Sami Hotels Q3 FY26 Earnings: Strong Growth Amid GST Challenges

Ladies and gentlemen, good day and welcome to the Q3 and 9M FY26 earnings conference call of Sami Hotels Limited.

This conference call may contain forward-looking statements about the company which are based on the beliefs,

opinions and expectations of the company as on date of this call. These statements are not the guarantees of

future performance and involved risk and uncertainties that are difficult to predict. As a reminder, all participant

lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation

concludes. Should you need assistance during the conference call, please signal an

operator by pressing star then zero on your touchstone phone. Anna conference owing Mr. Ashish Jakaral, MD and CEO of

Sami Hotels Limited. Thank you and over to you sir. >> Uh thank you so much. Uh good morning

everyone and welcome to Sammy Hotel's Q3 FY26 earnings call. Uh thank you for joining us today. I'm also joined by our

CFO Rajat Mahara our VP and head of investments Ghana Daz and Nakul Manaka SVP investments. Our investor relation

advisers uh strategic growth advisor are also on the call. We have uploaded our Q3 FI26 financial results and investor

presentation on these stock exchanges and on our website and I trust you've had a chance to review them. Uh let me

begin with a brief overview of the quarter before Rajat takes you through the financial results. Uh quarter 3 uh

FI26 was a strong operating quarter for TAMI delivered in a period that saw external disruptions including the

largest Indian airline facing operational challenges during December. Despite this, a portfolio demonstrated

resilience and pricing power. Same store ref grew by 13% yearonear to 5,643 rupees. Total income growth was 16% YI

to 342 crores for the quarter. On an underlying basis, the AIDA grew by 19% Yi, reflecting strong operating

flowthroughs. However, changes in GST regulations impacted the margins which moderated the reported EIDA growth to

13.2% on a YI basis. Even though there's a short-term impact of GS in part of our portfolio, we believe it will lead to

greater sales volumes as hotels become more affordable, especially in the midscale segment and will offset any

impact in the long term. Further, it is important to note that all of our new inventory being added is an upscale

segment which will remain largely unaffected by this change uh but also benefit from marginally lower capeex due

to reduction in GST rates across several construction items. This performance reinforces the strength of our city

ccentric business travel portfolio spread across India's most resilient office markets. For past 9 months,

office absorption across key markets remains very strong and has supported same store revenue growth significantly

ahead of a long-term target which we've always said is between 9 and 11% Y. Now, let me briefly touch upon our key

growth initiatives. Uh the 170 room W Hyderabad continues to progress as planned. Design development is mostly

completed and building modifications are underway. Mockup room will commence anytime now. This is a marquee asset for

Sami and will materially lift our AR profile both in Hyderabad and in the upscale segment. Uh in Bangalore the

demolition and reconstruction activities for the 220 rooms resting block in Whitefield Bangalore has commenced. This

remains a fairly high convection project in one of Bangalore's deepest commercial micro markets. Across the portfolio, we

now have 4,900 rooms operational. We have incremental 1,900 rooms under development or rebranding of which about

1,450 rooms is a net room addition. These projects will gradually shift our revenue mix towards upscale and upper

upscale which is currently 42% contribution to about 60% upon completion improving long-term earnings

quality. Besides this, we continue to have a very high quality and actionable pipeline of opportunities to fuel our

future growth and majority of it as of date are in form of capital efficient variable leases that can be easily

funded from our cash flows. With that, I'll now hand over to Rajiv to walk you through the financial performance in

more detail. >> Thank you Ashish. Good morning everyone. Let me take you through the financial

performance of Q3 F526. Total income for the quarter was 342 crores up 16.2% on a year-on-year basis.

Same same store asset income grew by circa 14% on a year-on-year basis. New opening including Trinity Whitefield and

the new Holiday Express rooms in Kolkata and Greater Nida contributed to incremental revenue. This was partly

offset by income loss from sold and discontinued assets including four points Chennai and Sheran Hyderabad

commercial floors which we have converted to 42 rooms. Consolidated IITA stood at 126 crores. Reported grew by

13.2% 2% on a year-on-year basis excluding the GST impact of circa 6.7 crores. Aida growth was 19.2% on a

year-on-year basis. GST impact was mostly in our uh midscale portfolio where fair bit of our revenue actually

comes from rooms being sold as less than 75,000 rupees. VA margins were 13.9% as compared to 36.9%

as compared to 37.9% last year. This drop in margin uh attributed to the GST change is circa 200 basis point.

Underlying operating cost and flow through remain stable during the quarter. Our finance cost declined

sharply to 40 crores versus 60 crores last year. uh the cash interest outflow is in the range about 34 crores for the

quarter. Balance cost in the finance cost represents non-cash and India's adjustments.

Our profit after tax for the quarter was 48 crores. The pad attributable to Sammy shareholders is 39.6 crores while the

minority interest accounted for 8.5 crores. As on 31st of December 2025,

our net debt stood at 1,450 crores, the average tenor of our facility is circa 12 years, which actually allows us a

strong margin of safety in terms of our liquidity. The trailing 12 months IDA excluding non-cash ESOP cost increased

to 482 crores. Our net debt to Bida remains stable at 3x. Importantly, we continue to fund our

growth capex through internal approvals with no material increase in the net leverage expected. With that, I hand

over to Ashish. >> Uh, thanks Raj. Uh, so in conclusion, uh, quarter 3 FI26 reinforces three key

messages for Sami. The first is that while global headlines remains volatile, on ground indicators in our core markets

show a strong trend line driven by India's economic engine. Our portfolio continues to deliver strong consistent

operating performance and growth and can manage repeated event risk as as we have seen in the last 9 months. Uh and the

last bit is that we have a strong growth pipeline and all the resources to deliver to achieve our targeted revenue

of circa 3,000 crores by 2030. We will now open the floor for questions. >> Thank you very much. We will now begin

the question and answer session. Anyone who wishes to ask a question may press star N1 on the touchstone telephone. If

you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use

handsets while asking the question. Ladies and gentlemen, we will wait for a moment while the question assembles. The

first question is from the line of Vikas Ahuja. Come and take stock broking limited. Please go ahead.

