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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good afternoon, ladies and gentlemen. On behalf of EIH Limited and SAP Securities, it is my pleasure to welcome you to EIH Limited's Q4 FY '23 and FY '23 earnings webinar. We have with us Mr. Vikram Oberoi, Managing Director and Chief Executive Officer; and Mr. Kallol Kundu, Chief Financial Officer.
Kindly note, this meeting has been recorded for compliance reasons. And during the most of this discussion, there may be certain forward-looking statements, which must be viewed in conjunction with the risk that the company faces. You'll have opening remarks and presentation by management, followed by Q&A session.
Thank you, and over to you Mr. Oberoi.
Thank you. Thank you so much, Naveen, and good afternoon, ladies and gentlemen. I believe there are about 60 people on the call right now, and thank you for joining us. You would have seen our results both for Q4 and for the financial year. And thankfully, we've had a very good year, a record year for the company, both as a stand-alone and at a consolidated level. And these results wouldn't have been possible had it not been for the dedication of all our colleagues who work hard to look after, I guess, to gain their trust and loyalty. So I must thank them. Of course, I would like to also thank our guest and people who've invested in the company for their faith in us. Kallol has a presentation. So I'll ask Kallol to present that, and then we'll be happy to take your questions. Thank you so much.
Thank you, Vikram. Good afternoon, ladies and gentlemen. So we begin the presentation with the key highlights of the Indian hospitality industry. I mean this is as the EIH annual report for February, March and April 2023 initially, which basically puts out the key highlights of where as we report the Indian hotel industry recorded its best ever performance since the plane we began occupancies ranging from 70% to 72% overall and average rates exceeding INR 8,200. Domestic air traffic in India has increased by close 7% in March compared to the previous month, and it increased by 11% compared to pre-COVID levels. So indeed in couching statistics.
Mumbai as per the report was a market leader in March 2023 with occupancy rates exceeding 76% and the average day rate of INR 11,000. PI's performance for Q4 is the best ever in the history of the company. It's a standard auditing performance, where we [indiscernible] which is really shown in this slide, blue line representing EIH Group of Hotels, and the line representing EIH-owned and managed in India, where what is clearly visible is the fact that starting from the quarter 1 of year 2020, where RevPAR was around 6,500 levels has not touched 15,000, which is pretty breaking.
I'm happy to share that EIH has demonstrated market leading operational performance. This is measured by STR reports. And as mentioned which EIH uses for its own and managed hotels. This data cost -- this data sets are all domestic products, which are owned and managed by EIH. And as is visible that since over a 4-year period starting April '19 to March '23, the RGI has been consistently above 100, which is supported by the ARR index, which is also consistently toward 100, which shows that demonstrates that the hotel of the company has been able to command the premium in the industry. And this is primarily to the company's big commitment to let and medical is potential to detail that --
The positioning is also reflected in the arts and accolades that the company has received and the various hotels have received. The overall hotels and resorts, of course, ran the world's best hotel Bank by Travel & Leisure U.S.A. in the world's best awards in 2022. It's been wrapped on the some is excellent by traveling leisure in South Asia also in 2022. It was voted, as you all remember, the best hotel group for 3 consecutive years by Telegraph Travel Awards U.K. 2019 and [ '17, ] of course, the next 3 years because of the pandemic, the Telegraph Travel awards were withheld.
Trade and Retail incinerator ranked amongst the best 5 star hotel group in India by Travel and Leisure in 2022. Properties, these are all listed out here and not bringing them out one by one. We provide you on by iron, you ran at last eases Beach result and Zora, the Aramark and gravitate rises [indiscernible] all of them have received plenty of ours and accolades as a listed here, and we're incredibly proud of these achievements and the recognition they bring to EIH Limited and hotels. These awards reflect our ongoing commitment to delivering exceptional hospitality experiences that create lasting memories for our guests.
As we mentioned earlier, the have also been unprecedented. We will cover the 2 aspects here in this presentation. The first one is with respect to quarter 4 for stand-alone as well as consolidated. Stand-alone revenues have increased vis-a-vis the same previous year from INR 229 crores to INR 586 crores, which is a 110% increase. The EBITDA has grown by 621% over the same period with the quarter from INR 34.6 crores to INR 249.3 crores. This similar set of results are audited for the consolidated results as well. Revenues have grown from INR [ 216 ] crores to INR 663.8 crores, and EBITDA has grown from INR 34.9 crores to INR 231 crores.
There is substantial financial agility that is because of enhanced operational efficiency, as you could you would probably notice, that growth in EBITDA is actually 10% inhibited actually hitherto growth percent in revenue, which means there's not and more operational efficiencies that have really kicked in. And this is again evident year where quarter 4 of 2023, while revenue increased 5% over the same period, the total expenses increased [ 9% ]
Monthly occupancy trends in the quarter 4, occupancy -- RevPAR which slightly softened in March, but seem to be doing better in the months out of that again. Citywide quarter-on-quarter financial year '23 versus financial year '20 is shown here, with Bengaluru recording the highest RevPAR growth for by Shimla Janice; Mumbai, [indiscernible] amongst over.
The quarter 4 occupancy and our performance at domestic hotels, including all managed hotels. This is available in the presentation and it's a slightly bit slide, so I won't take you through the individual data points. But essentially, what it is that ARR our occupancy, all of them have seen increases -- substantial increases across the quarters that are compared to it.
