CHALET - Chalet Hotels Limited Share Price

During the earnings call held on May 15, 2026, management provided an optimistic outlook on Chalet Hotels Limited, outlining both challenges and strategic initiatives. The company reported a consolidated revenue increase to Rs.25 billion for FY '25-'26 and an EBITDA boost to Rs.10 billion. Revenue, excluding the residential business, grew 18% YoY to Rs.20,741 million, with an EBITDA of Rs.9,573 million, marking a 21% YoY rise. For Q4, consolidated revenue was Rs.5,711 million (up 6% YoY) with an EBITDA of Rs.2,786 million (up 8% YoY). EBITDA margins improved to 48.8% for the quarter and 43.7% for the year.

Key forward-looking points include:

1. Strong Pipeline: The company now has 3,389 operating keys and a pipeline of 1,655 keys across seven assets, projecting a total of more than 5,000 keys in the near term.
2. Strategic Acquisitions: The acquisition of a 144-key resort in Udaipur for Rs.1,710 million aims to enhance the leisure market presence. Additionally, a 330-key Ritz-Carlton hotel in Hyderabad will strengthen the luxury segment with a capex of approximately Rs.5,600 million.
3. Commercial Real Estate Growth: The commercial real estate segment is expected to drive growth, with a run rate of Rs.280 million in March '26 and plans to scale up to Rs.300 million in FY '27.
4. Capital Allocation: Chalet Hotels plans approximately Rs.30 billion in capex from FY '27 to FY '29, primarily funded by internal accruals, emphasizing disciplined capital allocation.
5. Market Conditions: A favorable domestic tourism landscape, driven by rising disposable incomes and a renewed interest in local travel, positions the company for continued improvement, despite recent geopolitical challenges affecting international travel.

Overall, management remains confident about navigating current challenges while enhancing long-term growth potential through strategic initiatives and disciplined operational execution.

Question 1: Why did we choose to do the subsidiary level dilution structure for DIAL instead of funding it entirely through internal acquisition or maybe through debt? Who are the investors coming in DIAL? What strategic value do they bring beyond capital?

Shwetank Singh: We made a strategic decision to implement a minority equity stake in DIAL to manage our growth carefully. This is not a long-term strategy but a one-time proposal tailored for this specific project. It allows us to maintain control while tapping into additional resources. The exact investors involved bring capital, strategic insights, and potential operational synergies.

Question 2: Given the large upcoming pipeline, including the Hyderabad and DIAL projects, how should we think about annual capex intensity over FY '27 to '29? What is the expected peak debt guidance?

Shwetank Singh: We've invested around INR19 billion in capex over the past two years, primarily funded by internal accruals. For FY '27 to '29, we plan to invest about INR30 billion, largely through internal funds. We expect net debt to peak around INR20 billion as we continue to leverage our strong cash flow generation.

Question 3: What is your FY '27 ADR outlook, considering the recent trends in domestic travel versus international?

Shwetank Singh: We expect a strong recovery in ADRs, driven by increasing domestic tourism and potential shifts in wedding markets returning to India. Although our portfolio is more business-heavy, we anticipate maintaining competitive ADRs in line with market demand and changes in corporate travel patterns.

Question 4: Can you discuss how you see domestic corporate events evolving and their impact on occupancy?

Shwetank Singh: Domestic corporate demand has remained resilient; we've seen no declines. Our ability to redirect focus towards domestic demand segments, such as MICE, is increasing. We believe that leveraging our resources to optimize occupancy in response to shifting demands will continue to yield positive results.

Question 5: Can you provide insights into the performance of your newly acquired properties in Udaipur and Hyderabad? What IRRs have you projected?

Shwetank Singh: We view Udaipur as a strong leisure market with potential for high returns through refurbishing the newly acquired resort. Hyderabad, with its robust demand drivers, will allow us to dictate pricing effectively. Expected IRRs are aligned with our historical benchmarks, focusing on aggressive growth in occupancy and revenue post-stabilization.

Question 6: How are you addressing the impacts of construction at the Powai property on occupancy and revenue?

Shwetank Singh: The construction has temporarily affected our occupancy. However, once the project progresses and the noise diminishes, we expect to see a strong recovery in both MICE and social demand. We're committed to managing this phase effectively while enhancing our overall service offerings.

Question 7: How has the demand landscape evolved post-March cancellations, and what are your expectations for the upcoming quarter?

Shwetank Singh: April has shown a bounce-back after March cancellations, with occupancy rates improving. We're optimistic for the upcoming months based on current trends and expect strong demand fundamentals to continue, particularly as geopolitical tensions ease.