>> Yeah. Hi. Uh thank you for the opportunity. Um uh my my first question is as we are already at the end of

January uh how is the current quarter shaping up? Does the momentum seem seem seen so far will continue? Uh you know

with the World Cup coming next month do we anticipate any uptick from this event? Um overall you know just trying

to understand this momentum improve from here on. That's my first question. Thank you.

>> Uh thank you Vikas. Um so yes the business on books for February looks uh pretty strong. Uh January is always

slightly slow because of the um you know year and break and this year you know that 10th January extended till pretty

much 15th January because of the uh the pattern of you know school holidays in north especially uh Delhi and all but

February looks extremely strong and not just because of the world cup actually because generally a lot of demand is

getting compressed between now and end of January uh end of February and early March. So we do think that the momentum

that we've seen in quarter three will actually continue in quarter 4. >> Okay. Thank you. And uh in in terms of

uh you know the net debt increased by 80 k this quarter to 1450 could you help us maybe break down how much of that

increase was driven by capex and how much of that capex was offset by operating cash flow. Additionally, you

know, you had earlier guided for 300 cr of debt reduction from internal cash flows by 2030. Does this still hold on

considering that we have we have announced you know incremental expansion during the last quarter?

So because largely the the minor change in the net debt was an account of uh Na'vi Mumbai where we had to make a

certain extension uh payments to the authorities. Uh two um you know we are anticipating some inward uh uh uh

investment from GIC in the Bangalore project. Uh so you know there's always a bit of a mismatch in those two things.

So that 70 80 crores was largely on account of the Nami Mumbai payment. In terms of our long-term guidance both on

net debt and also on gross cap reduction continues to remain as is. I know there is incremental investment that we have

committed to Nav'i Mumbai. But if you look at our investor presentations which we've uploaded earlier the uh the

cushion between our total cash accumulation and capeex continues to be very comfortable. In addition to that as

we've demonstrated in the past because we continue to seek opportunities for uh very very limited asset recycling. So I

think we remain fairly comfortable and confident about continuing to achieve that number of uh debt reduction

alongside maintaining the capex plan that we have put together. >> Uh thanks Rash and and uh you know the

removal of this uh input tax credit led to moderation in AIDA which we highlighted in the presentation by 200

basis point. Does this imply that over the next few quarters a PIDA will grow at a slower pace than revenues or do we

have livers to offset that uh in the near term and also you know for FI27 should the revenue growth largely mirror

the ref growth with only incremental emissions given that most of our capacity expansion is expected to start

from FY28 as the high-tech uh city property is also expect likely to complete the end

of FI27 and and also one lastly one housekeeping question can we also possible to get a

ADR because numbers for this quarter >> uh so a couple of them one is on GST uh so you see the GST impact will be

visible for the short term um we do expect that overall reported numbers will kind of not show that from quarter

1 and that's just the adjustment to the base effect regard Don't forget last year first quarter was pretty terrible

because of India Pakistan the Ahmedabad Air India crash and all of that. So we think that there will be 150 basis point

200 basis point impact on margins because of GST in the short term. Uh but yeah I think there are more than enough

levers to start offsetting that but it'll take a quarter or two really. So that's on one uh two uh second question

was really around the next year uh FI27. So I think FI27 while there is no large opening because

but there's a lot of other levers that will come into play. The first really is that if you see we were adding you know

very small bunches of inventory this year but having said that all of that is now fully operational and will get fully

benefit in next year and some of the hotels like Sherton Hyderabad which are clearly outperforming the averages are

the hotels which are benefiting from almost a 20% inventory growth because of the new addition. So that the Trinity

Hotel in Bangalore which we had acquired last year has really ramped up well. We expect that to start kind of

outperforming uh through FI27 the new rooms in Holiday Express. So FI27 we have reasonable levers uh to kind of add

on top of same store bar revenue growth. Um that's was your second question. Third question was in terms of your ADR

occupancy. So if you see same store the ADR growth was 15.9% y the occupancy was stable except not

stable it was 73% had dropped about 1.6 percentage point the total ref power growth therefore was ending up being

about 13.3%. Right? This is all same store and we continue to believe that all operating

parameters should only be reported on same store. >> Uh sure I I I get it. Many thanks and

wish you luck for uh the next point. Thank you. >> Thank you. The next question is from the

line Janesh Jooshi from PL Capital. Please go ahead. >> Uh thanks for the opportunity. Uh sir,

my question again pertains to the GST impact. Uh I mean in response to the previous participants question uh you

mentioned that uh there can be an impact of about uh 150 to 200 basis points in the next couple of quarters. Uh I was

just wondering whether a pass through of this cost increase is possible or not especially on the corporate side. I

understand that uh typically the uh negotiations happen on an annual basis uh but given uh uh uh the loss of ITC

credit uh can we not renegotiate for a slightly uh better rate at least on the corporate side. So your thoughts on that

and also on the retail side u I was just wondering whether a pass through is uh possible or not and if not I mean what

are the challenges on that side? >> Uh Janesh very important question actually. So uh let's tell you the

what's happened in the quarters. First of all the pass through is already happening and if you see for the quarter

when same store grew at about 14%. And let me tell you if you were to do an impact of the uh the airline crisis in

