Q1 2027 Lemon Tree Hotels Ltd Earnings Call

August 10, 2026

Speaker #1: Ladies and gentlemen, good day and welcome to the Lemon Tree Hotels Limited earnings conference call. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes.

Operator 1: Ladies and gentlemen, good day and welcome to the Lemon Tree Hotels Limited earnings conference call. 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 this conference, please signal an operator by pressing * then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Anup Pujari from CDR India. Thank you, and over to you, sir.

Operator: Ladies and gentlemen, good day and welcome to the Lemon Tree Hotels Limited earnings conference call. 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 this conference, please signal an operator by pressing star then zero on your touchtone phone. 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.

Speaker #1: Should you need assistance during this conference, please signal an operator by pressing star, then zero, on your touch-tone phone. Please note that this conference is being recorded.

Speaker #1: I now hand the conference over to Mr. Anup Pujari from CDR India. Thank you, and over to you, sir.

Speaker #2: Thank you. Good afternoon, everyone, and thank you for joining us on the Lemon Tree Hotels Q1 FY27 earnings conference call. We have with us Mr. Patanjali Keswani, Executive Chairman of Lemon Tree Hotels; Mr. Nilendra Singh, Managing Director of Lemon Tree Hotels; Mr. Kapil Sharma, Executive Director and CFO of Lemon Tree Hotels; Mr. Saurabh Satodal, Managing Director and CEO of Fleur Hotels; and Mr. Mank Sharma, CFO of Fleur Hotels.

Anup Pujari: Thank you. Good afternoon, everyone, and thank you for joining us on Lemon Tree Hotels' Q1 FY27 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'll 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 has been included in the earnings presentation that was shared with you earlier. I will now request Mr. Keswani to make his opening remarks.

Anoop Poojari: Thank you. Good afternoon, everyone, and thank you for joining us on Lemon Tree Hotels' Q1 FY 2027 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'll 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 has been included in the earnings presentation that was shared with you earlier. I will now request Mr. Keswani to make his opening remarks.

Speaker #2: We'd like to begin the call with opening remarks from the management. Following that, we'll open the forum 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 has been included in the earnings presentation that was shared with you earlier.

Speaker #2: I would now request Mr. Keswani to make his opening remarks.

Speaker #3: Good afternoon, everyone, and thank you for joining us. Today, Neil, Managing Director of Lemon Tree Hotels, will be covering the business highlights and financial performance for Q1 2027, after which Saurabh, MD and CEO of FLEO, will brief you on FLEO's business development.

Patanjali Keswani: Good afternoon, everyone, and thank you for joining us. Today, Neel, Managing Director of Lemon Tree Hotels, will be covering the business highlights and financial performance for Q1 FY27. Post which, Saurabh, MD and CEO of Fleur will brief you on Fleur's business development. Lastly, I will share an update on the pro forma financials for Lemon Tree Hotels Limited and Fleur Hotels Limited upon the demerger scheme becoming effective. Of course, post that, we will open the forum for your questions and suggestions. Neel?

Speaker #3: And lastly, I will share an update on the pro forma financials for Lemon Tree Hotels Limited and FLEO Hotels Limited upon the demerger scheme becoming effective.

Speaker #3: And of course, after that, we will open the forum for your questions and suggestions.

Speaker #2: Neil, great. Hi, this is Neil. Let me take you through the key highlights of the quarter. For the quarter, total revenues stood at ₹346.8 crores, up 9% year on year. Net EBITDA stood at ₹151.9 crores, up 7%.

Neelendra Singh: Great. Hi, this is Neel. Let me take you through the key highlights of the quarter. For the quarter, total revenue stood at INR 346.8 crores, up 9% year-on-year. Net EBITDA stood at INR 151.9 crores, up 7%. Net EBITDA adjusted for GST impact and provision for Stock Appreciation Rights stood at INR 162.5 crores in Q1 FY27, up 14% as compared to INR 142.1 crore in Q1 FY26. PAT grew 19% to INR 57.3 crores, and cash profit grew 17% to INR 96 crores. Our growth ARR stood at INR 6,361, up 2% year-on-year, and occupancy was 75.7%, up 314 basis points versus last year. Our net EBITDA margin for Q1 FY27 stood at 43.8%, which was 99 basis points less than 44.8%, which we achieved last year in Q1 FY26.

Neelendra Singh: Great. Hi, this is Neel. Let me take you through the key highlights of the quarter. For the quarter, total revenue stood at INR 346.8 crores, up 9% year-on-year. Net EBITDA stood at INR 151.9 crores, up 7%. Net EBITDA adjusted for GST impact and provision for Stock Appreciation Rights stood at INR 162.5 crores in Q1 FY27, up 14% as compared to INR 142.1 crore in Q1 FY 2026. PAT grew 19% to INR 57.3 crores, and cash profit grew 17% to INR 96 crores. Our growth ARR stood at INR 6,361, up 2% year-on-year, and occupancy was 75.7%, up 314 basis points versus last year. Our net EBITDA margin for Q1 FY27 stood at 43.8%, which was 99 basis points less than 44.8%, which we achieved last year in Q1 FY 2026.

Speaker #2: Net EBITDA, adjusted for GST impact and provision for stock appreciation rights, stood at ₹162.5 crore in Q1 FY27, up 14% as compared to ₹142.1 crore in Q1 FY26.

Speaker #2: PAC grew 19% to ₹57.3 crore, and cash profit grew 17% to ₹96 crore. Our gross ARR stood at ₹6,361, up 2% year-on-year, and occupancy was 75.7%, up 314 basis points versus last year.

Speaker #2: Our net EBITDA margin for Q1 FY27 stood at 43.8%, which was 99 basis points less than 44.8%, which we achieved last year in Q1 FY26.

Speaker #2: This drop was due to the provision for stock appreciation rights and the loss of input credit in the GST levied, which increased our expenses by 3.5% of total revenue in Q1 this year, versus zero in the previous year's same quarter.

Neelendra Singh: This drop was due to provision for Stock Appreciation Rights and the loss of input credit in the GST levy, which increased our expenses by 3.5% of total revenue in Q1 this year versus 0 in the previous year same quarter. Our gross debt on 30 June 2026 stood at INR 1,475 crores, down 11% from INR 1,657.9 crores a year ago, and our cost of debt reduced 7.48%, down 53 basis points versus a year ago. In Q1 FY27, on the asset-light side, we opened 6 managed and franchise hotels with 334 rooms, which we had signed on an average 30 months ago. In this quarter, we also signed 13 managed and franchise hotels with 1,020 rooms, which is over 3x of the inventory that we opened. Our combined operational and pipeline inventory now stands at 23,381 rooms across 279 hotels in 170-plus cities.

Neelendra Singh: This drop was due to provision for Stock Appreciation Rights and the loss of input credit in the GST levy, which increased our expenses by 3.5% of total revenue in Q1 this year versus zero in the previous year same quarter. Our gross debt on 30 June, 2026 stood at INR 1,475 crores, down 11% from INR 1,657.9 crores a year ago, and our cost of debt reduced 7.48%, down 53 basis points versus a year ago. In Q1 FY27, on the asset-light side, we opened six managed and franchise hotels with 334 rooms, which we had signed on an average 30 months ago. In this quarter, we also signed 13 managed and franchise hotels with 1,020 rooms, which is over 3X of the inventory that we opened. Our combined operational and pipeline inventory now stands at 23,381 rooms across 279 hotels in 170+ cities.

Speaker #2: Our gross debt as of 30 June 2026 stood at ₹1,475 crores, down 11% from ₹1,657.9 crores a year ago, and our cost of debt reduced to 7.48%, down 53 basis points versus a year ago.

Speaker #2: In Q1 FY27, on the asset-light side, we opened six managed and franchise hotels with 334 rooms, which we had signed on an average 30 months ago, ballpark.

Speaker #2: In this quarter, we also signed 30 managed and franchise hotels with 1,020 rooms, which is over 3 times the inventory that we opened. Our combined operational and pipeline inventory now stands at 23,381 rooms, across 279 hotels in more than 170 cities.

Speaker #2: Of which, 135 hotels, which is 11,946 rooms, across 80 cities, 80-plus cities, are already operational. Network revenue for the quarter grew at 16% year on year, to 576 crores, with owned hotels contributing 320 crores, and managed and franchise hotels contributing 256 crores.

Neelendra Singh: Of which, 135 hotels, which is 11,946 rooms across 80-plus cities are already operational. Network revenue for the quarter grew at 16% year on year to INR 576 crores, with owned hotels contributing INR 320 crores and managed and franchise hotels contributing INR 256 crores. Owned hotels contributed 56% of the network revenue in this quarter. Fee income from management and franchise contracts from third party owned hotels stood at INR 22.8 crores in Q1 this year, an increase of 42% year on year. Fee from Fleur hotels stood at INR 22.6 crores, up 6% year on year. Total management fee from Lemon Tree stood at INR 45.4 crores, an increase of 21% year on year. Now I hand over to Saurabh for an update from Fleur.

Neelendra Singh: Of which, 135 hotels, which is 11,946 rooms across 80+ cities are already operational. Network revenue for the quarter grew at 16% year on year to INR 576 crores, with owned hotels contributing INR 320 crores and managed and franchise hotels contributing INR 256 crores. Owned hotels contributed 56% of the network revenue in this quarter. Fee income from management and franchise contracts from third party owned hotels stood at INR 22.8 crores in Q1 this year, an increase of 42% year on year. Fee from Fleur hotels stood at INR 22.6 crores, up 6% year on year. Total management fee from Lemon Tree stood at INR 45.4 crores, an increase of 21% year on year. Now I hand over to Saurabh for an update from Fleur.

Speaker #2: So owned hotels contributed 56% of the network revenue in this quarter. Fee income from management and franchise contracts from third-party owned hotels stood at ₹222.8 crores in Q1 this year, an increase of 42% year-on-year.

Speaker #2: Fee from FLEO Hotels stood at ₹22.6 crore, up 6% year on year. Total management fee from Lemon Tree stood at ₹45.4 crore, an increase of 21% year on year.

Speaker #2: Now, I hand over to Saurabh for an update from FLEO.

Speaker #4: Thank you, Neil. Thank you, everyone, for joining us on the call. Let me give you a quick update on our hotels under development. At Aurika Shimla, our own 90-room hotel, we have deployed approximately ₹108 crore of capital as on 30 June 2026. Finishing work and operational licenses are in the final stage, and we expect the hotel to open shortly.

Saurabh Shatdal: Thank you, Neel. Thank you everyone for joining us on the call. Let me give you a quick update on our hotels under development. At Aurika, Shimla, our own 90-room hotel, we have deployed approximately INR 108 crores of capital as on 30 June 2026. Finishing work and operational licenses are in final stage, and we expect the hotel to open shortly. At Aurika, Shillong, a leased 165-room hotel, we have deployed approximately INR 33 crores as on 30 June 2026, with the expected opening in H2 FY28. At Aurika, Varanasi, a 37-room leased heritage hotel, we have begun the work and with an expected opening in FY29. At Aurika, Nehru Place, Delhi, final approvals are pending from the authorities with expected capital deployment to be announced in due course and an expected opening on or after FY2030.

Saurabh Shatdal: Thank you, Neel. Thank you everyone for joining us on the call. Let me give you a quick update on our hotels under development. At Aurika, Shimla, our own 90-room hotel, we have deployed approximately INR 108 crores of capital as on 30 June, 2026. Finishing work and operational licenses are in final stage, and we expect the hotel to open shortly. At Aurika, Shillong, a leased 165-room hotel, we have deployed approximately INR 33 crores as on 30 June 2026, with the expected opening in H2 FY28. At Aurika, Varanasi, a 37-room leased heritage hotel, we have begun the work and with an expected opening in FY29. At Aurika, Nehru Place, Delhi, final approvals are pending from the authorities with expected capital deployment to be announced in due course and an expected opening on or after FY2030.

Speaker #4: At Aurika Shillong, a leased 165-room hotel, we have deployed approximately ₹33 crore as on 30th June 2026, with the expected opening in H2 FY28.

Speaker #4: At Aurika Varanasi, a 47-room leased heritage hotel, we have begun the work, with an expected opening in FY29. At Aurika Nehru Place, Delhi, final approvals are pending from the authorities, with expected capital deployment to be announced in due course, and an expected opening on or after FY30.

Speaker #4: Recently, an extension of validity of the letter of abroad for another year was received by FLEO from DDA, providing ample time for the project to attain all approvals.

Saurabh Shatdal: Recently, an extension of validity of letter of award for another year was received by Fleur from DDA, providing ample time for the project to attain all approvals. We have renovated 300 rooms this quarter, for which we have spent approximately INR 10 crores, and we anticipate a similar number in the next coming quarter. As for the Keys portfolio, renovation was two-third complete as on 30 June 2026. The portfolio is showing significantly improved performance with a double-digit growth across all locations. Keys portfolio RevPAR in Q1 FY27 was up 19% year on year to INR 2,885 on the back of a 350 basis point improvement in occupancy to 67% and 13% growth in average room rate to INR 3,808. On the pipeline side, we continue to evaluate a growing number of opportunities, whether an existing operating hotel or development of new hotel.

Speaker #4: We have renovated 300 rooms this quarter, for which we have spent approximately ₹10 crore, and we anticipate a similar number in the coming quarter.

Speaker #4: As for the Keys portfolio, renovation was two-thirds complete as of 30 June 2026, and the portfolio is showing significantly improved performance, with double-digit growth across all locations.

Speaker #4: Keys portfolio RevPAR in Q1 FY27 was up 19% year on year to ₹2,885, on the back of a 350 basis point improvement in occupancy to 67%, and 13% growth in average room rate to ₹3,808.

Saurabh Shatdal: Keys portfolio RevPAR in Q1 FY27 was up 19% year on year to INR 2,885 on the back of a 350 basis point improvement in occupancy to 67% and 13% growth in average room rate to INR 3,808. On the pipeline side, we continue to evaluate a growing number of opportunities, whether an existing operating hotel or development of new hotel. Now I'll hand over the forum back to Bhatu. Thank you.

Speaker #4: On the pipeline side, we continue to evaluate a growing number of opportunities, whether it's an existing operating hotel or the development of a new hotel. Now, I hand the forum back to Patu.

Saurabh Shatdal: Now I'll hand over the forum back to Bhatu. Thank you.

Speaker #4: Thank you.

Speaker #3: Thanks, Saurabh. I want to take this opportunity to continue our conversation on the demurrage GE scheme. Like last quarter, we have again shared pro forma financials for both Lemon Tree and FLEO Hotels, as they would appear upon the scheme becoming effective.

Neelendra Singh: Thanks, Saurabh. I want to take this opportunity to continue our conversation on the demerger scheme. Like last quarter, we have again shared pro forma financials for both Lemon Tree Hotels and Fleur Hotels as they would appear upon the scheme becoming effective. For Lemon Tree Hotels on a pro forma basis in Q1 2027, revenue stood at INR 65.7 crores versus INR 54 crores in Q1 last year, which is up 22%. Net EBITDA before provision for Stock Appreciation Rights was INR 38.1 crores versus INR 29.3 crores, and net EBITDA margin improved to 58.1% from 54.2%, up 383 basis points. PBT after share of profit of associates was INR 46.3 crores versus INR 38.4 crores, up 21%. PAT was INR 33.6 crores versus INR 27.5 crores, up 22%, and cash profit was INR 40 crores versus INR 30.5 crores, up 31%. For Fleur Hotels, on a pro forma basis, Q1 2027 revenue stood at INR 311.4 crores versus INR 292 crores, up 7%.

Patanjali Keswani: Thanks, Saurabh. I want to take this opportunity to continue our conversation on the demerger scheme. Like last quarter, we have again shared pro forma financials for both Lemon Tree Hotels and Fleur Hotels as they would appear upon the scheme becoming effective. For Lemon Tree Hotels on a pro forma basis in Q1 2027, revenue stood at INR 65.7 crores versus INR 54 crores in Q1 last year, which is up 22%. Net EBITDA before provision for Stock Appreciation Rights was INR 38.1 crores versus INR 29.3 crores, and net EBITDA margin improved to 58.1% from 54.2%, up 383 basis points.

Speaker #3: For Lemon Tree, on a proforma basis in Q1 2027, revenue stood at ₹65.7 crore versus ₹54 crore in Q1 last year, which is up 22%.

Speaker #3: Net EBITDA before provision for stock appreciation rights was ₹38.1 crore, versus ₹29.3 crore, and net EBITDA margin improved to 58.1% from 54.2%, up 383 basis points.

Speaker #3: PBT after share of profit of associates was ₹46.3 crore versus ₹38.4 crore, up 21%. PAC was ₹33.6 crore versus ₹27.5 crore, up 22%, and cash profit was ₹40 crore versus ₹30.5 crore, up 31%.

Patanjali Keswani: PBT after share of profit of associates was INR 46.3 crores versus INR 38.4 crores, up 21%. PAT was INR 33.6 crores versus INR 27.5 crores, up 22%, and cash profit was INR 40 crores versus INR 30.5 crores, up 31%. For Fleur Hotels, on a pro forma basis, Q1 2027 revenue stood at INR 311.4 crores versus INR 292 crores, up 7%.

Speaker #3: For FLEO, on a proforma basis, Q1 2027 revenue stood at ₹311.4 crores versus ₹292 crores, up 7%. Net EBITDA, without GST impact, was ₹125.1 crores versus ₹114 crores, up 10%, with a margin of 40.2%.

Neelendra Singh: Net EBITDA without GST impact was INR 125.1 crores versus INR 114 crores, up 10%, with a margin of 40.2%, up 112 basis points from 39.1%. PBT was INR 46.5 crores versus INR 35.5 crores, up 31%, and PAT was INR 34.7 crores versus INR 28.3 crores, up 23%. Cash profit was INR 68.4 crores versus INR 61 crores, up 12%.

Patanjali Keswani: Net EBITDA without GST impact was INR 125.1 crores versus INR 114 crores, up 10%, with a margin of 40.2%, up 112 basis points from 39.1%. PBT was INR 46.5 crores versus INR 35.5 crores, up 31%, and PAT was INR 34.7 crores versus INR 28.3 crores, up 23%. Cash profit was INR 68.4 crores versus INR 61 crores, up 12%. With this, we come to the end of our opening remarks, and we'll ask the moderator to open the forum for the questions that you may have.

Speaker #3: An improvement of 112 basis points from 39.1%. PBT was ₹46.5 crores versus ₹35.5 crores, up 31%, and PAT was ₹34.7 crores versus ₹28.3 crores, up 23%.

Speaker #3: Cash profit was ₹68.4 crore versus ₹61 crore, up 12%. With this, we come to the end of our opening remarks, and we'll ask the moderator to open the forum for questions you may have.

Patanjali Keswani: With this, we come to the end of our opening remarks, and we'll ask the moderator to open the forum for the questions that you may have.

Speaker #1: Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and 1 on the touchtone telephone.

Operator: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to please use handsets while asking a question. Ladies and gentlemen, we will now wait for a moment while the question queue assembles. Our first question is from the line of Archana Gudde with IDBI Capital. Please go ahead.

Speaker #1: If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to please use handsets while asking a question.

Speaker #1: Ladies and gentlemen, we will now wait for a moment. While the question queue assembles, our first question is from the line of Archana Gude, with IDBI Capital.

Speaker #1: Please go ahead.

Speaker #5: Hi, thank you for the opportunity. I have a few questions, starting with Keys. With 19% record growth, Keys is surely outperforming the flagship brands.

Archana Gudde: Hi. Thank you for the opportunity. I have a few questions, starting with the Keys. With 19% RevPAR growth, the Keys is surely outperforming the flagship brands. Does it match with the growth we envisaged before we took the renovation, or there is more to look at it in the upcoming quarters? That's my first question.

Archana Gude: Hi. Thank you for the opportunity. I have a few questions, starting with the Keys. With 19% RevPAR growth, the Keys is surely outperforming the flagship brands. Does it match with the growth we envisaged before we took the renovation, or there is more to look at it in the upcoming quarters? That's my first question.

Speaker #5: So does it match with the growth we envisaged before we took the renovation, or is there more to look at in the upcoming quarter?

Speaker #5: So that's my first question.

Speaker #3: Should I ask?

Patanjali Keswani: Should I answer? Yeah, sure. Keys, what we said about a year and a half, two years ago when we started the renovation was that we're targeting Keys to achieve Red Fox ARR, which is, if I remember right, INR 4,500, and we are close to that now. However, Keys is still a work in progress. The full renovation, we will be renovating many more rooms this year. We expect that next year Keys will operate to full performance, which means the occupancies will be close to the Lemon Tree average occupancies, and the ARR will continue to improve, and will reflect the full performance. Basically, I said we are targeting an INR 60 crore EBITDA from Keys, and I think that is something that we will achieve. All I will add, Archana, quickly is that Keys, almost 75% of the portfolio is now renovated.

Patanjali Keswani: Should I answer?

Speaker #4: Yeah, sure.

Neelendra Singh: Yeah, sure.

Speaker #3: So, Keys, what we said about a year and a half, two years ago, when we started the renovation, was that we're targeting Keys to achieve Red Fox ARRs, which was, if I remember right, 4,500 rupees, and we are close to that now.

