Chalet Hotels Ltd

NSE:CHALET

Earnings Call Analysis

Strong Performance Amid Economic Growth

Chalet Hotels Limited reported a robust financial performance in Q2 FY '25, with consolidated revenue increasing by 20% compared to the same quarter last year. This reflects resilience in the Indian hospitality sector, which has been buoyed by a positive economic environment. The company's EBITDA also grew by 20%, indicating a healthy operational margin.

Segment Highlights and Revenue Growth

The hospitality segment saw significant progress, with revenue climbing to INR 3.4 billion, growing by 18%. The average daily revenue per available room (RevPAR) improved by 10%, indicating strong demand and improved pricing. Notably, on a like-for-like basis, RevPAR increased by 12%, buoyed by increasing occupancy rates and average room rates. The occupancy for the portfolio reached 73.6%, which is a 40 basis points improvement YoY.

Highlights from the Real Estate Sector

Chalet also showcased robust growth in its residential real estate segment, selling 32 apartments during the quarter at an impressive rate of over INR 21,000 per square foot. This marks an increase in sales see average rates improving by about INR 300 from the previous quarter, highlighting strong demand in the residential market.

Annuity Business Growth

The rental and annuity segment performed well, generating INR 419 million in revenue, which reflects an impressive growth of 39% year-on-year. This segment has been aided by prudent cost management, resulting in a stable EBITDA performance. The company's leasing efforts have accelerated, with 200,000 square feet of leasing agreements executed in the last quarter, reinforcing confidence in reaching their leasing targets by the end of the financial year.

Challenges and Future Outlook

Despite these successes, challenges such as geopolitical uncertainty and stringent market conditions remain. The company acknowledged a non-cash impact of INR 2 billion due to changes in tax laws affecting its deferred tax assets, which resulted in a net loss reported for the quarter. However, the company remains optimistic about a robust second half of the fiscal year, driven by sustained domestic and international travel demand.

Strategic Growth Plans

Chalet Hotels is committed to its growth strategy, with a CapEx plan of INR 15 billion over the next six quarters. This investment supports ongoing projects and new acquisitions, including an 11-acre beachfront land parcel expected for completion within three years. The company’s focus on enhancing its portfolio and strategic positioning in high-demand regions is expected to yield substantial returns.

Financial Health and Ratings Upgrade

The company maintained a stable net debt of INR 16.6 billion with a reduced average cost of finance of 8.52%, down by 35 basis points since March 2024. Recently, Chalet received credit ratings upgrades, reflecting its strong financial health and ability to navigate market conditions effectively.

Earnings Call Transcript 2025-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to the Chalet Hotels Limited Q2 FY '25 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict.

[Operator Instructions]

Please note that this conference is being recorded.

I now hand the conference over to Mr. Sanjay Sethi, MD and CEO, Chalet Limited. Thank you, and over to you, sir.

[Sanjay Sethi, executive]

Joining us today for the earnings call on the performance for Chalet Hotels Limited Q2 FY '25 results. To begin with the Indian hospitality sector seems to be doing well and bounced back this quarter to demonstrate strong performances. It has been driven by overall positive environment supporting travel. From a macroeconomic perspective, India is navigating a mixed environment. The IMF predicts steady growth and inflation remains relatively under control. Though challenges like global geopolitical uncertainty continue to persist. During Q2 FY '25, we've been able to demonstrate continued growth across key metrices when compared to the same period last year. Consolidated revenue of the company increased by a healthy 20%. EBITDA also saw 20% rise from Q2 of FY '24. Within the hospital lease segment, our revenue grew by 18% accompanied by a similar increase in the segment EBITDA. Our portfolio occupancy stood at 73.6%, up 40 bps, with the average room rate showed a 10% improvement over Q2 FY '24, contributing to a year-on-year growth in RevPAR of 10.3%.

