Chalet Hotels Limited — Q3 FY25 earnings call

Call held 30 Jan 2025

Management summary

Chalet Hotels delivered its best-ever quarter in Q3 FY25, driven by robust performance across its Hospitality, Rental & Annuity, and Residential segments. Consolidated revenue and EBITDA saw significant double-digit growth, with strong margins maintained. The company continues its aggressive growth trajectory with a substantial capex plan for the next three years, primarily funded by internal accruals, and anticipates continued strong demand in key markets, supported by infrastructure developments like new airports.

Highlights

  • Consolidated revenue grew 22% YoY to INR 4.6 billion (460 crores).

  • Consolidated EBITDA increased 23% YoY to INR 2.1 billion (210 crores), with a margin of 45.5%.

  • PAT for the quarter was INR 965 million (96.5 crores), a growth of 37% YoY.

  • Hospitality segment revenue grew 17% YoY to INR 4 billion (400 crores), with RevPAR up 16% to INR 9,000.

  • Average Room Rate (ADR) in Hospitality segment rose 18% to INR 13,000, with occupancy at 70%.

  • Rental and Annuity portfolio revenue surged 92% YoY to INR 577 million (57.7 crores), achieving 79% EBITDA margins.

  • The company spent INR 4.8 billion (480 crores) on capex and land acquisitions year-to-date.

  • Net debt stood at INR 15.8 billion (1580 crores) as of December 31, 2024, with an average cost of finance at 8.53%.

Key financials

  1. Consolidated Revenue ₹460 Cr +22%YoY
  2. Consolidated EBITDA ₹210 Cr +23%YoY
  3. Consolidated EBITDA Margin 45.5%
  4. Consolidated PBT ₹120 Cr +33.3%YoY
  5. Consolidated PAT ₹96.5 Cr +37%YoY
  6. 9-month EBITDA ₹520 Cr

What they filed

Q1 FY27: revenue down 42.8%, net profit down 57.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue377 458 522 895 735 +95%582 +27%558 +7%512 −43%
EBITDA150 205 241 357 299 +99%265 +29%266 +10%234 −34%
Net profit-139 97 124 203 155 +212%124 +28%163 +31%86 −58%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

SegmentRevenueEBITDA Margin
Hospitality₹400 Cr46.1%
Rental and Annuity₹57.7 Cr79%
Residential Real Estate——

Capital allocation

high confidence
  • Capex ₹2,000 Cr largely funded through internal accruals
    • Capex and land acquisitions (9M FY25) ₹480 Cr
    • Goa hotel (175-180 keys at 1.4 crores/key) ₹245 Cr
    • Powai Phase 2 (balance capex) ₹600 Cr
    The company has been actively investing in its growth and has a capital expenditure under the current plan of around INR20 billion for the next 3 years. This will be largely funded through internal accruals.
  • Debt Net ₹1,580 Cr Cost 8.5%
    The net debt as on December 31 was at INR15.8 billion. We closed the quarter with an average cost of finance standing at 8.53%, a reduction of 34 bps from March '24.

Guidance & targets

Capex

  • Total Capital Expenditure Capex · next 3 years · High confidence INR 20 billion
    The company has been actively investing in its growth and has a capital expenditure under the current plan of around INR20 billion for the next 3 years.

    — Nitin Khanna

Funding

  • Capex Funding Mix Funding · next 3 years · High confidence largely through internal accruals
    This will be largely funded through internal accruals.

    — Nitin Khanna

Rental and Annuity

  • Commercial Inventory Full Potential Rental and Annuity · next 2 quarters · High confidence within a couple of quarters
    I'm confident we will be reaching full potential of the commercial inventory within a couple of quarters.

    — Sanjay Sethi

  • Exit Run Rate (annualized) Rental and Annuity · once fully leased · High confidence INR 400 crores
    So we're expecting roughly 30 crores as your exit run rate once all of this is leased out, which in effect is about -- I think, closer to 400 crores almost, right, on an annualized basis. And expect about 90% of that to flow through to EBITDA.