Total beverage revenue also increased in domestic hotels, including manged hotels from INR 143 crores to INR 222 crores, which is a 55% increase. And in fact is also the strong bounce back in the OFS revenues, we have grown in quarter-on-quarter by 100% and is going strong. For the full year, it's a similar story here. Again, is going up from INR [ 16 27 ] crores in FY '19 quarter 4 -- full year FY '23 at INR [ 36 ] crores. EBITDA going up from INR 406 crores in FY '19 to INR 626 crores in FY [ '24 ]. And the product cost to INR 113 crores to INR 330 crores as consolidated from INR 149 crores to INR 325 crores.
This is a depiction of the return on capital employed. So essentially, this is on a consolidated basis. The total capital employed on a consolidated basis, minus the cash equivalents and all current and noncurrent investments INR [ 20 ] crores on a dual capital motion [ 9% ]. How we see the cash I think that there are to monitor the cash will obviously be deployed going forward for growth of the company and will also be used to garner additional debt for our projects going forward.
If you were to look at the majority of this net capital employed, about 62% of this is deployed in [indiscernible] that's about [ 32.5% ] of INR [ 69 ] crores is deployed in Oberoi hotels, and this is at or surface where the return capital [ 45%, ] which just shows that the fact that the overall premium also generates a very high capital employed or come
But as are good financial resilience, strength and debt management as a result of which the year that we started with, we were at a net debt of INR 271 crores, which is now at a positive cash balance of of INR 129 crores. This is our net basis. Quarter-on-quarter and on entrants, this -- segment is -- has really over the years been growing strong quarter-on-quarter and is really one of the best performing segments as of now. But corporate also has really picked up and reached the high and it speaking at from the has crossed well the premet [Technical Difficulty]
COVID levels, et cetera. later is just beginning to pick up and especially with or leisure, just beginning to come up. We have a separate site that --
So kind of foreign blue line basically shows that till February 2023 for Oberoi for prudent and are hotels taken together foreign room nights were well below pre-COVID levels, which indeed is very encouraging because it just shows the optimum that one might really take away from this because the online to come back, they'll obviously contribute way more to the overall of the company.
We continue our efforts on carbon footprint. This is again some data points, which you can go through the presentation. And the performance highlights, I'm not yet going through these because these are already published, and I'm sure you have access to all of these.
So with that, I'll just quickly [indiscernible]. So we have 2 projects on a which has already opened in memory [Technical Difficulty]
We also do launch volumes and so mission more and are under one as we is included -- to equipment is again available for is interested in the presentation, and this is just the status about the number of keys et cetera. Thank you so much, and we'll be happy to take questions.
[Operator Instructions] And then we share the investor presentation that Kallol has presented, in case you want to go through it and ask some specific questions. Please --
We have a question from Amit Agarwal.
The few years ago, like a decade, we are among the top 2 players in the industry. But now the sales come up in capacity, though not in our scale or luxury, but is the management concerned about this, sir? And the second question is this 30% revenue to INR 126 crores. What will happen to it after the new lease deal and buying of the Himachal Government Holding, what will happen to this amount? And the third one on, sir, what are the plans on Andaman and Nicobar islands?
Good afternoon. Hi, I'll try and answer those questions and Kallol, please feel free to chip in. So the first one was on our company vis-a-vis other hotel companies. And we, as you know, are in the luxury segment. Now you also know that the segment with various statistics that you look at in India is growing much faster than others. And therefore, we believe that there's tremendous opportunity in this segment. This is the segment we want to focus on. And so the segment we want to grow. And if you saw the ROCE details that closure, even amongst over Trident, overall, the premium segment achieves a considerably high ROCE. That's also reflected in the average run rates and also on RevPAR. So we believe in the segment. We believe in the future growth of India. And we believe that the segment will continue to grow lighthouse in the past, maybe even at a quicker pace, a great accelerated pace, which will benefit certainly Oberoi hotels and also Trident hotels in the luxury and upper upscale segments. So that was the first question.
The second question was on and ashore. And actually, we have provided in the accounts in consolidated accounts, which both include EIH stand-alone and Machaba, INR 69 crores towards the lease payments, interest and was some penalties. Kallol, do you just want to run through those figures to give greater insight on that?
Sure. I'll just maybe as a the amount, what I basically say that this entailed some table from 2005 to [indiscernible] to the data we accepted the award of the arbitrator. And therefore, we've not provided for the lease rentals as well as applicable, but I would not get too much into the region because the execution division has been filed, and it is subdues, so therefore, I don't really care to it. But just to give you a flavor of what happens to the company. I think that was your question. The company has over INR 200 crores of cash. So obviously, take this avoidable to enter the end of June so please take it with
Maybe I also made a -- probably I said should said more than I should have given, but these -- I think we should really limit what we say. But please feel free if you share that you that you can, if you don't then please go ahead.
Yes. So I would that's the way I was coming to a comment. I think, Harry, our overall to say that it is positive for the company because we take a decision and obviously, after charging these rental sector, the rest of the profit of the company, but we all on commenting on one because it is subdues.