Patanjali Keswani: Keys, what we said about a year and a half, two years ago when we started the renovation was that we're targeting Keys to achieve Red Fox ARR, which is, if I remember right, INR 4,500, and we are close to that now. However, Keys is still a work in progress. The full renovation, we will be renovating many more rooms this year. We expect that next year Keys will operate to full performance, which means the occupancies will be close to the Lemon Tree average occupancies, and the ARR will continue to improve, and will reflect the full performance. Basically, I said we are targeting an INR 60 crore EBITDA from Keys, and I think that is something that we will achieve.

Speaker #3: However, Keys is still a work in progress. With the full renovation, we will be renovating many, many more rooms this year. So we expect that next year, Keys will operate at full performance, which means the occupancies will be close to the Lemon Tree average occupancies, and the ARR will continue to improve and will reflect the full performance.

Speaker #3: Basically, I have said we are targeting a ₹60 crore EBITDA from Keys, and I think that is something that we will achieve.

Speaker #4: And all I would add, Archana, quickly, is that nearly 75% of the portfolio is now renovated. The interesting thing is, and we've talked about this in earlier calls as well, that the hotels that got renovated earlier, a.k.a.

Neelendra Singh: All I will add, Archana, quickly is that Keys, almost 75% of the portfolio is now renovated. The interesting thing is, we've talked about this in the earlier calls as well, that the hotels that got renovated earlier, aka our Pimpri property, our Whitefield property, are showing results of that renovation. It's a very neat, sharp product, and the high-quality renovation shows its impact both in occupancy as well as ARR. Therefore, we're not only able to price it better but also get more rooms filled post-renovation. That today is visible across the portfolio of 7 hotels, and that's why as a portfolio, it could deliver a 19% RevPAR increase over last year.

Patanjali Keswani: The interesting thing is, we've talked about this in the earlier calls as well, that the hotels that got renovated earlier, aka our Pimpri property, our Whitefield property, are showing results of that renovation. It's a very neat, sharp product, and the high-quality renovation shows its impact both in occupancy as well as ARR. Therefore, we're not only able to price it better but also get more rooms filled post-renovation. That today is visible across the portfolio of 7 hotels, and that's why as a portfolio, it could deliver a 19% RevPAR increase over last year.

Speaker #4: Our Q3 property, our Whitefield property, are showing results of that renovation. It's a very neat, sharp product, and the high-quality renovation shows its impact both in occupancy as well as ARR. Therefore, we're not only able to price it better but also get more rooms filled post-renovation, and that is today visible across the portfolio of seven hotels. That's why, as a portfolio, it could deliver a 19% RevPAR increase over last year.

Speaker #5: Right. Just to follow up on this, what would be the operating expenses for Keys renovation this year? I think we'll be completing everything by this year-end, right?

Archana Gudde: Right. Just to follow up on this, what would be operating expenses for Keys renovation this year? I think we'll be completing everything by this year-end, right?

Archana Gude: Right. Just to follow up on this, what would be operating expenses for Keys renovation this year? I think we'll be completing everything by this year-end, right?

Speaker #3: So, the operating expenses will depend on which part of the portfolio. For those hotels that are going for a full renovation and a complete upgrade, we’re keying Q3, which cost roughly ₹11 crore.

Patanjali Keswani: The operating expenses will be depending on which part of the portfolio. Those hotels that are going for a full renovation and a complete upgrade were Keys Pimpri, which cost roughly INR 11 crores. Then it was Keys Whitefield, which would have cost us about INR 23 crores. These are over. Now we are investing in the second-level Keys. We finished Keys Ludhiana. We are now doing Keys Cochin, Keys Trivandrum, and Keys Vizag, which will be at about INR 4 to 5 lakhs a key. I would say that we would end up when we finish the full portfolio, the balance spend on 300 rooms would be about INR 13, 14 crores.

Speaker #3: And then it was Keys Whitefield, which would have cost us about ₹23 crore. So these are over. Now we are investing in the second-level Keys.

Speaker #3: So we finished Keys Ludhiana, we are now doing Keys Cochin, Keys Trivandrum, and Keys Vizag, which will be at about ₹4 to ₹5 lakhs a key.

Speaker #3: So I would say that we would end up, when we finish the full portfolio, the balance spent on 300 rooms would be about ₹1,340 crores.

Speaker #5: Sure. One more question. We have done extremely well in some of the key markets, like Delhi, Pune, and Hyderabad, in terms of occupancy. But at the same time, in Mumbai and Gurgaon, we couldn't do that well.

Archana Gudde: Sure. One more question. We have done extremely well in some of the key markets like Delhi, Pune has abundant in terms of occupancy. At the same time, Mumbai and Gurgaon couldn't do that well. For the markets which did well, was that a few events which led to this kind of growth? Or how we should look at it as a sustainable number going forward? What's your outlook on the Bombay and Gurgaon market going forward?

Archana Gude: Sure. One more question. We have done extremely well in some of the key markets like Delhi, Pune has abundant in terms of occupancy. At the same time, Mumbai and Gurgaon couldn't do that well. For the markets which did well, was that a few events which led to this kind of growth? Or how we should look at it as a sustainable number going forward? What's your outlook on the Bombay and Gurgaon market going forward?

Speaker #5: So, for the markets where we did well, was that due to a few events which led to this kind of growth, or should we look at it as a sustainable number going forward? And what's your outlook on the Bombay and Gurgaon markets going forward?

Speaker #3: Yeah, sure. Thanks, Archana. I think the answer broadly—let me summarize the big impact we had in Q1, which is what most of the hospitality industry, let's say, experienced, which is the West Asia conflict.

Patanjali Keswani: Yeah. Sure. Thanks, Archana. I think the answer broadly, let me summarize the big impact we had in Q1, which is what most of the hospitality industry-

Archana Gudde: Right

Archana Gude: Right

Patanjali Keswani: let's say, experienced, which is the West Asia conflict. The biggest effect of that was, of course, lesser inbound traffic and the uncertainty. That had second-order effects. In our segment, that translated largely towards lesser domestic travel as a second-order effect of less inbound travel. We saw that corporate demand in most of our high-density CBD locations like Bombay, even Hyderabad and Bangalore, declined. There was lesser travel in, let's say, our corporate segment. There was lesser hiring, there was lesser relocation, and hence it was pretty clear in early April that this segment would typically will be softer as companies were tightening their belts on travel and T&E expenses, or just traveling less. This, therefore, in many cases, was compensated by our retail strategy.

Speaker #3: That led to multiple—the biggest effect of that was, of course, lesser inbound traffic and the uncertainty. Now, that had second-order effects, and in our segment, that translated largely towards lesser domestic travel as a second-order effect of less inbound travel.

Speaker #3: And we saw that corporate demand in most of our high-density CBD locations, like Bombay, even Hyderabad and Bangalore, declined. There was less travel in, let's say, our segment—our corporate segment.

Speaker #3: There was lesser hiring. There was lesser relocation. And hence, there was we did pretty clear in the early April that this segment would typically will be softer as companies who are tightening their belts on travel and expenses and just traveling less.

Speaker #3: This, therefore, in many cases, was compensated by our retail strategy. So we amped up our, let's say, our ability to fill our hotels through retail because of the softness in corporate demand.

Patanjali Keswani: We amped up, let's say, our ability to fill our hotels through retail because of the softness in corporate demand. I'm now answering your question. In cities like Delhi, Hyderabad, and Bangalore, we could more than compensate the decline in corporate traffic that came through because of West Asia conflict. In Bombay, we couldn't, and in Gurgaon, we couldn't. Hence, essentially, you would see the softness in Bombay and Gurgaon market, whereas Delhi, Bangalore, and Hyderabad continue to do well. Also, there is still the lag effect of the 2,000 new rooms that have opened in the micro market of Bombay near the airport in the last two years, and that supply is still being absorbed. There were some Novotel and some Radisson and some other brands that opened, and put together, there were 2,000 rooms.

Speaker #3: In cities like—I'm now answering your question—in cities like Delhi, Hyderabad, and Bangalore, we could more than compensate for the decline in corporate traffic that came through because of the West Asia conflict.

Speaker #3: In Bombay, we couldn't. And in Gurgaon, we couldn't. And hence, essentially, you would see the softness in the Bombay and Gurgaon markets. Whereas Delhi, Bangalore, and Hyderabad continue to do well.

Speaker #4: Also, there is still the lag effect of the 2,000 new rooms that have opened in the micro market of Bombay, near the airport, in the last two years, and that supply is still being absorbed.

Speaker #4: So there were some Novotels and some Radissons and some other brands that opened. And put together, there were 2,000 rooms. But Bombay is such a market that when supply injections happen on this scale, there might be a temporary mismatch between supply and demand, but it catches up very rapidly.

Patanjali Keswani: There were some Novotel and some Radisson and some other brands that opened, and put together, there were 2,000 rooms. Bombay is such a market that when supply injections happen on this scale, there might be a temporary mismatch between supply and demand, but it catches up very rapidly. I think you'll see that even with us in these quarters going forward, the catch-up.

Patanjali Keswani: Bombay is such a market that when supply injections happen on this scale, there might be a temporary mismatch between supply and demand, but it catches up very rapidly. I think you'll see that even with us in these quarters going forward, the catch-up.

Speaker #4: And I think you'll see that even with us in these quarters, going forward.

Speaker #3: The catch-up.

Speaker #5: Sure. So on this, maybe just lastly, one more question: How was the situation in July and the first ten days of August? Was there some improvement over Q1 in terms of demand?

Archana Gudde: Sure. On this, maybe just last, I'll squeeze one more question. How was the situation in July and first 10 days of August? Some improvement over Q1 in terms of demand?

Archana Gude: Sure. On this, maybe just last, I'll squeeze one more question. How was the situation in July and first 10 days of August? Some improvement over Q1 in terms of demand?

Speaker #3: Absolutely. I think Q1 sounds like everybody caught a little bit of a cold. Q2 is significantly better. And July was great. Good recovery in July.

Patanjali Keswani: Absolutely. I think Q1 sounds like everybody caught a little bit of a cold. Q2 is significantly better. July was great. A good recovery in July. August continues to be solid as well.

Speaker #3: And August continues to be solid as well.

Speaker #5: Sure. That was really helpful. Thank you, and all the best, sir. Thank you.

Archana Gudde: Sure. That was really helpful. Thank you and all the best, sir. Thank you.

Archana Gude: Sure. That was really helpful. Thank you and all the best, sir. Thank you.

Speaker #3: Thank you.

Patanjali Keswani: Thank you.

Speaker #1: Thank you. Our next question is from the line of Achal Kumar with HSBC. Please go ahead.

Operator: Thank you. Our next question is from the line of Achal Kumar with HSBC. Please go ahead.

Speaker #5: Yeah, hi. Thanks for taking my question. The first one is on ARR. So, ARR in this quarter was up only 2%, despite 19% growth in keys.

Achal Kumar: Yeah, hi. Thanks for taking my question. The first one on ARR. ARR in this quarter was up only 2% despite 19% growth in Keys. What's going on? I understand that probably you guys dropped the rates to boost occupancy. Is that the strategy we should expect going forward, or are you going to change that strategy and boost the ARR? I just want to understand a bit of flavor on that, please.

Speaker #5: So, what's going on? I understand that you probably dropped the rates to boost occupancy. Is that the strategy we should expect going forward, or are you going to change that strategy and boost the ARR?

Speaker #5: So I just want to understand a bit of the flavor on that, please.

Speaker #3: Yeah, so sure, Achal, and good to hear you again. You're right. When we, and I'm going back to what I said to Archana, when in early April—in fact, as early as March—we could understand that corporate demand, both inbound-led demand and domestic travel, would be affected.

Patanjali Keswani: Yeah. Sure, Achal, and good to hear you again. You're right. I'm going back to what I said to Archana. When in early April, in fact, as early as March, we could understand that corporate demand, both inbound-led demand and domestic travel both will be affected. We had to pivot to fill in the rooms through our retail channels. They come at a lesser net ARR in that sense, and hence you would see that when we deploy a more volume retail-based strategy, the occupancy looks so much better in Q1 versus last year, but at the cost of ARR, you're right. I would say this is temporary. This was undertaken largely to react to the swing or to the situation that we had in Q1.

Speaker #3: We had to pivot to filling the rooms through our retail channels. They come at a lesser net ARR in that sense, and hence you would see that when we deploy a more volume, retail-based strategy, the occupancy looks so much better in Q1 versus last year.

Speaker #3: But at the cost of ARR. You're right. So this is but I would say this is temporarily. This was undertaken largely to react to the ensuing or to the situation that we had in Q1.

Patanjali Keswani: I would say this is temporary. This was undertaken largely to react to the swing or to the situation that we had in Q1. We're back to a more balanced approach in July, August, and that's the way to look at it, to be able to drive ARRs higher and maintain our strength in occupancy as well. Temporary, of course, in Q1.

Speaker #3: We went back to a more balanced approach in July and August, and that's the way to look at it to be able to drive ARRs higher and maintain our strength in occupancy as well.

Patanjali Keswani: We're back to a more balanced approach in July, August, and that's the way to look at it, to be able to drive ARRs higher and maintain our strength in occupancy as well. Temporary, of course, in Q1.

Speaker #3: So, temporarily, of course, in Q1.

Speaker #5: Okay. So you mean from Q2 onward, we should expect a change in the strategy, right?

Achal Kumar: Okay. You mean from the Q2 onward, we should expect the change in the strategy, right?

Speaker #3: Yes, yes. I would say, I mean, our strategy generally has been to keep our strength on occupancy and drive higher ARR premium. Q1, as you know, was an aberration for almost everybody in our segment.

Patanjali Keswani: Yes.

Achal Kumar: Okay

Patanjali Keswani: Our strategy generally has been to keep our strength on occupancy and drive higher ARR premium. Q1, as you know, was an aberration for almost everybody in our segment. Therefore, in the mid-scale segment, we had to resort to a more volume-based, retail-based strategy plan, tactical plan, rather than continue to drive ARR, which was anyway soft down.

Speaker #3: And then, therefore, in the mid-scale segment, we had to resort to a more volume-based, retail-based strategy plan—tactical plan—rather than continue to drive ARR, which was anyway softer.

Speaker #5: Right, fair enough. My second question was around your growth pipeline. You have given the growth, and you mentioned the growth pipeline for the next year.

Achal Kumar: Right. Fair enough. My second question was around your growth pipeline. You have given the growth for, you mentioned about the growth pipeline for the next year, what I'm trying to understand is that, have you sort of sketched out your growth in terms of brand-wise? Should we expect the majority of the growth in the higher-end brands, the upper-end brands, or do you expect more to the Keys? I just want to understand a bit of a flavor on that so that we can understand what kind of GST impact you continue to face, please.

Speaker #5: But what I'm trying to understand is, have you sort of sketched out your growth in terms of brand-wise? I mean, should we expect the majority of the growth in the higher-end brands, the upper-end brands, or do you expect more to do with keys?

Speaker #5: So, I just want to understand a bit of the flavor on that, so that we can understand what kind of GST impact you continue to face, please.

Speaker #3: Yes, interesting. So, I mean, you know from the pipeline that we've sort of talked about, most of them are Auroricas. So we will continue, at the top end of the business, to expand in Auroricas and in Lemon Tree in demand-dense areas or in key destinations.

Patanjali Keswani: Yes. Interesting. You know from the pipeline that Saurabh talked about, most of them are Aurika. We will continue to, at the top end of the business, continue to expand in Aurika and in Lemon Tree in demand-dense areas or in key destinations. That doesn't go away, Achal. These are areas where we'll deploy our own capital and build larger destinations. However, as we expand into tier 2, tier 3 India, we will also use Lemon Tree Hotels and Keys, both the brands to penetrate India deeper.

Speaker #3: That doesn't go away, Achal. These are areas where we'll deploy our own capital and build larger destinations. However, as we expand into Tier 2, Tier 3 India, we will also use Lemon Tree Hotels and Keys, both the brands, to penetrate India deeper.

Speaker #3: So, on the asset-light side, I would say the approach towards, let's say, expansion is two-pronged. One, to continue to, let's say, use our upper mid-scale brands and upper-scale brands to penetrate in demand-dense areas.

Achal Kumar: Okay.

Patanjali Keswani: On the asset-light side. I would say the approach towards, let's say expansion is two-pronged. One, to continue to, let's say, use our upper mid-scale brands and upper upper-scale brands to penetrate in demand-dense areas, and use our mid-scale brands, aka Lemon Tree Hotels and Keys portfolio to penetrate deeper into India.

Speaker #3: And use our mid-scale brands, a.k.a. Lemon Tree Hotel and Keys portfolio, to penetrate deeper into India.

Speaker #5: Okay. Fair enough.

Achal Kumar: Okay. Fair enough.

Speaker #2: Regarding capital deployment last quarter, we had said that we are pursuing rooms of around 2,500 keys. That pursuit is still on, and we are very hopeful to achieve that in the coming quarters.

Saurabh Shatdal: Sorry, Achal, this is Saurabh here. Just to add on the capital deployment. Last quarter also, we had said that we are pursuing rooms of around 2,500 keys. That pursuit is still on, and we are very hopeful to achieve that in the few quarters ahead. We are very confident on the capital side.

Speaker #2: We are very confident on the capital side.

Speaker #4: No, I think, if I may speak for both of you—see, we are talking about two absolutely different strategies. One is the asset-light growth of Lemon Tree, which will come from signed hotels that start opening typically 30 months—as Neil mentioned in his opening remarks, from 30 to 36 months—from when they are signed.

Patanjali Keswani: No, I think, okay, Saurabh, I speak for both of you. See, we are talking about two absolutely different strategies. One is the asset-light growth of Lemon Tree, which will come from signed hotels which start opening typically 30 months, as Neil mentioned in his opening remarks, from 30 to 36 months from when they are signed. As long as the rate of growth of our signings is much more than the rate of growth of openings, it means that what we are really opening is what was signed, say, two and a half years ago. What we sign now, we will open two and a half years later. That will tell you the rate of acceleration of our asset-light side managed fee business.

Speaker #4: So, if you look, as long as the rate of growth of our signings is much more than the rate of growth of openings, it means that what we are really opening is what was signed, say, two and a half years ago.

Speaker #4: And what we are going to sign now, we will open two and a half years later. So that will tell you the rate of acceleration of our asset-light, managed-fee business.

Speaker #4: Now, if you overlay that with the fact that FLIR is now growing fairly aggressively, we will have, I'm pretty sure, in the next few months, a bunch of announcements regarding the acquisitions and developments we are going to be doing.

Patanjali Keswani: Now, if you overlay that with the fact that Fleur is now growing fairly aggressively and we will have, I'm pretty sure, in the next few months, a bunch of announcements as to the acquisitions/developments we are going to be doing. That will add further fee income to Lemon Tree. It's the combination of the two that we are looking at from Lemon Tree's perspective as to where it will be in the next year and the years ahead. We have a fairly clear line of sight. If those of you who are interested, look at what we signed in 2023. You will find that we opened it this year. What we signed in 2024 will open, starting, in fact, end of this year. What we sign in 2025 will be opened a year after that. The fee income stream is fairly clearly defined.

Speaker #4: That will add further fee income to Lemon Tree, and it's the combination of the two that we are looking at from Lemon Tree's perspective as to where it will be in the next year and the years ahead.

Speaker #4: We have a fairly clear line of sight. If those of you who are interested look at what we signed in 2023, you will find that we opened it in this year.

Speaker #4: What we signed in '24 will open starting, in fact, at the end of this year. And what we sign in '25 will be opened a year after that.

Speaker #4: So, the fee income stream is fairly clearly defined. All we have to overlay on that is, within the third-party-owned hotels, the quality of the fees.

Patanjali Keswani: All we have to overlay on that is within the third party-owned hotels is the quality of the fees. If it's a tier 1 city or a metro, then the fees are much higher than those in tier 2, and that is higher than those in tier 3, and so on. We have a whole model on this as it happens, and we have a fairly clear line of sight as to where the fee income of Lemon Tree will be over the next three to four years, because that's based on the signings that we have as at present. Overlay that with the fees that we will earn from current and future hotels of Fleur, then you have the aggregate of the two. That too is an interesting number.

Speaker #4: So, if it's a Tier 1 city or a metro, then the fees are much higher than those in Tier 2. And those are higher than those in Tier 3, and so on.

Speaker #4: So we have a full model on this as it happens, and we have a fairly clear line of sight as to where the fee income of Lemon Tree will be.

Speaker #4: Over the next three to four years, because that's based on the signings that we have as at present. Overlay that with the fees that we will earn from current and future hotels of FLIR, and then you have the aggregate of the two.

Speaker #4: And that, too, is an interesting number. I think, over the next 8 to 12 quarters, you will start seeing an acceleration in the fee income of Lemon Tree.

Patanjali Keswani: I think over the next eight to 12 quarters, you will start seeing acceleration in the fee income of Lemon Tree.

Speaker #5: Right. Fair enough. My final question is around the sort of strategy. Of course, in terms of debt, in terms of ROCe, so while the picture around the Lemon Tree looks pretty bright, it's an asset-light model, you'll have very healthy margins, very healthy ROCe, and then probably the dividends.