    — Sanjay Sethi

  • EBITDA Flow-through from Exit Run Rate Rental and Annuity · once fully leased · High confidence 90%

    — Sanjay Sethi

Residential Real Estate

  • Remaining Inventory Sales Residential Real Estate · next few quarters · Medium confidence few quarters
    Out of total 321 units, we have 50 unsold inventory, which are largely in the new towers; and we expect it to take about few quarters to sell.

    — Sanjay Sethi

  • Koramangala Apartments Revenue Recognition Residential Real Estate · Q4 FY25 · High confidence 60-70 apartments
    Not entire revenue recognition. It will be graded revenue recognition, which will be, as Nitin mentioned, in the range of around 60 apartments, give or take 10.

    — Sanjay Sethi

Hospitality

  • JW Marriott Sahar Growth Hospitality · coming year · High confidence growth
    And we are also confident that, in the coming year, we will continue to have growth at JW Marriott Sahar.

    — Sanjay Sethi

  • Hospitality Segment Margin Hospitality · as new assets stabilize · Medium confidence move up
    Understood. So as we stabilize, of course, we should expect your margins to move up?

    — Sanjay Sethi

Foreign Travel

  • Foreign Travel Growth Foreign Travel · coming year · High confidence growth
    So yes, I do expect growth in the foreign travel. And I actually alluded to one major change that's going to happen in the coming year which is going to support that, which is the airport expansion that we'll see in Bombay.

    — Sanjay Sethi

Project Timelines

  • Dukes Retreat Full Opening Project Timelines · Q1 FY26 · High confidence end of Q1 FY26
    It will be Q2. We are just ensuring that it comes out really well and the full product is ready.

    — Sanjay Sethi

  • Marriott Bengaluru Inventory Addition Project Timelines · Q4 FY25 · High confidence end of Feb/early March
    Sometime in end of February, early March, we should see that inventory getting added to Bangalore. It will be this quarter, though.

    — Sanjay Sethi

  • Goa Hotel Completion Project Timelines · from start date · Medium confidence 30 months
    And from the start date, we expect about 30 months to completion.

    — Sanjay Sethi

Debt

  • Peak Debt Debt · any point of time · High confidence not beyond INR 19-20 billion
    Overall on the company basis, we don't expect debt to go, with the announced pipeline, to beyond 1,900 crores to 2,000 crores as a peak debt at any point of time.

    — Sanjay Sethi

F&B Growth

  • F&B Growth (Q1 FY26) F&B Growth · Q1 FY26 · High confidence very well
    Going forward, I don't see F&B growth going dramatically up, except that in Q1 -- in the coming year's Q1, because weddings are better than last year, we see Q1 doing very well.

    — Sanjay Sethi

Room Expansion

  • Total Operating Rooms Room Expansion · few quarters down the line · Medium confidence close to 5,000
    I see no reason why, in a few quarters down the line, that shouldn't be a close to 5,000 number.

    — Sanjay Sethi

Market context

  • RevPAR Growth (existing portfolio) RevPAR · ongoing · High confidence double-digit
    I've maintained that we will see double-digit RevPAR growth. Even for the last few quarters, I've said that. We've actually been exceeding that over the quarters. I see no reason why that commentary needs to change. Very confident that we will deliver double-digit RevPAR growths on our existing portfolio. And we will add through new assets and new inventories.

    — Sanjay Sethi

What to watch in Q4 FY25

Dukes Retreat Full Opening

end of Q1 FY26
Current 73 rooms operational, banquet hall and F&B outlets still to open
Target Full product ready and operational

Why it matters

Completion of a new asset, expected to contribute to revenue and margins.

The Dukes Retreat continues, 73 rooms I repeat. 73 rooms, a restaurant, a bar and a pool are already operational. Meanwhile, we've had -- and while we've had some delays on the completion time line, the product is turning out extremely well.

Risks & concerns

  • Project delays impacting new inventory additions

    medium

    Analyst noted 1-quarter delay for Dukes Retreat and Marriott Bengaluru. Management acknowledged delays but provided updated, firm timelines for completion.