And the last question, Harry, you had was on Andaman and Nicobar islands. Now we would be very interested in a hotel opportunity in one of those. Of course, Andaman, I know well, and they're beautiful islands and beautiful beaches. And I'm not just referring to have on but to others as well. And as when these opportunities come up, provided that they are on terms that make commercial sense, we would be very interested to pursue these opportunities, either on our own or with partnerships. So we would be -- that's really all I can say at this point on the Andaman and Nicobar islands.
Amit Agarwal.
Mention of an and [indiscernible] Gurgaon. Can you please let us close the plan for the same? This is the first question.
Sorry, Amit, I couldn't, your voice is coming slightly rough. Could you repeat the question? I'm sorry, I didn't hear it.
There is a mention of 13 acre land in Gurgaon. Can you please make us on the plan for the same?
So there is a mention of 30 acre -- sorry?
1-3.
13 acre plot in Gurgaon, so what is our plan for the same?
So this actually is -- there's a piece of land in Gurgaon on Sona -- in Sona rather, which is belongs to the company. And as we were actually thinking of selling this land, we're not now. And we will certainly -- when we have a plan for development of that site, we will share those details with you. .
Nothing right now, nothing right now?
Nothing that I can share with you right now.
And my second question is, the [indiscernible] voting us seems particularly in shutting down the operations over there?
I'm sorry, you want to mission of EBITDA I couldn't hear the question. I'm sorry, sorry. days .
Titrations over there?
Yes, the boat is not sailing at present. And one of the things that we are really actively pursuing, which was a plan from the slide also the close is really focusing on investing our efforts in assets that give a return, sadly, Vrinda didn't fall into one of those. And to sailing, we're looking at what can be done with Vrinda. It has been provided. It's been written more completely on our balance sheet over the years. So Kallol, do you want to add anything at all to that?
That's what the decrement the asset as are a few years back, and it's not a
And my third question is regarding racial. The construction hasn't started yet. As for my information is still open for regular -- update the status of the project as of now?
Yes. No, Amit, the work at site is continuing. And the in close chart, you'll see rail chart on when the hotel will also be ready for operations which was low. That was on '26, am I correct? I can't recall the...
No. '24, '25.
'24-'25. So -- but work is well underway at site.
Is it open for both site now?
Is it open for?
[indiscernible]
No, the hotel is under construction.
Okay. And my next question is regarding Cafe and stand-alone restaurants are coming up. And this is big -- Do you think a management to many different businesses altogether, which our main business.
Amit, it is very difficult to comprehend your question because there's a lot of disturbance in the line.
I heard the -- I think I heard the -- I know it's a lot of disturbance. But I think -- so actually, I met these businesses, I'm not -- they're all related to our core business is hospitality. F&B is an integral part of the hospitality business. So that's the first thing. The big club is -- it attracts our premium gas -- it provides them and their families with exceptional facilities, and it helps us to build and engage with our customers, which not only visit the club, but also state other hotels. -- and pay premium prices at our hotels. So I think it's not a separate business at all. And the made, which is going to open middle of next month is a going to be an exceptional dining venue, overlooking the Geo fountains, an exceptional location. And we have no doubt that it will be very, very successful. So it's really in that our business is certainly the perspective that we've taken. This isn't a business, which is outside of hospitality.
Sorry. [indiscernible] expansion of the. [Technical Difficulty]
Amit, I'll tell you what happened with Cou Cou. When we opened Cou Cou, first it was really on a parts concept that's what thought would work. We realized that, that is not what it is. And so we significantly changed Cou Cou's positioning from a artistry to a casual dining venue. And some of these changes in menu, et cetera, took place a couple of months ago. And there has been a significant increase in sale. So I still believe in Cou Cou the long run. I believe it will do well, and we're seeing some sites of that immediately. And once it stabilizes. We plan on that this is a workable content. Of course, we will look at scaling this concept. So I think I've said this before, and that position hasn't changed.
[indiscernible] Right now, there's a midstages opened, which has been very well. And his name is Cou Cou
Actually, Amit, could you just send us details on that because I'm not aware of it. This brand name is registered, so they -- nobody else should be using it. So if you could share details with either Kallol myself or Naveen, I'd be really grateful.
The other question from
Good part of my questions have been covered by previous participants. My question is to Kallol, sir. Sir, there is an increase in other expense on a Q-o-Q basis. So what is the reason, sir?
Yes. The increase has actually been a expensive. It's mainly the most important increases on account of increasing commission to trail agents, which will increase because the business has increased -- So obviously, the quantum of commission expense has gone up. And second is repairs is also something that was a little spudding the COVID, but there are several other hearts coming out. So this increase is not really 1 to .
Okay. No, no, sir, -- so when we see stand-alone -- the other expenses are flat on a Q-o-Q basis. When we see console P&L, other expenses are up INR 50 crores, actually.
on it last year?
Q-o-Q, quarter-on-quarter.
Yes. So time quarter-to-quarter, actually, if you see there are some expenses which are not incurred during the peak seasons, and they are deferring to the summer season, et cetera. So really speaking, it's nothing out of the line.
And Kallol, just -- again, maybe you want -- we just want to emphasize the point on the increase in flow-through. Now so the flow-through that you mentioned right in the part of your opening presentation, you come back which suggests that expenses are well under control. All expenses are well under control.
Sir, just one last question. Sir, with regard to the under active discussions pipeline, how close are we for the materialization of this pipeline? If you can highlight something that would be great, sir?