December you know it was pretty pretty substantial. Now if you look at the revenue growth in the midscale segment

that we have shown on page number 15 of our presentation actually the midscale segment which has the highest impact of

GST also showed a revenue growth of 16% and 14% respectively right now what will happen is you of course input tax

related loss will show in higher cost but if you look at the total growth is still pretty substantial in those two

segments so your you you know the alignment needs to happen in the reporting the actual number continues to

be in our opinion reasonably ly strong especially given December was almost a 3-w week wipe out you know we are

typically prepared for December to be a 10-day wipe out but December almost became a 3-w week wipe out because of

the airline classes which started in the beginning and then continued because of the year end new year vacation and all

of that right so janesh I think in quarter 4 onwards you'll started you'll start seeing a pretty bad strong

recovery to margins but that's largely driven by revenue growth uh so yeah you're right password has already

started happening because the revenues have started going up but I cannot change the way the numbers are reported

which is the cost even reflect in the costline items. >> Got that and sir on the corporate side

uh when do annual uh renegotiations typically happen and if it is nearby are we going to take into account this uh uh

IDC loss uh which will be there with us and then renegotiate for rates accordingly. Answer is yes because the

customer clearly understands that if he was paying 100 rupees of room rate and 12 rupees of tax earlier there was 112

rupees being paid by the customer today it's 105 so if we account for a slight increase he'll still be paying 112 or

less than that so as you know any contract is renegotiated you will start seeing and and and Jes coming back that

actually helps increase demand because you know while we can increase the room rate offset the cost impact you know

there is not really the real growth for customer will will be 7 8 9% right but more important j the nature of business

is changing now right we all who underwrite hotel sector needs to prepare ourselves underwriting the soldout dates

versus rest the year and we are seeing the demand compressed between few days every quarter so let's say last quarter

it was November and November would have contributed majority to the quarterly profits and growth this quarter it's

going to be period starting from 20th January or 25th January till pretty much middle of March right and therefore in

those days contracted rates play very little role because our ability to repric hotels on a daily basis three

times a day is very very strong so hotels which have an average rate of 13,000 rupees are already priced for

20,000 rupees in the month of February jes so I think the industry has changed the dependence on the locked in RFP

prices for the year and its impact on the average reported room rate is kind of diminishing every year so we're not

worried I think the demand is very wrong, you will start seeing very quickly this whole cost being absorbed

because we do feel that GST reduction is across the sectors and industries which should help boost overall economic

activity and give us the paybacks. >> Uh got that uh sir one last question from my side. our FND revenue was up by

about 9% in this quarter and I guess in the previous quarters uh we had mentioned that uh ballrooms are under

renovation especially at Hyderabad and Pune and accordingly we should expect some kind of a pickup happening on the

FNB revenue side in second half of the year. Uh but this 9% growth when I compare it with our uh same revar growth

of about 13% it is still lower. So just wanted to check on this part whether those ballrooms are operational or not

and if yes then why why the FNB income still lagging. So a couple of clarifications first of all the

ballrooms are operational in both the hotels and pun and sheran hyderab the same store fnd growth was actually 10% 9

not 9% the 9% is overall and there is obviously incremental rooms that we've added in holiday express and other

portfolios uh and 10% FnB growth is actually pretty decent uh while rooms have really outperformed at 13 and a

half 14% raspar but 10% FnB growth yi this used to be 6 7% janesh uh till last year now we've gotten to about 10% FNV

growth yi. So I think ballrooms are starting show impact and as they stabilize you know I think you will

continue to see that mirror close to double digit yi growth. >> Got that sir. Thank you. Thank you so

much and all the best. >> Thank you Jes. >> Thank you. Before we take the next

question I reminded to all if you wish to ask a question please press star N1. The next question is from the line of

web h from Hong Securities. Please go ahead. >> Uh web your line is unmuted. Please

proceed with your question. >> Hi, can you hear me? >> Yes, I can hear you. Please go ahead.

>> Okay, great. Uh so first of all, congratulations for a good set of numbers, sir. Uh my first question was

uh regarding our upper upscale and upskill segment. So we have seen bit of occupancy decline uh for this segment

particularly in this quarter. Any particular reason for that? >> Uh generally what happened in December

uh weather the airline issues that we saw in December. >> Okay. Only pertaining to that there was

a bit of a >> yeah because upscale tends to have group movements and conferences and mice and

obviously such a significant airline uh disruption led to massive calcul cancellations. Uh so that's why the

entire occupant flight occupancy you saw was in the upscale upper upscale segment.