On a like-to-like basis, the portfolio RevPAR is up by 12%. Within the portfolio, Hyderabad led the occupancy improvement Bangalore followed by Hyderabad led the pack on the room read growth. For the rental and annuity portfolio, we clocked a revenue of 419 million, a growth of 39% on the same period last year, an 18% improvement on the previous quarter. The Residential Real Estate segment continued robust sales with strong rates per square foot. We have sold 32 apartments flat in this quarter, and I'm happy to share that we started clocking a new high rate of over INR 21,000 per square foot. Nitin will later on share some more details on this.

On the leasing front, we have picked up pace in the quarter in the last quarter with over 2 lakh square foot of LOS being executed. We are confident of our target of achieving a majority leasing by end of this financial year. We continue to grow our portfolio, and I'm extremely happy to share that we have had a [indiscernible] strategic milestone with the acquisition of an 11-acre beachfront land parcel in [indiscernible]. The resort is expected to open in approximately 3 years from now and will feature around 170 keys. The resort will position at the higher end of the pyramid and likely to be an upper upscale result.

Some updates on the ongoing projects. I'm afraid there's been a little bit of a delay on the opening of the or rather the full opening of the renovated and upgraded due to treat by quarter. We expect to launch it in its new upstart by end of the financial year. However, graded opening of hotel rooms is already happening every month. And currently, we have 37 rooms, a restaurant, a bar and a swimming pool in operation. The touch at the D3 terminal in Delhi International Airport, which was scheduled to open by end of FY '26 is now delayed and expected to open potentially by June of 2026.

On the other projects, the work on the new hotel in role, the Cignas 2 and away and the additional rooms in Bangalore, they are all on track. In Q2 FY '25, we have commenced the renovation of 4 points by Sheraton Navi Mumbai and 35 rooms have been taken out for the upgrade that we are doing, and therefore, they are out of action for this quarter. Completion of this upgradation is set for July 2025.

I'm delighted to share that Chalet Hotels on the KPMG ESG Excellent Award 2024 in the midscale small cap companies and has also retained the spot as the Best in Workplace program in 2024 in our category of companies in India.

Overall, ladies and gentlemen, we're expecting a robust H2 driven by domestic and international corporate travel, mice and the reading segment. We also expect the leasing base sale of residential units and gradual increase in inventory at the deep retreat and a [indiscernible] Whitefield to assist the subsequent quarters.

I will now hand over to Nitin Kanda, our CFO, to take you through the financial updates with some final details. Thank you.

[Nitin Khanna, executive]

Thank you, Sanjay. Good morning, ladies and gentlemen. Welcome to another quarter's call as we continue the streak of historically best performances. This is 1 of the historically best performances for quarter 2. On the financial updates, hospitality. In the Hospitality segment, AD have had a double-digit growth with stable occupancy at 74%. The resultant RevPAR was at 7,756, with a growth of 10%. Excluding the newly acquired hotel at Arab and the Duke retreat, which is under full renovation. On a same-store basis, the occupancy expanded by 200 bps and RevPAR grew by 12%. It will be pertinent to note that the total room nights sold were higher by 7% during the same period. Hospitality revenue for the quarter was INR 3.4 billion a growth of 18%, led by a combination of rate growth, inventory additions and a healthy F&B growth. EBITDA for the segment came at INR 1.4 billion with a growth of 18%. And we maintained margins at 41.4% within the quarter, led by prudent cost management. It would be pertinent to note that on a same-store basis, margins improved to 43.4%, which is an expansion of 200 bps. As we continue to add more hotels and diversify the positioning and segments, our margins for various quarters may see a marginal shift accommodating the seasonalities of the respective micro markets and. segments.

