coming through better capacity utilization. I think what may happen is the bridge between RevPAR and total revenue. As you know that while the RevPAR grew at 14.5%, the total revenue grew at, I am talking same store, by the way, right? Because of increased food and beverage income in Q3, Q4, on accounts of events, weddings, so on and so forth, we do expect that the total revenue growth may be slightly better than we have done in Q2, largely because it will catch up to the RevPAR growth, right?
My sense is we should model the total revenue growth to be also in the zip code of about, I would say, 13%-14% for same store. RevPAR also around 14%-15%. A good flow-through. In terms of just optics, year-over-year growth, they will be very good because we have been reporting comparable EBITDA margins for the last four quarters because of the GST. From Q3 onwards, there is no comparable because we have impact in both years, right? We will go back to reporting the right EBITDA growth, which will be in high teens, honestly. I think we will see some of these changes in Q3, Q4. But Jinesh, do not forget, these are times when there is a lot of volatility. So, we should bank the performance and continue to work hard rather than expect that magic will keep happening, right?
I have banked the performance, but we remain very cautious about how Q3 and Q4 will pan out. There is nothing on the statistics and data which makes us worried, but of course, there are events which are beyond control. Rajat, from your side.
Yeah. Jinesh, specifically on the deferred tax. The deferred tax recognition which is still left for us to take in the P&L is roughly around 100-odd crores put together. We expect that to be taken in our P&L in the Q4. That is the time we, as per our internal policy, accounting policy, we discuss with the auditors and take the final impact of that in the P&L. The moment that is recognized, that is an effective upside in the P&L for that particular quarter. However, there will still be tax expense which will be coming on account of the deferred tax that has been recognized in the past. On a net basis for the next H2, the tax benefit, netting off against the expense with the tax asset, will be somewhere in the range about 25 to 30-odd crores.
Understood. Understood, sir. Thank you so much and all the best for second half.
Thank you, Jinesh.
Thank you. The next question is from the line of Prashant Biyani from Elara Securities. Please go ahead.
Yeah, thank you for the opportunity. Sir, can you corroborate whether HITEC City micro market has seen a very sharp ADR growth in the last six months, and your assumption of around 10% revenue contribution from W on a stabilized basis. If the high rate growth continues in HITEC, is there some upside risk to that assumption?
Okay, so Prashant, we are extremely bullish in Hyderabad as an overall city because of fantastic infrastructure, a very good base of existing businesses, a rather diversified nature of businesses between HITEC and Financial District, presence of infrastructure companies in Hyderabad. I believe that Hyderabad has We are long on Hyderabad in terms of the next big city in India, number one. Within that, HITEC City is perhaps the most mature city. It has over 100 million sq ft of existing office space, low single-digit vacancies, good rents, and the growth continues to remain unabated, right? With that backdrop, we do think that the HITEC City market has obviously done well. I mean, I will give an example. We have a Holiday Inn Express in HITEC City, and that for several quarters has remained operating at 20%, 25% premium to the portfolio average for Holiday Inn Express, right?
So, if we do a portfolio average of INR 4,000 in doing that, running that hotel at about INR 5,000, INR 5,100, right? That is a 25% premium of that market, and I am not going on external data sources, I am going by data that we collect internally, right? So that is one. Second, we know that the product is turning out to be exceptionally good. We also believe that W is a much loved and awaited brand for a tier-1 city in India. It is kind of rather surprising there is only one W in India as of now, which is in Goa. Of course, there are multiple Ws being developed as we speak by different owners. There is one opening in Bangalore, we are opening in Hyderabad, there is one happening in NCR. But nevertheless, this W will be amongst the first Ws in a tier-1 location, and especially in that sort of a curbside.
We do expect that hotel to deliver outstanding results in terms of rate. In terms of an upside potential, I think you are right. W has the potential to outperform and deliver more than if you take FY 2027 as a basis. FY 2027, I mean, W has the potential to go up to 170-odd crores of top line, which will be in excess of 10% of FY 2027 total revenue. I think this is one asset where I would tend to not remain very conservative, but err on the side of being optimistic, just because of the quality of the curbside and the asset. So yeah, there is an upside in this asset as we open it.
Stabilization period would now narrow down to around two years for likes of Delhi, Hyderabad, Bangalore?