    Analyst acknowledged

  • Slowdown in consumption/discretionary spending impacting hotel demand

    low

    Analyst asked if slowdown in consumption is leading to budget downsizing or cancellations for Q4. Management pointed to strong Q3 performance and expected continuation of positive trends for Chalet.

    Analyst downplayed

  • Increased competition from new hotel supply in key markets

    low

    Analyst raised concerns about new hotels (Fairmont, Fairfield) impacting pricing and occupancy. Management expressed confidence in brand strength, distribution, and market positioning, stating new supply is in different segments or will be absorbed by market growth.

    Analyst downplayed

Q&A highlights

7 direct
MMR RevPAR growth vs. peers and impact of new supply (Fairmont) Direct
Our MMR RevPAR has grown about between 6% and 7%, largely on the back of an ADR strategy. We did let go of some business, which were low-paying business during the period, for long-term reasons. A 13% growth in the average room rate for the Mumbai metropolitan region is an extremely healthy rate.

Addresses competitive performance in a key market and management's strategy to prioritize ADR over occupancy, while also commenting on new supply.

Asked by Karan Khanna, Ambit Capital

Foreign guest share and impact of new Mumbai airports Direct
As and when that opens at Navi Mumbai, the -- 2, 3 things will happen. Number one, the cargo will be split between the 2 airports... Second, the passenger traffic will also split between the 2 airports... it makes it easier for travelers to come in and out because flight seats capacity will be augmented.

Provides strategic insights into macro factors (airport expansion) that will drive future foreign tourist arrivals and benefit Chalet's Mumbai properties.

Asked by Karan Khanna, Ambit Capital

Kerala project details (capex, timeline, demand) Partial
However, this 150-room hotel is a the first phase is 150 rooms. Potentially we can go up to 300, 400 rooms, but I don't think the market can support that for now. The Phase 1 will have 150 rooms and a convention center. To a large extent, we will create the demand in house with the convention center for the 150 to support the 150 rooms.

Offers details on a new pipeline project, including its scope, potential, and funding, though timelines remain fluid.

Asked by Karan Khanna, Ambit Capital

Increase in finance costs in Q3 FY25 Direct
If you remember, in the last quarter, we had said that the Powai commercial building is capitalized. And this happened towards the end of the last quarter. This interest is post OC which we started charging to P&L from this quarter. That's the major increase.

Clarifies the reason behind a significant increase in finance costs, linking it to the capitalization of the Powai commercial building.

Asked by Jinesh Joshi, PL Capital

Sustainability of strong Hyderabad market performance Direct
Adhidev, it's not a one-off event. It is normal growth of the business. Q3 is a better quarter than Q1 and Q2. That's what we've seen play out. And we see Q4 being equally strong. This growth in Hyderabad and Bangalore is structural in nature. It is not driven by singular events that are happening in those cities.

Confirms that strong market conditions and growth in key cities like Hyderabad and Bangalore are structural and sustainable, not temporary.

Asked by Adhidev Chattopadhyay, ICICI Securities

Exit run rate and EBITDA flow-through for the fully leased commercial portfolio Direct
So we're expecting roughly 30 crores as your exit run rate once all of this is leased out, which in effect is about -- I think, closer to 400 crores almost, right, on an annualized basis. And expect about 90% of that to flow through to EBITDA.

Provides specific financial targets and profitability expectations for the rapidly growing annuity business.

Asked by Adhidev Chattopadhyay, ICICI Securities

Delays in Dukes Retreat and Marriott Bengaluru project timelines Direct
Dukes is delayed. I actually mentioned that in my opening statement. It will be Q2. We are just ensuring that it comes out really well and the full product is ready... Sometime in end of February, early March, we should see that inventory getting added to Bangalore. It will be this quarter, though.

Clarifies updated timelines for the completion and operationalization of key new hotel inventory, which impacts near-term revenue contribution.

Asked by Hrishikesh Bhagat, Kotak AMC

Competitive impact of Fairfield (Marriott brand) on JW Marriott Sahar pricing Direct
Fairfield is a budget hotel in the Marriott portfolio. There is no reference point between the two, as far as pricing is concerned. Fairfield to JW Marriott can have a gap of almost anywhere between 2x to 5x on the pricing, so I don't think that's a fair comparison. And it's not even worth looking at, so don't bother about the Fairfield one at all.

