Thanks Mridul and Ravish for giving me the questions. This was my first time at Byke’s AGM. The AGM was well attended, everybody seemed happy because they thought Byke has done a great job in a difficult year(Demonitisation and GST). Anil Patodia did most of the talking/answering and he seemed very upbeat. The only other person who spoke was Ayush Patodia(I think Anil’s son), this young chap talked nicely and seemed pretty intelligent.
Anil answered the questions but some of his answers were too vague. Here is what I remember:
The most asked question was about GST: Anil said GST is a big blessing for Byke, as earlier it used to get affected by cash transactions done by neighbouring unbranded hotels, especially for banquets. Also, in the room leasing segment, the GST rate is less than earlier rates. Current GST rates for Byke are either 12% or 18%. But room chartering business got affected by GST. I couldn’t understand what he meant but here is what I remember he said: “When Byke charters rooms and sells it to agents then there is GST on that transaction, then when the agent sells it to the sub-agent then there is GST on that transaction and when the sub-agent sells it to the end user then there is GST on that transaction. If the GST is on a gross revenue basis then there is no input credit available but if it is on a net revenue basis then there is input credit available. That is the reason why the company moved to net revenue basis for room chartering.” Sorry, Anil may have explained this properly but my recollection is poor because of my lack of understanding.
He said business is good since GST implementation and the current occupancy rate is 65% (I think he meant the leasing segment).
About Delotel, Borivili, he said the property is ready but OC(I think he meant occupancy certificate) is not there yet. They are expecting it soon. And because this property is lying vacant, the ARR and occupancy rates are low. (Here is my doubt: if the property is not being utilised then why is it part of the ARR calculation? is it because they may be paying the lease rental on it?)
They expect the Borivili property to generate significant amount of banquet revenue.
A lot of people asked about their goal of having 25 properties by 2020. Is it realistic? Anil was emphatic in saying that they will meet that goal ahead of time. He said at this point they are talking to 20-25 property owners to bring them under Byke brand either through leasing model or through franchise model. Now they are planning to take bigger/larger hotels.
For the franchise model, on the question of how is Byke different from companies like OYO, he said those companies are losing money and Byke won’t get into any losing proposition. I think he was a bit vague about their strategy. He said there are a lot of single hotel owners who don’t want to or don’t know how to brand their properties. They are keen on the Byke franchise model.
On the question about the online hotel booking platform, he said they will resume work on it soon after the GST related disruption settles down.
He didn’t specify the capex amounts but said there is no plan of any equity dilution or taking any debt. In fact, he said at this point company has zero longterm debt.
To my question about why the chartering business can’t be replicated by a competitor, he said there are some other people who are doing it but none is as profitable as Byke. He said others charter rooms throughout the year whereas Byke charters rooms only for the peak season. Also Byke pays the hotel owners in advance, mostly 90 days ahead of time and sometimes a year in advance. When I said that somebody can give better margin to the agents and take the business away, he said the agent network is based on trust(didn’t sound convincing).
One shareholder/analyst suggested that Byke should explore the option of banquet chartering. Anil liked the idea and said that it has great potential. He said banquet is a lucrative segment and Byke is doing well in this segment. He said the Thane property's banquet hall has received booking for even 2019.
I travelled all the way from Bhubaneswar to Mumbai just for this AGM and I am glad that I did.