Achal Kumar: Right. Fair enough. My final question is around the sort of strategy, of course, in terms of debt, in terms of ROCE. While the picture around the Lemon Tree looks pretty bright, it's an asset-light model. You'll have very healthy margins, very healthy ROC, and then probably the dividends. On the Fleur side, aren't you worried about if the model is only asset heavy? Aren't you worried about at some point of time you will be very debt heavy and all that? Do you think you're comfortable with that, or do you think at some point of time, Fleur could also change the model and could think about doing some asset light? Any color on that, please?

Speaker #5: But on the FLIR side, aren't you worried if the model is only asset-heavy? So, aren't you concerned that at some point you will be very debt-heavy and all that?

Speaker #5: So do you think you're comfortable with that, or do you think at some point in time FLIR could also change the model and consider doing something asset-light?

Speaker #5: So, any color on that, please?

Speaker #4: Yeah, sure. See, the very purpose of separating the two is to have two different kinds of companies, with two different mandates and two different risk-return profiles.

Patanjali Keswani: Yeah, sure. See, the very purpose of separating the two is to have two different kinds of companies with two different mandates and two different risk-return profiles. Fleur is a company that will be only focused on asset creation, whether it is through development or through acquisitions. The only asset-light side of Fleur's business, if we are using the word asset light in an asset-heavy business, is through leases. When Fleur leases a hotel, think of it very simply as follows. If a hotel today costs INR 1.5 crores a key, including land, a 200-room hotel costs INR 300 crores. The way to look at leases, that we will basically put in maybe 5% to 10% of the capital when we take a hotel, maybe more, depending on what the agreement is, but we will typically take 50% to 60% of the EBITDA. Think of it this way.

Speaker #4: FLIR is a company that will be only focused on asset creation, whether it is through development or through acquisition. The only asset-light side of FLIR's business, if we are using the word asset-light in an asset-heavy business, is through leases.

Speaker #4: So, when FLIR leases a hotel, think of it very simply as follows: if a hotel today costs one and a half crores a key, including land, a 200-room hotel costs 300 crores.

Speaker #4: So, the way to look at leases is that we will basically put in maybe 5 to 10 percent of the capital when we take a hotel—maybe more, depending on what the agreement is.

Speaker #4: But we will typically take 50 to 60 percent of the EBITDA. So, think of it this way: a ₹300 crore hotel making ₹35 crore or ₹40 crore of EBITDA— we invest maybe ₹40 crore.

Patanjali Keswani: A INR 300 crore hotel making INR 35 crore or INR 40 crore of EBITDA, we invest maybe INR 40 crore, and we would take INR 20 crore of EBITDA, of which part goes fees to Lemon Tree, and the balance would remain with Fleur. That is the only asset-light side of Fleur. However, Fleur's return on capital is fairly meaningful even today. If I look at FY26, Fleur did after all fees a net EBITDA of INR 550 crore on a total capital deployed, if I remember right, of about INR 4,300 crore. It was about 12.5%, 13%. Once we finish the Keys renovation, once we finish the entire renovation, our expectation on Fleur is it should move towards a 15% ROCE. Lemon Tree has reported a 58 point some percent EBITDA margin. Lemon Tree's ROCE will be meaningfully higher.

Patanjali Keswani: A INR 300 crore hotel making INR 35 crore or INR 40 crore of EBITDA, we invest maybe INR 40 crore, and we would take INR 20 crore of EBITDA, of which part goes fees to Lemon Tree, and the balance would remain with Fleur. That is the only asset-light side of Fleur. However, Fleur's return on capital is fairly meaningful even today. If I look at FY 2026, Fleur did after all fees a net EBITDA of INR 550 crore on a total capital deployed, if I remember right, of about INR 4,300 crore. It was about 12.5%, 13%. Once we finish the Keys renovation, once we finish the entire renovation, our expectation on Fleur is it should move towards a 15% ROCE. Lemon Tree has reported a 58 point some percent EBITDA margin. Lemon Tree's ROCE will be meaningfully higher.

Speaker #4: And we would take ₹20 crore of EBITDA, of which part would go as fees to Lemon Tree, and the balance would remain with FLIR. So that is the only asset-light side of FLIR.

Speaker #4: However, FLIR's return on capital is fairly meaningful even today. If I look at FY26, FLIR did, after all fees, a net EBITDA of ₹550 crores on a total capital deployed, if I remember right, of about ₹4,300 crores.

Speaker #4: So it was about 12.5 to 13 percent. And once we finish the Keys renovation, once we finish the entire renovation, our expectation on FLIR is that it should move towards a 15 percent ROCE.

Speaker #4: Lemon Tree has reported a 58-point-something percent EBITDA margin. Lemon Tree's ROCE will be meaningfully higher. I don't want to comment on what the ROCE will be, because it is very simple.

Patanjali Keswani: I don't want to comment on what the ROCE will be because it is very simple. The capital deployed by Lemon Tree is marginal. It will hardly need any capital going forward other than investments made in brand and in marketing and in generative search and in tech, which is not meaningful. Its fee income will continue to accelerate. You have seen that this quarter, in spite of all the slowdowns, it has still led to, I think we've increased our supply by 15%, 16%, but the fee income has grown 42%. That is very evident that the ROCE of Lemon Tree will become very, very high, and you will see that play out, especially when we have actually given 1 point of guidance, which is our long-term plan in the next 3 years or 4 years is to have an EBITDA margin around 75% to 80%.

Speaker #4: The capital deployed by Lemon Tree is marginal. It will hardly need any capital going forward, other than investments made in brand, in marketing, in generative search, and in tech.

Speaker #4: Which is not meaningful. And its fee income will continue to accelerate. You have seen that this quarter, in spite of all the slowdowns, it has still led to—I think we've increased our supply by 15–16 percent, but the fee income has grown 42 percent.

Speaker #4: So that is very evident that the ROCE of Lemon Tree will become very, very high. And you will see that play out, especially when we have actually given one point of guidance, which is our long-term plan in the next three or four years is to have an EBITDA margin around 75 to 80 percent.

Patanjali Keswani: That is very evident that the ROCE of Lemon Tree will become very, very high, and you will see that play out, especially when we have actually given 1 point of guidance, which is our long-term plan in the next 3 years or 4 years is to have an EBITDA margin around 75% to 80%. Of a much, much, much larger base of hotels which we are managing and charging fees for. Does that answer your question?

Speaker #4: And of a much, much, much larger base of hotels, which we are managing and charging fees for. So does that answer your question?

Patanjali Keswani: Of a much, much, much larger base of hotels which we are managing and charging fees for. Does that answer your question?

Speaker #5: Yeah, that's fine. Absolutely. I have one more, but I'll come back to you. Thank you.

Achal Kumar: Yeah, that's fine. Absolutely. I have 1 more, but I'll come back into queue. Thank you.

Speaker #4: Oh, sorry, I didn't answer your debt question. We are very clear. We have broadly been looking at debt to EBITDA. Occasionally, if we are building six big hotels, which is what our plan is, debt may briefly cross two times existing EBITDA.

Patanjali Keswani: Sorry, I didn't answer your debt question.

Achal Kumar: Yeah.

Patanjali Keswani: We are very clear. We are broadly looking at debt to EBITDA. See, occasionally, we are building six big hotels, which is what our plan is. Debt may briefly cross 2x existing EBITDA. Our long-term plan is that in Fleur, debt to EBITDA should hover around two, and that's a good sign because it means we are able to productively deploy capital. If debt to EBITDA falls below 2 is to 1, you can actually ask a reverse question, which is, why are you not growing? It's a balanced approach. Right now our debt is only, I think, in Fleur about INR 1,200 crores or INR 1,100 crores. The numbers we announced excluded the cash position in Lemon Tree and Fleur, which is about INR 200 crores. Actually our debt is INR 200 crores less than what Neil said. At a group level, it is INR 1,275 crores.

Speaker #4: But our long-term plan is that, in FLIR, debt to EBITDA should hover around two. And that's a good sign because it means we are able to productively deploy capital.

Speaker #4: If debt to EBITDA falls below 2:1, you can actually ask a reverse question, which is, why are you not growing? So, it's a balanced approach.

Speaker #4: And right now, our debt is only, I think, about—in Fleur—about 1,100 or 1,200 crores. The numbers we announced excluded the cash position in Lemon Tree and Fleur, which is about 200 crores.

Speaker #4: So, actually, our debt is Rs. 200 crores less than what Neil said. At a group level, it is Rs. 1,275 crores. Is that correct, Kapil?

Patanjali Keswani: Is that correct, Kapil?

Speaker #2: Yeah. Yes.

Kapil Sharma: Yeah. Yes.

Speaker #4: And our EBITDA was 700. So, we are in that zone where there is comfort and an ability to deploy meaningful capital. Keep in mind that Warburg has to put in 960 crores.

Patanjali Keswani: Our EBITDA was INR 700 crore. We are in the zone where there is comfort and an ability to deploy meaningful capital. Keep in mind that Warburg has to put in INR 960 crore, that too will be deployed in Fleur before we list. We have, as Saurabh mentioned, a bunch of very exciting opportunities. Some of them are going through a phase where we will be able to make announcements fairly quickly. I think just wait for the next six months, you may be very pleasantly surprised.

Speaker #4: So that, too, will be deployed—in FLIR, before we list. And we have, as Sohrab mentioned, a bunch of very exciting opportunities. Some of them are going through a phase where we will be able to make announcements fairly quickly.

Speaker #4: And I think just wait for the next six months. You may be very pleasantly surprised.

Speaker #5: Perfect. Thank you, and I wish you good luck.

Achal Kumar: Awesome. Thank you and wish you good luck.

Speaker #4: Thank you. Thank you.

Patanjali Keswani: Thank you.

Speaker #5: Thank you. Our next question comes from the line of Karan Khanna with Ambit Capital. Please go ahead.

Neelendra Singh: Thank you.

Operator: Thank you. Our next question comes from the line of Karan Khanna with Ambit Capital. Please go ahead.

Speaker #3: Yeah. Hi. Thanks for the opportunity. Two questions from my side. Firstly, part two—and perhaps Sohrab, you could take this as well—following up on Mumbai performance: a couple of quarters back, you spoke about significant pricing power for Aurika Mumbai in FY27, given that the occupancies are stabilized.

Karan Khanna: Yeah. Hi. Thanks for the opportunity. Two questions from my side. Firstly, Patu and perhaps Saurabh, you could take this as well. Following up on Mumbai performance, a couple of quarters back, you spoke about significant pricing power for Aurika, Mumbai in FY27, given that the occupancies are stabilized. Obviously, since then we've had the rest Asia crisis. Fundamentally, given the performance for Mumbai this quarter, would you like to bring down the guidance for Mumbai for FY27? Will it be single-digit RevPAR this year or are you confident of double-digit RevPAR here?

Speaker #3: Obviously, since then, we've had the Rest Asia crisis. But fundamentally, given the performance for Mumbai this quarter, would you like to bring down the guidance for Mumbai for FY27?

Speaker #3: Will it be single-digit red part this year, or are you confident of double-digit red part here?

Speaker #4: See, about Audi Car Bombay—in Bombay, with the supply addition and whatever has happened, I would still say Q1 was an aberration. Q2 will be better.

Patanjali Keswani: See, about Aurika, Mumbai, in Bombay with the supply addition and whatever has happened, I would still say Q1 was an aberration. Q2 will be better. As far as the RevPAR growth goes, I think we are now kind of feel we have stabilized Aurika, so we will be focusing on the ARR of Aurika, I think you see what happens currently Q2, then we can have this conversation. Anything I say it becomes very guidance oriented. All I can say is we are focusing on pricing now.

Speaker #4: And as far as our growth goals are concerned, I think we now feel that we have stabilized Audi Car. So we will be focusing on the ARR of Audi Car.

Speaker #4: And I think you see what happens, Karan, in Q2, and then we can have this conversation. Because anything I say, it becomes very guidance-oriented.

Speaker #4: But all I can say is, we are focusing on pricing now. Yeah.

Neelendra Singh: Yeah.

Speaker #3: Sure. Sure.

Speaker #4: In fact, Neil is personally focusing on it. Would you like to give a broad comment on this, Neil?

Patanjali Keswani: In fact, Neel is personally focusing on it. Would you like to give a broad comment on this, Neel?

Speaker #3: Yeah. In my current light again, good to speak to you. I think we all believe that, and we've talked about this in the past calls as well, Karan, that the Audi car in Mumbai is now a stable brand.

Neelendra Singh: Yeah. Karan, hi again. Good to speak to you. I think we all believe that, and we've talked about this in the past calls as well, Karan, that the Aurika in Mumbai is now a stable brand. It's recognized well, and therefore at the kind of occupancies it delivers, we believe it's good time to be able to now reprice it and price it to the positioning that we want Aurika to have in that sense. Again, the current aberration notwithstanding, we will continue to drive Aurika on the price side. Aurika's pricing will look better than today, and you will see that in the RevPAR improvement going forward, for sure.

Speaker #3: It's recognized well. And therefore, at a at the kind of occupancies it delivers, we believe it's a good time to be able to now, yeah, reprice it and to price it to the position that Audi Car to the positioning that we want Audi Car to have in that sense.

Speaker #3: So again, without—I mean, the current aberration notwithstanding—we will continue to drive Audi Car on the price side. Audi Car's pricing is better than today.

Speaker #3: And you will see that in the red part—improvement going forward, for sure. Sure. And then secondly, Neil, if I look at slide 63 of the presentation, where you're targeting to open 2,000 keys in FY27, Q1, you are at 334 keys.

Karan Khanna: Sure. Secondly, Neil, if I look at slide 63 of the presentation, where you're targeting to open 2,000 keys in FY27. Q1 you are at 334 keys. Is there a risk of slippage here in terms of number of openings in FY27, or are you confident about opening all the 2,000 keys during the year?

Speaker #3: So, is there a risk of slippage here in terms of the number of openings in FY27, or are you confident about opening all the 2,000 keys during the year?

Speaker #4: Yeah. So, okay, good point, Karan. See, I mean, in this business, there's always a little bit of wash or a slippage here and there.

Neelendra Singh: Yeah. Okay, good point, Karan. See, in this business there are always a little bit of wash or a slippage here and there. Broadly, I'm pretty confident to be around the 2,000 keys mark, and things happen. From the pipeline that we have today and the kind of relationships we have with our owners, I feel largely confident unless something large falls on our heads, but 2,000 should be okay.

Speaker #4: Broadly, I'm pretty confident to be around the 2,000 keys mark, and things happen. But from the pipeline that we have today and the kind of relationships we have with our owners, I feel largely confident, unless something large falls on our head.

Speaker #4: But 2,000 should be okay.

Speaker #3: Sure. And then lastly, Sohrab, talking about FLIR, you're considering investing around ₹2,000 or ₹3,000 crores, probably at the peak of an upcycle. In FLIR post-demerger, given that one of the advantages that Lemon Tree has enjoyed in the past has always been to invest in a downturn and wait during an upcycle.

Karan Khanna: Sure. Lastly, Saurabh, talking about Fleur, you're considering to invest around INR 2,000 to 3,000 crores in probably the peak of an upcycle in Fleur post demerger. Given that one of the advantages that Lemon Tree has enjoyed in the past has always been to invest in a downturn and wait during an upcycle. Could you help us with how you are thinking about IRRs in this expansion strategy? On the INR 960 crores of capital infusion by Warburg, is there an update here on timelines?

Speaker #3: So could you help us with how you're thinking about IRRs in this expansion strategy? And on the ₹960 crore capital infusion by Warburg, is there an update here on the timelines?

Speaker #4: So thank you, Karan, for your question. From an investment timeline perspective, we would deploy capital based on what we assess to be the best opportunity, given our internal evaluation of the ROCE and what we want to go forward with.

Patanjali Keswani: Thank you, Karan, for your question. From an investment timeline perspective, we would deploy given what we get as the best opportunity, given our internal assessment of the ROC, what we want to go forward with. There is no hurry. We want to deploy capital at the right strategy, at the right locations, and where we see that our capital deployment gets us the right return. From an upside investment perspective, we are still focused on markets which have deep demand in the top six, seven cities in India. That is where we want to chase our opportunities. The markets which are closer to India, 3 to 5 hours journey from India, where lot of Indians are still traveling overseas.

Saurabh Shatdal: Thank you, Karan, for your question. From an investment timeline perspective, we would deploy given what we get as the best opportunity, given our internal assessment of the ROC, what we want to go forward with. There is no hurry. We want to deploy capital at the right strategy, at the right locations, and where we see that our capital deployment gets us the right return. From an upside investment perspective, we are still focused on markets which have deep demand in the top six, seven cities in India. That is where we want to chase our opportunities. The markets which are closer to India, 3 to 5 hours journey from India, where lot of Indians are still traveling overseas.

Speaker #4: So there is no hurry. We want to deploy capital in the right strategy, at the right locations, and where we see that our capital deployment gets healthy and the right return.

Speaker #4: So, from an upside investment perspective, we are still focused on markets which have deep demand in the top six or seven cities in India. That is where we want to chase our opportunities.

Speaker #4: And the markets which are closer to India, three- to five-hour journey from India, where a lot of Indians are still traveling overseas. And we see that also as an upside going forward in the next two, three, five years, given the size of the economy and growth of the per capita income.

Patanjali Keswani: We see that also as an upside going forward in the next 2, 3, 5 years given the size of the economy and growth of the per capita income. Those are 2 larger strategies and some of the leisure locations which are upcoming like temple tourism or some of the other tourism where Indians are traveling. These 3 are focus strategies from an investment. Like Patu said,

Saurabh Shatdal: We see that also as an upside going forward in the next 2, 3, 5 years given the size of the economy and growth of the per capita income. Those are 2 larger strategies and some of the leisure locations which are upcoming like temple tourism or some of the other tourism where Indians are traveling. These 3 are focus strategies from an investment. Like Patu said,

Speaker #4: So those are two of our larger strategies. And some of the leisure locations that are upcoming, like temple tourism or some of the other types of tourism where Indians are traveling.

Speaker #4: So, these three are focused strategies from an investment perspective. And like Part 2 said, all would not just be pure investments—some of them would be brownfield.

Saurabh Shatdal: All would be not just be a pure investment. Some of them would be brownfield, some of them would be operating assets between 6 to 8 multiples, what we will look at buying, and some would be deep demand greenfield assets. Also for better returns, some of them will be long lead buildings which we will take in either a brownfield or an operating asset or a greenfield. Mix of all these profile strategies with a full focus on the return on capital is what our strategy is, given Warburg is giving us INR 960 crore and some kind of INR 200 to 300 crore of balance sheet money, which we currently have.

Speaker #4: Some of them would be operating assets, between six to eight multiples, which we will look at buying. And some would be deep demand, greenfield assets.

Speaker #4: And also, for better returns, some of them will be long-leased buildings, which we will take in—either a brownfield, an operating asset, or a greenfield.

Speaker #4: But a mix of all these four or five strategies, with a full focus on the return on capital, is what our strategy is. Given Warburg is giving us ₹960 crore and some ₹200–₹300 crore of balance sheet money, which we currently have.

Karan Khanna: Great.

Speaker #4: And let me add to that for Karan. We are not in an upcycle. We are not in an upcycle. The India occupancy is still in the mid-sixties.

Karan Khanna: Let me add to that for a minute. Let me add, Karan.

Patanjali Keswani: Let me add to that for a minute. Let me add, Karan.

Saurabh Shatdal: Sure.

Karan Khanna: Sure.

Saurabh Shatdal: We are not in an upcycle. The India occupancy is still mid-sixties. I don't know why people say we are in an upcycle. An upcycle is defined when India occupancies cross 70%, 72%.

Patanjali Keswani: We are not in an upcycle. The India occupancy is still mid-sixties. I don't know why people say we are in an upcycle. An upcycle is defined when India occupancies cross 70%, 72%. At the rate of growth of our economy, I think we will be in an upcycle next year or the year following. Deployment of capital in demand-dense markets means actually, the level of volatility in a demand-dense market, whether it's a down-cycle, mid-cycle, up-cycle, is much, much less because by definition, a demand-dense market is supply constrained. That's the reason why it's demand-dense.

Speaker #4: And I do not—I don't know why people say we are in an upcycle. An upcycle is defined when India occupancy has crossed 70, 72 percent.

Speaker #4: At the rate of growth of our economy, I think we will be in an upcycle next year or the year following. So, deployment of capital in demand-dense markets means actually the level of volatility in a demand-dense market, whether it's a downcycle, mid-cycle, or upcycle, is much, much less.

Patanjali Keswani: At the rate of growth of our economy, I think we will be in an upcycle next year or the year following. Deployment of capital in demand-dense markets means actually, the level of volatility in a demand-dense market, whether it's a down-cycle, mid-cycle, up-cycle, is much, much less because by definition, a demand-dense market is supply constrained. That's the reason why it's demand-dense. There is more demand than supply. I'll give you a classic example of this. A demand-dense market is Outer Ring Road, Bangalore. A demand-dense market is BKC, Mumbai. A demand-dense market is where we have 1,000 rooms which is near the airport in Mumbai. That in spite of 2,000 rooms coming in, still the occupancy in that market is in the early 70s.

Speaker #4: Because by definition, a demand-dense market is supply-constrained. That's the reason why it's demand-dense. There is no demand and supply. And I'll give you a classic example of this.