>> Understood. And uh next on uh Trinity Bangalore uh I understand Marriott had taken over operations for Trinity in

August and uh just wanted to understand how has been the performance post Marriott taking over and uh since now

Marriott is operating the property do we plan to delay the overall renovations planned for Trinity?

uh so web uh while the team pulls out the exact number changes uh I'll answer the second part first. So what we are

doing in Trinity is doing so we doing earlier we were in thinking of investing about the plan was to invest about 70 80

crores in full renovation for it to be converted to a part of collection and managed by Marriott. Uh what we've

actually done is we've done an inter renovation. So we've already spent about 7 crores in this hotel largely towards

life safety and uh and in technology. We are going to complete a very small refurb program between now and margin

which is about 23 24 crores and with that we think the hotel is extremely well uh positioned to uh kind of move up

on its rate chart. in terms of its performance if you see uh in July 25 this hotel was doing uh a total revenue

of about you know 1.8 crores a month uh with a rate of 5900 occupancy of let's say 55 60%. We have moved that revenue

in November December to about almost like 3 crores average per month. So we've done that 50% growth in revenue a

little bit more than 50% growth in revenue and the rate is now sitting between 8,000 and 10,000 rupees on a

monthly basis in October, November, December and occupancy being around 50%. So while the occupancies has remained

the same because of renovation, we have pushed the rate almost 2x of what it used to be prior to the Marriott

management and therefore the resultant asset income has gone from 1.8 crores a month to almost I would say 2 1/2 to 3

and a half crores a month. So yes, there is a sizable impact and as we complete the current ongoing refurbishment which

gets completed by end of March uh the next fiscal year this hotel should start seeing very strong consistent

performance with no interruption for renovations for full FI27. >> Understood sir. Uh just uh lastly on our

uh recently added inventory uh including Kolkata, Whitefield, Bangalore and uh now the uh uh Sherata Hyderabad and Pune

as well. So how has been early demand trends uh in the new inventory uh has the full absorption happened?

>> Yeah. So I'll give you I mean the impact in FI26 is going to be small but FI27 is when they'll start really impacting. So

I give you one example for uh for Whitesfield hotel we were just checking those numbers earlier and you know

sometimes you have reporting anomalies for instance Whitefield is an existing operating hotel so it's classified as a

same store and we suddenly realized that the total revenue growth is 15% in rooms but the repar growth is 13 and a half%

and mathematically it's incorrect and when we dig deeper we realize that Whitesfield Hotel because of those 56

rooms has seen a total revenue growth room revenue growth of almost 45%. Right? So those 56 rooms being added to

a existing 160 room hotel saw that hotel revenue jump by almost 45% because the rooms are

slightly larger. U Kolkata is stabilizing really well. Uh it's it's interestingly even though people don't

talk a lot about Kolkata it is a silent performer. uh that hotel is stabilizing uh quite adequately. Now the rate is we

are actually now touching uh okay so well it was almost doing an occupancy of 62% in the first few if you

see from July till December the average occupancy is about 62.4% 4% the rate is almost upward of 4,000 rupees. It's

almost touching 4 and a half,000 rupees. It has contributed almost 6 cr since opening to our top line. So all the

hotels are stabilizing really well. Sheran Hyderabad is just gotten added. So you'll see the impact of that coming

in February and March and same for hydrogen C. >> Understood. And sir, our expansion

pipelines shows status of development is still into design stage for our uh for all of our uh planned green field

projects. So uh are you confident that you'll be able to execute projects within uh two to two and a half years uh

to you know stick to the uh mentioned timeline. >> So if you see slide number 18 uh we'll

take you project by project. So for instance in double Hyderabad the work is going on on site. Actually the mockup

should be ready in the next few months. Uh so it's it's an existing building and which is being retrofitted to being

converted to a W uh in courtyard Pune tribute uh Bangalore Whitefield tribute Jaipur which is where you're seeing a

lot of design design these are existing hotels right so these existing hotels have to be taken through a renovation

which will start let's say in April or so so the timeline between design and start of renovation and complete is not

like a green field project which is 12 18 months you start first phase comes to first of all if they start going into

renovation in phases. They come back also in phases. So that's why you're seeing a lot of estaters being designed.

Coming to Western Bangalore, the western Bangalore uh we will put it as construction when the effectively the

RCC starts getting casted but the demolition of the existing building has been completed. Site leveling has been

done. Uh we should start the piping shoring in the next month or so. So there's active work in all of those

sites. The only way where it is true design is actually one financial district Hyderabad and and the Navi

Mumbai project. >> Understood sir. Perfect. Thank you so much and all the best.

>> Thank you. >> Thank you. The next question is from the line of Ronak Puran from Noama. Please

go ahead. >> Yeah. Uh hi this is Rajiv here. Uh good morning sir. So I am on slide 13 and 14.

Um this is the same store uh uh same store. If I just that and for this quarter it is looking like the

incremental margin on this revenue is close to 4%. But considering that we are you know we have grown far at 13 odd uh

percent. And in the previous year few quarters we have seen that this number shooting up to close to 60%. So um while

the revenue is driven more by room revenue I the flow through should have been higher right. Any thoughts on this?

>> Ladies and gentlemen, the management line has been disconnected. Please hold while we get them reconnected. Ladies

and gentlemen, thank you for being on hold. The management has been reconnected. Thank you. And over to the

management. >> Thank you. Sorry. Uh Rajie, you were on the call. Can you start your question

again? >> Yeah. Uh yeah. Uh so I was talking about slide 13 and 14. uh which is on the

incremental revenue and incremental aida. So if I were to calculate incremental margin for this quarter it

is close to 44%. And considering that it is largely driven by room revenue which has grown

at faster pace the flow through should have been higher right because we have in the previous quarters we have seen

this number hovering close to 60% as well. So your thoughts on why the flow flow through is lower.

So I think uh Rajiv a large part of that was uh the uh expected drop in revenues in December and that's why the flow

through is only about 45%. You're right this should be ideally about 55 to 60%.