Addresses concerns about new competition and pricing pressure on a flagship property, with management dismissing the competitive threat due to different market segments.

Asked by Vikas Ahuja, Antique

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Detailed narrative

Q3 FY25 Consolidated Performance

Chalet Hotels reported its best-ever quarter in Q3 FY25, with consolidated revenue growing 22% year-on-year to INR 4.6 billion. Consolidated EBITDA increased 23% year-on-year to INR 2.1 billion, achieving a strong EBITDA margin of 45.5%. The company's Profit After Tax (PAT) for the quarter was INR 965 million, marking a 37% year-on-year growth. For the nine months ended December 31, 2024, the consolidated EBITDA stood at INR 5.2 billion.

Hospitality Segment Highlights

The Hospitality segment recorded a robust 17% year-on-year revenue growth, reaching INR 4 billion. Average Room Rates (ADR) surged 18% to almost INR 13,000, while occupancy remained stable at 70%. This resulted in a 16% increase in RevPAR to INR 9,000. On a like-to-like basis, excluding newly acquired hotels, RevPAR grew by 17% with 71% occupancy. The segment's EBITDA margin was 46.1%, attributed to effective cost control strategies.

Rental and Annuity Business Growth

The annuity portfolio demonstrated rapid growth, with revenue surging 92% year-on-year to INR 577 million. The segment achieved an EBITDA of INR 455 million, translating to an impressive 79% margin. Management noted significant leasing momentum, securing an additional 400,000 square feet in the quarter, and expects to reach the full potential of its commercial inventory within a couple of quarters, targeting an annualized exit run rate of INR 400 crores with 90% EBITDA flow-through.

Residential Real Estate Segment Update

In the residential real estate segment, Chalet maintained strong sales velocity and rates, selling 18 apartments in the quarter at an average rate of approximately INR 22,000 per square foot. The company has 50 unsold units, primarily in new towers, which are expected to be sold over the next few quarters. Overall collections for the nine months stood at INR 2.9 billion, with outstanding receivables of INR 4 billion as of December 31, 2024. Revenue recognition for 60-70 apartments in Koramangala is anticipated in Q4 FY25.

Project Pipeline and Development

The phased opening of The Dukes Retreat continues, with 73 rooms, a restaurant, a bar, and a pool already operational, and full completion expected by end of Q1 FY26. Renovations at Four Points By Sheraton Navi Mumbai are progressing, targeting completion by July 2025. New inventory at Marriott Bengaluru is being released and will be fully operational by end of February/early March. The Taj at Terminal 3 Delhi International Airport is expected to open in Q2 FY27. New projects at Airoli, Varca, Goa, and Powai Cignus 2 are advancing as planned, with Powai Phase 2 having a balance capex of INR 600 crores for the next three quarters. The Kerala project (150-room hotel with convention center) is also moving forward, with an indicative capex of INR 1.4 crores per key.

Capital Expenditure and Debt Management

Chalet Hotels spent INR 4.8 billion on capex and land acquisitions during the first nine months of FY25. The company has a current plan for capital expenditure of approximately INR 20 billion over the next three years, which will be largely funded through internal accruals. Net debt as of December 31, 2024, was INR 15.8 billion, with an average cost of finance at 8.53%, a 34 bps reduction from March '24. Management expects peak debt not to exceed INR 19-20 billion, demonstrating a comfortable balance sheet position.

Market Outlook and Growth Drivers

The company remains optimistic about the next few years, citing robust corporate travel, a growing MICE segment, and vibrant leisure and wedding markets. The opening of new major airports in Mumbai and Delhi is expected to significantly boost passenger capacity and foreign travel. Management anticipates double-digit RevPAR growth for its existing portfolio and structural growth in 'new-age cities' like Bengaluru and Hyderabad, where supply remains muted. The total operating rooms are expected to reach close to 5,000 in a few quarters.

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