I think Kallol's presentation has dates on everything. But we -- you would have seen that our existing hotel portfolio has performed well. I think we're well positioned as far as these hotels go in terms of future performance as well, I hope. I think the -- we all recognize that a key area of focus of the company and therefore, all of us is on growth and that's what we're focused on today. And we will -- as soon as we have information to share with you on growth -- we're working on this every day as -- If there's one thing that gets leadership's attention, it is to drive growth. So I hope all efforts will have positive oncoming we'll be able to share something with you in time to come. And hopefully, that shouldn't be too long. So that's what I'd like to add to that. I hope I answered your question.
No, sir, what I meant was in the Slide 30. On left-hand side bottom, you mentioned that the under active discussions Oberoi Hotels 3, Trident 7, I was pertaining to that, sir.
So they're all -- and my answer would remain the same. We are pursuing these with great determination, with great energy and with great passion. And with all those 3 things in place, I hope we will be able to share the details with you soon.
We have a question from Bharat
So when we are talking of driving a growth and we are seeing a big opportunity in the luxury segment where we are present. So in -- what will be the -- in absence of a new addition of the new hotel, what will drive our growth in short term and medium term? How do we really take this growth strategy going ahead?
Bharat, very good and a very fair question that you asked. So there is still -- if you look at hotel prices in India, I'm seeing rates go up for us, whether it's Oberoi or Trident. And this is also an industry or hospitality trend in India. Even today, if you compare the hotels that we have today with most parts of the world, our hotels are in India are really underpriced. For the quality and the quality of service you get these hotels are very a great value. Now I'll give you some insights, and this is a function of supply and demand. We have a hotel in Gurgaon and the Trident Gurgaon, and that used to do an over 20,000 average room rate. So really -- and this is the hotel opened, if I remember correctly in 2006. So these figures that I'm quoting you maybe 2010, '12, I don't remember exactly. The point I'm making is that there is considerable upside in average run rate. And there is also some upside in occupancy as well. So I think in the short to medium term, there's quite a lot of headroom, both at Oberoi and Trident hotels.
And how do we see -- because this higher ARR are largely contributed by foreign visitors, whereas I mean, we understand this is still has not really picked out, I mean, pick up the way it should have domestic traveler is. So how -- what is your sense on when do we see really foreigner start visiting more or occupying a help improving ARR as well as occupancy level?
So two things. Bharat, first of all, as Indians our propensity to spend is actually very high. And we see -- if you look at the presentation that Kallol has, foreign occupancy hasn't set a side close presentation. One shows the occupancies -- foreign occupancies and the other one shows average room rates. So you can see foreign occupancy hasn't come back, but you'll also see that average rates have grown considerably despite that. So our India or we Indians are more than happy to pay those rates for a quality experience. That's the first point. The second point is that we certainly expect foreign business to bounce back to, or hopefully even surpass COVID levels in this coming winter, and that will help our hotels further. So I think both those signs are positive, both for rate and for occupancy.
Basically, Bharat, if you see the last 7 quarters, it was not as a Visa equipments, et cetera, or relaxed. So therefore, the people in different countries are really are difficult. So those are those are using foreign travel is are also going up. So maybe we have a case
And when do we expect a new hotel to be operational in our -- for our company?
We've got a chart that on Slide 30 on all the upcoming projects which have already been announced. And a list of 11 hotels, which are under active discussion, which will be now shortly.
Okay, fair. And my one more question is about normally when we open a new property, normally, how long it takes to break even or start contributing at EBITDA level?
It varies from location to location, but I think our industry -- generally, it's between 3 to 5 years depending on the location.
And last question for our CFO. So what -- I mean, I have seen that stand-alone, our Q4 is always better than the Q3, whereas in -- if you look at on console, whereas Q4 is a little lower. So what is it with that seasonality is the console level, that is really -- if you can give some more color into it.
Well, I first begin by saying that you see the composition of the consolidated results. So one large chunk of that is national. And international, the hotels have 2 kinds of financial reporting. Some hotels are on a flash period basis, some are on a calendar year basis. So therefore, in the case of some of the deli get CapEx consolidated on our one line consolidation there in the last -- The results which are incorporated are as of December of the last year. So obviously, there's a seasonality factor, but that really does not change the perspective. I think the point that has been relevant for us to consider and which we are very actively pursuing is there's a major shift and focus on how to really make our international business extremely profitable great properties and very well appreciated. I guess, but being to perform as good as the -- India, which the management is very, very well seized up. And hopefully, going forward, we'll have similar kinds of trends both for stand-alone and consolidated results. .
The next question is from Saurabh Patwa.
Sir, just wanted us your thoughts on sort of the kind of hotels which we have on the luxury side. And I think we believe is largely that's why we have a larger proportion of owned and versus a lower and lower proportion of management comfort. Is this -- I think as a sort of a roadblock in increasing the pace of growth? Or essentially, we want to remain focused on owned versus not going for a lot of management -- management term?
I think for us, Saurabh, they are -- we can grow through management contracts. We can grow through hotels where EIH is an owner like many of our EIH hotels, where we can grow through partnerships. And growth is very important for us so that we are in locations where our guests travel to. Also important to us for the career aspirations of -- so we can offer growth as well. And also grow the company profitability, both top line and profitability. So we at EIH are happy to pursue all those options for growth. There's no one single -- we'll be keen and we're actively pursuing opportunities in all 3 areas.