>> The GST is actually know margins would have been or growth would have been 19. So I think it's largely because of the

December impact because of the December upscale kind of dropped from so what happens is that every hotel is prepped

for a certain quarter in terms of the revenue buildup and therefore we saw strong revenue build up for the quarter

accordingly some of the adjustments to the operating structures payroll and outsource staff and all of that is done

but the sudden drop in revenues in the two weeks in December kind of helped you know made us slip on that flowthroughs

which typically should be in 55 60% and this quarter was 45%. So you're absolutely right. There's a 10% slip in

the flow throughs. >> Yeah. Uh secondly, uh uh about your comment on let's say uh demand getting

compressed in some particular dates. Uh so what is the I mean what is the metric we should follow to just get a sense on

uh let's say for the upcoming fiscal or the next fiscal what where how do we track this compression in dates any

metric you track? >> Yeah. So Raj we track metrices for instance we have this demand compression

graph where we say how many days in a year the occupancy was in which bands okay so let's say how many days the

occupancy was between thankfully now there's no 0 to 30 we had prepped in the covid time so we had a graph of 0 to 30

30 to 50 50 to 70 70 to 90 and 90% plus which is pretty much sold out right so we do track across the portfolio and buy

a hotel what is that sort of demand compression that we are seeing and also how is the rate responding ing to those

buckets. So therefore what was the average rate in the 70 to 90 bucket and when the number of days the occupants

was above 90%, how did that rate move up and did we really yield those days? So we are tracking that uh we'll what we'll

do is Rajie we will u in we used to put the semi Intel page we will include that back where we'll show you this demand

compression chart so you can see uh what's happening this is entire year right

>> three quarters >> so just show me this number >> yeah so I'll give you an example

uh >> what's happening is for the last three quarters if you see uh the days the

occupancy was upward upward of 90% is almost 30%. So 30% of all days in the last 9 months across our entire

portfolio the occupancy was upwards of 90%. Incremental 28% of the days the occupancy was between 70 and uh 90%. So

if you add those together you're almost at uh 50 >> 60

>> 60 odd percent 57% when the occupancies upwards of 70%. And the other data that we need to see is how does the rate

move. So for instance if the average rate between 70 to 90 bucket was 6826 the same rate became 7,500 rupees in the

days the occupancy was above 90%. So you can see how much do you yield between 70 90 and 90 plus right uh and if you talk

about days when you're 50 to 70% the actually the rate was only 6,000 rupees right so you're moving from 6 to 7 a

half,000 so we do track this demand compression trends across hotels and for the portfolio which is what is showing

us the fact that increasingly it's about speeding that one/ird of the year uh really well and that creates the whole

uh y growth that creates the whole flowroughs all of that is a gift of that demand compression.

>> Yeah. Just to follow up on that uh so this this shifting of bucket towards let's say higher yielding uh or uh you

know where the demand is stronger how how far forward let's say the visibility we have in terms of giving confidence

that FI27 is looking stronger than FI26 u or I'll say before that >> so well um

you know I can give you the secret sauce but as they say I can give you the recipe but you can't get the sauce

yourself Uh I think the answer lies in mapping holidays because they are very

predictable Rajiv and you know today you can map all the holidays on the graph. Increasingly you have to account for

certain event risk. Now the event could be different event could be India Pakistan or Ahmedabad or monsoons or an

airline crisis or something right and what we are learning is besides that mapping those holidays you have to also

map unknown events in different parts of the year and then layer up the the positive events you know the large group

movements the conferences so on and so forth I'll give give you an example goal is going through a conference for oil

and gas I don't think one can find a room in Goa uh you know in the next 2 weeks or so similarly when conferences

happen in Bangalore you can sell a room for 30,000 rupees 35,000 so events are booked much in advance actually so you

have ability to kind of map I would think 65% to 70% uh of how the demand compression will work and the balance

30% uh I hate to say this is is short lead where your revenue management team and your ops team needs to be really on

up on their feet to respond fairly quickly Okay. >> Uh, sure. That's very helpful. Uh, I'll

reconnect on on the Sam in a little bit. Uh, meeting offline. >> Thanks. Thanks.

>> Thank you. The next question is from the line of Ashel Kumar from HSBC. Please go ahead.

>> Yeah. Hi. Um, um, thanks for taking the question. I had only uh two questions. I'm sorry

if uh kindly excuse me if you already answered because my line was bad. Um so um just want to understand your u your

uh quarterly performance and if I look through the the cost line items I can see a huge jump in um something called

fixed cost and the variable cost. What is going on there? And uh on the employee side because of the new labor

courts um you have booked um one of um 11 million uh but then uh going ahead how would this because this will become

normalized next year right so how would this impact your employee cost? Thanks. So Archel uh first things first when you

look at the operational efficiency chart which shows individual cost head uh the growth that you see there is largely on

impact of uh you know the input tax credit that we would get you would get input tax credit across each line item

how would you assess for that >> so it goes as a cost in each line item >> in each line item line item