FY 2029 will be stabilized for this hotel, because don't forget, we are getting enough time in FY 2028, to kind of open this hotel, capture the full RFP cycle for the next calendar year. So, our assumption is that FY 2029, this hotel is a stabilized hotel, which is literally the second full year. And it is a 170-room hotel in a market that is very large. If this was a 400-room hotel, 500-room hotel, we would have been more cautious to give another year. But 170 room in that location with the W brand and the Bonvoy distribution, it shouldn't be a hard thing for us to deliver, really.
Sure. Thank you so much, and happy Diwali to all.
Thank you.
Thank you.
Thank you. The next question is from the line of Achal Kumar from HSBC. Please go ahead.
Yeah. Hi. Thanks for taking my question. First of all, in terms of your targets around net debt to EBITDA, you mentioned you want to reach 2.5. Can you give us a bit of a bridge from here on? How do you see reaching 2.5, including what kind of CapEx, what kind of FCF you are expecting, and over what timeline we should expect 2.5? Thanks.
Achal, just give me a second. Gyana is just walking up to me with the bridge. We are at about 3.1 right now, plus/minus, like double decimals. As I said, we are really working hard to make sure that we get to below three by either the end of this fiscal year or another quarter or so. What is happening is that a lot of our current cash oblig debt is in development assets, such as W Hyderabad, and which produce no EBITDA. As W Hyderabad opens for FY 2028, and that EBITDA starts coming through. By the way, our net debt is not really changing materially. There will always be a plus/minus INR 100 crore movement because of quarterly cash in, cash out. They may sometimes see higher draws of cash also on the book.
But I think generally, we have always committed to the fact that our net debt will remain in the range that it is right now. With the net debt remaining stable and all of our growth being funded from our free cash, and the EBITDA growing not just on a same-store basis, but also the incremental EBITDA coming from hotels like W Hyderabad, we do think that the path from current three times, or let us say 2.9x , going to 2.5x is another, I would say, I would think, on the conservative side, 18 months. In that, what we are not factoring in is any incremental capital recycling. I think we have stated on earlier occasions, Achal, that we have identified one or two hotels in our portfolio, where we think we would rather recycle that capital than hold it for the long term.
The challenge we face is we always need a counterpart to recycle capital, and therefore, we will hesitate to commit on a timeline. But since I am asking for, let us say, an 18-month period, both to deliver incremental EBITDA and also have the optionality to recycle some capital, we remain extremely confident that SAMHI will deliver that stated around 2.5x over the period that I am stating right now. So, it is a rather execution-driven path, not a lot of risk on where the market would be really, in terms of RevPARs and rate growth and all of that.
Okay, perfect. Thank you. My second question is about RARE India, since you are being so bullish. Can you give us a bit of a color in terms of now, where are you in terms of revenue, EBITDA in FY 2028, FY 2029? Do you have any sort of updated color in terms of numbers from where you gave us when you actually launched it or when you acquired it? Any update on that, please?
Yeah, surely. I think there are two things. Our excitement about RARE is in multiple, right? Number one is that for a company like ours, which for the last 15 years has either grown same store, which is plus-minus the market performance, or has grown through CapEx-led, investment-led growth, right? Put capital, build new hotels. I think what we're trying to do is build a non-CapEx-led fee stream for the long term. Asset-light models take time, but as they mature and they ramp up, they become a well-oiled machine. So, that's one. That's more long term, really, right? The second is that the economics for us is rather attractive. As these hotels go on the distribution platform, we get a commission of about 18% on every booking that is made, right?
I think you'll start seeing the revenue ramp-up and the profit ramp-up happen from FY 2028, because the platforms just go live end of this calendar year. So, FY 2028 will be the first full year of operations of some of those hotels. We think we should get to about, my sense is about INR 15 crore-INR 20 crore of top line in the next fiscal year, which is almost, interestingly, half a ton of our total investment in a single year, right? This will be a reasonably good margin business, because as you say, there is really no employees on our rolls, no power expense, no nothing. So, we do think, as we had articulated in March when we had acquired this is going to be a business which will grow on its own without capital.
This is a business where solving for a 50% ROCE is not a hard thing to do. In our owned asset, I just responded to Karan, you put capital and you go to 16%, 17%. So, I think both in account of bringing growth to SAMHI on a year-over-year basis and also very high ROSIs, even though the underlying investment is small. So, I'm not claiming that that ROCE will shift the needle on our portfolio ROCE. For that, I still need to do Westin Bangalore and W Hyderabad in our existing portfolio. But I think this platform will become accretive on all of those accounts in FY 2028.
Okay, fine. My final question is about, I just want to understand-
Mr. Kumar, may we request you to return to the question queue for a follow-up? Thank you. The next question is from the line of Viraj Mahadevia from MoneyGrow. Please go ahead.