Patanjali Keswani: There is more demand than supply. I'll give you a classic example of this. A demand-dense market is Outer Ring Road, Bangalore. A demand-dense market is BKC, Mumbai. A demand-dense market is where we have 1,000 rooms which is near the airport in Mumbai. That in spite of 2,000 rooms coming in, still the occupancy in that market is in the early 70s.

Speaker #4: A demand-dense market is Outer Ring Road, Bangalore. A demand-dense market is DKC, Bombay. A demand-dense market is where we have 1,000 rooms, which is near the airport in Bombay.

Speaker #4: That, in spite of 2,000 rooms coming in, still the occupancy in that market is in the early seventies. So there may be a small—one may say that if we are targeting a ROCE of 16 percent post-fees, in a situation of high supply coming in, in a demand-dense market, it means expensive supply has come in, which is why these markets have moats.

Patanjali Keswani: There may be a small One may say that if we are targeting a ROCE of 16% post fees, in a situation of high supply coming in in a demand-dense market, it means expensive supply has come in, which is why these markets have moats which are basically cost-led or capital-deployed-led. We are fairly confident based on our ability to attract customers to our brand, that we will perform well in these markets. We don't really consider bottom of cycle, middle of cycle, top of cycle. We look at how we are performing and say, Look, this is what we think we'll deliver. We know our cost structure, we know the kind of revenues we can generate, and it is on that basis of knowledge that we make capital allocation decisions.

Speaker #4: Which are basically cost-led or capital deployment-led. And we are fairly confident, based on our ability to attract customers to our brand, that we will perform well in these markets.

Speaker #4: And we don't really consider bottom-of-cycle, middle-of-cycle, or top-of-cycle. We look at how we are performing and say, "Look, this is what we think we'll deliver."

Speaker #4: We know our cost structure. We know the kind of revenues we can generate. And it is on that basis of knowledge that we make capital allocation decisions.

Speaker #3: Sure. Very helpful, part two.

Saurabh Shatdal: Sure. Very helpful.

Speaker #4: And the debt is always taken. And the debt is always taken, assuming downcycle conditions, for a margin of safety. That's it.

Patanjali Keswani: The debt is always taken assuming down cycle conditions for a margin of safety. That's it.

Speaker #3: Great, very helpful. Part two. I'll come back in with you for follow-ups. Thank you.

Karan Khanna: Great. Very helpful, Parthoo. I'll come back in with you for follow-ups. Thank you.

Speaker #4: Thank you.

Patanjali Keswani: Thank you.

Speaker #1: Thank you. Our next question is from the line of Sameet Sinha with Macquarie. Please go ahead.

Operator: Thank you. Our next question is from the line of Sameep Sinha with Macquarie. Please go ahead.

Speaker #5: Yes, sir. Thank you very much. So, part two, picking up on what you’re talking about—the management fee. Clearly, good performance there. I think everyone’s waiting for the compounding to start in that business.

Sameep Sinha: Yes. Thank you very much. Parthoo, picking up on what you are talking about the management fee, clearly good performance there. I think everyone is waiting for the compounding to start in that business. We saw year over year average revenue per room up 12%. For the last 3 quarters it was negative. Should we assume that it will stay in this kind of range going forward now on a sustainable durable basis? I understand that in your business there is suddenly a new batch of rooms, a new batch of cohort of rooms comes in and suddenly that number could go down. Do you think, if you could give us a sense of how that line will compound? I have a couple of follow-up questions.

Sameet Sinha: Yes. Thank you very much. Parthoo, picking up on what you are talking about the management fee, clearly good performance there. I think everyone is waiting for the compounding to start in that business. We saw year over year average revenue per room up 12%. For the last 3 quarters it was negative. Should we assume that it will stay in this kind of range going forward now on a sustainable durable basis? I understand that in your business there is suddenly a new batch of rooms, a new batch of cohort of rooms comes in and suddenly that number could go down. Do you think, if you could give us a sense of how that line will compound? I have a couple of follow-up questions.

Speaker #5: We saw year-over-year average revenue per room up 12 percent for the last three quarters. It was negative. Should we assume that it will stay in this kind of range going forward now, on a sustainable, durable basis?

Speaker #5: I understand that in your business, it's suddenly a new batch of rooms—a new cohort of rooms comes in—and suddenly that number could go down.

Speaker #5: But do you think you could give us a sense of how that line would compound? Then I have a couple of follow-up questions.

Speaker #4: Certainly, we are not happy with Q1 performance. We feel we could have done better. But from Q2 onwards, we are definitely going to look at double-digit growth numbers.

Patanjali Keswani: See, certainly we are not happy with Q1 performance. We feel we could have done better. Q2 onwards, we are definitely going to look at double digit growth numbers. Okay? That is as a company. As far as management fees go, the minute we hit double digits, say in Fleur, then the management fee from Fleur also hits double digits, and Fleur still accounts for 56% of our network revenue. If Fleur is growing well, it is a virtuous cycle. The better Fleur grows, the better our fee income from Fleur grows. Third party is a different ballgame. It is growing very rapidly. I think I have said this before, that the rate of growth of operational rooms in third party hotels is set to accelerate finally. If you just go back in time, 3 years ago, we signed 2,000 rooms.

Speaker #4: Okay? But that is as a company. As far as management fees go, the minute we hit double-digit, say, in FLIR, then the management fee from FLIR also hits double digits.

Speaker #4: And FLIR still accounts for 56 percent of our network revenue. So, if FLIR is growing well, it's a virtuous cycle. The better FLIR grows, the better our fee income from FLIR grows.

Speaker #4: Third party is a different ballgame. It is growing very rapidly. I think I have said this before, that the rate of growth of operational rooms in third-party hotels is set to accelerate finally.

Speaker #4: Because if you just go back in time, three years ago we signed 2,000 rooms; two years ago, we signed 3,500 rooms; last year, we signed nearly 5,000 rooms.

Patanjali Keswani: 2 years ago we signed 3,500 rooms. Last year we signed nearly 5,000 rooms. These rooms, this rate of growth of signing translates to openings 3 years out, and therefore fee income from those hotels. As long as the rate of growth of signings is significantly higher than the rate of growth of openings, it is a positive trajectory and a flywheel effect. That you are going to see very clearly in the next 2 years in Lemon Tree and of course, going forward. We are very, very optimistic about it. In fact, I should say confident. Simultaneously, Fleur will now start deploying capital which will lead ultimately to proceeds for Fleur and fee income for Lemon Tree. The sum of the two is quite exciting.

Speaker #4: So these rooms, this rate of growth of signings, translates to openings three years out. And therefore, fee income from those hotels. So, as long as the rate of growth of signings is significantly higher than the rate of growth of openings, it's a positive trajectory.

Speaker #4: And a flywheel effect. So that you are going to see very clearly in the next two years, elementary. And of course, going forward, we are very, very optimistic about it.

Speaker #4: In fact, I should say confident. And simultaneously, FLIR will now start deploying capital, which will ultimately lead to ROCEs for FLIR and fee income for Elementary.

Speaker #4: So, the sum of the two is quite exciting.

Speaker #3: And Sameet, I'll just quickly share some numbers. So between last Q1 and this Q1, we've added 1,300 rooms. And now, because last year—as compared to the preceding years—was the biggest year in terms of room additions.

Saurabh Shatdal: Sameep,

Neelendra Singh: Sameep,

Sameep Sinha: Yeah.

Sameet Sinha: Yeah.

Sameep Sinha: Just quickly share some numbers. Between last Q1 and this Q1, we've added 1,300 rooms. Now because last year was

Neelendra Singh: Just quickly share some numbers. Between last Q1 and this Q1, we've added 1,300 rooms. Now because last year was Compared to the preceding years, was the biggest year in terms of room additions, in terms of signings. This compounding is bound to happen. I'm repeating what Patu said. Till the time we continue to open or sign many more rooms than we open, and both will eventually keep growing anyway, you will start seeing this compounding. The first batch of, let's say, 1,300 rooms, which opened in this Q1 or between last Q1 and this one, just make it illustrative, at least in this quarter. You'll see similar trends in next quarter as well.

Neelendra Singh: Compared to the preceding years, was the biggest year in terms of room additions, in terms of signings. This compounding is bound to happen. I'm repeating what Patu said. Till the time we continue to open or sign many more rooms than we open, and both will eventually keep growing anyway, you will start seeing this compounding. The first batch of, let's say, 1,300 rooms, which opened in this Q1 or between last Q1 and this one, just make it illustrative, at least in this quarter. You'll see similar trends in next quarter as well.

Speaker #3: In terms of signings, this compounding is bound to happen. So, I'm repeating what was said in part two. Till the time we continue to sign many more rooms than we open, and both will eventually keep growing anyway, you will start seeing this compounding.

Speaker #3: The first 30, the first batch of, let's say, 1,300 rooms, which opened in this Q1 or between last Q1 and this one—just to make it illustrative, at least in this quarter.

Speaker #3: You'll see similar trends in the next quarter as well.

Speaker #4: No, think of it this way, Sameet. We signed 5,000 rooms last year. In FY26 and FY29, we'll open, all going well, around 5,000 rooms in Lemon Tree's portfolio of managed hotels.

Patanjali Keswani: No, think of it this way, Sameep. We signed 5,000 rooms last year, FY2026, and FY2029 we'll open, all going well, around 5,000 rooms in Lemon Tree's portfolio of managed hotels. This excludes anything that Fleur may add on. Just to give context, we are currently operating only 12,000 rooms. Just in FY2029 or in that year, 2029 going to 2030, we'll open 5,000 rooms, which is 45% of our current inventory in managed portfolio.

Speaker #4: This excludes anything that FLIR may add on. Just to give context, we are currently operating only 12,000 rooms. So, just in FY29, or in that year—'29 going to '30—we'll open 5,000 rooms.

Speaker #4: Which is 45 percent of our current inventory in the managed portfolio.

Speaker #3: Great.

Speaker #5: No, definitely. Thank you. I can see the flywheel is about to turn there. Secondly, just talking about the margin side, EBITDA margin compressed about 90 basis points.

Sameep Sinha: Yeah, that's excellent. I can see the slide is about to turn there. Secondly, just talking about on the margin side, EBITDA margin compressed about 90 basis points. This is better than we expected. I think you had guided to a much bigger decline for the year. How should we think about the progression for the year in light of the fact that Q2 seems to be turning around nicely? What sort of margin should we expect for the full year?

Sameet Sinha: Yeah, that's excellent. I can see the slide is about to turn there. Secondly, just talking about on the margin side, EBITDA margin compressed about 90 basis points. This is better than we expected. I think you had guided to a much bigger decline for the year. How should we think about the progression for the year in light of the fact that Q2 seems to be turning around nicely? What sort of margin should we expect for the full year?

Speaker #5: This is better than we expected. I think you're guided too much—much bigger decline for the year. How should we think about the progression for the year, in light of the fact that the second quarter seems to be turning around nicely?

Speaker #5: What sort of margin should we expect for the full year?

Speaker #4: Let me ask you, what do you expect Elementary's net EBITDA to be for FY27?

Patanjali Keswani: Let me ask you, what do you expect Lemon Tree's net EBITDA to be for FY27?

Speaker #5: Okay. I mean, I can probably give you my numbers, but not now.

Sameep Sinha: Okay. I can probably give you my numbers.

Sameet Sinha: Okay. I can probably give you my numbers.

Speaker #4: I'm just curious. What is your expectation?

Patanjali Keswani: I'm just curious. What is our expectation?

Speaker #5: Yes. Yeah. I'm not looking at my numbers. I'm at, what, $7.5 billion?

Sameep Sinha: Yeah. I'm looking at my numbers. I'm at about INR 7.5 billion.

Sameet Sinha: Yeah. I'm looking at my numbers. I'm at about INR 7.5 billion.

Speaker #4: No, I'm asking percentage.

Patanjali Keswani: No, I am asking percentage.

Speaker #5: Oh, percentage. About 47 percent.

Sameep Sinha: Oh, percentage. About 47%.

Sameet Sinha: Oh, percentage. About 47%.

Speaker #4: Okay, it will be well better than that. See, I will repeat to you a very interesting thing. Our EBITDA margins are fundamentally compressed because we have a bunch of expenses which are not normal, still playing out.

Patanjali Keswani: Okay. It will be well better than that. See, I will repeat to you a very interesting thing. Our EBITDA margins are fundamentally compressed because we have a bunch of expenses which are not normal still playing out. One of them was unanticipated, which was what happened with GST. Our mitigation for GST is to, as a strategy, constantly look at how we can replace rooms below INR 7.5 to over INR 7.5. What was the ARR in Q1? INR 6.3 something? Our ARR in Q1 was INR 6.3. What Neel is saying is that he is going to focus on increasing ARR. Let's assume a 5%, 6% improvement in Q2. In winter, that will go up another 10%, hopefully. What you are going to see is more and more rooms being sold at over INR 7.5, so the GST impact comes down.

Speaker #4: One of them was unanticipated, which was what happened with GST. But our mitigation for GST is to, as a strategy, constantly look at how we can replace rooms below 7.5 to over 7.5.

Speaker #4: So what was the error in Q1? Six point three something. So our error in Q1 was 6.3. So what Neil is saying is that he is going to focus on increasing ARR.

Speaker #4: So let's assume a 5–6% improvement in Q2. In winter, that will go up another 10%, hopefully. So what you're going to see is more and more rooms being sold at over 7.5.

Speaker #4: So, the GST impact comes down. Number two, and this is very significant for us, is the amount of money we have spent on renovation.

Patanjali Keswani: Number two is, this is very significant for us, is the amount of money we have spent in renovation. It is an enormous sum. That will drop dramatically next year. Dramatically. What should the EBITDA margin, net EBITDA margin be next year on a consolidated basis will not be visible because we will hopefully by next year demerge. If I looked at it should be 50%. Because our performing hotels EBITDA margin is already at the hotel level in the late 50s. As revenue grows, the below the line expenses get distributed over larger revenue. GST, of course, hopefully will reduce and renovation will drop dramatically. There is no reason why we should not, and I am saying it in front of Neel.

Speaker #4: It's an enormous sum, and that will drop dramatically next year—dramatically. So, what should the EBITDA margin, net EBITDA margin, be next year on a consolidated basis?

Speaker #4: This will not be visible because, hopefully, we will demerge next year. But if I look at it, it should be 50 percent, because our performing hotels' EBITDA margin is already at the hotel level in the high 50s.

Speaker #4: As revenue grows, the below-the-line expenses get distributed over larger revenue. And GST, of course, hopefully will reduce. Renovation will also drop dramatically. So, there is no reason why we should not.

Patanjali Keswani: GST, of course, hopefully will reduce and renovation will drop dramatically. There is no reason why we should not, and I am saying it in front of Neel. I'm putting pressure on him and Saurabh. There is no reason why our EBITDA margins net should be less than 50%. This is my statement. You will have to see what happens in Q2 and going on into Q3. Remind you, Q2 will also have a lot of renovation expense.

Speaker #4: And I'm saying it in front of Neil and putting pressure on him and Zohra, but there is no reason why EBITDA margins, net, should be less than 50%.

Patanjali Keswani: I'm putting pressure on him and Saurabh. There is no reason why our EBITDA margins net should be less than 50%. This is my statement. You will have to see what happens in Q2 and going on into Q3. Remind you, Q2 will also have a lot of renovation expense.

Speaker #4: And this is my statement. You will have to see what happens in Q2 and going on into Q3. And, mind you, Q2 will also have a lot of renovation expense.

Speaker #3: And let me just top it up. See, I mean, you've seen the trend that our renovation is also tapering, I mean, so that will help.

Neelendra Singh: Let me just top it up. You've seen the trend that our renovation is also tapering, Sameep. That will help. Our ARR will improve. That will help, clearly. Our GST impact broadly, I would say, you could still say this is ballpark in the range of 2% of our net of our overall revenue. Banking on a much stronger H2 of the year, I also agree that 50% is not something that's too difficult to achieve.

Speaker #3: Our ARR will improve. That will help, clearly. Our GST impact, broadly, I would say you could still say this is ballpark in the range of 2 percent of net of our overall revenue.

Speaker #3: But banking on a much stronger Q—sorry, H2—of the year, I also agree that the 50 percent is not something that's too difficult to achieve.

Speaker #5: And that's for 6 to 28? Or 27? 6 to 27.

Patanjali Keswani: That's for fiscal 2028.

Neelendra Singh: Yeah.

Neelendra Singh: 2027.

Speaker #4: 27 will not be 47; it will be better. But fiscal 28—if we don't do 50, then we have underperformed.

Neelendra Singh: 2027 will not be 47. It'll be better. Fiscal 2028, if we don't do 50, then we have underperformed.

Patanjali Keswani: 2027 will not be 47. It'll be better. Fiscal 2028, if we don't do 50, then we have underperformed.

Speaker #5: Got it. Thank you very much. All the best.

Sameep Sinha: Got it. Thank you very much. All the best.

Sameet Sinha: Got it. Thank you very much. All the best.

Speaker #4: Thank you.

Neelendra Singh: Thank you.

Patanjali Keswani: Thank you.

Speaker #2: Thank you. Our next question comes from the line of Dixie with Incred Research. Please go ahead.

Operator: Thank you. Our next question comes from the line of Dikshi with Incred Research. Please go ahead.

Speaker #6: Okay, thank you for taking the question. My first question is regarding the number of rooms that we've added this quarter for management fees. The net addition seems to be only 134 rooms, whereas we've mentioned that we've opened 334 rooms.

[Analyst] (Incred Research): Thank you for taking the question. My first question is regarding the number of rooms that we've added this quarter for management fees. The net addition seems only to be 134 rooms, whereas we've mentioned that we've opened 334 rooms. Have any hotel management contracts ended? How do we see these going forward? Are the 2,000 room addition on management contracts gross or will it be net addition?

Dikshi Jain: Thank you for taking the question. My first question is regarding the number of rooms that we've added this quarter for management fees. The net addition seems only to be 134 rooms, whereas we've mentioned that we've opened 334 rooms. Have any hotel management contracts ended? How do we see these going forward? Are the 2,000 room addition on management contracts gross or will it be net addition?

Speaker #6: So have any hotel management contracts ended? And how do we see these going forward? Are the 200 or 2,000 room additions on management contracts gross, or will it be net additions?

Speaker #4: We should, just to get it right. So, rephrase what you're saying. Are you—so first of all, we've added 1,300 rooms from last quarter to this quarter.

Patanjali Keswani: Just to get it right, just to rephrase what you're saying. First of all, we've added 1,300 rooms from last quarter to this quarter. Last as in Q1 to this Q1, in one year on year. Did you get that?

Speaker #4: Last, I think, Q1 to this Q1. So in one year, year-on-year. Did you get that?

Speaker #6: I am asking about Q4 to Q1.

[Analyst] (Incred Research): I am asking about Q4 to Q1.

Dikshi Jain: I am asking about Q4 to Q1.

Speaker #4: Okay. So what has happened is, one contract we have terminated mutually, which is in Tharudhan Valley, which was a 70-room resort. Then there was a hotel called Nestor Hotel, which we inherited from Keys, which was giving us no fees.

Patanjali Keswani: Okay. What has happened is one contract we have terminated mutually, which is in Tarudhan Valley, which is a 70-room resort. There was a hotel called Nestor Hotel which we inherited from Keys, which was giving us no fees, but it was in the portfolio. We have in fact taken it to NCLT now. We have taken it to NCLT. It was not reflecting in the fee income, but it was reflecting in the inventory. Are you getting me?

Speaker #4: But it was in the portfolio. And we have, in fact, taken it to NCRT now. We have taken it to NCLT. So it was not reflecting in the fee income, but it was reflecting in the inventory.

Speaker #4: Are you getting me? So, between these two, we removed 70 rooms from Tharudhan Valley and 130 rooms from Nestor, which is 200 rooms, but the income loss was only from Tharudhan.

[Analyst] (Incred Research): Okay.

Dikshi Jain: Okay.

Patanjali Keswani: Between these two, we removed 70 rooms from Tarudhan Valley and 130 rooms from Nestor, which is 200 rooms. The income loss was only from Tarudhan. It was not from Nestor because Nestor we were not even charging fees. It just had a brand, the Keys brand. We were trying to resolve the payments they owed to Keys when we acquired it. You can imagine we acquired it in 2019, and they owe a large amount of money to Keys. This was just think of it as just notional. The only upside is that if they pay the old fees which they owed Keys, it is fairly substantial and if we get it, well and good. It has had no impact in our revenue perspective. The impact has been with the 70 rooms of Tarudhan Valley.

Speaker #4: It was not from Nestor, because Nestor was a—we were not even charging fees. It just had our brand, the Keys brand, and we were trying to resolve the payment they owed to Keys when we acquired it.

Speaker #4: So you can imagine we acquired it in 2019, and they owe a large amount of money to Keys. So this was just—think of it as just notional.

Speaker #4: The only upside is that if they pay the old fees, which they owed Keys, it is fairly substantial, and if we get it, well and good.

Speaker #4: But it has had no impact on our revenue perspective. The impact has been with the 70 rooms of—what is it called?—Tharudhan Valley.

[Analyst] (Incred Research): Okay. Thank you.

Dikshi Jain: Okay. Thank you.

Speaker #6: Okay. Thank you.