If I can just add to what -- I'll give a financial perspective to Saurabh. I think it is a good question. I think if you study the company's balance sheet as accounts like -- including consolidated, you would see that over our subsidiaries and EIH is today at 3 company and has sufficient amount of cash reserves in hand, right? We also the projects which are going to be managed -- So what you realize that you bid you guide is that along with the company being cash surplus. Obviously, that lends us enough credibility to raise the amount of debt which the company can sustain, which really adds up to say that there's quite a bit of funds in hand, which we can easily deploy over the next 3 to 4 years. And it's a correlate back to the point that the return on capital point a shoe on a little really think when these holes that are bid really provides the return on capital employed. You can see the different management fees versus only on the management fees versus the difference in -- So to answer your question in short, I think it has to be a mix and that's what the mantra is pursuing. It has to be a credible balance mix. And quality is our topmost priority, therefore, really speaking, going into the volume game in many, many manage metals is not really something that we plant to run. But having said that, we are very, very well positioned to the funds adequately over the next few years and therefore, generate very high returns for our shareholders.
My names as related to linked to this, the response that you already required and a few of the us which provide the part. So the way you've highlighted is like normally anything would take, let's say, like on an industry basis 3 to 5 years and since the addition of hotels and for us in the next 2, 3 years is would be very minimal. We would be essentially betting on operating leverage, and that's why the growth in revenue would be outpace sharply by the growth in profitability. Is it a fair understanding?
Sir, can we model data or should I?
No, go ahead, Kallol. I was trying to really understand the question, but please go ahead, Kallol.
So, Saurabh, again, if you see really speaking, the results that you've seen in this quarter and for the financial year is just reversed, right? The growth in profitability is actually higher than the rate of growth of revenue. Now that's possible because of a number of reasons. And like a mentioned earlier on, I think there's still enough and more upside on the new rates front, and which therefore really the flow-through to EBITDA in case of rate cut is much higher. So therefore, we don't see that really as a concern. But also to say that I think you mentioned that we have limited properties which we are talking about. That may not well be the case way for -- probably use more such a notes just that we are today in a position where we would like to really jump the gun. But surely, that's not consumption that one should take.
So that is exactly what I wanted to understand.
We have a question from Yashvardan Agrawal.
I have a few questions. Sir, first, on the industry competitiveness. So as we are in the luxury segment, there are a lot higher and even the Marriott is like very bullish on the Indian market. So sir, what is our competitive advantage in companies industry like how are we competing against them? So if you can answer that on that, so that would be helpful.
Sure, Yashvardan, sorry, I shouldn't shorten your name, I apologize. I mean what really our guests tell us, and this isn't our perspective, it's our guest perspective that we bid guest experiences that are the best in the industry. And therefore, guest #1 value add. They see that distinguishing us from others, and they're willing to pay a premium. And that is reflected in the RGI index that Kallol has earlier on -- Yes. So that's -- it's a [ 127 ] which rate is 120. So -- and this is again just to clarify, this is against in each location, we define our competitive set. So these are against hotels that we believe that we directly compete in where they need a minimum of 4 hotels. So the leading hotels in each of the locations where we operate. And SCR data indicates that we considerably outperformed our competitors in these markets. So our guess views on us is what's important. And we know from data and from what I guess tell us that they appreciate the quality of our hotels. They appreciate the quality of personalized contention that our colleagues give to each and every one of our guests. And most importantly, that creates loyalty and they're willing to pay a premium over our competitors to stay with us.
Sir, that so that could be only advantage? Or like is there any other point you would like to add?
So I think that's the key thing, if I've understood your question correctly, but if I missed something, please help me.
So what I try to just add to what -- So the Slide 5 that we presented data from 2009, 2023. And in every single quarter, you will find that our average indexing Similarly, the RGI index is also higher than 100, which obviously means that the competitive set in which rating, we are able to really drive our premium for reporting services that we provide. So that should be -- the trend is even for 4 years. then I think that's what the established trend.
If there's something you feel -- I really meant that seriously. If you feel we still haven't answered your question, please feel free to elaborate further because obviously, we would like to answer your questions. And we may learn from what you asked us or tell us. So please don't hesitate.
Yes, sir, sure. So sir, what I'm saying is that it will listen to the management commentary of other hotels, there are many hotels which are in the pipeline and many hotels and rooms are coming into the market, will be safe in the next 3 to 5 years. So in so supply is increasing a lot. And so we are saying that the demand is also increasing. So my question is that I got that on the guest will come to us in case of that we are providing them with a good like services and all. But sir, is there anything else that we could be saying that we are having locations, for example, at very good locality or the heading. So the cutting there, they are very good, and we are getting them with a good service. But is there anything else in which we can say that we are superior to our competitors. So on that, I'm looking for more clarity
So Yashvardan, I'm not here to comment on our competitors who I'm sure do a fine job in the hotels that they operate. But what I can maybe just add in what you said is that we need to be in locations where our guests travel to, and I think I made that point earlier on as well. And we are entirely focused on meeting or meeting if not exceeding that objective. So -- and that comes to down to your point on growth. Absolutely, we need to grow. We need to grow in locations with our guests travel to, and we need to grow with profitable hotels, either for our owners, if it's a management contract, or our partners if it's a joint venture or if it's an EIH Hotel grow profitably as well. So our efforts are focused on all 3 of those.