On the annuity business, on the rental and annuity front, our revenue for the quarter was at INR 419 million with an EBITDA of INR 3 million. And plus, we are already seeing flow-throughs improving. On the residential, Kora Mangala, on the updates on residential projects, we have sold 32 new units during the quarter, commanding an average rate of INR 21.35 per square feet -- this is again higher by about INR 300 from the previous quarter. In all the 253 units -- sorry, the 253 units have been sold out of 321 units, that is 80% sales have been achieved. Overall collections during H1 was INR 2.4 billion, and we have outstanding receivables of INR 3.4 billion as of September 30. From a console perspective, the consolidated revenue for the quarter was INR 3.8 billion, a growth of 20% year-on-year. Consolidated EBITDA was at INR 1.6 billion with a growth of 20% and a margin of 40.6% for the quarter.

Consolidated PBT for the quarter was at INR 0.8 billion versus INR 0.4 billion in the same quarter last year. Just to touch and update on the [indiscernible]. The recent Finance Act withdrew the indexation benefit on long-term capital gains tax. And as a result, the company reversed its deferred tax assets to the tune of INR 2 billion within the quarter. under discussion, which had onetime noncash impact. This has resulted in a negative PAT of INR 1.4 billion for the quarter. Without this impact, the PAT has grown 75% on a year-on-year basis.

On the debt part, during the year to date, the company has spent about INR 4.1 billion and land acquisitions, which was majorly met out of internal accruals. The net debt as on 30th September '24 was at 16.6 billion, which has been pretty much stable. We closed the quarter with an average cost of finance standing at 8.52%, a reduction of 35 bps from March '24.

I'm happy to further add that within the quarter, Chalet has received ratings upgrade from India ratings, which moved from A- to AA and from ICRA, which moved from A to A+. We have also received a new rating from CRISIL of AA-. The company has been actively investing in its growth and has a CapEx plan of around INR 15 billion for the next 6 quarters for the announced projects. These will be largely funded through internal accruals. We will continue on our growth trajectory and our balance sheet is in a very comfortable position to support further strategic growth opportunities.

With this, let me open the floor for Q&A.

[Operator]

[Operator Instructions] The first question is from the line of Vikas from Antique Stock Broking.

[Vikas Ahuja, analyst]

Sir, my first question is, in the opening remark, we said that H2 is going to be robust. So is it fair to assume that in terms of ADR, an growth, we mean better than Q2 or at least double digits for second half?

[Sanjay Sethi, executive]

Vikas, thank you for your question. As you know, we don't give forward-looking numbers, but you'll also know that the 2 typically in our industry is significantly better than we expect that credit that sort of trend to continue. But it looks like we are good for decent Q3 and Q4.

[Vikas Ahuja, analyst]

Sir, I was just sitting on Y-on-Y now? So -- okay, that's fair. Secondly, if I refer to the industry reports, which have come in as a couple of months, Mumbai has seen a strong double-digit growth. But I'm surprised to see we have reported 7% growth in Mumbai in terms of especially when we started very strong in July. Can you please help us understand that?

[Sanjay Sethi, executive]

Sure. So look, I know -- I haven't seen the reports that you are referring to, but I think Mumbai is for us, we reported a 7% growth in ADR, which is a healthy growth given that we were trying to stabilize the ava hotel. We've also had new supply that's come into the Navi Mumbai market. So to some extent, there is slightly stronger competitive environment in the Navi Mumbai. Of course, the Navi Mumbai by hotel as is not a very large hotel 150 rooms. So the impact will be in the overall scheme will be that much lower. But I think a 7% growth in a quarter where we had extreme weather conditions, including flooding, where we saw softening up of September. In fact, the September 1st 20 days were pretty weak. And while September numbers are not really all from the consultants, I think we see that we saw a bit of a disappointing September demand by. However, the last end of September picked up very, very aggressively, and we were able to sort of do -- close the month reasonably well. In terms of the numbers of growth. I think we've had a balanced growth between JW Sahar and Westin Pava in terms of rate. Power has also improved occupancies [indiscernible] executive apartment hasn't had a growth on ADR, but have grown on the occupancy side. And the 4 points by Sheraton has had an ADR growth of 5% and given the competitive environment that it is in, with occupancy, 83% and ADR growth of 5%, I think the hotel has held out very well in those competitive landscape and maintained its leadership position with a strong margin.