Hi, Ashish, Rajat. Congratulations on the strong operating performance. I noticed that there's a large deferred tax in Q2. Can you explain to us a little bit about what is this deferred taxation and why is it so lumpy, and how is it likely, you partly explained it, to play out in H1 versus H2 of this year?
Sure, Viraj. So, Viraj, SAMHI actually has been sitting on a large pool of losses and unabsorbed depreciation in our books. Now, for many years, since we were not profit-making, we were not able to recognize the advantage of that in our balance sheet and the P&L. Now, as per the accounting standard, the moment we turn positive and there is a forecast that we believe will allow us to use these tax credits later on at the time when we become tax payable against, this is the setting off of the losses against the profit for the subsequent year. That is the time we recognize the asset in our books, which basically means that all of these losses that we have with us today will allow us to save cash outflows at the time when we are actually liable to pay taxes.
So, for assets where we had clear path and we were able to demonstrate to the auditor that we have full certainty of recovering of these accumulated losses and unabsorbed depreciation in form of tax credits, we recognized that last year, and the balance which is left with us will be getting recognized in the Q4 of this year.
Understood. Any further plans for asset monetization specifically, Ashish, over the course of this and next year?
Yes, Viraj. We have earmarked two hotels. I think on a realistic basis, the realization value should be about INR 200 crore-INR 230 crore. I wouldn't promise this fiscal year. We are only left with five months. I think, as I said to Achal's questions earlier, we would like to get at least half of this executed in the next fiscal year, and that kind of accelerates us to that 2.5. Actually, we don't think it depends on that, honestly. We just think it brings additional capital to the company, and therefore I use the word not monetization but recycling, because I do believe that balance sheet is strong, does not need any external support, including capital recycling. It just allows us to improve our ROEs and revenue growth.
Understood. This INR 200, INR 230 is cumulative or per hotel?
Cumulative.
Okay.
These are small hotels with insignificant contribution to EBITDA.
Understood
as we sell, we take this capital back into our balance sheet, you will not see any impact on our revenue or EBITDA, really.
Excellent. And the cumulative CapEx till FY 2030, from today till FY 2030? That's my last question.
FY 2031, I would add that to include Navi Mumbai, right?
Uh-huh. Okay.
That would be about INR 2,200 crore, of which about INR 150 crore will be funded by GIC. I think INR 2,400 crore, INR 150 crore is being funded by GIC. Our net spend will be about INR 2,250 between FY 2027 and FY 2031. That is a three or four-year period. All of it, as I said, funded by our internal accruals. I would again make sure that we give the right guidance. Our net debt is circa around INR 1,500, INR 1,450, about INR 1,450, INR 1,500 crore. It will remain in that zip code, Viraj, but please be patient and considerate that it may shift by INR 100 crore plus-minus.
Sure
In quarter on quarter, there are certain quarters where the CapEx is high and the EBITDA is low, let us say quarter one, quarter two. There are certain quarters, quarter three, quarter four, when the EBITDA and cash production is very high and the CapEx remains largely the same, actually. We would ask for a little bit of tolerance, but largely it will remain in that zip code of where it is right now.
Excellent. Thank you so much. Look forward to the ramp-up of the new hotels over the next 12 to 15 months.
Thank you, Viraj.
Thank you. The next question is from the line of Vikas Ahuja from Antique Stock Broking. Please go ahead.
Yeah, hi. Thank you for the opportunity. I am happy to welcome you and the team, Ashish. My first two questions. The first one is, with H1 already near 13%, well above your 9%-11% guided range, and we expect second half to be strong. You did talk about tailwinds in FY 2028 from W HITEC City, RARE India, and hotels rebranding, coming into FY 2028, some part in 2029. Then we also have five, six hotel opening post that. So why keep the range unchanged at 9%-11% rather than raising it? Because from where I am looking at and what you are guiding, it looks like it is going to be a much better number. That is number one.
Number two is, could you also share the ADR or RevPAR performance, especially for maybe the three key cities, maybe how Gurgaon has done versus maybe Hyderabad and Bangalore? Thank you.
Okay, Vikas. Let me clarify. When we say 9%-11%, it is for same-store hotels, okay? It does not include the impact of new openings. That is one clarification that we have. Since we met some of you prior to our IPO, which is May of 2023, we have remained consistent on saying 9%-11% is same-store hotel growth. Very happy to say, last three years, average CAGR for same store is 10.4%, right? Not saying it for we-said-so moment, but it is more important to say that the long-term guidance is in the range, and there is no need to change that, at least in the short term, right? Second, you are absolutely right.