And also to add that our balance sheet is very strong, as I described in a from my previous applies, that leaves us with a potential to really execute projects and profitable projects and assets on capital for that.
We have a question from Rajiv Bharati.
Sir, on Slide 21, you had this direct channel, which is has materially in terms of contribution. And then you had said that your OTA commission has increased. So those 2 comments, can you throw some light on that?
The OT is actually a means to bookings. So it's included. It's guest coming directly to us, but using an So that comes within the direct segment, Rajiv.
Okay. And you have specified the pipe heating business for the quarter. Is it -- is there seasonality in that or we can multiply that by 4 to get, let's say, FY '24
I don't want to give a Kallol telling me that I can't give forward-looking statements, and so I better not. But we remain -- the Flight Kitchen business went through a very, very difficult period due to COVID. International travel, as you know, stopped. There were then limited flights there was domestic airlines that also greatly reduced the number of flights and that increased over a period of time. The flight kitchen business for us is our largest contributors are international travel. And we've seen Kallol presented a slide on foreign arrivals into India at our hotels. And I know that people in India are traveling more internationally as well. So I think we're well positioned with all the key drivers for growth increasing, particularly in winter just to answer your question, that is greater in winter. There's greater travel to India internationally in winter, so from October to March, and that will be elected in the numbers, no doubt.
And if you want, what is the ballpark margin at which this segment operates at. I mean I just want to derive what is the hotels business margin give us this kind of guiding that
Yes. Kallol, can you...
Margins are 20%, 25% EBITDA. Rajiv, you asked --
Yes, yes, yes.
So it's a combined percentage that I mentioned. However, if you give a split between them, that's really going ratios -- The airport catering business is actually more profitable than the Q3, but practices also equally profitable. And with the competitive landscape that is opening up in India today in, et cetera. I think there is a high propensity for which to really go up.
Kallol, would it be fair to also -- and again, I don't know if we should be making these statements not. But I'm not talking about us, in particular, but there is a capacity constraint for the segment with limited suppliers and demand picking up. So there is a capacity constraint. We should see prices going up and with prices going up, margin -- would that be a fair comment to make?
Absolutely a fair comment, and I'm sure our analysts friends would be able to equally work it out as to how many number of flights are potentially going to get added in the next couple of years. And what is the capacity of the limited sectors? What is the total capacity well available, if you really go in into to, you see the deficit capacity that is being projected. So I think there's nothing wrong in saying that I'm sure.
So on the orbital awards, so you mentioned that the thing is subject risk. But in terms of what is the potential risk in terms of this number ballooning even further apart from the number you already provided for?
Well, the management has made our best estimate. And therefore, this is the best estimate of the risk that has already been provided for in the accounts as of date.
And why is there a differential between one of my understanding on this and the stand-alone in the console, so there is a INR 10 crore in the stand-alone --
See the difference is because the lease rental payment is payable by the company in the study, which is -- So obviously, that comes in from the consolidated cotton to the EIH comps. The EIH's liability is only towards the initial building of the project and all of that. So obviously, the lability for EIH to the government is much less as compared to the limit of how that's why the standalone water is lower and the consolidated figure is higher.
Yes, great. And sir, in terms of the divestment, is there any talks of considering Oberoi Mauritius in that? Seems they are contributing to losses in the contribution to the -- associates?
Are you talking about services, how are you talking about Oberoi Mauritius?
Oberoi Mauritius and Mercury car rentals, which is part of the profit of share from associates because otherwise, -- should have contributed to profitability, but ex of that, the number is a negative number.
Understood. I'm not sure to answer that.
No, please go ahead, Kallol. These tough questions. here very difficult. So I think, Kallol, you can answer.
No, Rajiv, on my last of questions. So well, I think you'll have to wait a little for the Oberoi Mauritius to stabilize because it opened in December 2019 and in March 2020 COVID hit, and then the hotel was closed on out that. So we are the newest entrant in the market there with a beautiful and outstanding product, which is just beginning to really pan out with reviews, et cetera. So you'll have to wait a little bit before comes in. And for Oberoi Mauritius, there is no reason at a moment to really believe that there's a need to really look at it because there are deduction class, et cetera, which are we currently assess and as soon as the top of the plan, I'm short that will be available to you. But on divestment in general, if you say, I think [indiscernible] We have always articulated that there is a need, which management is well that we need to really move away from investments which are not into those profits. Two of them we have successfully done in the last one year. One was the press and one was the -- Mauritius, which has also been completely the whole transaction has been completed. So I think as of now, and you already mentioned that the other businesses are all really in the state of -- So we are going to really look at any further investment plans. But in the area in we have to go back.
Yes. And the last question is in terms of the dividend payout ratio. So you usually have 50% dividend payout some fast. And this time around, the number is lower. Are you working towards a certain number for the upcoming projects and then the payout ratio would go back to the historical levels?