[Vikas Ahuja, analyst]

Okay. Sir, my last question is how is the overall [indiscernible] cycle looking like. And in terms of -- if I look at the hospitality B growth for Mumbai versus the other regions. The other region growth is almost 3%. So do you think this trend will continue going in the near medium term as well? That's my last question, sir.

[Sanjay Sethi, executive]

So as the -- on the occupancy side, Mumbai is reporting slightly higher occupancies than Hydebad and Bangalore. And we believe with that stabilizing, we see that Mumbai will continue a rate growth part of the number that seeded in Q2. Hyderabad and Bangalore, will continue to grow strongly. And I think there's an opportunity of growing occupancies there in addition to the rates. So that's what we are likely to do in the quarter 3 and quarter 4. In Delhi, we expect at the rabi, we expect both occupancies and road rate to grow very aggressively in H2 because that's a seasonal hotel with winters being the best part of the year for them. and the wedding season is kicking in. We also expect the wedding season to support JW Saha and we provide hotels very strongly. Novotel Pune has done extremely well, and it has actually absorbed the 88 new rooms we opened and being able to deliver it with the addition of 88 rooms, 78% occupancies and with an ADR growth of 10%. So I think it's a strong growth there. Hyderabad mine space, we've seen rates at the mine space be slightly lower in terms of growth, but the occupancy has jumped 15% point, which is a very strong jump in Hyderabad. And Westin High Tech, which is the hotel that we have a single client and place has had a rate growth of almost 30% occupancies, of course, in that hotel 100%. So overall, same-store growth on ADR of 9% same-store growth in occupancy over 2.5%, 3% and overall growth on RevPAR as is the same-store growth that we have as a story, which is, I think, a very healthy one.

[Vikas Ahuja, analyst]

Sir, just 1 thing that we missed was corporate rate, rate hike. Are you able to [indiscernible].

[Sanjay Sethi, executive]

No, apologies for that. Our corporate rate cycle will start going forward. I will let the team sort of work that out before we come back with any commentary on the same.

[Operator]

The next question is from the line of Karan Khanna from Ambit Capital.

[Karan Khanna, analyst]

So just a couple of questions from my side. Firstly, I think in a recent interview, you spoke about increasing the indexation towards laser to about 20% of the portfolio. while office assets should contribute over 25% of the oral BI. Can you talk a bit about what kind of markets are you targeting beyond Goa? And secondly, where we are in terms of the cycle, the hospitality cycle. Do you think allocating capital towards the leisure portfolio at this point seems an attractive proposition.

[Sanjay Sethi, executive]

I'm sorry. I'm sorry, I had my mic on mute. Apologies for that, Karan. Yes, we believe that getting about 20% of the portfolio in the leisure space, it's a good strategy. It will continue to support overall growth for the portfolio. Currently, we've got dues at Lonavla. We've got Ravi outside Delhi. We operate a small resort in Mudra for the group and was something that we've announced. Look, it's all going as per sales strategy over the last few years. There's no sort of major deviation to that. We have stated we'd like to be in the big markets of Goa and Rajasthan. We said we'd like to be in the driving distances of Tele, Mumbais and other big cities in the country. We did say that we'd like to be in the Malas omewhere. Those are all opportunities that we're looking at as and when something comes by, we will come back to all of you and share what all that we're doing on the pipeline outside. Goa, we believe can be deeper than just 1 model, and we'll continue to look for opportunities more than just the option that we have currently.

[Karan Khanna, analyst]

Secondly, on Bangalore, where you have about 120, 130 is getting added at the Whitefield property. Now we've seen listed earlier also acquiring an asset in the Whitefield micro market and we're looking for another 200 ks to the existing portfolio. So can you talk a bit about the Bangalore in particular, the Whitefield micro market and with the kind of supply that's coming, how should we think about the overall occupancy and rate growth potential in that micro market.

