Q1 2027 Lemon Tree Hotels Limited Earnings Call Transcript
Key Points
- Total revenue grew 9% YoY to INR346.8 crores, with net EBITDA up 7% and PAT up 19% to INR57.3 crores.
- Occupancy improved significantly, up 314 basis points YoY to 75.7%, driven by a strategic pivot to retail channels.
- Asset-light expansion accelerated: signed 13 new managed/franchised hotels (1,020 rooms) in Q1, over 3x the rooms opened, boosting fee income from third-party hotels by 42% YoY.
- Keys portfolio renovation is delivering strong results, with RevPAR up 19% YoY to INR2,885, and management targets INR60 crore EBITDA from Keys.
- Pro forma financials for the demerged entities show strong growth: Lemon Tree's net EBITDA margin improved to 58.1% (up 383 bps), and Fleur's PBT grew 31% YoY.
- Gross debt reduced 11% YoY to INR1,475 crores, and cost of debt declined 53 bps to 7.48%.
- Management expects Q2 and H2 to be significantly better, with July and August showing solid recovery, and targets 50% net EBITDA margin for FY28.
- Fleur's growth pipeline is robust, with plans to add 2,500 rooms through acquisitions/developments, supported by Warburg's INR960 crore infusion.
- International expansion is underway with operational hotels in Nepal, Bhutan, and Dubai, and further markets like Thailand and Maldives are being evaluated.
- Renovation spend is tapering off, with most high-value renovations completed, which will reduce expenses and boost margins going forward.
- Net EBITDA margin declined 99 bps YoY to 43.8%, impacted by GST input credit loss and provision for stock appreciation rights, which increased expenses by 3.5% of revenue.
- Gross ARR growth was muted at just 2% YoY, as the company had to drop rates to drive occupancy amid soft corporate demand.
- Mumbai and Gurgaon markets underperformed due to the West Asia conflict and new supply (2,000 rooms) near Mumbai airport, leading to weaker corporate travel.
- Q1 was an aberration with a slowdown in corporate demand, forcing a pivot to lower-yield retail business, which pressured ARR.
- Two management contracts were terminated (Tarudhan Valley and Nestor Hotel), reducing net room additions to 134 in Q1, though the impact on fees was minimal.
- GST impact is expected to persist, with management estimating a 2% impact on revenue, and it will only gradually reduce as more rooms are priced above INR7,500.
- Renovation expenses remain elevated, with INR10 crores spent in Q1 and a similar amount expected in Q2, though this is tapering.
- The demerger process is still pending regulatory approvals (SEBI, NCLT), with completion expected only in the second half of 2027, creating uncertainty.
- Fleur's asset-heavy model carries debt risk, though management targets a debt-to-EBITDA ratio of around 2x and expects ROCE to improve to 15%.
- Management acknowledged that Q1 performance was below expectations and that they could have done better, indicating execution challenges in a volatile environment.
Ladies and gentlemen, good day, and welcome to the Lemon Tree Hotels Limited Earnings Conference Call. (Operator Instructions) Please note that this conference is being recorded. I now hand the conference over to Mr. Anoop Poojari from CDR India. Thank you, and over to you, sir.
Thank you. Good afternoon, everyone, and thank you for joining us on Lemon Tree Hotels Q1 FY '27 earnings conference call. We have with us Mr. Patanjali Keswani, Executive Chairman, Lemon Tree Hotels; Mr. Neelendra Singh, Managing Director, Lemon Tree Hotels; Mr. Kapil Sharma, Executive Director and CFO of Lemon Tree Hotels; Mr. Saurabh Shatdal, Managing Director and CEO of Fleur Hotels; and Mr. Mayank Sharma, CFO of Fleur Hotels.
We'd like to begin the call with opening remarks from the management, following which we have the forum open for an interactive question-and-answer session. Before we start, I would like to point out that some statements made in today's call may be forward-looking in nature, and a disclaimer to this effect
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