Well, Rajiv, the percentages are actually higher than 3%. I know you're talking about dividend payout. And the reason why we want to really emphasize and I think become a adequately cover that is that we want to strike a balance between distributing dividends to our shareholders versus retaining funds for our future growth because we are very aggressively looking at going ahead with products. So therefore, we need to be careful to maintain the dose and which is why even though we have increased the rate of dividend the rest of the fund is actually available for growth, which I'm sure will benefit shareholders because in the long term, the value accretion is probably as important as it is.
Yes. Just one last thing. On the receivable, there was a center of excellence initiative, which you guys had. On the receivable numbers there in any more juice left or are you happy with the current number?
Well, receivables, I think, has really phenomenally well. If you see volumes to be with much lower sets of turnover, if you go back to previous years, the debt used to be well over INR 200 crores. Now even with higher turnovers, it's still on those levels, but out of that about INR 40 crores is on account of international debt. So really speaking, that terms have come down a lot. If you say, is there any more room left for further improvement is always go for improvement, of course. So we continue to find out the reason a means to improve our excellence. I think the center of excellence has really done very good for us, especially during the COVID years, and we're definitely looking to refine it further along with our colleagues in operations.
The next question is from Tarang Agrawal.
Just stearing wheels towards the international business, if you could give us a sense on how the revenue and the profitability for the international business alone panned out for FY '23 versus '22? Number two, is there any debt specifically on the international business? And number three, across the 7 properties that you have there, I mean, a couple of them in Bali, 1 in Mauritius and the balance in the other parts of Africa. If you could just rank -- help me understand which are the stronger properties right now from a P&L perspective and which are up and coming?
Kallol, over to you.
Over to you. So Tarang, I think...
Tarang asked a tough question. So thanks, Tarang.
So we time the reason why we would -- so we in terms of profitability, let me tell you what the businesses have been profitable at EBITDA level. But we've also worked very closely towards looking at better -- because we also want to be a very, very well-grown organization. So there are some losses that have been accumulated into -- in the current year's consolidated accounts, but that is primarily because of some impairments that we've taken on some of our assets. Some of our assets, for example, [indiscernible] really need replication also get payment, they're achieving good rates as of now. If you see Oberoi doing average rates from [ 300 ] correct me if I'm wrong. And Dura Mauritius also doing about 625-odd. is very flying away. So really, I don't want to speak about that. That's our newest property. But overall...
Over $800.
Over $800 per room night. So yes, they're doing well. But I think the focus of our attention for the last 2 years was more on India because we were just going to come out of COVID. Now having established that and with our colleagues are really taking full control of the India operations, it's for us to also look at what is happening internationally. So therefore, I wouldn't be too much on the past performance. But obviously, going forward, I think we will have better news to share in [indiscernible] concerned.
But I mean some sense on the international top line and EBITDA for FY '23 because while ARRs sound nice, I'm not too sure how occupancies are panning out there.
No, occupancies are also on to. So the difficulty of discussing is these properties are all in different geographies and in different currencies. So they get translated making many times before they reach a rupee. For instance, in waging to dollars. So really, this -- it will be different in a state format answer if you want to really analyze. And I'm happy to take it off-line if you wish in a separate discussion to explain to you the way it is done. But it will be in a conference call in this when we have a little bit time less difficult to really explain.
Understand. Just last, is there any debt on EIH International or any of your EIH international subsidiaries?
No. Tarang, I mean that is the best part of our balance sheet. None of our companies, including the parent company or any of the subsidiaries or associates have any debt
No gross debt there, right?
No.
There's just something I answer, let me know, we pick up a call. We have a question -- a few more questions. Jayakanth Kasthuri.
So my questions have been answered.
Nikunj
I just wanted to come back your question about expansion and ask it a different way. I would love to get your thoughts on maybe 2 factors as it relates to your growth strategy. The first part is just where we are in the industry cycle? And whether -- because of the rising income levels, for example, within the domestic consumer that reduce the seasonality or the risk of seasonality from international stradlers, and how maybe the -- this industry cycle might allow you to be more aggressive? That's the first factor.
And then the second is in terms of wanting to maintain your brand equity, and so this maybe relates more to management contracts, but I guess the level to which that focus on maintaining the brand equity reduces the opportunity set available to you when you think about management contracts that might be up for bid?
Great. So I'll try and answer that and Kallol, please with anything, please feel free to do anything that I need to say or anything that I say. So I think one of the positive sides of India's increasing affluence is that people are taking short breaks, they're traveling within the country, and they're traveling year around. So I think that will certainly help maybe not completely, but to seasonality. And of course, when it gets very hot in the north daily, et cetera, people will then go up to hill stations. We have hotels in Simla. So I think in time, and we've already seen this trend. Seasonality has been coming down over the years, if I were to take the COVID period out of it. In terms of the quality of hotels and the -- our ability to secure management contracts, in fact, this is one thing we learned from Mr. Oberoi, Chairman Americas. And in those days, he was Chairman. He said, it's when you are partnering with somebody and they are relying on you, you have to be even more careful with giving your owner return. And therefore, we get many opportunities. If we do not believe the hotel will be profitable, we do not pursue those opportunities because it's just creating a problem for the future. So we have to believe, we have to do an analysis, and we have to know the high level of certainty that we will give a good return to the owner. And we've demonstrated that with our Gurgoan hotels, with We have a fourth hotel with the same owner. And we take great care in our partnerships or in management contracts to ensure we only pursue projects where we will -- where the owner will be happy with the returns that we can generate. So I don't know if I've answered your question. If I were to just maybe say one other thing, we do get opportunities that we do turn down for that very reason.