[Sanjay Sethi, executive]

So Karan, you refer to another hotel company, adding inventory and then on see more growth. So have we just should give you more confidence in the market given that to seriously listed hotel investment companies are looking at growing the white market. So it's clearly a positive market, and we will continue to explore that. We are only a few months away from opening these rooms, and we believe by end of this current quarter, we have this round ready and maybe by January, with licenses in place, we could start commercial operations for those additional homes.

[Karan Khanna, analyst]

And lastly, on Core Bangla Bangalore project, where you managed to sell about 32 units this quarter, which is also at a 16% higher I would say early. So talk a bit about what kind of time line are you looking at for monetizing the balance units in this project.

[Sanjay Sethi, executive]

So I think it's another 2 to 3 quarters at most. I think 3 quarters is a safe assumption to make. We also have that 140,000 square foot of the office to which is, and as of now, we look at -- we're looking at selling it, but closer to completion. We believe that there's still some upside on the rates for the balance 6 units, and we'll continue to pursue that.

That's the time line.

[Operator]

[Operator Instructions] The next question is from the line of Raghav Malik from Jefferies Group.

[Raghav Malik, analyst]

Yes. Sorry, about that. Am I audible?

[Sanjay Sethi, executive]

Yes, we can hear you.

[Raghav Malik, analyst]

So I just wanted to ask a bit more about the RevPAR essentially. I know you don't give guidance, but -- how the -- how is the RevPAR tracked across the 3 months for the quarter, if you could tell us? And is there any further sort of normalization make similar to how we've seen in the industry where in July August has been much stronger in September, slightly on the lower side with the mid-to high kind of similar number?

[Sanjay Sethi, executive]

Yes. So Raghav, thank you for the question. July was a strong month. We saw August to reasonably well. And whilst you are concerned, as I said earlier, on the first 20 days of September, we saw a very strong uptick once the holidays and the heavy rains were over and we caught up the gaps and close with the positive story or variance to the previous year's quarter 2, which was reassuring. We do not give guidance on going forward. But on a same-store basis, last quarter, we grew by 12% on a RevPAR basis. And I see no reason why we will not have similar range of growth going forward.

[Raghav Malik, analyst]

Okay. Okay. And my other question is on the CapEx that is been slightly pushed in terms of page Delhi and agency. So could you just provide some more detail on that, please?

[Sanjay Sethi, executive]

So as Taj Delhi as many people on the call will know, is a shell that's been developed by our landlord there, which is International Airport Limited. They have had some challenges with the monsoon and trading side, 3 baseband site. The pace has picked up extremely well in the last 1 month or so, I'm very happy with the pace of development there. But it still resulted in some delays and we thought it best to at least guide all of you on the delay that's there. So you are aware of it. And therefore, we expect it to be completed now maybe in the month of June of 2026. We expect our team to move into the site in January. That's when the site will be ready for our team to start work on the NEP and the fit outside with the low flows and basement. And then progressively, they'll continue to give us a floor at a time. It's not a very high building just on plus 6 stories or ground plus element, would recall exactly. But in that range, and we are hoping that with the 1.5 years from January, we should have completed the fit-outs and the hotel will be ready for commercial opening. On [indiscernible], we had said that we will get the approvals around this quarter. And we will come back to you as soon as we'll get back on that. I must though use the share that they could potentially be delays in approval only because of the Maharashtra election at that announced, and there will be some time to stabilize post elections. And I think that will also -- just so that I can cover the earlier questions that were asked in terms of outlook for this quarter, we expect that there could be some impact during those 1 or 2 days of elections in Mumbai and Pune on the business. But that's going to be a 1- or 2-day impact. Bangalore [indiscernible].