Speaker #4: By the way, just to alert everybody, we are very clear. We are signing lots of hotels. There will be cases where we will terminate our agreements.

Patanjali Keswani: By the way, just to alert everybody, we are very clear. We are signing lots of hotels. There will be cases where we will terminate our agreements because of a lack of adherence to our brand standards. Therefore, what one must look at, as you have rightly looked at, is net room addition as we grow more aggressively. There will be a drop due to friction in managed hotels. There will be some losses. As far as possible, obviously, it will be not material compared to the number of hotel rooms we open.

Speaker #4: Because of a lack of adherence to our brand standards. And so, therefore, what one must look at—as you have rightly looked at—is net store, net room addition.

Speaker #4: As we grow more aggressively, there will be a drop due to friction in managed hotels—there will be some losses. But as far as possible, obviously, it will not be material compared to the number of hotel rooms we open.

[Analyst] (Incred Research): Okay. Thank you. My next question is regarding the ADR growth that we've seen for the quarter. There has only been a growth in Keys portfolio. There has not been growth in Lemon Tree portfolio, Lemon Tree Premier portfolio, or Red Fox. How do we see this moving for the next two years?

Dikshi Jain: Okay. Thank you. My next question is regarding the ADR growth that we've seen for the quarter. There has only been a growth in Keys portfolio. There has not been growth in Lemon Tree portfolio, Lemon Tree Premier portfolio, or Red Fox. How do we see this moving for the next two years?

Speaker #6: Okay, thank you. My next question is regarding the ADR growth that we've seen for the quarter. There has only been growth in the Keys portfolio.

Speaker #6: There has not been growth in the Elementary portfolio, Elementary Premier portfolio, or Red Fox. How do we see this moving for the next two years?

Speaker #4: So, the only drop—well, there has been a small growth in ARR of about 2.5 to 3 percent, if I remember right.

Patanjali Keswani: Well, there has been a small growth in ARR of about 2.5% and 3%, if I remember right. The main reason for this is that we have been pushing the retail segment, and we are obviously dropping prices somewhat in order to increase occupancy, and that was specifically based on the conditions of Q1. See, we are not so affected by inbound travel. Okay? What we are affected by is large corporates who are our customers and their managers and deputy general managers who travel, who then stay with us. Large corporates took a decision, and we spoke to a number of those CEOs actually, that they would tighten their belts because of uncertainty in Q1. We know this because a few of them actually we have spoken to. That was because of, you see, for a large corporate, travel is discretionary at some level.

Speaker #4: The main reason for this is that we have been pushing the retail segment, and we had obviously dropped prices somewhat in order to increase occupancy.

Speaker #4: And that was specifically based on the conditions of Q1, which is where we found, you see, we are not so affected by inbound travel. Okay.

Speaker #4: What we are affected by is large corporates who are our customers, and their managers and deputy general managers who travel, who then stay with us.

Speaker #4: Now, large corporates took a decision—and we spoke to a number of those CEOs, actually—that they would tighten their belts because of uncertainty in Q1.

Speaker #4: I mean, we know this because a few of them, actually, we have spoken to. And that was because, you see, for a large corporate, travel is discretionary at some level.

Speaker #4: So they were saying some of them in fact even told me directly that they've asked their people to do Zoom calls rather than go on actual travel.

Patanjali Keswani: They were saying, some of them in fact even told me directly that they have asked their people to do Zoom calls rather than go on actual travel. That was the impact. The interesting thing is that we are seeing that coming back in Q2. Q1, as I said, was an aberration. I still feel and maintain we could have done better. In Q2, I think all these issues will be resolved, and we will go back to the expected level of improvement in revenue through a more balanced mix of ARR and occupancy.

Speaker #4: So that was the impact. But the interesting thing is that we are seeing that coming back in Q2. Q1, as I said, was an aberration.

Speaker #4: I still feel, and maintain, we could have done better. But in Q2, I think all these issues will be resolved, and we will go back to the expected level of improvement in revenue through a mix of ARR and a more balanced mix of ARR and occupancy.

[Analyst] (Incred Research): Have we completed any renovations for Red Fox or Lemon Tree Premier where we've seen a good ARR growth?

Dikshi Jain: Have we completed any renovations for Red Fox or Lemon Tree Premier where we've seen a good ARR growth?

Speaker #6: Have we completed any renovations for Red Fox or Lemon Tree Premier where we've seen good ARR growth?

Speaker #4: Well, look at Delhi. It is the only portfolio. Except, you see, one reason why you are seeing that Red Fox by Lemon Tree had a negative ARR growth in Q1 versus Q1 previous year was we rebranded the Red Fox Delhi Airport into the Lemon Tree Delhi Airport.

Patanjali Keswani: Well, look at Delhi. It is the only portfolio. One reason why you are seeing that Red Fox by Lemon Tree had a negative ARR growth in Q1 versus Q1 previous year was we rebranded the Red Fox Delhi Airport into the Lemon Tree Delhi Airport. Okay? The last bit of renovation is left, I think, in the entire portfolio of 487 rooms. 37 rooms are balance, which are currently under renovation. The sad thing is both the hotels are doing over 90% occupancy, so there is a real loss of revenue. We will open this by the end of Q2. These two hotels, Delhi, are the fully renovated hotels. Hyderabad HITEC City is also fully renovated. These are showing a good improvement in spite of market conditions not necessarily being conducive.

Speaker #4: Okay. But it is just the last bit of renovation left, I think. In the entire portfolio of 487 rooms, 37 rooms are pending, which are currently under renovation.

Speaker #4: And the sad thing is, both the hotels are doing over 90 percent occupancy. So there is a real loss of revenue. But we will open this by the end of Q2.

Speaker #4: And these two hotels in Delhi are fully renovated—actually, they are fully renovated hotels. Now, Hyderabad HiTech City is also fully renovated. So, these are showing good improvement in spite of market conditions not necessarily being conducive.

Patanjali Keswani: Hyderabad HITEC City is also fully renovated. These are showing a good improvement in spite of market conditions not necessarily being conducive. Wherever we have renovated, we see that customer response is good. Now local market conditions may be XYZ, but we are confident that this renovation is going to lead to a significant improvement in RevPAR as it plays out by the end of this year.

Speaker #4: And wherever we have renovated, we see that customer response is good. So now, local market conditions may be X, Y, or Z. But we are confident that this renovation is going to lead to a significant improvement in RevPAR as it plays out by the end of this year.

Patanjali Keswani: Wherever we have renovated, we see that customer response is good. Now local market conditions may be XYZ, but we are confident that this renovation is going to lead to a significant improvement in RevPAR as it plays out by the end of this year.

Speaker #6: Okay. Okay. Thank you for taking the question.

[Analyst] (Incred Research): Okay. Thank you for taking the question.

Dikshi Jain: Okay. Thank you for taking the question.

Speaker #2: Thank you. Our next question comes from the line of Vineeth Agarwal with Bajaj Alternates. Please go ahead.

Operator: Thank you. Our next question comes from the line of Vineet Agarwal with Bajaj Allianz. Please go ahead.

Speaker #5: Hello. Yeah. Thank you, and thank you for the opportunity. Just a couple of questions. One is, with three international destinations now operational—which are Nepal, Bhutan, and Dubai—and fresh Nepal signings this quarter, what's the medium-term ambition for international contribution to network revenue and fees?

Vineet Agarwal: Hello. Thank you for the opportunity. Just a couple of questions. One is, with three international destinations now operational, which is Nepal, Bhutan, and Dubai, and fresh Nepal signings this quarter, what's the medium-term ambition for international contribution to network revenue and fees? Are further overseas markets under evaluation?

Vineet Agrawal: Hello. Thank you for the opportunity. Just a couple of questions. One is, with three international destinations now operational, which is Nepal, Bhutan, and Dubai, and fresh Nepal signings this quarter, what's the medium-term ambition for international contribution to network revenue and fees? Are further overseas markets under evaluation?

Speaker #5: And are there further overseas markets under evaluation?

Speaker #4: So, we are interested in markets that are preferably within a three-hour flight for us, where lots of Indians travel, because it is time for us to now monetize our loyalty program.

Patanjali Keswani: We are interested in markets which are preferably 3 hours flight from us, where lots of Indians travel, because it is time for us to now monetize our loyalty program and the fact that in our existing markets in India, 45% of our demand is repeat. One opportunity which is very clear is, of this 45% demand, only half is in our loyalty program, which still accounts for 2.5 million members. We find a lot of them, in our internal surveys and conversations with them, travel internationally short hops. What are the markets where Indians go? The biggest and best market is UAE. You would be surprised to know that in spite of war, the Indian movement to UAE was not significantly affected. Other than a few days, it is still very much there. The next market is Nepal, where we are already expanding significantly.

Speaker #4: And the fact that in our existing markets in India, 45 percent of our demand is repeat. One opportunity which is very clear is that of this 45 percent demand, only half is in our loyalty program, which still accounts for 2.5 million members.

Speaker #4: And we find, in our internal surveys and conversations with them, that a lot of them travel internationally—short hops. So, what are the markets where Indians go?

Speaker #4: The biggest and best market is the UAE. You'll be surprised to know that, in spite of the war, the Indian movement to the UAE was not significantly affected.

Speaker #4: Other than a few days, it is still very much there. Then the next market is Nepal, where we are already expanding significantly. Then Thailand, specifically Bangkok and Phuket.

Patanjali Keswani: Thailand, specifically Bangkok and Phuket. South of India, there is not so much Sri Lanka, but certainly Maldives. When we look at this, there are lots of Indians traveling here, and many of them are loyalty members. It begs the question that if 32 million Indians traveled overseas last year, over 12 million traveled to these three markets I spoke about. Actually, it is probably a larger number. This is an old number I have. It is in my opinion, a very simple thing. Go where your customers go. Marriott did that in the '50s and '60s. So did Hilton, other international brands. They always went where their customers who were familiar and comfortable and liked their brands, they went there.

Speaker #4: South of India, there is not so much Sri Lanka, but certainly the Maldives. So when we look at this, there are lots of Indians traveling here.

Speaker #4: And many of them are loyalty members. So it begs the question that if 32 million Indians traveled overseas last year, over 12 million traveled to these three markets I spoke about.

Speaker #4: Actually, it's probably a larger number. This is an old number I have. So it is, in my opinion, a very simple thing: go where your customers go.

Speaker #4: Marriott did that in the '50s and '60s. So did Hilton. So did other international brands. They always went where their customers, who were familiar with, comfortable with, and liked their brands, went.

Patanjali Keswani: They always went where their customers who were familiar and comfortable and liked their brands, they went there. There is no reason why Indian brands should not also go international, in my opinion, because we now have the numbers, which is Indians traveling overseas. Why should we not capture that share of the wallet?

Speaker #4: And there is no reason why Indian brands should not also go international, in my opinion, because we now have the numbers, which is Indians traveling overseas.

Patanjali Keswani: There is no reason why Indian brands should not also go international, in my opinion, because we now have the numbers, which is Indians traveling overseas. Why should we not capture that share of the wallet?

Speaker #4: And why should we not capture that share of the wallet?

Speaker #5: Thank you. And the second question is, what is the incremental RevPAR uplift you are expecting once the renovation of the remaining keys is also complete?

Vineet Agarwal: Thank you. The second question is, what is the incremental RevPAR uplift you are expecting once the renovation of remaining Keys are also complete?

Vineet Agrawal: Thank you. The second question is, what is the incremental RevPAR uplift you are expecting once the renovation of remaining Keys are also complete?

Speaker #4: So, I would not say Ref Bar uplift. I would say simply that we have a simple target: keys should generate ₹6.5 lakhs per key EBITDA.

Patanjali Keswani: I would not say RevPAR uplift. I would say simply that we have a simple target. Keys should generate INR six and a half lakhs per key EBITDA. If Keys has an EBITDA margin of 50% when it's stable, it means INR 13 lakhs to 14 lakhs per room. That's what we want. We want a revenue of about INR 150 to 120 crores from Keys and an INR 60 crore EBITDA.

Speaker #4: And if Keys has an EBITDA margin of 50 percent when it's stable, it means ₹13 lakh to ₹14 lakh per room. So that's what we want.

Speaker #4: We want the revenue to be about ₹120 to ₹150 crore from Keys, and a ₹60 crore EBITDA.

Speaker #5: Understood. Thank you so much, and all the best for future quarters. Thank you.

Vineet Agarwal: Understood. Thank you so much and all the best for future quarters. Thank you.

Vineet Agrawal: Understood. Thank you so much and all the best for future quarters. Thank you.

Speaker #4: Thanks, Vineeth.

Patanjali Keswani: Thanks, Vineet.

Speaker #2: Thank you. Our next question comes from the line of Jinesh Joshi with PL Capital. Please go ahead.

Operator: Thank you. Our next question comes from the line of Jinesh Joshi with Prabhudas Lilladher. Please go ahead.

Speaker #3: Thank you for the opportunity. Sir, I just wanted one small clarification from your side. I think our total fee income, which is third-party plus FLIR, is mentioned at about ₹45 crore in the presentation.

Jinesh Joshi: Thanks for the opportunity. Sir, I just wanted one small clarification from your side. I think our total fee income, which is third party plus Fleur, it is mentioned at about INR 45 crores in the presentation. However, if I look at our pro forma financials, the figure mentioned over there is about INR 66 crores. If you can please first clarify on this part.

Speaker #3: However, if I look at our pro forma financials, the figure mentioned over there is about 66 crores. So, if you can please first clarify on this part.

Speaker #4: Yeah, so that's not fees. In the pro forma, we still have to lease hotels—it's elementary—which are not being transferred to FLIR because their balance lease terms are maybe six, seven years.

Patanjali Keswani: Yeah. That's not fees. In the pro forma, we still have two leased hotels in Lemon Tree, which are not being transferred to Fleur because their balance lease terms are of maybe six, seven years, and there is a restriction in our lease agreement that we would not be able to assign it to any other company. What you are seeing is a INR 20 crore, I guess, revenue from them?

Speaker #4: And there is a restriction in our lease agreement that we would not be able to assign it to any other company. So, what you are seeing is a ₹20 crore, I guess, revenue from them.

Speaker #3: Yeah. EBITDA.

Kapil Sharma: Yeah, EBITDA.

Speaker #4: EBITDA. Yeah, yeah. Does that answer your question?

Jinesh Joshi: Understood.

Patanjali Keswani: Does that answer your question?

Jinesh Joshi: Yes, sir, pretty much. One second observation as well. If I look at our network and franchised revenue mix, the number that we have reported in the presentation, I think the growth is about 29%, whereas for our owned hotels that growth figure is at about 6%. I wanted to check this higher growth number is simply due to addition of the managed rooms that we have seen on a YY basis? Or does this also have some kind of an impact whereby our network revenue from the managed side is doing slightly better than our owned hotels? If you can maybe clarify on this part. Lastly, one short follow-up. What will be our CapEx for 2027 and 2028?

Speaker #3: Yes, sir. Pretty much. One second observation as well. So if I look at our network and franchised revenue, net, the number that we have reported in the presentation, I think the growth is about 29%.

Speaker #3: Whereas for our owned hotels, that growth figure is at about 6 percent. So I just wanted to check—this higher growth number is simply due to the addition of the managed rooms that we have seen on a year-on-year basis?

Speaker #3: Or does this also have some kind of an impact, whereby our network revenue from the managed side is doing slightly better than our own hotels?

Speaker #3: So if you could just maybe clarify this part. And lastly, just one short follow-up: What will be our capex for 2027 and 2028?

Speaker #4: So there were many questions. Same-store revenue growth for the managed portfolio was in the high single digits. I think it was 9 or 10 percent.

Patanjali Keswani: There were many questions. Same-store revenue growth for managed portfolio was in the late single digits. I think it was nine, 10%. Okay? One of the reasons is some of the hotels which we opened last year were not stable in the managed portfolio, so they stabilized this year. On a low base, there was a higher impact of revenue. Okay? Number two is new hotels that we opened Also added to the revenue of the managed portfolio. What that meant was that while they are not performing at full revenue per fee capacity because they are still new and will take a year or more to stabilize, they are also incrementally adding to the fee income. If you do a sum of the parts, same store, nine, 10%, new hotels, additional, that's what led to this growth.

Speaker #4: One of the reasons is that some of the hotels which we opened last year were not stable in the managed portfolio, so they stabilized this year.

Speaker #4: So, on a low base, there was a higher impact on revenue. Number two is, new hotels that we opened also added to the revenue of the managed portfolio.

Speaker #4: And what that meant was that while they are not performing at full revenue per fee capacity because they are still new and will take a year or more to stabilize, they are also incrementally adding to the fees.

Speaker #4: So, if you do some of the parts—same store at 9-10 percent, new hotels additional—and that's what led to this growth. In fact, if what we are seeing is correct, then as we add more and more hotels, which is the catch-up of what we signed in the last three years, the rate of growth of fee income will be enormous.

Patanjali Keswani: In fact, if what we are saying is correct, then as we add more and more hotels, which is the catch-up of what we signed in the last three years, then the rate of growth of fee income will be enormous. That is something I would recommend you track. That is the first answer. What was the other question you asked?

Speaker #4: And there is something I would recommend you track. That is the first answer. What was the other question you asked?

Speaker #3: 2026, okay. Capex figures for FY27 and 2028—if you can just maybe highlight that.

Jinesh Joshi: Sir, CapEx figures for FY27 and FY28, if you can maybe highlight that.

Speaker #4: This year, it is about... sorry. Okay, we'll call you and tell you. I think Nipun says he'll give you the exact details because we have to search for these numbers.

Patanjali Keswani: This year it is about Sorry? Okay, we'll call you and tell you. I think Niket says he'll give you the exact details because we have to search for these numbers. What I can say is that next year onwards, OpEx and CapEx in renovation will meander towards 1% of revenue from what it was in the past three years.

Speaker #4: But what I can say is that, next year onwards, opex and capex in renovation will meander towards 1 percent of revenue, from what it was in the past three years.

Speaker #3: Okay, sir. Thank you. Thank you so much.

Jinesh Joshi: Okay, sir. Thank you. Thank you so much.

Speaker #2: Thank you. Our next question comes from the line of Vaibhav Mule with Haitong Securities. Please go ahead.

Operator: Thank you. Our next question comes from the line of Vaibhav Mule with Haitong Securities. Please go ahead.

Speaker #5: Hi, sir. Sorry for the apostrophe. My first question again was on the renovation. I wanted to delve a bit more into the timelines. I think last time we met on the call, you had said a tentative timeline of October for completing the overall renovation on this side.

Vaibhav Mule: Hi, sir. Thanks for your patience. My first question again was on the renovation. I wanted to delve a bit more on the timelines. I think last time we met on the call you had said that tentative timeline of October for completing the overall renovation cycle. Given almost 75% of the inventory is now renovated, what is the revised guidance on completing the overall renovation exercise and related to that in this quarter? Yes.

Vaibhav Muley: Hi, sir. Thanks for your patience. My first question again was on the renovation. I wanted to delve a bit more on the timelines. I think last time we met on the call you had said that tentative timeline of October for completing the overall renovation cycle. Given almost 75% of the inventory is now renovated, what is the revised guidance on completing the overall renovation exercise and related to that in this quarter? Yes.

Speaker #5: Even almost 75 percent of the inventory is now renovated. What is the revised guidance on completing the overall renovation exercise? And Renee, just to that, in this quarter, yes.

Speaker #4: Yeah. So, it's like this: we did 300 rooms in Q1. We think we'll do about the same number or a little more this quarter.

Patanjali Keswani: Yeah. It's like this, we did 300 rooms in Q1. We think we will do about the same number or a little more this quarter. Now what we do, let me just give one clarification. Renovation is of 3 types. There is high-value renovation, which is INR 10, 12 lakhs a key. Those are in high-value locations where we feel we will be able to improve both ARR and occupancy, like Keys Whitefield or Pimpri, Keys Pimpri. Those are what I would say large renovations. Those are more or less completely over except for Lemon Tree, old Red Fox, now Lemon Tree Hotel, Delhi, and a little bit in Electronic City in Bangalore, which is being rebranded as a Lemon Tree Premier. Where else do we have? Red Fox. Red Fox Hyderabad, which will also be rebranded as a Lemon Tree hotel when it is complete in October.

Speaker #4: So now, what we do—let me just give one clarification. Renovation is of three types. There is high-value renovation, which is Rs. 10 to 12 lakhs a key.

Speaker #4: Those are in high-value locations where we feel we will be able to improve both ARR and occupancy, like Keys Whitefield or Keys Pimpri.

Speaker #4: And those are what I would say are large renovations. Those are more or less completely over, except for Elementary Old Red Fox, now Elementary Delhi.

Speaker #4: And a little bit in Electronic City in Bangalore, which is being rebranded as an Elementary Premium. And where else do we have high and Red Fox?

Speaker #4: Red Fox Hyderabad, which will also be rebranded as an Elementary hotel when it's complete in October. The other renovations are of a much smaller nature and, in fact, in some cases, are basic refurbishments.