Great. That's very helpful. And maybe just a follow-up on one of the earlier questions. There was a question just about where the growth might come from the next few years. The right and you mentioned some of the options you're looking at, including management contracts, including some of the hotels that are still under discussion. I guess the question is, were you almost implying that we could see growth from some of these hotels that are under discussion in some of the early years, not necessarily out years? Or is that something you were not implying?
So if your question is on timing, I hope we'll have positive news to share with you. We are as eager or we're very eager to share that news with you. And as soon as we're in a position to do that, we will do that.
we have a question from Jerry Shekhawat. .
So firstly, given the PCS and proposition 20% thesis in position from 1st of July, I mean, how do you think about it in terms of, one, your domestic rates and also the impact on the international business. Can you provide your view there?
You're talking about -- when you say this is the tax that is deducted on foreign
Foreign expense, yes. That's right.
I mean I'm sure that will help Indian hotels, including us, the extent to which I'm not sure. But I would say just if you're a traveler or a guest who somebody travels and you need to make a choice between an Indian hotel and traveling overseas. I think your take on this will be probably greater than the insight we can offer. Our perspective is just from consumers as well of hotels. And finally, it's really our customers who make the decision. But I think more than that, people are, I think, a greater impact comes from a trend we're seeing where people are taking more brakes and shorter breaks. And those are a large proponent than I presume will be in India. I think for the really affluent this may not have a direct impact but we have a wide spectrum of guests and for some, I'm sure it will farthest may not.
Understood. And I also want to pick your brains on the hotels up cycle. Now given that most of the hoteliers are posting all-time high profitability, and also expanding because of that. So one, how long do you think this up cycle could last? And secondly, when I look at your ARRs or even that of your competitors, these are probably 30%, 35% versus the pre-COVID levels. So one, given the FDA recovery, what the room do you think there could be on the ARR? These are my 2 questions.
So I think ARR is really a function of what the supply is and what demand is. I mean I used to work at our Bombay hotels years ago, this was in -- I think it was when India first started to liberalize after the first half And we saw demand just shoot up. The hotel was for the all the time. And rates suddenly within a short period of time, shot up drastically. So there's limited supply coming in and supply does take time. So I think there is in -- certainly in city locations, also the hotels that have been there for some time, occupied premium locations that are no longer available. And location for city hotels are very important in a guest choice. So I think in my view, there's if demand continues to there's considerable upside in average room rates. And we are -- our city hotels in India are very underpriced when you look at other markets around the world.
And Mr. Oberoi, given that most of the people say that the supply is like you to take another 3 to 4 years to come in, but aren't you seeing a lot of acquisitions happen, a lot of management contracts because there are a lot of distressed assets available as well. So could you supply it much earlier than what probably the industry is expecting. And then hence, sort of matching the overall demand growth. Did you feel that?
I don't think we don't fear it. And maybe we should. We don't fear it. I mean these -- we've looked at in the past in of hotel assets and not pursue those opportunities because to these as to refurbish or redevelop these assets and to make them into hotels, that certainly could be an over Trident. We've at least thought that, that would be challenging. Now that the others who can do that, I can't really say. But guest would pay a premium for quality hotels and for quality service that we're certain on. And also quality locations, particularly for city hotels. For leisure hotels, there's a greater flexibility on location. And the premium hotels today in a particular city already have those well covered.
Friends, we have already taken the liberty of exceeding the time out for the con call. So probably we'll just take one last question, which has been posted on the Q&A pool. This one is from S Krishnakumar or Can you elaborate the role carboline and ITC copy? Has anything changed in their role involvement?
So as far as Reliance is concerned, we have 2 Reliance directors on our Board. We have all their support and their trust and we were a very good relationship with them. And they supported the company during COVID with the rights issue, if you recall. So it's -- there's really nothing perhaps other than that, that I want to add. We have the full support of the 2 Reliance directors who are very supportive in the advice and guidance that provide us at a Board level, and we greatly appreciate that and value that.
I hope that's answered your question, KK. Thank you very much, Vikram and Kallol for taking all the questions. I hand over the call webinar to Vikram for his closing remarks. Please.
First of all, thank you to you. Nothing more to add. I hope this year will be better than last year. We're going to work very hard to doing it the best top line we can, the best bottom line we can. And there's always opportunity to improve. And every rupee counts. And certainly, as far as our general managers are concerned as far as the corporate function heads are concerned, in fact, all our colleagues are concerned, we want to do whatever we can to provide our guests with a great experience. We want to do whatever we can to drive every rupee on top line and every rupee on bottom line, every rupee counts, and we're focused on achieving that. So thank you so much. Really appreciate all the questions. Some of them were very difficult, so please be kind to us next time, but thank you very much.
Thank you so much -- and thank you so much, Naveen. And thanks to all of you, ladies and gentlemen. We are always happy to answer questions even if it is -- it could be done within this time slot. Thank you so much.
Thank you very much, ladies and gentlemen. If there are any further unanswered questions, please feel to send them to me up here at milan we'll take them up with Kallol. Thank you very much for coming call once again. I look forward to hosting you again.