>> so so Achel you will see uh the GSC input tax credit getting uh kind of spread across all the key cost items so

that's one reason why you see uh slightly elevated uh cost across let's say fixed or variable or or all others

actually variable typically remains between 19 and 21% it's 20 >> 20 odd percent so it's it's pretty

stable it's it's largely going into your fixed cost um so that's largely a GST impact which the input tax credit is

getting added to the expenses number two you're asking us about uh the labor code uh so one time has been taken u in any

case for the next 12 months. Uh it's an implementation. Yeah. So we'll actually reset the uh the overall salary

structure. Uh good for us that you know we were actually calculating the entire cost at 40%. Correct of base uh or the

way the wage is is the way it is defined. So we'll only have to move from uh 40 to 50 and uh a small percentage

impact on that in of gratitude and leave in cashman which also depends as to how many people actually stay with us for

those many years. Uh so it would not be mar you know a major increase in the overall cost as we move forward time

impact has been taken off completely. Yeah Raj thankfully because of being a young company and high attrition our

impact was only 1.1 crores against some of the fears which have you know for instance shown very high number uh and

to like Rajasth clarified that uh you know we were already at a pretty progressive 40% basic to total CTC and

the regulation is only recommending it to be 50%. So we really don't see any uh sizable noteworthy change to the uh

payroll structure. Okay, perfect. Thank you. >> Thank you. The next question is from the

line of Smith Gala from RSP and Manchester. Please go ahead. >> Yeah, thank you for the opportunity. My

first question uh was uh regarding the ref. Uh we have consistently seen doubledigit uh growth in the ref for at

least the three quarters this year. Uh so in the shorter term with a higher base of Q4 last year and if you if you

want to look at a longer term of 2 three years do we uh see a sustained double digit or a low teams growth in the ref

bar and what will uh drive the thing >> so uh I think uh not just for the current quarter but we've always

mentioned that our demand supply modeling tells us that the total revenue growth which is largely being

attributable to refs actually will remain in high single digits to early double digits. So a double-digit uh refa

growth is clearly something that we are fairly uh confident will be maintained in quarter 4 uh in in spite of there

being a very high base last year. So we don't see any uh risk to that. And about the longer term sir

>> so so while I we've mentioned that in the long term we expect refers to remain between 7% to 11% same store you know

same sorry 9% to 11% keer for the next 3 to 5 years on same store hotels and I think that same store is something

apologize that we keep repeating uh but for us it's really important that all these KPIs are being discussed on same

sets of hotels that have not gone significant change so Okay. And next bookkeeping question. Uh

how do you see the tax rate uh for the full year FI26 and uh years coming forward?

>> Uh can you repeat the question please? >> Uh uh a bookkeeping question uh tax rate for the full year FI26 and FI27 and

beyond. >> Uh so see uh uh we are actually sitting on a huge losses. So at least over the

next 3 to 5 years we don't actually see any significant tax outflows. Uh what you would actually see is some bit of a

reversal or uh defer tax asset being created on our books. So after that it would actually be a non-cash tax line

item that you will see in the P&L but there would not be any consequent cash outflow that we see at least for the

next 2 to 3 years. Okay. So what will be the percentage wise quantum of the just the book entry?

>> Book entry he's talking about about 7 cr you have. >> Yeah. That's the defer tax uh expense

which is there because in certain assets which actually have turned profitable. Uh that's about 25% of the profits of

that particular hotel which is there. But on a consolidated basis it reduces because we will have to look at the tax

expense only for those entities where there tax has been created. >> Okay. Okay. That was helpful. Um yeah

fine that's also nice idea. Thank you. >> Thank you. The next question is from the line of Sam Aaran from Ambit Capital.

Please go ahead. >> Hi Dean. Thanks for this opportunity. Just a couple of questions from my side.

Firstly, how are the corporate negoti negotiations for CY26 fairing till now in terms of uh just the number of rooms

and the AR increase that is being agreed on and secondly what would be the breakup between the AIDA margins between

the ACIC portfolio and the rest of the portfolio and how much of more uh integration in margins uh can be uh

still expected. So um so the first question is uh and I think we tried addressing it earlier the

whole concept of RFPs driving the average rate is sort of becoming a little not that relevant because as I

said there's very few contracts with last room available pro provisions uh dynamic pricing is becoming real more

and more real and that's why you're seeing the ability for a hotel to price when it's above 90% at almost almost 35%

premium to uh let's say day when it occupancy is 50%. So that shows you that the pricing power sits squarely with the

hotel today. Uh in terms of the RFPs we are seeing a really healthy acceptance of RFP growth and I'll tell you why

Sumit because last year what has happened is uh companies realized that on soldout dates they had to really book

through let's say an online discount to bar which was really really high. So they're also realizing that the net rate

they pay through through the year was really high compared to the RFP rates and therefore the resistance on RFP rate

increase is kind of becoming a bit of a old-fashioned conversation to be honest with you. Uh the second question was

>> margina margin. So >> if you see the asset level eida for >> including

>> same store including ACIC is >> 40.1%. And for ACIC is 40.3%.

So now ACIC is fully integrated in terms of its IPA margins. uh it's reporting the same 40% uh IITA for both same store

nonac store ACIC. >> Oh, got it. Uh that's all from my side. Thank you.

