KAMATHOTEL - Kamat Hotels (India) ltd. Share Price

Management's outlook for Kamat Hotels (India) Limited for FY'26 appears positive, with expectations for improved performance and new hotel openings contributing to growth. The company has set a target to increase the Average Room Rate (ARR) from approximately Rs.6,500 in FY'25 to Rs.7,500 in FY'26, indicating a 15% increase. Occupancy rates reached 65% for Q4 FY'25, and the management aims to maintain or improve upon these figures as new properties come online.

Key forward-looking points include:

1. New Openings: The company recently soft-launched the Chandigarh Orchid Hotel (122 rooms) in mid-April, with a formal opening slated for early May 2025. Additionally, they anticipate new properties in Rishikesh (54 rooms opening July 1, 2025) and Mandvi, Kutch (153 rooms expected by December 2025), among others.
2. Financial Growth: The consolidated revenue for Q4 FY'25 stood at Rs.93 crore, reflecting a growth of 9.5% YOY. For the full year FY'25, revenue was Rs.363 crore, a 19.1% increase YOY, with EBITDA reaching Rs.105 crore (28.9% margin).
3. Strategic Debt Reduction: Management has successfully reduced debt from around Rs.200 crore to Rs.105 crore, with plans to further decrease it to approximately Rs.75 crore by year-end.
4. Technology Enhancements: Investments in technology and operational efficiencies are expected to improve EBITDA and further streamline processes, helping to maintain margins despite potential pressures from leasing new properties.
5. Market Conditions: Management provided a cautious but optimistic outlook, based on market conditions and expected demand recovery, factoring in seasonal fluctuations in occupancy and revenue.

Overall, Kamat Hotels is positioned for growth through strategic expansion and improving operational metrics while managing financial health.

Major Q&A from Kamat Hotels (India) Limited Q4 & FY'25 Earnings Call Transcript

1. Question: Can you please share an update on the Mahodadhi Palace JDA? How much CAPEX is there? What kind of revenue can we expect? And what could the ROCE look like from this property?

Answer: Our joint venture for Mahodadhi Palace hasn't progressed as planned; we are currently seeking new strategic partners. The property will have around 180 rooms in Puri, a premium MICE destination. We anticipate strong demand and an attractive ARR due to Puri's appeal. However, exact revenue figures depend on finalizing partnerships.

2. Question: With a higher mix of leased hotels, what kind of EBITDA margin are you expecting this year?

Answer: The EBITDA margin will gradually decline as more leased hotels come on board, reducing our average return. Currently, we're transitioning into revenue-sharing properties, which typically yield margins of 10%-15%. While we expect a drop, growth from self-owned properties like Orchid Pune will help mitigate this impact.

3. Question: Why are you targeting a slower growth rate for FY'26 despite positive market indicators?

Answer: I maintain a conservative outlook because new hotels take time to stabilize; for instance, Chandigarh opened in mid-April, and its revenue will build gradually. We want to be realistic. Political stability and favorable policies should support growth, but we prioritize a prudent forecast to manage expectations.

4. Question: What is the guidance for EBITDA given the expansion and growth strategies outlined?

Answer: I cannot provide an exact figure, but my focus is to improve efficiencies through technology and automation. These improvements should enhance our EBITDA. Full-year guidance is cautious not to overstate potential but aims to sustain growth through our new properties.

5. Question: How much CAPEX will be dedicated to renovations this year?

Answer: We're expecting around Rs.40 crores in CAPEX for renovations, primarily for the Pune hotel. These renovations will occur in phases, ensuring a majority of rooms remain operational throughout.

6. Question: What is the estimated revenue contribution from the Rishikesh and Hyderabad properties?

Answer: The Rishikesh property is expected to contribute approximately Rs.12 crores this financial year, while Hyderabad is projected to add around Rs.7-8 crores. Combined, they should make an incremental impact on our revenues.

7. Question: Will any properties be expiring or up for renewal this year?

Answer: None of our leased properties are approaching their renewal periods. All existing leases are long-term, ensuring stability moving forward.

8. Question: Can you provide clarity on the enforcement directorate investigation?

Answer: We anticipate the resolution soon; we expect to recover approximately Rs.16.5 crores from the court, which includes a deposit for the ED matter. We are confident in the legitimacy of our transactions and are hopeful for a favorable outcome.

9. Question: When do you plan to start paying dividends?

Answer: Dividend distribution is subject to board approval. While I cannot commit to a timeline, I will present this concept for consideration, as dividends could indeed enhance shareholder value and stock performance.

This encapsulation captures key inquiries and their responses during the earnings call, reflecting the financial and operational strategies discussed.