Patanjali Keswani: The other renovations are in the nature of much smaller interventions and, in fact, in some cases are basic refurbishments. Keys Cochin, Keys Visakhapatnam, Keys Trivandrum will go through a refurb. Of which I think about one third or one half is over, but those are INR two and a half, 3 lakhs per room. When we say we are renovating 300 rooms and 6, 700 rooms in H1 this year, those are high-value renovations. What will flow into Q3 and Q4 will be more in the nature of refurbs and quicker turnaround. A refurb can take as little as a week and at most a month. If I refurb 800 rooms in Q3 and Q4, the cost could be much less than the renovation of 300 rooms.

Speaker #4: So, Keys Cochin, Keys Visakhapatnam, and Keys Trivandrum will go through a refurb, of which I think about one-third or one-half is over. But those are ₹2.5 to ₹3 lakhs per room.

Speaker #4: So, when we say we are renovating 300 rooms and 600–700 rooms in H1 this year, those are high-value renovations. What will flow into Q3 and Q4 will be more in the nature of refurbs and quicker turnaround.

Speaker #4: So, a refurb can take as little as a week and at most a month. And if I refurb 800 rooms in Q2, Q3, and Q4, the cost could be much less than the renovation of 300 rooms.

Speaker #4: So, it's a mix-and-match strategy, because we are very careful and mindful of the money we spend in each hotel, based on the earning capacity that we expect from the incremental investment.

Patanjali Keswani: It's a mix and match strategy because we are very careful and mindful of the money we spend in each hotel based on the earning capacity that we expect from the incremental investment. As far as Lemon Tree Hotels goes, we will have finished the full renovation of the main hotels and refurbishment of a lot of Keys and other hotels that needed intervention in FY27. In FY28, we will revert to norm, which is really no renovations, but a continuing thing on refurb. Refurb can happen when you need to replace the curtains, you need to redo the upholstery, you need to improve some lighting somewhere, and these are minor costs, which is why I said, typically we spend 1%, 1.2% of our revenue in renovation, and we will revert to norm from next year.

Speaker #4: As far as elementary goes, we will have finished the full renovation of the main hotels and refurbishment of a lot of Keys and other hotels that needed intervention in FY27.

Speaker #4: In FY28, we will revert to the norm, which is really no renovations, but ongoing refurbishment. Refurbishment can happen when you need to replace the curtains.

Patanjali Keswani: In FY28, we will revert to norm, which is really no renovations, but a continuing thing on refurb. Refurb can happen when you need to replace the curtains, you need to redo the upholstery, you need to improve some lighting somewhere, and these are minor costs, which is why I said, typically we spend 1%, 1.2% of our revenue in renovation, and we will revert to norm from next year. There may be a little bit of stuff left here and there, but, by and large, the entire portfolio will be new by next year.

Speaker #4: You need to redo the upholstery. You need to improve some lighting somewhere. And these are minor costs, which is why I said typically we spend 1%, 1.2% of our revenue on renovation.

Speaker #4: And we will revert to normal from next year. There may be a little bit of stuff left here and there, but by and large, the entire portfolio will be new.

Patanjali Keswani: There may be a little bit of stuff left here and there, but, by and large, the entire portfolio will be new by next year.

Speaker #4: By next year.

Speaker #5: Understood. Just related to this, in Q1, we have seen almost 350 bids impact on margins on account of GST as well as SAR provisions.

Vaibhav Mule: Understood. Just related to this, in Q1, we have seen almost 250 basis impact on margins on account of GST as well as SAR progress. Margin decline has been around 100 basis. I am assuming that part of this is because of lower OpEx part of the renovation in the P&L, which has partly offset the overall impact. Can you elaborate a bit more on how much of this offset was because of the operating leverage and because of the renovation? Related to what you said on the renovation, can we expect improved margin trajectory because of lower renovation in next phase?

Vaibhav Muley: Understood. Just related to this, in Q1, we have seen almost 250 basis impact on margins on account of GST as well as SAR progress. Margin decline has been around 100 basis. I am assuming that part of this is because of lower OpEx part of the renovation in the P&L, which has partly offset the overall impact. Can you elaborate a bit more on how much of this offset was because of the operating leverage and because of the renovation? Related to what you said on the renovation, can we expect improved margin trajectory because of lower renovation in next phase?

Speaker #5: But margin decline has been around 100 bps. I'm presuming that part of this is because of lower opex, part of the renovation in the P&L, which has partly offset the overall impact.

Speaker #5: Can you elaborate a bit more on how much of this offset was because of the operating leverage and how much was because of the renovation? And related to what you said on the renovation, can we expect an improved margin trajectory because of lower renovation in H2?

Speaker #4: So we spent about 9.8 crores on renovation in Q1, which is about 2.25 to 2.3 percent of revenue. So that was the total spend.

Patanjali Keswani: You know we spent about INR 9.8 crores in renovation in Q1. Okay? Which is about 2.25% to 2.3% of revenue. That was then the total spend. Now, normally what would we have spent? Normally we would have spent INR 3 crores, which is 1% or 1.2%. It varies, but it is not material. Basically, the incremental spend was about INR 6 crores this year. Next year, that will disappear. What we expect is there are four or five impacts which have played out. One was one off of property tax, ex gratia last year. There was now the ongoing impact of GST, which we are hoping to ameliorate. There was the massive impact of renovation in the last 3 years. All these will disappear except for GST. GST has to be tackled from a pricing perspective, and we are very cognizant of that.

Speaker #4: Now, normally, what would we have spent? Normally, we would have spent 3 crores, which is 1 percent or 1.2 percent. It varies, but it is not material.

Speaker #4: So basically, the incremental spend was about ₹6 crore this year. Next year, that will disappear. So what we expect is, there are four or five impacts which have played out.

Speaker #4: One was a one-off property tax, tax gratuity last year. There is now the ongoing impact of GST, which we are hoping to ameliorate. There was the massive impact of renovation in the last three years.

Speaker #4: All these will disappear except for GST. And GST has to be tackled from a pricing perspective, and we are very cognizant of that. So if you ask me, our EBITDA margin versus last year deteriorated by 1 percentage point on revenue.

Patanjali Keswani: If you ask me, our EBITDA margin versus last year deteriorated by 1 percentage point on revenue. Our spend in renovation was 2.2%. If you see the waterfall change, it was an incremental INR 5 crores over last year. Sorry, a reduction in INR 5 crores over last year. Last year we spent INR 15 crores in renovation. This renovation is now tapering off. EBITDA margins should recover, and next year in summer, it should be definitely 2% to 2.5% higher than what it is this year. Overlay that winter EBITDA margins are significantly higher because of season pricing, demand, et cetera. That is where you can come to the average of at least at 50% net EBITDA margin, which is our expectation next year. In fact, you should see elements of it even in Q2 and H2 this year.

Speaker #4: But our increase in spend on renovation was 2.25%. And if you see the waterfall change, it was an incremental ₹5 crore over last year.

Speaker #4: Sorry, a reduction of ₹5 crore over last year. Last year, we spent ₹15 crore on renovation. So this renovation is now tapering off. So EBITDA margins should recover.

Speaker #4: And next year in summer, it should definitely be two to two and a half percent higher than what it is this year. And overlay that, winter EBITDA margins are significantly higher because of season pricing, demand, etc.

Speaker #4: And that's where you can arrive at an average of at least 150 percent net EBITDA margin, which is our expectation for next year. In fact, you should see elements of it even in Q2 and H2 this year.

Speaker #5: Understood. Just lastly, if I may add on the 2,500 keys potential acquisition that we are planning—even this will be partly operational portfolio and partly greenfield.

Vaibhav Mule: Understood. Just lastly, if I may add on the 2,500 piece potential acquisition that we are planning. Even this will be partly operational portfolio and partly greenfield with INR 960 crores being infused by Warburg. We already have around INR 200 crores of debt on the book. Assuming mid to upper mid-teen sort of a portfolio, will that increase our debt levels to north of INR 2,000 crores for a temporary period at the time of acquisition? Does that take your net debt to EBITDA north of 3? Is that a correct assumption?

Vaibhav Muley: Understood. Just lastly, if I may add on the 2,500 piece potential acquisition that we are planning. Even this will be partly operational portfolio and partly greenfield with INR 960 crores being infused by Warburg. We already have around INR 200 crores of debt on the book. Assuming mid to upper mid-teen sort of a portfolio, will that increase our debt levels to north of INR 2,000 crores for a temporary period at the time of acquisition? Does that take your net debt to EBITDA north of 3? Is that a correct assumption?

Speaker #5: With ₹960 crores being infused by Warburg, we already have around ₹1,200 crores of debt on the books. Assuming mid to upper mid, in terms of portfolio, will that increase our debt levels to north of ₹2,000 crores, even if only for a temporary period at the time of acquisition?

Speaker #5: And does that take your net debt to EBITDA north of 3? Is that a correct assumption?

Speaker #4: No, it is incorrect. I'll tell you why. Suppose I'm building a ₹500 crore hotel, okay? And let's assume I take three and a half years to build it.

Patanjali Keswani: No, it is incorrect. I will tell you why. Suppose I am building a INR 500 crore hotel. Okay. Let's assume I take 3 and a half years to build it. The immediate payment, typically, depending on the land value, can be 20% to 30% of this INR 500 crore, which means I will immediately pay INR 100 to INR 150 crore to acquire the land. Of the balance INR 350 crore, the way the spend goes is in the first year, you spend only 15% of that because it is towards digging up the basement and making your shell, which is a core shell, and it is a low cost. Second year, another 25% to 30% goes.

Speaker #4: The immediate payment, typically depending on the land value, can be 20% to 30% of this 500, which means I will immediately pay ₹100 to ₹150 crores to acquire the land.

Speaker #4: Now, of the balance ₹350 crore, the way the spend goes is: in the first year, you spend only 15% of that because it's towards digging up a basement and making your shell.

Speaker #4: Which is a cold shell and it's low cost. Second year, another 25–30 percent goes. It is only in the last year, specifically in the last nine months, that you spend up to 30–35 percent of the project cost, because that is in finishing and in equipment orders.

Patanjali Keswani: It is only in the last year, specifically in the last 9 months, that you spend up to 30% to 35% of the project cost because that is in finishing and in equipment orders. Let's make a number. I am building a INR 100 crore hotel. I pay INR 20 crore plus INR 10. I spend INR 30 crore this year. I spend INR 20 crore next year, INR 25 crore, and I spend INR 40 to 50 crore in the last year. How does this money get spent? Assuming 1 is to 1 debt equity, which is our general perspective. The first INR 50 crore goes from our pocket and takes care of the first 2 years or 2 and a half years. In the last year is when you technically require debt, but you have also cash flows. We try and match our free cash with that requirement.

Speaker #4: So, let's make a number. I'm building a ₹100 crore hotel. I pay ₹20 crores plus ₹10 crores. I spend ₹30 crores this year. I spend ₹20 crores next year, ₹25 crores.

Speaker #4: And then I spend 40–50 crores in the last year. Now, how does this money get spent? Assuming 1:1 debt to equity.

Speaker #4: Which is our general perspective. The first ₹50 crore goes from our pocket and takes care of the first two years, for two and a half years.

Speaker #4: In the last year is when you require technically required debt, but you also have cash flows. So we try and match our free cash with that requirement.

Speaker #4: So really, debt to equity is not what we look at as much as debt to EBITDA. So we use operating EBITDA—known EBITDA—to really look at debt for new hotels, rather than fund new hotels based on a presumed EBITDA.

Patanjali Keswani: Really debt to equity is not what we look at as much as debt to EBITDA. We use operating EBITDA, known EBITDA, to really look at debt for new hotels rather than fund new hotels based on a presumed EBITDA. That is a standard risk mitigation practice that Lemon Tree Hotels has had from the beginning. Do I make sense to you?

Speaker #4: So, that is a standard risk mitigation practice that Lemon Tree has had from the beginning. Do I make sense to you?

Speaker #5: Yes, sir. That is clear. Thank you for your detailed answers and all the information.

Vaibhav Mule: Yes, sir. That is clear. Thank you for your detailed answer. I know I am a bit

Vaibhav Muley: Yes, sir. That is clear. Thank you for your detailed answer. I know I am a bit

Speaker #4: Thank you.

Patanjali Keswani: Thank you.

Speaker #2: Thank you. Our next question is from the line of Rajiv Bharti with Novama. Please go ahead.

Operator: Thank you. Our next question is from the line of Rajiv Baski with Nuvama. Please go ahead.

Speaker #5: Yeah. Good evening, sir. Thanks for the opportunity. Sir, on the renovation side, put together, we are spending close to ₹450-odd crores. And like you have narrated earlier.

Rajiv Baski: Yeah. Good evening, sir. Thanks for the opportunity. Sir, on the renovation side, put together we are spending close to INR 450 odd crores and like you've narrated earlier-

Rajiv Bharati: Yeah. Good evening, sir. Thanks for the opportunity. Sir, on the renovation side, put together we are spending close to INR 450 odd crores and like you've narrated earlier-

Speaker #4: Including capex. Including capex.

Patanjali Keswani: Including CapEx.

Rajiv Baski: Okay. Yeah, this will be close to 2 years break even. That means, let's say after 2 years of stabilization, you will add close to INR 450 crores in terms of the absolute revenue, right? From the top-line side.

Rajiv Bharati: Okay. Yeah, this will be close to 2 years break even. That means, let's say after 2 years of stabilization, you will add close to INR 450 crores in terms of the absolute revenue, right? From the top-line side.

Speaker #5: Yeah. And this will be closer to two years to break even. That means, let's say, after two years of stabilization, you will add close to ₹450 crore in terms of absolute revenue, right?

Speaker #5: On the top line side.

Speaker #4: Yeah, maybe not so, because the operating leverage of incremental revenue is higher. But we target a 50 percent of spend as EBITDA margin input.

Patanjali Keswani: Yeah. Maybe not so because the operating leverage of incremental revenue is higher. We target a 50% of spend as EBITDA improvement.

Speaker #4: EBITDA improvement.

Speaker #5: Okay. I'm just seeing, let's say, from Q1 of FY 26 to Q1 of FY 27, we have seen close to 28, 29 crores kind of a delta.

Rajiv Baski: Okay. I'm just seeing, let's say from Q1 FY26 to Q1 FY27, we have seen close to INR 28, 29 crores kind of a delta. Ideally, the CapEx which you have done from pre-FY25 or including FY25, close to INR 230 odd crores if I'm not wrong. Let's say a quarter of that should have flown through or maybe let's say 20% because you are saying operating leverage part of that should have flown through even if, let's say everything else remains stable and now a delta on, let's say the sector's ARR growth should be riding on top of that. Isn't that how it should have been?

Rajiv Bharati: Okay. I'm just seeing, let's say from Q1 FY 2026 to Q1 FY27, we have seen close to INR 28, 29 crores kind of a delta. Ideally, the CapEx which you have done from pre-FY25 or including FY25, close to INR 230 odd crores if I'm not wrong. Let's say a quarter of that should have flown through or maybe let's say 20% because you are saying operating leverage part of that should have flown through even if, let's say everything else remains stable and now a delta on, let's say the sector's ARR growth should be riding on top of that. Isn't that how it should have been?

Speaker #5: Ideally, the capex which you have done from pre-FY 25, including FY 25, close to 230 odd crores, if I'm not wrong. That should have let's say a quarter of that should have flown through or maybe, let's say, 20 percent because you're saying operating leverage part of that should have flown through even if, let's say, everything remains else remains stable and a delta on, let's say, the sector's ARR growth should be riding on top of that.

Speaker #5: Isn't that how it should have been?

Speaker #4: Yeah, absolutely right. And what you have to look at is where that spend happened each year, in which hotel. That's what we track.

Patanjali Keswani: Yeah, absolutely right. What you have to look at is where has that spend happened each year? In which hotel? That's what we track and how has that hotel performed 2 years later. For example, we spent INR 11 crores in upgrading Keys Pimpri. I'm just giving you an example. How is Keys Pimpri's delta in EBITDA before and after that spend? That's what we look at. Sorry?

Speaker #4: And how has that hotel performed two years later? So, for example, we spent ₹11 crore in upgrading Keys Pimpri. I'm just giving you an example.

Speaker #4: So, how is Keys Pimpri's delta in EBITDA before and after that spend? That's what we look at. So it's not—sorry?

Speaker #5: No, so the Pimpri example is one which has been highlighted, which we take. But do we have any other case studies?

Rajiv Baski: The Pimpri example is one which has been highlighted, which we take it. Any other case study which we have?

Rajiv Bharati: The Pimpri example is one which has been highlighted, which we take it. Any other case study which we have?

Speaker #4: Yes, Lemon Tree. Lemon Tree Premier, Delhi, which has been fully renovated. Have a look at that. Nipun, would you share some numbers with him on a phone call?

Patanjali Keswani: Yes. Lemon Tree Premier Delhi, which has been fully renovated. Have a look at that. Niket, will you share some numbers with him on a phone call? What are the fully renovated hotels? Now, this year it is now finally Lemon Tree Premier Hyderabad, Lemon Tree Premier Delhi. By end of this quarter, it will be Lemon Tree Hotel Delhi. There will be Keys Whitefield. These are the high impact investments. Okay? Like Lemon Tree Delhi, both the two hotels will have accounted for INR 50 crore of renovation expense. Has the EBITDA gone up by INR 25 crore is the question. Those kind of numbers we'll be happy. Actually what you need to see is the breakdown of where the money has been spent and what is the incremental EBITDA once it has stabilized and reopened.

Speaker #4: So, what are the fully renovated hotels now? This year, it is now finally Lemon Tree Premier Hyderabad, Lemon Tree Premier Delhi, and by the end of this quarter, it will be Lemon Tree Hotel Delhi.

Speaker #4: There will be Lemon Tree Keys, Whitefield. These are the high-impact investments, okay? So, like Lemon Tree, Delhi—both the two hotels will have accounted for ₹50 crores of renovation expense.

Speaker #4: So, has the EBITDA gone up by 25 crores? That is the question. We would actually be happy with those kinds of numbers. What you need to see is the breakdown of where the money has been spent.

Speaker #4: And what is the incremental EBITDA, once it has stabilized and reopened? I mean, opened as a renovated hotel. And those numbers are very visible.

Patanjali Keswani: I mean, opened as a renovated hotel, those numbers are very visible.

Speaker #5: Yeah. So the request is, is it possible to, let's say, include more case studies like the one you shared with the Pimpri example?

Rajiv Baski: Yeah. The request is that is it possible to let's say put more case studies like you have shared with the Pimpri one?

Rajiv Bharati: Yeah. The request is that is it possible to let's say put more case studies like you have shared with the Pimpri one?

Speaker #4: In the next investor presentation, why don't you take Lemon Tree Premier Hyderabad, Lemon Tree Hotel Delhi—wherever we have spent large amounts of money.

Patanjali Keswani: Well, in the next investor presentation, why don't you take Lemon Tree Premier Hyderabad, Lemon Tree Hotel Delhi, wherever we spent large amounts of money. I think we spent INR 35 crores in Hyderabad, 30, 35. INR 50 crores in Delhi. That's INR 85, which is over 20% of our total spend. Have a look at that. Sure, sure. Start showing more and more hotels. I think you want more transparency, we'll give it to you.

Speaker #4: I think we spent ₹35 crores in Hyderabad—₹30, ₹35, and ₹50 crores in Delhi. That's ₹85 crores, which is ₹20 crores over 20 percent of our total spend.

Speaker #4: Have a look at that. Show shadow. Start showing more and more hotels. I think you want more transparency. We'll give it to you.

Speaker #5: Sure, that's all from my side, sir. Thank you. All the best.

Rajiv Baski: Sure. That's all from my side, sir. Thank you. All the best.

Rajiv Bharati: Sure. That's all from my side, sir. Thank you. All the best.

Speaker #4: Thank you. Discuss this with me. I'll show you the format.

Patanjali Keswani: Thank you.

Rajiv Baski: Thank you.

Rajiv Bharati: Thank you.

Patanjali Keswani: Discuss this thing actually.

Speaker #2: Our next question comes from the line of Subhi Gupta with Trinetra Asset Managers. Please go ahead.

Operator: Our next question comes from the line of Shubhi Gupta with Trinetra Asset Managers. Please go ahead.

Speaker #3: Yeah. Hi, sir. Am I audible?

Shubhi Gupta: Yeah. Hi, sir. Am I audible?

Speaker #4: Very audible, ma'am.

Patanjali Keswani: Very audible, ma'am.

Speaker #3: Yeah, hi. So, most of my questions have been answered. Just one question: the investments that we're doing on the technology side, what kind of contribution should we expect towards bookings?

Shubhi Gupta: Yeah, hi. Most of my questions have been answered. Just one question. The investments that we are doing on the technology side, what kind of contribution should we expect towards booking from this?

Speaker #3: From this.

Speaker #4: So, investment in technology is free. One is impossible to quantify in terms of return on investment, which is improvement in efficiency. Okay. Which is an ongoing process.

Patanjali Keswani: Investment in technology is three. One is impossible to quantify in terms of return on investment, which is improvement in efficiency. Okay? Which is an ongoing process. Just to give context to everybody, Lemon Tree, I must confess, in the first 15 years of its operations, had a bunch of its technology stack. The architecture was very, I should say, archaic. We used to work with Excel spreadsheets. We had a small revenue management system. We had a multiple set of vendors providing property management system, point of sale system, so on and so forth. Just after COVID, I think Kapil decided to put a ERP in place. Is that correct, Kapil?