[Raghav Malik, analyst]

Okay. Sure, sir. And sir, I just missed the CapEx number. You had mentioned something for the next 6 quarters. What would be the number? CapEx items.

[Sanjay Sethi, executive]

The CapEx is INR 15 billion for the next 6 quarters.

[Nitin Khanna, executive]

INR 1,500 crores is the CapEx for the projects that we've shared with you. But that's for the next 6 quarters.

[Operator]

The next question is from the line of Adhidev Chattopadhyay from ICICI Securities.

[Adhidev Chattopadhyay, analyst]

The first question is on our leasing guidance. Obviously, you reiterated that the -- by March, you're looking to leave the majority of the space. give us some more color on the Bangalore and Pai market separately, how they would trend in terms of the leasing traction -- and from, let's say, Q3 of this year, do we -- are you expecting some Q-on-Q pickup in the rental income because of the leasing we have done in the previous quarters. That is the first question.

[Sanjay Sethi, executive]

Thanks, Adhidev. I will let Nitin come back with details. But just as a quick overview, between leased and LOI signed were roughly 8% -- 6% at away, but we've got another 33% to be signed in the next few days. And when I say few days, it's literally before the Vale hopefully, that we'll be able to sign that. So we'll get to about 70% of supers concern. In Bangalore, in the new to that we built, I think we are how much I'll let Nitin come back the details, but we are getting good traction in Bangalore, slower than we expected. The challenge was there were 2 large business tech parts that had also built in the vicinity they have now got a job, and we believe our traction will pick up. But Nitin, if you have any further color to share.

[Nitin Khanna, executive]

So on a total Bangalore front, we have around close to 1 million square feet as a GLA. Out of which 55% is already leased. 4% is more, which is in the process of signs. So it's more from a committed perspective, we are already 60% committed over there. In terms of pipeline, we have around 21,000, which from -- by end of December, we are looking at getting a final negotiation, there is certain evaluation of relocation happening for 1 of the big clients, which probably we will get better news by end of December. In the second white field, we are looking at education sectors, some of the big corporates coming in, which is around 56% vacant. We will get the first high visit completed by December end on that. On the Page part, as Sanjay has already told, we are almost like a verge of closing discussions with the biggest corporate. We do see that by end of this year, March year, you will see almost 90% of getting leased out.

[Sanjay Sethi, executive]

So just to sort of add to that, the leasing rates continue to be strong rise. They are as per the earlier indication that we've given and with inflatory growth on the base rate also.

[Adhidev Chattopadhyay, analyst]

Okay. So sir, just to understand correctly, you're saying across Bangalore and Power, you are expecting to get to a leasing plus no 90% by March, right, across all the [indiscernible]?

[Sanjay Sethi, executive]

Right.

[Adhidev Chattopadhyay, analyst]

Okay. Okay. Sir, the second question I had is on the international arrivals. Obviously, there has been a lot of talk about going back to pre-COVID levels. So could you give us some sense now that we are into the second half of the year. How do you see that trending? And even, let's say, even what is the sort of dependence is the domestic business making up for any shortfall if any, in the international in [indiscernible].

[Sanjay Sethi, executive]

Yes. So look, clearly, the domestic digital continues to be extremely strong. and has supported us in the previous quarters, almost 6, 7 quarters now to make up for the gap in the foreign tourist arrivals. Foreign tourist arrivals as per the passenger data is almost back to pre-COVID. In our case, currently in the quarter 2, 33% of the room nights came from foreigners, 29% last year same quarter. But in terms of absolute room nights, we've grown from 5,886 40 room nights to 65.65 foreign room nights, which is a 20% -- 24% growth last year same period. So clearly, we're seeing strong traction and this quarter 2 is never not really the decade for foreign travelers to come into India. We look forward to this growing a little more directively in the subsequent quarters.