>> Thank you sir. >> Thank you. The next question is from the line of Gazal Gupta from ASK Wealth

Advis. Please go ahead. >> Hi sir. Uh congratulations on the results. uh at this one uh basic

question. So uh our hotels are divided into three three categories where in the upper midcale segment the AR rs are in

the range of 7900 or so. Now there would be hotels which would have arr below 7500 and above that as well. So just

wanted to understand that you know uh would we face any issues in terms of raising prices in this particular

category because the customer would end up paying a lot more uh 18 I mean 18% versus 5% which they'll be paying uh

earlier. So just wanted to understand your thoughts uh on this part. So Gazle the the GST is a is a beautiful uh

puzzle because it doesn't happen by hotel it happens by every room that is sold and I can tell you even in upscale

there are hotels which have had 20% of its room revenues coming from uh rooms sold below 7 and a half and to that

extent a porata input tax credit is lost in that hotel. So pricing is a daily job for each room and there will be

acceptance and resistance on depending on how busy the city and the hotel is. U I really don't think that increasing the

price is relating to GST. It's about demand and supply. Uh we have seen rates growth being extremely strong for last

several quarters. GST no GST incidents no incidents. So it's a factor of only demand and supply determines the pricing

and nothing else. Demand remains really strong. supply is non-existent or near non-existent in core market and

therefore the confidence level that refire should continue to grow in early double digits. So it's all going to be

decided by demand and supply and again I'll repeat the cost of repeating it all depends on those days when the demand is

so compressed that effectively you can repric your hotels uh with with high efficiency. So it's it's demand and

supply. It has nothing to do with with GST non GST. I mean the day after GST was imple implemented as the hotel rate

went up by 15%. Let's say one could argue that 12% is you know 7% is just the GST impact because the customer is

saving 7% GST. But it's just hypothetical. The real thing is what is the real rate growth and it's demand and

supply. >> Okay. Okay. That's helpful sir. And uh secondly on the asset recycling part uh

is there any update on that segment uh because last quarter you had mentioned that you know there is 135 crores of uh

asset recycling which is still pending. So any update on that uh front? >> No. So the the only thing is that asset

recycling we have we have completed large part in the last let's say 3 years or so. uh at this point we still feel

there are one or two hotels where there is a recycling opportunity but uh we don't have any definitive agreements or

uh decision on that as yet it's a part of a plan uh and I think we'll give ourselves another 12 to 18 months to

execute that >> okay okay thank you so much sir thanks a lot

>> thank you guys >> thank you the next question it's from the line of hendra pradan from maximal

capital please go ahead your line is unmuted please go ahead. >> Uh yeah so uh sir just uh uh two

questions so sorry for uh probing further on the GST point. So you know for the customer who was playing paying

um you know you gave an example 112 but that 12 rupees was available as input tax credit but now it is not available.

So for your customer you know the price has gone from 100 to 105 effectively because he doesn't have the ITC. So this

5% impact uh you know when you have gone back to let's say your corporate customers uh what's been the outcome of

uh this you have let's say less than 7,500 what has been the uh mix of the outcome

so have you uh you know what is the weighted average impact on this uh after all your negotiations?

No, there is no negotiation on GST with the customer on a real-time basis. Right? I will again repeat hotel

prices are decided every single day. I do a revenue of 2 and a half crores a day on a weekend. I do the same hotels

do 5 and a half crores on a weekday. It's not that uh you're negotiating with an large company or Microsoft on a daily

basis or a monthly basis or a quarterly basis. Right. The hotels are being priced and I'll repeat on a demand and

supply right now. GST you're right for in the midscale segment uh on that given day if you were to assume the rates were

100 rupees the customer is paying 7 rupee less GST the input tax credit is being lost by us not by the customer

right uh but again the hotels are being repriced on a daily basis so same segment has reported a 14 to 16% revenue

growth uh I'd like to believe some part of that was because for the customer the real rate growth may not have been 16%

but Not easy to say that because the rate growth is being reported on a weighted average basis whereas the GST 5

to 7 depends on so let's say if Rajat buys a room for 7,000 the same day I'm being sold a room for 8,000 in the same

hotel right on that porata income that Rajat has given me I lose input tax credit on my I don't and we not able to

really there's just not possible to determine for those rooms which were sold for less than 7 and a half was

there price increase. So I think we all need to I know we would like to calculate it to the last level but it's

just not possible mathematically. We'll have to agree to the fact that the total revenue growth in the same segment where

GST is most uh applicable has been 14 and 16% y in spite of 3 weeks in December being

wiped out. Right? So let's feel good about the fact that the demand remained very strong. The pricing power remains

with the hotel and yes in the short term there is a y margin impact but that will really disappear as we kind of start

absorbing this revenue growth >> also uh or not all the customers actually can take the benefit of the GST

credit whether in this era or earlier. uh the way credit can be taken by a corporate customer if they have their

office which also has a GST number in the same state where the hotel is. So if somebody is traveling from Delhi to

Bangalore and he's actually being charged GST in Bangalore, he doesn't have an office in Bangalore, he can't

take the GST credit for the stay he's doing. So it's not that all the corporate customers are actually losing

or gaining because of the GST. Some of them are. The only thing is for them the price has reduced on an overall basis.

Uh instead of say 118 they are paying 105 now just for as an example. Yeah. So sorry but there is no unfortunately a

very easy answer to this. You know it's extremely complicated and therefore we should remain focused on what's been the

real revenue growth in that same segment. And I think we are very confident that the revenue growth is so

strong that even this margin compression will disappear uh in the next quarter or two.