We have had some, if I may use, boring few quarters last two years, where I would think 98% of our revenue was same store, unlike most of our peers, which were adding new hotels during this time. For us, 98% of our revenue has been same store, and that is why our revenue growth has been in that zip code of 12%, 13%, 14%, 15% this quarter. We are very happy with that. This changes as we open W Hyderabad. We were discussing this earlier, that just that one hotel on a stabilized basis should add, on an FY 2027 basis, let us say 10%, but let us say on an FY 2028, FY 2029 basis, 6%, 7%, right? Then you layer that on top of the same-store growth. Same store, let us take 10%, which is middle of the range, 10.4% is the last three years.
You add 6%, 7% on top of that, you get to 16%, 17% revenue growth. Then the good news is that almost every, I would think, six quarters or so, with some lags and some catch-ups in between, we would have a new hotel open till 2031. So we open W Hyderabad, we will have some more additions in Sheraton Hyderabad. Actually, for FY 2028, you have W Hyderabad, which is non-same store. You would have some contribution from RARE, which is non-same store. FY 2029, we would have incremental inventory in Sheraton Hyderabad, which is non-same store, and ramp-up of W Hyderabad and RARE. Then in FY 2030, we would have, fingers crossed, we should have the Westin Bangalore, maybe we will catch up a quarter or so in that year. After that, the ramp-up of that hotel, then we have Ingka, then we have Navi Mumbai.
I think I would say I keep looking at slide number six of our investor presentation, where from FY 2012 till FY 2026, SAMHI grew at a revenue CAGR of 22%. Okay. Now, I know that is not the number we have gotten used to seeing in the last seven, eight quarters. That is because we only started reinvesting capital in 2023, 2024, 2025, so there is a lag. But I think our eyes are set on taking the company back to that high-teen revenue growth, combination of 10% same store, and the balance coming from new inventory addition. I think we are very confident we will get back to that path, and this without exerting any pressure on our balance sheet, because now we are a cash machine. This year, for instance, we will produce about INR 320 crore, INR 350 crore odd of free cash from operations.
Our CapEx will be more or less the same, so no change to net debt. Next year, of course, we see growth in EBITDA. Our finance costs, even with another two rounds of repo rate increase, will remain in the zip code of INR 125 crore to INR 140 crore, right? Therefore, there is a lot more cash being produced. I think you are absolutely right. We are not saying SAMHI will grow at 10%, 11%, Vikas. We think same store will grow at 9% to 11%. SAMHI, with new additions, should go back to a growth trajectory which is high teens, if not early 20s, which is what our past has been.
Okay.
Now, second,
Thanks, Ashish. Yeah, the second.
On RevPAR, so we saw Bangalore grew at about total revenue of 12%, same store hotels, pretty much. RevPAR was about 8%, high base. Hyderabad, fabulous, 21.4% total revenue growth, 19.1% RevPAR growth. NCR, ignore the number. It was 44% RevPAR growth, but that's because we had Hyatt Place Gurgaon last year was going through renovations, and therefore, I wouldn't like to think this is the. And Pune, we have seen a RevPAR growth of 17.2%, because of the fact that we left a lot of, I wouldn't say low paying, I would say no paying F&B catering business. The total revenue growth is rather muted, but RevPAR growth is 17.2. So it's been a healthy environment across most key markets, actually, in the last six months.
Thanks, Ashish.
Thank you. The next question is from the line of Aditya Srinivasan from iPod PMS. Please go ahead.
Thank you for the opportunity. I just have a couple of questions. One would be with respect to ROCE. ROCE today is about 7% or 8%, and with ACIC being about 6% or 7%. I just want to understand what it would take to reach the line of about 17%-18%, which is the ROCE of mature assets. If you could put some color on that. I will just quickly turn my second question too. I would just like to understand the year-on-year path to reach INR 3,000 crore of free cash flow over the next four to five years. Also, if you could put some color on the guidance, revenue guidance by FY 2030 or 2031, that would be great. Thank you.
Thank you, Aditya. Some easy questions, some almost impossible to answer. On ROCE is an easy one. You are absolutely right. There are three buckets of capital employed in our business. I think, if you can mute, there is some background noise, Aditya.
Oh, yeah. Sorry. Sure.
