Samhi Hotels

Samhi Hotels reported a robust Q2 FY26, with total income growing 11% year-on-year to INR 296 crores. Same-store RevPAR increased by 11.2% to INR 5,026, aligning with long-term guidance of 9-11% CAGR. EBITDA rose 14% to INR 110 crores, expanding margins to 37.3% from 36.2% last year. The company achieved a Profit After Tax of INR 99 crores, significantly up from INR 13 crores last year, partly due to a INR 57 crores reversal of Navi Mumbai land impairment.

The company announced a landmark dual-branded hotel development in Navi Mumbai, marking its entry into India's financial capital. Phase 1 will feature 400 rooms, with potential expansion to 700 rooms, making it SAMHI's largest hotel by room count. The project entails a Phase 1 cost of INR 650 crores over 3-4 years, with a cost per key of INR 1.65-1.7 crores, significantly below replacement cost. The total investment for 700 rooms is estimated at approximately INR 1,000 crores, with an expected EBITDA potential of INR 180-185 crores for the full 700-room hotel.

SAMHI further strengthened its Hyderabad portfolio by signing a 260-room mid-scale hotel under a long-term variable lease in the Financial District, with an investment of INR 45-50 lakhs per key, expected to be operational in 36-42 months. Progress on the W Hyderabad in HITEC City is on track for a December 2026 opening. Across the portfolio, over 1,500 rooms are under active development or rebranding, aiming to expand the total portfolio to over 6,300 rooms in the near future.

The company's balance sheet is in its strongest position since listing, with net debt to EBITDA reduced to 2.9x (2.4x adjusted for growth projects). Average interest cost has fallen to 8.5%, and the credit rating was recently upgraded to A+. Management expects to maintain net debt to EBITDA around 3x in the short term and target 2.5x in the midterm, supported by an anticipated investable surplus of INR 1,700 crores from operating free cash. The overall blended interest cost is targeted to fall below 8% by FY27, with the latest refinancing coupon at 7.55%.

Management articulated a disciplined strategy focusing on India's most dynamic office markets and a balanced mix of mid-scale and upscale assets. They emphasized that mid-scale assets, particularly leased ones like Holiday Inn Express HITEC City, offer high Returns on Capital Employed (ROCE), with one asset achieving 45% ROCE, and help diversify risk. The Navi Mumbai project, originating from an acquisition with a low underlying land cost of INR 26 crores, is expected to yield a mid-teen ROCE, aligning with their capital-efficient growth philosophy.

SAMHI projects a total revenue CAGR of 17-18% for the next 3-5 years, even before factoring in Navi Mumbai. The total capex, including Navi Mumbai Phase 1, is estimated at INR 1,500 crores, which will be funded primarily through operating free cash and GIC infusion for some projects. The company anticipates no cash tax payouts for the next few years. Management remains confident in maintaining financial discipline while delivering growth, leveraging its strong balance sheet and robust free cash flows.