Hi @Deepesh_Punetha with reference to your questions i have read the annual reports and will try to address your queries as per my understanding. Obviously management will be in a better position to address the queries
1)The hotel land for orchid mumbai is owned by promoter entity (Plaza hotels) and is given on long term lease to kamat hotels. It is mentioned as owned as technically it is owned by group company but actually it is a leased hotel. Kamat hotels pays royalty charges to promoter entity.
2)Even though agreement will end in 2024 this agreement is extendable for another 30 years so it will be extended.
3)The royalty payable is basically for orchid vile parle mumbai which is based on the percentage of sales as decided by the board. It is basically lease expenses but it is paid as royalty so it would be accounted in other expenses and not as lease as per ind as.For FY23 it was 3 percentage of sales and for FY24 it was increased to 5 percent of sales. Going forward not sure what will this be. Maybe management can provide clarity.
4)Loan was given by kamat hotels to promoter entity (plaza hotels) at 20 percent which was the same rate at which the company had raised ncd’s. The loan was given to enable promoter entity to clear outstanding dues with prudent arc which was taken for construction of a hotel project in nagpur which the promoter entity was undertaking and which was to be handed to listed entity but this project was shelved.
5)The contingent liabilities are mainly income tax issues due to misreporting by the banks of loan settlement as the loans were assigned to arc’s and arc’s also subsequently reported it so as per the company it led to double counting of income by the it department. The company believes these dues are not payable and should be set aside by the courts so hence it has not provided for them. Also some expense disallowances were not admitted by the it department which the management feels is admissible and it is under appeal
In case you received any further update from the company kindly let us know
Overall i feel valuations are attractive and the legacy issues of debt have been resolved. Now the company is on a strong growth trajectory which would kick in from Q1FY25. Moreover expansion would mainly be through the lease route rather than management contract so this would significantly contribute to topline. FY24 was more of a restructuring year for the company so growth will start to kick in from this quarter.
As per the Q3 concall, Vishal Kamat ji was quite confident of achieving INR 100 crores of EBITDA, but there’s a miss by 10%.
Although, on the other hand they also said that the debt will remain at the same rates till June or July but they’ve managed to bring it down to lower rater.
It was a bit disappointing that the management didn’t take the one off costs ( finance restructuring / statutory payments etc) in their calculations while giving the confident 100 Cr EBITDA guidance in the last concall held in Feb 2024.
This episode raises concerns on their guidance of 400Cr/140cr ebitda target for FY25. There will be one off costs in FY25 too considering the plans to add ~600 keys / ramp up of new properties, so will have to wait & watch.
While upfront investments in manpower/opex for upcoming properties is understandable, calling out the total one off expenses in Fy24 might have been prudent in their investor communication so investors have an idea of the normalized EBITDA.
Finance Restructuring cost will come under Finance costs and won’t be a part of EBITDA calculation. And I think it is good news that they’ve restructured the debt earlier then what they’ve mentioned.
Next year, bottom line should get better, even if everything remains same due to debt reduction and restructuring.
Couple of hotels were partially operational during last year and should be fully operational during this year + Multiple hotels have come online during Dec-23 to Apr-24 period which should contribute to topline. Even if they achieve 15-20% growth from here without messing things up, I’ll be very happy because it is cheaply available as of now.
As per the filing today for the merger (link) nearly 44 lakhs new shares to be issued to the promoter group . As per the closing price of 260 /- today, the ascribed value of new shares issued is nearly 114 Cr.
The last annual report mentions about the same that the STP was set up on the land of SRAPL in Vile Parle. The Orchid Vile parle hotel itself was inagurated in 1997 so its been nearly 27 years . Not sure if KHIL paid any amount earlier for the use of this land.
This is a 16 acre land parcel for which 75,000 x 20 (ratio) x 256 current share price = 38 Cr approx value , so approx cost of 2.4 cr/acre. This allows them to develop hotel on 5 acre and 11 acres can be for other real estate users
They probably want to use the 5 acre plot for themselves either for a hotel resort and maybe lease out/JV the remaining land to real estate developers.
FY25 profitability will be a turnaround for the company , 61 Cr odd finance costs will come down to 25 Cr odd → so minimum 25-30 Cr flow through to the bottom line . FY24 PBT was 24 cr odd, so just savings on interest cost could double the PBT. Now if the company does the growth as given in the guidance earlier, the jump would be even higher.
Now its a wait and watch if market rerates the business or not.
I think while focusing only on interest cost reduction, we are missing one thing. They have sold VITS Andheri for 125 cr which helped repay debt at 20% interest cost or around Rs 25 cr per year. But at the same time they have leased the hotel back from the new owners under a management contract and the lease cost is Rs 20 crs per annum. So on the Andheri hotel sale, the flow through to PBT is only Rs 5 crs and not Rs 25 crs.
So, assuming a base case of 30% turnover growth as guided and translating the same to PAT growth @ 30% (Management has actually guided an EBITDA growth of 50%+ which is not far-off, assuming 7% ARR increase, 10-15% occupancy increase but let’s be conservative)
I have a few queries - does anyone have any ideas on the same?
The remaining 58 Cr NCD were supposed to be redeemed with the warrant money and internal accruals over July /Aug - any idea when?
Management claimed that they are targeting 140 Cr ebitda in Fy25 → even if they achieve 120-130 Cr EBITDA, its available currently at <7x EVebitda for FY25. There is an overhang on the valuation multiple given by market currently , given the past issues on leveraged expansion etc. If they execute on their guidance and deliver, there might be a rerating?
Any idea of the depledging of promoter shares, given NCD’s to be repaid in full soon?
They might generate 40-50 cr surplus cash post repayment of NCD’s (one participant was mentioning total inflow of 120 Cr types in last concall), so has management indicated any dividend/buyback etc?
Disc: Invested and biased .