Thank you. Our mature assets are at about, I would think, 15%-16% return on capital employed, and there is a large pool of assets which have demonstrated that. To us, that is important because that shows that as we invest capital, open hotels, and let them stabilize, that is the kind of return on capital employed we will get. It is low because of a large goodwill, and I think we have explained this before. Both SAMHI and ACIC were foreign-owned controlled companies prior to the IPO. There was a fair valuation done of both entities, and that resulted in SAMHI's stock price being at INR 238, which was the allocation price to Asiya. At the same time, there was a goodwill in the Asiya's asset value. That goodwill technically depresses the return on capital employed of Asiya, or of ACIC. Sorry, my bad.
Having said that, I feel goodwill is a true representation of a company's value, just as INR 238 potentially was the right representation of SAMHI's value back then. We think that as we mature Fairfield Hyderabad, and that hotel is doing really well, we are in the process of renovating Four Points Pune, and eventually it will become a Courtyard Pune. The same thing is happening to the Four Points in Jaipur. This asset, this company is work in progress, Aditya, as we speak. The performance of the underlying market and assets that we are maturing is very strong, and therefore, we have no reasons to believe that ACIC will also end up being in mid-teen ROCEs in times to come.
There is a pool of capital employed in assets which, let us say, we have put some money in Hyatt Regency Pune or Sheraton Hyderabad or some of those assets which are just opened now. The amount is not very large, but nevertheless, they need to start producing stabilized profits. We do think that in the long term, we should deliver a 14%-15% ROCE. Having said that, we need to watch out for new capital employed. There, the good news is that several of our hotels, like W Hyderabad, Ingka Noida, One Financial District Hyderabad, are long-term variable leases, which means even though these are new hotels, and when you open a new hotel, you are prepared for low ROCE because you capitalize the entire asset and denominator, not depreciated, your depreciation in the numerator, and the income is not stabilized.
That is the recipe for low ROCE, right? But in long-term variable leases, Aditya, the good thing is that the denominator does not carry land and building, and the numerator, therefore, does not also carry the depreciation for land and building. It does carry a lease expense. A lot of our new openings are on long-term variable leases, which will not be ROSI diluted even in the initial few years, right? Then we go to assets like Sriperumbudur, which Karan kind of led us to explain, where because it is an extension to an existing hotel which is already in high 20s ROSI, the opening year ROSI should not be 4% as with typical development. It would be accretive to our portfolio average. Largely, I think even the fresh capital deployment we are doing, unlike typical new developments, would not tend to pull down our ROSI significantly.
There will be some impact in the first year or so, but I think we are very, very confident that the company will deliver mid to high-teen ROCE as we open these hotels, right? That is the first part of the question. The second part about FY 2031, FY 2030, right? I will repeat. Long-term same store total revenue growth, 9%-11%, right? We will be happy with 11%, we will be happy with 9%, we will be excited at 12%, we will be disappointed at 7% and 8%, right? So we believe that given the current demand-supply situation. One thing I was writing and then Gyana said it did not read well, so I said maybe I will speak about it. And I have been guilty of that narrative as well in the last quarter. When we say we have done 15% revenue growth in spite of all the problems in the world, okay?
I think that second limb should not be said anymore, and I will tell you why, for two reasons. Number one, it tends to make you believe there will be no problems in future, okay? So it is creating a false sense of optimism in an increasingly volatile world. Second, it disregards the fact that the size of the Indian economy is so big that it has the ability to absorb certain amount of global volatility. I will not be cocky enough to say all volatility for all times to come, but you have seen what has happened in the last six months, right? I think we need to take assurance from the fact that the demand in India is very strong.
The supply, at least in year one, will find it really hard to catch up, and therefore, we will operate in that environment where total revenue growth should remain in the zip code of 9%-11%. It has been now three years. We remain confident for the next two years, so five year is a long period to hold to one long-term guidance. As and when we see more data come our way, we will revise that.
Got it. Thank you so much. That puts a lot of things into perspective. And all the best. Thank you. Happy Diwali.
Thank you.
Thank you. Ladies and gentlemen, thank you. We will take that as the last question. I would like to hand over the conference to the management for closing comments. I would like to hand over the conference to the management for closing comments.
Thank you so much. So thank you so much for your patience to being on this call and coming on the previous calls. As I said, we've had a very reassuring H1. We're fairly confident about H2, but I think our excitement comes from what's coming from next fiscal year when we start breaking away from same store, start adding inventory to our portfolio. I think I'd look forward to speaking to all of you as we get onto that path. Thank you so much. We'll speak to you soon.
Thank you. On behalf of SAMHI Hotels Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.