Speaker #4: Now, just to give context to everybody, Lemon Tree, I must confess, in the first 15 years of its operations, had a bunch of its technology stack—the architecture was very, I should say, archaic.

Speaker #4: We used to work with Excel spreadsheets. We had a small revenue management system. We had multiple vendors providing property management systems, point of sale systems, and so on and so forth.

Speaker #4: Just after COVID, I think the couple decided to put an ERP in place. Is that correct, couple? Yes. So the first one and a half years went into ERP.

Kapil Sharma: Yes.

Patanjali Keswani: The first one and a half years went into ERP, and implementation of that itself was quite a nightmare. We said, we need to look at Lemon Tree as it's growing because at that point we were accelerating our signed contracts, which is 2024 when we signed 3,500 rooms. What do we need to be far more efficient as an operating company? Number 2, where can we capture clear upsides through revenue management, through better sales? How do we integrate with and how do we use providers like Salesforce, which we felt we could finally afford? What are the other steps like loyalty program, our website, so on and so forth, which we needed to upgrade. That was for last two and a half years, that's what we've been doing. Some of them have hit MVP 2, some have hit MVP 1.

Speaker #4: And implementation of that itself was quite a nightmare. Then we said, now we need to look at Lemon Tree as it's growing, because at that point, we were accelerating our signed contracts, which was 2024, when we signed 3,500 rooms.

Speaker #4: So, what do we need to be far more efficient as an operating company? Then, number two, where can we capture clear upsides—through revenue management, through better sales? How do we integrate with and how do we use providers like Salesforce, which we felt we could finally afford?

Speaker #4: And what are the other steps, like the loyalty program, a website, and so on and so forth, which we needed to upgrade? Now, those took—that was for the last two and a half years.

Speaker #4: That's what we've been doing. Some of them have hit NVP2, some have hit NVP1. What we have done is start rolling them off across our owned portfolio because we didn't need to ask any owner for approval for it.

Patanjali Keswani: What we have done is started rolling them off across our owned portfolio because we didn't need to ask any owner for approval for it. I can say broadly that certain targets have been met. Certain are still work in progress. We've got Kartike on board, who was the Chief Digital and Technology Officer of Coca-Cola. He now runs our technology vertical. He has been studying everything in place, and we are looking for further improvements in our offerings. Right now it is still very much an in-house thing. Our intention is once we have rolled it out to our satisfaction within our existing portfolio, then we will look at the managed portfolio and offer them these services.

Speaker #4: And I can say broadly that certain targets have been met; certain are still a work in progress. Now, we've got Karthikey on board, who was the Chief Digital and Technology Officer of Coca-Cola.

Speaker #4: He now runs our technology vertical. He has been studying everything in place, and we are looking for further improvements in our offerings. But right now, it is still very much an in-house thing.

Speaker #4: Our intention is, once we have rolled it out to our satisfaction within our existing portfolio, then we will look at the managed portfolio and offer them these services. In our new contracts with the managed hotels, we have specifically said that technology upgrades and so on will be at their cost and will be linked to our brand standards.

Patanjali Keswani: In our new contracts with the managed hotels, we have specifically said that technology upgrades and so on will be at their cost and will be linked to our brand standards. To summarize, we are recognizing these investments, although we are OPEXing it mostly. They are also investments in terms of monetization opportunities with our brand, this is something that will play out over the next, my best guess is next 2 years. Then I think we'll be able to actually give ROIs once we export it to third-party hotels.

Speaker #4: So, to summarize, we are recognizing these investments, although we are mostly expensing them as OPEX. They are also investments in terms of monetization opportunities with our brand.

Speaker #4: And this is something that will play out over the next, my best guess is, the next two years. And then I think we'll be able to actually give ROIs once we export it to third-party hotels.

Speaker #3: Thank you so much, sir. Thank you.

Shubhi Gupta: Thank you so much, sir. Thank you.

Speaker #4: Thank you.

Patanjali Keswani: Thank you.

Speaker #2: Thank you. Our next question comes from the line of Nikhil Poptani with Kizuna Wealth. Please go ahead.

Operator: Thank you. Our next question comes from the line of Nikhil Poptani with Kizuna Wealth. Please go ahead.

Speaker #5: Yeah. Hi, sir. Thank you for giving me the opportunity. So, the first question is about our non-negotiated rooms. As we've already mentioned, we try to fit in with the retail.

Nikhil Poptani: Hi, sir. Thank you for giving me the opportunity. My first question is that our non-negotiated room, as we've already mentioned that we try to fill in with our retail. Can we expect the negotiated rooms to go up back in the mix? How much would be the pricing impact for that if our negotiated room goes back, the mix goes up? That is my first question.

Speaker #5: So, can we expect the negotiated rooms to go back up in the mix? And how much would be the pricing impact for that if our negotiated room mix goes back up?

Speaker #5: That is my first question.

Speaker #4: Okay. Hi. Hi, Nikhil. So definitely, yes. I guess when we, like I said, as we achieve more balance—which is already visible in July and August—you can certainly see in the next presentation you will potentially notice a better balance of negotiated and non-negotiated business, no doubt about it.

Patanjali Keswani: Hi, Nikhil. Definitely, yes. I guess, like I said, as we achieve more balance, which is already visible in July and August, you can certainly see in the next presentation, you will potentially notice a better balance of negotiated and non-negotiated business. No doubt about it. It will be difficult for me to comment because that's speculative, depending on the seasonality, the rate and the ARR for different segments differ. I can tell you this for sure, that the balance between retail or negotiated and non-negotiated will be better Q2 onwards.

Speaker #4: It will be difficult for me to comment, so I kept it speculative. Depending on the seasonality, the rate in the ERR for different segments differs.

Speaker #4: But I can tell you this for sure, that the balance between retail or negotiated and non-negotiated will be better Q2 onwards.

Speaker #5: Yes, sir. My second question is that, on average, we are going to add 2,000 rooms in the coming five years—four years from 2026, 2027, 2028, and 2029.

Nikhil Poptani: Sir. My second question is that on an average that we are going to add 2,000 rooms in coming four years, from 2026, 2027, 2028, 2029, 2030. When we are targeting 50% EBITDA margins, when the fixed cost also comes up, won't that impact our margin a little bit?

Speaker #5: So, when we are targeting 50% EBITDA margins, if the fixed cost goes up, won't that impact our margin a little bit?

Speaker #4: No, I didn't get you. You said, 'I'll answer this.' Can you let me explain a bit? How does net EBITDA come? Net EBITDA comes at the hotel level, less below-the-line expenses.

Patanjali Keswani: I didn't get you. I'll answer. Let me explain a bit how does net EBITDA come. Net EBITDA comes hotel level less below the line expenses. As our revenue grows, the below the line expenses, which do not grow significantly, we made all the investments we need in technology and in people. They will not grow at the rate of growth of revenue. Below the line expenses, which is fundamentally corporate expenses as a percentage of sales, will keep reducing as a percentage of sales. When we say that we are targeting in Lemon Tree to ultimately have EBITDA margin of 75% to 80%, it means really we are saying we will double our management fee income and our below the line expenses, which is basically talent and technology, as a percentage of revenue will then drop to 20% to 25%.

Neelendra Singh: I didn't get you.

Patanjali Keswani: I'll answer. Let me explain a bit how does net EBITDA come. Net EBITDA comes hotel level less below the line expenses. As our revenue grows, the below the line expenses, which do not grow significantly, we made all the investments we need in technology and in people. They will not grow at the rate of growth of revenue. Below the line expenses, which is fundamentally corporate expenses as a percentage of sales, will keep reducing as a percentage of sales. When we say that we are targeting in Lemon Tree to ultimately have EBITDA margin of 75% to 80%, it means really we are saying we will double our management fee income and our below the line expenses, which is basically talent and technology, as a percentage of revenue will then drop to 20% to 25%.

Speaker #4: As our revenue grows, the below-the-line expenses— which do not grow significantly— we have made all the investments we need in technology and in people.

Speaker #4: They will not grow at the rate of growth of revenue. So, below-the-line expenses, which are fundamentally corporate expenses as a percentage of sales, will keep reducing.

Speaker #4: As a percentage of sales, when we say that we are targeting, in Lemon Tree, to ultimately have an EBITDA margin of 75% to 80%, it really means we are saying we will double our management fee income and our below-the-line expenses, which is basically talent and technology.

Speaker #4: As a percentage of revenue, we'll then drop to 20–25 percent. Now, with growth, what happens is fixed costs get distributed and margins expand.

Patanjali Keswani: With growth, what happens is fixed costs get distributed and margins expand. Variable cost is something we are very focused on. It is something we constantly look at seeing how we can reduce it. Typically in our company, our hotel expenses, half are variable and half are fixed. The way we look at it is that variable costs will grow at the rate of growth of occupancy, and fixed costs will grow at the rate of inflation, and that is what we try to achieve. Which is why we said next year if our revenue grows X, whatever that X is, and I don't want to give guidance there. I'm talking now consolidated and not disaggregated, then the EBITDA margins expanding to 50% is not a big deal. Plus, please don't look at Q1. Q1 is an aberration.

Speaker #4: Variable cost is something we are very focused on. It is something we constantly look at, seeing how we can reduce it. And typically, in our company, our hotel expenses are half variable and half fixed.

Speaker #4: So, the way we look at it is that variable costs will grow at the rate of growth of occupancy, and fixed costs will grow at the rate of inflation.

Speaker #4: And that is what we try to achieve, which is why we said, next year, if our revenue grows X—whatever that X is, and I don't want to give guidance there—and I'm talking now consolidated, not disaggregated, then the EBITDA margins expanding to 50% is not a big deal.

Speaker #4: Plus, please don't look at Q1. Q1 is an aberration. It is the entire year that matters. Last year, for example, I think we did 49% EBITDA margins.

Patanjali Keswani: It is the entire year that last year, for example, I think we did 49% EBITDA margins. What am I saying? I'm saying basically that if our renovation expenses drop by 1% of revenue, our EBITDA margins will be 50%. I would urge you to look at Which is that slide on expos, renovation expenses? Please look at slide 20. If in FY26 we did 49% of EBITDA margin with a 5.8% impact due to GST, technology, and renovation, we are saying GST will increase to 2%, which it will. Technology will increase by 50% from 0.6 to point. However, renovation will drop. If you look at the sum of the parts, there is a 1% reduction in expenses, therefore 49 should logically go to 50. Does that clear?

Patanjali Keswani: It is the entire year that last year, for example, I think we did 49% EBITDA margins. What am I saying? I'm saying basically that if our renovation expenses drop by 1% of revenue, our EBITDA margins will be 50%. I would urge you to look at Which is that slide on expos, renovation expenses? Please look at slide 20. If in FY 2026 we did 49% of EBITDA margin with a 5.8% impact due to GST, technology, and renovation, we are saying GST will increase to 2%, which it will. Technology will increase by 50% from 0.6 to point. However, renovation will drop. If you look at the sum of the parts, there is a 1% reduction in expenses, therefore 49 should logically go to 50. Does that clear?

Speaker #4: So what am I saying? I'm saying, basically, that if our renovation expenses drop by 1% of revenue, our EBITDA margins will be 50%. And I would urge you to look at the slide, which is at slide...

Speaker #4: Renovation expenses. Please look at slide 20. If in FY '26, we did a 49% EBITDA margin, with a 5.8% impact due to GST, technology, and renovation, we are saying GST will increase to 2%, which it will.

Speaker #4: Technology will increase by 50%, from 0.6 to 0.9. However, renovation will drop. So, if you look at the sum of the parts, there is a 1% reduction in expenses.

Speaker #4: And therefore, 49 should logically go to 50.

Speaker #5: Okay. That's clear. Yes, yes, sir. No, sir. Another question is, along the lines that if we are targeting, let's say, increasing our average room rate to 7,500 plus, what would be the timeline to achieve that?

Nikhil Poptani: Yes, sir. Now sir, my other question is like on the lines, if we are targeting let's say increasing our average unit to 7,500 plus, what would be the timeline to achieve that? Would it take 1 year, 2 years, 3 years?

Speaker #5: Like, would it take one year, two years, three years?

Speaker #4: No, it won't. So let me explain. GST applies for that percentage. The input credit, or the input credit we lose, is the percentage of rooms that we sell below ₹7,500.

Patanjali Keswani: No, it won't. Let me explain. GST applies for that percentage. The input credit we use is the percentage of rooms that we sell below 7,500. For example, our company average was 52% below 7,500 and 48% above 7,500. Our intent is not that we will be able to get rid of. All the rooms will not go to 7,500. Our intent is that this percentage should ramp up so that a larger and larger percentage of rooms are sold at over 7,500. Okay? For example, Red Fox East Delhi will never charge 7,500. It will never happen. Red Fox Jaipur will never charge 7,500. There are hotels where based on their brand positioning, their location, and the markets they serve, they will be in the 3,000, 4,000, 5,000 range.

Speaker #4: So for example, our company average was 52% below 7,500 and 48% above 7,500. Our intent is not that we will be able to get rid of all the rooms—rooms will not go to 7,500.

Speaker #4: Our intent is that this percentage should ramp up, so that a larger and larger percentage of rooms are sold at over ₹7,500. Okay? For example, Red Fox East Delhi will never charge ₹7,500.

Speaker #4: It will never happen. Red Fox Jaipur will never charge ₹7,500. So there are hotels where, based on their brand positioning, their location, and the markets they serve, they will be in the ₹3,000, ₹4,000, ₹5,000 range.

Speaker #4: But there are plenty of hotels we feel we can reprice in demand-dense markets where a large amount of our revenue comes from. And that is where the GST impact will progressively reduce, which again, I refer you to on slide 20.

Patanjali Keswani: There are plenty of hotels we feel we can reprice in demand dense markets where a large amount of our revenue comes. That is where the GST impact will progressively reduce, which again, I refer you to the slide 20. We are saying basically 2% will drop to 1.7% and continue to drop. There will never be a situation where it will be zero.

Speaker #4: We are saying, basically, 2% will drop to 1.7% and continue to drop. But there will never be a situation where it will be zero.

Speaker #4: Yeah.

Speaker #5: Yes, sir. So the valuation impact will get lower and lower as we increase, as our mix for the 7,500 rooms grows up.

Nikhil Poptani: Yes, sir. The dimensional impact will get lower and lower as our mix for the 7,500 room goes up?

Speaker #4: Yeah. Yes. Yeah. Yeah. For example, all the new Auricas that we are opening will all be over 7,500. Somebody raised the question about Aurica Bombay.

Patanjali Keswani: Yes. For example, all the new Aurikas that we are opening will all be over 7,500. Somebody raised the question that, Aurika, Mumbai. Aurika, Mumbai today has less than 5% GST impact. We'll make it zero by next year. Lemon Tree Premier, Mumbai International Airport, has I think about 10% to 11%, we'll make it 3% to 4% by next year. There are certain markets, Lemon Tree Premier, HITEC City, Hyderabad, 7% to 8%, we'll make it zero. When we look at these markets like Lemon Tree Premier, Delhi Airport, now it's a Pareto principle. These account for larger inventory with much higher revenue per room, as we keep increasing the rates here, the GST will progressively reduce. Please look at it as a weighted average.

Speaker #4: Arica Bombay today has less than 5% GST impact. We'll make it zero by next year. Lemon Tree Premier Bombay has, I think, about 10–12%.

Speaker #4: We'll make it 3–4 percent by next year. So there are certain markets. LTP Hyderabad has 7–8 percent. We'll make it zero. So when we look at these markets like LTP Delhi, now it's a Pareto principle.

Speaker #4: These account for larger inventory with much higher revenue per room. And as we keep increasing the rates here, the GST will progressively reduce. So, please look at it as a weighted average.

Speaker #5: Yes, sir. Thank you, sir.

Nikhil Poptani: Yes, sir. Thank you, sir.

Speaker #4: Thank you.

Patanjali Keswani: Thank you.

Speaker #2: Thank you. Our next question comes from the line of Rahul Majethia with Stratton Oakmont. Please go ahead.

Operator: Thank you. Our next question comes from the line of Rahul Majethia with Stratton Oakmont. Please go ahead.

Speaker #6: Hi, thanks for taking my question. With our accelerated asset line expansion into Tier 2 and Tier 3 markets, what's our situation regarding the regional mice expansion?

Rahul Majethia: Hi. Thanks for taking my question. With our accelerated asset-light expansion into tier 2 and tier 3 markets, what's our situation regarding the regional MICE expansion? Local banqueting, regional MICE, have we restructured our central sales and advertising and promotion teams to capture this demand? Or is this burden purely falling on the franchisee partners? Are we expected to extract a higher marketing or franchise fee to fund some national-level brand campaigns for these Lemon Tree brands, which are managed by a third party?

Speaker #6: So, local banqueting, regional MICE—have we restructured our central sales and advertising and promotion teams to capture this demand, or is this burden purely falling on the franchisee partners?

Speaker #6: And are we expected to extract higher marketing or franchise fees to fund some national-level brand campaigns for these Lemon Tree brands, which are managed by third parties?

Speaker #4: Great, Rahul. I'll answer that. So, for your, let's say, first question, we have actually, let's say, modified our sales structure to be able to bring more focus, better relationships, and a greater, let's say, execution strength to each segment.

Patanjali Keswani: Great, Rahul. I'll answer that. For your first question, we have actually, let's say, modified our sales structure to be able to bring more focus, better relationships, and a greater execution strength to each segment. When I say a segment, I mean airlines is a segment, MICE and weddings is a segment, and travel trade is a segment. Therefore, look at our sales structure as led by segments in the headquarters, aka airlines, MICE and weddings, and travel trade. In the geographies as well through our regional sales structure, which is classified into three clusters, north and east, south and west. As we become larger and deeper penetrated into India, there are two learnings that we have taken in from the past. First, the initial Lemon Tree model didn't have too much space for banquets.

Speaker #4: When I say segment, I mean airlines, the segment, MICE and weddings is a segment, and travel trade is a segment. And therefore, as we look at our sales structure, it is led by segments in the headquarters, a.k.a. airlines, MICE and weddings, and travel trade.

Speaker #4: And in the geographies as well, through our, let's say, regional sales structure, which is classified into three—so the three structures or three clusters: North and East, South, and West.

Speaker #4: As we become larger and more deeply penetrated into India, there are two learnings that we've taken from the past. First, when we created the initial Lemon Tree model, it didn't have too much space for banquets.

Speaker #4: As India has grown and as we have grown, we've learned that weddings and banquet revenue are a reasonable source of revenue. While we'll still continue to be in the range of 7,500 to 2,500 room revenue versus others, banqueting and harnessing these local MICE opportunities is a big revenue source.

Patanjali Keswani: As India has grown and as we have grown, we've learned that weddings and banquet revenue is a reasonable source of revenue. While we'll still continue to be in the range of 75, 25 room revenue versus others, banqueting and harnessing these local MICE opportunities is a big revenue source. Hence, looking at that and the general evolution of our chain in that direction, we have, to your point, structured or restructured our central sales team to cater to that. The leaders for these segments, travel trade, MICE, weddings, airlines, are also in place now. As we execute H2, we believe that we do expect more output from these segmental opportunities that so far we've been mild in executing. To your second question, will we charge more for national campaigns? Not right now.

Speaker #4: And hence, looking at that and the general evolution of our chain in that direction, we have, to your point, structured or restructured our central sales team to cater to that.

Speaker #4: The leaders for these segments—travel trade, MICE, weddings, airlines—are also in place now. So, as we execute the second half of the year, we believe that we do expect more output from these segmental opportunities that so far we've been, let's say, mild in executing.

Speaker #4: To your second question, will we charge more for national campaigns? I'm not, right now. See, listen, we already, at this point of time, have a fee structure which is based on a base fee and sales and marketing fees.

Patanjali Keswani: See, listen, we already at this point of time have a fee structure which is based on base fee and sales and marketing fees. What we certainly do at this point of time is have a very clear marketing calendar that speaks on two aspects. One, the seasonality aspect, and the other themes for the quarter. For example, the theme that we've been promoting very aggressively in Q1 and part of Q2 is weddings and celebration. That I guess is in the ambit of driving overall messages for all our hotels, including third-party owned and our own. No, we don't want to charge anything additional to what we are charging already to our third-party part owners.

Speaker #4: What we certainly do at this point in time is have a very clear marketing calendar that speaks to two aspects. One, the seasonality aspect.

Speaker #4: And the other themes for the quarter—for example, the theme that we've been, let's say, promoting very aggressively in Q1 and part of Q2—is weddings and celebration.

Speaker #4: And that, I guess, is in the ambit of driving overall, let's say, messages for all our hotels, including third-party owned and our own. So, no, we don't want to charge anything additional to what we are charging already.

Speaker #4: To our third-party owners.

Speaker #6: That will be optimized. All the best for the coming quarters.

Rahul Majethia: That'll be all from my side.

Patanjali Keswani: Thank you.

Rahul Majethia: All the best for the coming quarters.

Speaker #4: Thanks.

Patanjali Keswani: Thanks.

Speaker #2: Thank you. Our next question comes from the line of Shivam Singh with Capital Arch. Please go ahead.

Operator: Thank you. Our next question comes from the line of Shivam Singh with Arch Capital. Please go ahead.

Speaker #7: Good evening, sir.