>> Yes sir. So this is well understood. In fact you're right. So I think the corporate customers who don't have the

office will not be able to avail and also the individual customers anyways were not availing. So for both these

categories it is cheaper. Uh this is well understood sir. uh and and on the pipeline of expansion so you know I'm

referring to slide number 18 so you have around 1,900 odd rooms that you have laid out uh that uh are going to come up

um you know till FI30 um what about the other inorganic opportunities of the pipeline if you can

throw some color on that and uh is it even possible given the balance sheet constraints that uh

do >> so I think I did mention in my opening remarks that uh we continue to have a

pretty interesting actionable pipeline of uh variable leases uh and that kind of also addresses your second question

about u financial capability and I won't even go to balance sheet as it exists today

because we are at three times net debt bit a significant amount of a capital is invested in assets which are not

producing IITA today. So if you were to only put debt on assets which are currently operating a net will be 2.5

times or so right. So the balance sheet is pretty in a solid state. We are generating about so if TTM free cash was

300 crores but if I take the current interest rate levels because GIC investment happened in July May and

therefore the reduction in interest rates happen subsequent to that. But if I take current interest rate but

historically if it does our free cash will move from 300 crores to 350 crores should be circa 400 crores plus in the

next 12 months because of the growth in earnings and trust me 400 crores of free cash for a company like ours is more

than adequate. variable leases on the first day required five, seven, eight, 10, 15 crores investment. Then your

partner has to invest majority of the capital before you move in into the fit house, right? So I think the variable

leases is our is our answer to continue to grow without really putting any pressure on our balance sheet because

that only barely uses the free cash that the business produces. A large part of a committed capeex is in large projects

like western Bangalore and Nav'i Mumbai which in all fairness are the cape cycle will only kind of bulk up starting FI

2829 at which point of time the VITA from WH Hyderabad the renovations the Trinity

Bangalore all of that will also start kind of getting an impact on Ccash. So I think we have we have adequate uh buffer

plus there's incremental 150 crores of investment pending from GIC over the next let's say two 2 and a half years.

So that also gets added to our free cash. So it is a we are we are sitting in a very comfortable situation and I

have confirmed earlier and I'll reaffirm that most of our current discussions on pipelines are all variable leases which

do not require us to put cash up for acquiring an asset. It only requires us to do investment on fit house.

>> Okay. Okay. And and and you also alluded to this uh uh uh the the 3,000 odd cr revenue uh ambition uh in the next four

odd years. So that is around almost 2 and a half times more than the current run rate. So uh so this 300 cr free cash

flow that you have produced in the TTM basis. So you are this is excluding everything other than uh after including

everything other than growth capex I'm assuming this 300 crores. So that you also expect to go up in the similar

fashion like 2.5x in the next 5 years and I'm assuming that this is without any incremental

acquisitions that you may do. So is that the right understanding sir? >> Uh if you look at our investor day

presentation we have clearly articulated in that that the total bita accumulation in the la next four to five years is

expected to be in the zip code of about 3,000 3 and a half thousand cr and we've given the whole list of capex that we

have with investable surplus on top of that. So you're absolutely right uh the number is clearly 2.4 four times our

current revenue run rate. But that's not a difficult thing because u majority of our new inventory that is getting added

is all in the upscale upper upscale space. So today if your per key is sorry revenue per key is let's say 25 lakhs

per key the in the same in the same period the revenue per key for an upscale asset will be 50 55 lakhs in

those cities where we've invested our capital. So this addition of double hyderabad and the western Bangalore uh

you know some of the other assets is also helping us maintain that growth rate. So yeah the 3,000 cr target that

we have is based on two or three assumptions. The same store will grow between 9 and 11% ker in terms of

revenue. Two you will have incremental revenues coming from the growth initiatives that we've already invested

in by the way and we are fully funded in terms of current cash and future cash flows. That takes us to the 3,000. it

does not invisage any new acquisition. Uh so that's how we add up that 3,000 crores largely only only variable in

that is that assumption of 9 to 11% keer on same store revenue and since we made that presentation last year at least for

three quarters subsequent to that we maintained a revenue growth which is ahead of that

>> and and that includes the impact of these 470 through3 rooms which are rebranded and 1458 new addition

>> everything everything >> and and this 300 cr free cash flow that you have produced on a TTM basis before

growth capex. So that you assume should also grow uh in line with revenue >> um more than revenue because there's

always operating leverage. Uh so typically if you see uh our revenue growth was 16%, our growth before GST

impact was 19%. Eventually you will go back to that mathematics as you kind of adjust your baseline. So you have seen

the IITA growth remain in excess of the revenue growth. Then beyond that our interest cost remains flat and therefore

the cash growth continues to be even higher than that. So if your revenue growth is let's say 14 15%. Your cash

growth will be substantially higher than that because of a operating leverage and b interest cost remaining stable.

>> Understood sir. Uh thank you sir and all the best. Thank you so much.

>> Thank you ladies and gentlemen. Due to time constraint that was the last question for today. I now hand the

conference over to the management for closing comments. Thank you and over to the management.

>> Uh thank you everybody for a very engaging call. I would uh reiterate the fact that I know sometimes these small

changes to the regulation distract us but that had 2% impact on revenue and that revenue grew at 16% YI. So we

should remain steadfast focused on the fact that demand and supply continues to remain extremely favorable to the

incumbent owners operators in the sector in India. Uh we are actually quite excited about the broader changes in the

economy including rationalization of GST which is boosting local demand, local consumption. Uh that's the only reason

we surviving through several event risk still coming out strong. uh our core markets what's been the most uh humbling

data to see is that in our core markets for last 9 months the office net office absorption remains to be extremely

strong Bangalore is touching 12 million square ft for a 9-month period all other cities Bombay Hyderabad Pune NCR even

Chennai now is touching 6 to 7 million square ft I think with that backdrop we remain fairly confident that our curve

will remain at or ahead of our long-term target and that helps us get to uh at least the targeted number of 3,000 cr

revenue by FI30. So look forward to speaking to you again next quarter and thank you so much for your time.

>> Thank you very much on behalf of Sami Hotels Limited. That concludes this conference. Thank you all for joining us

today and you may now disconnect your lines.