Shivam Singh: Good evening, sir. Am I audible?

Speaker #2: Shivam, you're not clearly audible.

Operator: Shivam, you are not clearly audible.

Speaker #7: Pretty clear. Hi. Audible now, sir?

Patanjali Keswani: Pretty clear.

Shivam Singh: Am I audible now, sir?

Speaker #4: Better.

Patanjali Keswani: Right now.

Speaker #7: So I wanted to ask you, sir, why are we not getting into an airline catering business where we can maximize our F&B revenue or something like that?

Shivam Singh: Sir, I wanted to ask you, sir, why are we not getting into an airline catering business where we can maximize our F&B revenue or something like that?

Speaker #4: A great question, Shivam. I guess I'll answer it in my way. Padu, please help me if you want to come in as well. I think the simple answer, Shivam, is just focus, and focusing on our strengths.

Patanjali Keswani: A great question, Shivam. I'll answer it in my way. Badu, please help me if you want to come in as well. I think the simple answer, Shivam, is just focus and focusing on our strengths. Catering, you know our business model is largely driven on maximizing room revenue, and therefore F&B is a relatively smaller part of the business. Therefore, the strength of our business model is in driving rooms and associated business. Catering, while it could be an exciting business, but we believe we'll keep our focus at this point of time in penetrating deeper into India. Like we always said in Lemon Tree, what we stand for is a good sleep, is a good shower, is a good Wi-Fi, and good breakfast for our guests who stay with us across the network.

Neelendra Singh: A great question, Shivam. I'll answer it in my way. Badu, please help me if you want to come in as well. I think the simple answer, Shivam, is just focus and focusing on our strengths. Catering, you know our business model is largely driven on maximizing room revenue, and therefore F&B is a relatively smaller part of the business. Therefore, the strength of our business model is in driving rooms and associated business. Catering, while it could be an exciting business, but we believe we'll keep our focus at this point of time in penetrating deeper into India. Like we always said in Lemon Tree, what we stand for is a good sleep, is a good shower, is a good Wi-Fi, and good breakfast for our guests who stay with us across the network.

Speaker #4: Catering, you know our business model is largely driven on maximizing room revenue and therefore F&B is a relatively smaller part of the business. We and therefore the strength of our business model in is in driving rooms and associated business.

Speaker #4: Catering, while it could be an exciting business, we believe we'll keep our focus at this point in time on penetrating deeper into India.

Speaker #4: And like we always said at Lemon Tree, what we stand for is a good sleep, a good shower, good Wi-Fi, and a good breakfast for our guests who stay with us across the network.

Speaker #7: And so my second question was regarding, sir, what portion of our business is related to an OTA?

Shivam Singh: Sir, my second question was regarding, sir, what portion of our business is related to an OTA?

Speaker #4: OTA, yeah. Late 30s, mid-30s to late 30s. Sometimes it depends on the tactic that we might deploy in that month or quarter.

Patanjali Keswani: OTA? Yeah. Mid-30s to late 30s. Sometimes it depends on the tactic that we might deploy on that month or quarter, but broadly speaking, it will be in the mid-30s.

Neelendra Singh: OTA? Yeah. Mid-30s to late 30s. Sometimes it depends on the tactic that we might deploy on that month or quarter, but broadly speaking, it will be in the mid-30s.

Speaker #4: But broadly speaking, it will be in the mid-30s.

Speaker #7: Sir, when we are spending so much on tech, why not go for it, sir? Like, expand our own?

Shivam Singh: Sir, when we are spending so much on tech, why not go for it, sir? Like expanding our own-

Speaker #4: Our own?

Speaker #7: Sir, our own marketing and getting bookings directly instead of going through an OTA.

Patanjali Keswani: Sorry. Our own?

Neelendra Singh: Sorry. Our own?

Shivam Singh: Sir, our own marketing and getting bookings directly instead of going through an OTA.

Speaker #4: Oh, 100%. I think that is also a very, let's say, oft-executed playbook, Shivam, where hotels generally tend to drive a higher portion of direct through on the basis of their website and loyalty, which is our plan as well.

Patanjali Keswani: Oh, 100%. I think that is also a very, let's say, an oft-executed playbook, Shivam, where hotels generally tend to drive a higher portion of direct through on the basis of their website and loyalty, which is our plan as well. Not denying that at all. As we get better in our loyalty program, and convert better on our website, this is bound to happen. In fact, in Q1, as we deployed a stronger retail plan, our proportion of business from our direct channels also increased.

Neelendra Singh: Oh, 100%. I think that is also a very, let's say, an oft-executed playbook, Shivam, where hotels generally tend to drive a higher portion of direct through on the basis of their website and loyalty, which is our plan as well. Not denying that at all. As we get better in our loyalty program, and convert better on our website, this is bound to happen. In fact, in Q1, as we deployed a stronger retail plan, our proportion of business from our direct channels also increased.

Speaker #4: So, not denying that at all. As we get better with our loyalty program and convert better on our website, this is bound to happen.

Speaker #4: In fact, in Q1, as we deployed a stronger retail—let's say—plan, our proportion of business from our direct channels also increased.

Speaker #7: So, another small question. Sir, what was the enterprise value at which we transferred all the hotels to Fleur?

Shivam Singh: Sir, I have another small question. Sir, what was the enterprise value at which we transferred all the hotels to Fleur?

Speaker #4: The enterprise value is evident in the fact that today we own 59% of Fleur and Warburg owns 41. When we transfer everything, we will be 74 and they will be 26.

Patanjali Keswani: The enterprise value is evident in the fact that today we own 59% of Fleur and Warburg owns 41%. When we transfer everything, we will be 74% and they will be 26. You can work that one.

Speaker #4: So you can work that through.

Speaker #7: So I have worked on that, sir. So, the 960 that they will be investing at a later stage, will the valuation remain the same, or will that be prevalent to the market scenario at that point in time?

Shivam Singh: Sir, I have worked on that, sir. INR 960 that they will be investing at a later point of stage. Will the valuation remain the same or will that be travel into the market scenario at that point of time?

Speaker #4: It is a valuation which is fixed at, I think, $1 billion.

Patanjali Keswani: It is a valuation which is fixed at, I think, $1 billion.

Speaker #7: Yes, yes.

Shivam Singh: Yes.

Speaker #4: So they are investing in Fleur at $1 billion.

Patanjali Keswani: They are investing in Fleur at $1 billion.

Speaker #7: Okay.

Shivam Singh: Okay, sir.

Speaker #4: So, they are giving $100 million for 10% primary.

Patanjali Keswani: They are giving $100 million for 10%, primary.

Speaker #7: Okay, sir. So the post-holding would be 36% with Warburg and the remaining would be with us, right?

Shivam Singh: Okay, sir. The post holding would be 36% would be Warburg and the remaining would be with us, right?

Speaker #4: No. The demergers came, and with us is the following. Initially, before they put in this money, we own 74, they own 26. Of this 74, we will distribute 33 to Lemon Tree shareholders.

Patanjali Keswani: No. The demerger scheme envisages the following. Initially, before they have put in this money, we own 74%, they own 26%. Of the 74%, we will distribute 33% to Lemon Tree shareholders. That will lead to an automatic delisting. Are you with me?

Speaker #4: That will lead to an automatic delisting. Are you with me?

Speaker #7: Yes, sir. Yes, sir.

Shivam Singh: Yes, sir. I am.

Speaker #4: And we will then be 41 shareholders will be 33 and Warburg will be 26. Now, somewhere before this, Warburg will put in 100 million dollars and they stake will go from 26 on 100 to 26 on 110 because that additional 960 crores will give them 10 more shares.

Patanjali Keswani: We will then be 41%, shareholders will be 33%, and Warburg will be 26%. Somewhere before this, Warburg will put in $100 million. Their stake will go from 26% on 100 to 26% on 110 because that additional INR 960 crores will give them 10 more shares. Are you with me?

Speaker #4: Are you with me? Then the shareholding becomes Lemon Tree is 41 out of 110.

Shivam Singh: Yes, sir.

Patanjali Keswani: The shareholding becomes Lemon Tree is 41% on 110.

Speaker #7: Yes, sir.

Shivam Singh: Okay.

Speaker #4: Warburg is 36 out of 110, and Lemon Tree shareholders are 33 out of 110.

Patanjali Keswani: Warburg is 36% on INR 110, and Lemon Tree shareholders are 33% on INR 110.

Speaker #7: Okay, sir. That is really helpful to know, sir. And sir, regarding our growth, when do we see exponential growth starting? Because in the last five quarters, we haven't been growing at the pace which we were confident of achieving at that point of time.

Shivam Singh: Okay, sir. That is really helpful to know, sir.

Patanjali Keswani: Pleasure

Shivam Singh: Regarding our growth, when do we see an exponential growth starting? Because in the last 5 quarters, we haven't been growing at the pace which we were confident of doing at that point of time. Do we see a tipping point after which we start the acceleration again?

Speaker #7: So, do we see a tipping point after which we start the acceleration again?

Speaker #4: So, see, growth—when you say growth, what growth do you mean? Fleur was not a going concern. Once Aurika Bombay opened, the capital that was deployed by APG was then agreed to a number, and that capital was fully deployed once Aurika Bombay opened.

Patanjali Keswani: See, when you say growth, what growth do you mean? Fleur was not a going concern once Aurika, Mumbai opened. The capital that was deployed by APG was an agreed to number, and that capital was fully deployed once Aurika, Mumbai opened. No further capital was deployed either by Lemon Tree or APG in Fleur. Fleur, after that, could have only grown at the rate of its free cash flow. To solve for that and to take advantage of what we felt were opportunities, Warburg bought out APG and then is now putting in additional capital. That will lead to a significant growth spurt, which I think we have already said we are in active discussion and hopefully 2,500 rooms, whether operating or under development, will come into our portfolio. Let me give you some numbers.

Speaker #4: No further capital was deployed either by Lemon Tree or APG in Fleur. So, Fleur after that could have only grown at the rate of its free cash flow.

Speaker #4: To solve for that, and to take advantage of what we felt were opportunities, Warburg bought out APG and is now putting in additional capital.

Speaker #4: That will lead to a significant growth spurt, which I think we have already said we are in active discussion, and hopefully two and a half thousand rooms, whether operating or under development, will come into our portfolio.

Speaker #4: So let me give you some numbers. We currently operate just under 6,000 rooms. We are building 850 to 900 rooms. If we acquire these 2,500 rooms, then we are talking about 3,300 rooms, which will be a mix of operating assets and some assets that will open over the next three to three and a half years.

Patanjali Keswani: We currently operate a shade under 6,000 rooms. We are building 850 to 900 rooms. If we acquire these 2,500 rooms, then we are talking 3,300 rooms, which will be a mix of operating assets and some assets that will open over the next three and a half years. Basically, we are saying Fleur will increase by over 50% in rooms by FY30, mota-mota. Much more in revenue because the incremental rooms that are being bought are all Aurikas other than some operating assets. You can do your math backwards. Once we start making announcements, it is easy to do the math backwards because we are actually giving you EBITDA per room for different brands in our quarterly presentations and annual presentations. All you have to say is how many new Aurikas are opening. This is the average Aurika EBITDA per room into this.

Speaker #4: So basically we are saying Fleur will increase by over 50% in rooms, by FY 30, Mota Mota, but much more in revenue because the incremental rooms that are being bought are all Aurica's.

Speaker #4: Other than some operating assets. So you can do your math backwards. Once we start making announcements, it's easy to do the math backwards because we are actually giving you EBITDA per room for different brands in our quarterly presentations and annual presentations.

Speaker #4: So all you have to say is how many new Auricas are opening. This is the average Aurica EBITDA per room into this—this is the Lemon Tree Premier, and so on.

Patanjali Keswani: This is the Lemon Tree Premiers, and so on. That is one aspect of growth, and I am personally very bullish on it, which is why I'm staying on as an executive director in Fleur for the next five years. As far as Lemon Tree goes, it is now reinventing itself as an asset-light player at scale. We did not feel we could do this split earlier. Lemon Tree had to demonstrate a high growth in fee income and a large amount of fee income for it to be an asset-light player in India because there is at present no asset-light player of scale in India in the hotel space.

Speaker #4: So, that is one aspect of growth, and I am personally very bullish on it, which is why I'm staying on as an Executive Director in Fleur for the next five years.

Speaker #4: As far as Lemon Tree goes, it is now reinventing itself as an asset light player at scale. We did not feel we could list do this split earlier.

Speaker #4: Lemon Tree had to demonstrate high growth and fee income, and a large amount of fee income, for it to be an asset-light player in India, because there is at present no asset-light player of scale in India in the hotel space.

Patanjali Keswani: Lemon Tree had to demonstrate a high growth in fee income and a large amount of fee income for it to be an asset-light player in India because there is at present no asset-light player of scale in India in the hotel space. In that sense we are new, and we hope the market over the next six quarters will understand what Lemon Tree can generate as fee income and how exciting that is and the rate of growth and appropriately decide what it is worth.

Speaker #4: So, in that sense, we are new, and we hope the market, over the next six quarters, will understand what Lemon Tree can generate as fee income, how exciting that is, and the rate of growth, and appropriately decide what it is worth.

Patanjali Keswani: In that sense we are new, and we hope the market over the next six quarters will understand what Lemon Tree can generate as fee income and how exciting that is and the rate of growth and appropriately decide what it is worth.

Speaker #7: Absolutely, sir. That was a really nice explanation. Thank you so much for it.

Shivam Singh: Absolutely, sir. That was a really nice explanation. Thank you so much for it.

Speaker #4: My pleasure.

Patanjali Keswani: My pleasure.

Speaker #7: Thank you. Our next question is from the line of Arjavi Marwaha with Marzlan. Please go ahead.

Operator: Thank you. Our next question is from the line of Arjavi Marwaha with Marston. Please go ahead.

Speaker #6: Yeah, hi. Thanks for the coffee call and for taking my question. I just had a few simple questions about what kind of progress you've made towards the demerger in the last quarter?

Arjavi Marwaha: Yeah. Hi. Thanks for the conference call and taking my question. I just had a few simple questions about what kind of progress have you made towards the demerger in the last quarter, and when can we expect the demerger between the two demerger releases stated in the last question?

Speaker #6: And when can we expect the demerger between Fleur and Lemon Tree, which was just explained in the last question?

Speaker #4: Kapil will answer that. Yeah, so as you know, as we discussed in the last meeting also, this is at the approval stage with the authorities.

Patanjali Keswani: Kapil will answer that because he's made on demerger.

Kapil Sharma: Yeah. As you know, as we discussed in the last meeting also that this is at approval stage with the authorities. Currently, with the SEBI post we got the CCI approval and some scrutiny by the stock exchanges. That is in process as of now post with the NCLT process of filing and meetings and hearings would start. As we pointed out earlier that calendar year 2027 would be the year when this will be completed, but it's not later part of the year but the first half of that we should be able to complete this whole demerger exercise and list Fleur within that timeline.

Speaker #4: So currently, with SEBI post, we got the CCI approval and some scrutiny by the stock exchanges. So that is in process as of now.

Speaker #4: Post with the NCLT process, filings, and meetings and hearings would start. So, as we pointed out earlier, calendar year '27 would be the year when this will be completed.

Speaker #4: But it's not the later part of the year. In the first half, we should be able to complete this whole demerger exercise and list Fleur within that timeline.

Speaker #6: So that means you have to keep in

Patanjali Keswani: You have to keep in mind also that subject to SEBI, then shareholder vote, creditors approval, and then NCLT approval, there's a whole process. After all that, it will still take 1 month, I think, for it to be listed.

Speaker #4: mind all the subject to SEBI to then shareholder vote, creditor's approval, and then NCLT approval. There's a whole process. And after all that, it will still take one month, I think, for it to be listed.

Kapil Sharma: Yeah.

Speaker #4: So, conservatively, since we have very little control over many of these approval processes, you can say it is in the late second half of next year.

Patanjali Keswani: Conservatively, since we have very little control over many of these approval processes, you can say it is in the late second half of next year. Would you agree with that, Kapil? With some certainty?

Speaker #4: Would you agree with that, Kapil, with some certainty?

Speaker #6: Yes.

Speaker #4: Hopefully.

Kapil Sharma: Yeah.

Kapil Sharma: Hopefully.

Speaker #6: Yeah.

Kapil Sharma: Yeah.

Speaker #7: Okay. Thank you, sir. That would be around 12 months from now. And I guess workload quarter will continue tracking the progress. Thank you.

Arjavi Marwaha: Okay. Thank you. That would be around 12 months from now. I guess quarter-on-quarter we can keep tracking the progress made. Thank you.

Speaker #4: Thank you.

Kapil Sharma: Thank you.

Speaker #7: Thank you.

Operator: Thank you.

Speaker #6: Thank you.

Patanjali Keswani: Thank you.

Speaker #7: Our next question is from the line of Vikram Shah with Vikram Securities. Please go ahead.

Operator: Our next question is from the line of Vikram Shah with Vikram Securities. Please go ahead.

Speaker #5: Hi, good evening. My question was more towards the quality of some of our rooms. We've had—because I keep track—we keep traveling to Rishikesh, to Delhi, and I'm afraid I hate to say it, but the room quality has deteriorated quite a lot.

Vikram Shah: Hi. Good evening. My question was more towards the quality of some of our rooms we've had because we keep traveling to Rishikesh, to Delhi, and I hate to say it, but the room quality has deteriorated quite a lot. This is the Lemon Tree Premier I'm talking about. I don't want to get into the details too much, but I can see a visible quality deterioration as I said. What are we doing to renovate or to make these things better?

Speaker #5: This is a Lemon Tree premiere I'm talking about. And I mean, I don't want to get into the details too much, but I can see a visible quality deterioration, as I said.

Speaker #5: What are we doing to renovate or to make these things better?

Speaker #4: Which hotels are you talking about specifically?

Patanjali Keswani: Which hotels are you talking about specifically?

Speaker #5: Lemon Tree Premiere next to the Delhi airport, and then there was the Lemon Tree in Tapovan.

Vikram Shah: Lemon Tree Premier next to the Delhi Airport, and then there was the Lemon Tree in Tapovan.

Speaker #4: Well, I'm surprised to hear that because the Lemon Tree score has gone to 4.6 out of 5 after renovation. So, I don't know which room you stayed in and what happened, but our general customer feedback is fantastic and our rating has gone up significantly.

Patanjali Keswani: Well, I'm surprised to hear that because the Lemon Tree score has gone to 4.6 on 5 after renovation. I don't know which room you stayed in and what happened, but our general customer feedback is fantastic, and our rate has gone up significantly, and so has occupancy. I'd like to know which room you stayed in. If you can just send the details, we'll get back to you. Rishikesh is a managed portfolio property which needs renovation, and I think it is happening. When is it happening?

Speaker #4: And so has occupancy. I'd like to know which room you stayed in. If you can just send the details, we'll get back to you.

Speaker #4: Rishikesh is a managed portfolio property, which needs renovation. And I think it is happening. When is it happening?

Speaker #6: So they are planning for later this year and next year.

Niket Sood: They are planning for later this year and next year.

Speaker #4: Okay, so Rishikesh will go through renovation, but that's a managed hotel, so the owners have to agree and so on. But I think he's agreed to renovate also.

Patanjali Keswani: Okay. Rishikesh will go through renovation, but that's a managed hotel, so owners have to agree and so on. I think he's agreed to renovate also. It would be helpful if you Nipul, just take the number.

Speaker #4: But it would be helpful if you just, Nipun, just take the number, and we'd love to get some inputs from you.

Niket Sood: Sure.

Niket Sood: We'd love to get some inputs from you as to what you found was.

Speaker #4: As to what you found was.

Speaker #5: Maybe take a picture, etc. Of course, this was just for a constructive conversation, so I'd be happy to share it.

Vikram Shah: We did take pictures, et cetera, and of course, this was just for a constructive conversation. I'd be happy to share it.

Patanjali Keswani: No problem. Please share.

Speaker #4: No problem. Please share. Appreciate that.

Niket Sood: Appreciate that, Vikram. Thanks for bringing it up. We'll come back to you soon.

Speaker #6: And thanks for bringing it up. We'll come back to you.

Speaker #5: Thank you. Thank you.

Vikram Shah: Thank you.

Operator: Thank you. We have no further questions, ladies and gentlemen. I would now like to hand the conference over to the management for closing comments. Over to you, gentlemen.

Speaker #7: Thank you. We have no further questions, ladies and gentlemen. I would now like to hand the conference over to the management for closing comments.

Speaker #7: Over to you, gentlemen.

Speaker #4: Okay. Thank you once again for your interest and support. We'll continue to stay engaged. Please be in touch with our Investor Relations team for any further details or discussions.

Patanjali Keswani: Okay. Thank you once again for your interest and support. We'll continue to stay engaged. Please be in touch with our investor relations team for any further details or discussions. We look forward to interacting with you soon. Thank you.

Speaker #4: And we look forward to interacting with you soon. Thank you.

Speaker #6: Thanks.

Kapil Sharma: Thanks.

Operator: Thank you. On behalf of Lemon Tree Hotels, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.

Browse all earnings call transcripts

Q1 2027 Lemon Tree Hotels Ltd Earnings Call

Request TrialDemo

Lemon Tree Hotels

Earnings