[Adhidev Chattopadhyay, analyst]

Sir, but what is the visibility and the thing in terms of forward bookings and broadly, is it better than last year? Or how would it trend or.

[Sanjay Sethi, executive]

It is definitely better than last year. That is all I can share. We don't give forward-looking numbers, I don't know it.

[Operator]

[Operator Instructions] The next question is from the line of Prashant Biyani from Elara Securities.

[Prashant Biyani, analyst]

Sir, what led to this sharp increase in other expenses?

[Sanjay Sethi, executive]

I'll let Nitn comment on the other expense side. Nitin?

[Nitin Khanna, executive]

So other expenses, basically, there are a few one-offs and also revenue-linked expenses, which have got increase. One is -- in terms of advertisement, very much for the residential sector, which is around close to INR 4 crores, which we have seen for -- also in legal and professional expenses, which is again related to expansion, which we are doing strongly. That's also has an upside, which has come in. So these are the ones which are calling up major engage also call rating some of the expenses around us demolition that also has contributed to a onetime increase in other expenses.

[Sanjay Sethi, executive]

So just to recap it, it's the rating expenses, legal expenses for growth opportunities and the residential case.

[Prashant Biyani, analyst]

Sir, out of this, sir, only this ad spend of INR 4 crores looks to be one-off or you would not concur with that view? And if you can mention the total one-off, how much it could be?

[Sanjay Sethi, executive]

So while as seeing only advisement is one-off, and I agree that, that is one-off. But legal expenses are connected with acquisition opportunities. We acquired a land parcel in this quarter and the legal expenses to -- for that have been captured in the other expenses. And then the triple is also -- was a onetime first rating that we had expensed on the continuous expenses that come from it will be of lower mix.

[Prashant Biyani, analyst]

And secondly, for high-tech Heterobag, how do you decide on the rate? Is it fixed quarterly, yearly, monthly, given that we have 1 occupant for all the rooms.

[Sanjay Sethi, executive]

So we have a quarter -- we have a contract for 3 years and all the rates are captured in that. In fact, in the current financial year, the rate increases have come twice and the overall rate increase is about 30% for this quarter. In fact, my colleague just remind me the firstly, increase was in March. So it was not actually this financial year, but there was an increase in August, which impacted this quarter's numbers. But overall, been March and all the increases on a year-on-year for quarter 2, we've had a 30% rate growth [indiscernible] earlier in the past months.

[Prashant Biyani, analyst]

Yes. But I mean due for revision it's mostly twice a year or...

[Sanjay Sethi, executive]

It's going to happen once a year going forward. This was a onetime price in a 12-month cycle that we had captured in our agreement because we started off on a lower rate, given that their own occupancy will build up over time. So we've got the benefit of that. On a RevPAR basis, West in Hi-tech SP1763161157 Is higher than every other hotel of us.

[Prashant Biyani, analyst]

Okay. And lastly, Mr. Sethi, for Duke by 15th of December, how many rooms can be open for GES?

[Sanjay Sethi, executive]

So we have 37 operating now. Now gradually, we're going to add another 36 rooms to 73% by early December. We will move into about 100 rooms by January and all the 146 roles by end of the financial year.

[Operator]

The next question is from the line of Jinesh Joshi from PL Capital.

[Jinesh Joshi, analyst]

Sir, I have a question on our Goa Hotel. I think in the last call, we were a bit hesitant in giving out the CapEx number. So is it possible to give some color on that now?

[Sanjay Sethi, executive]

So Jinesh, we expect roughly a spend of INR 2 crores per key, including land, maybe a little over that, plus IDC, et cetera. out of which about INR 1.3 million to INR 1.5 crores will be spent on construction costs. The balance is the land cost and whatever the transaction cost that we had. This I must -- since we're speaking about this particular opportunity, I must say that this is quite a stunning location. We've got wipes frontage. It's a flattish land. So the views are going to be clear. There's no sandals covering the view from the main construction side we build out a is very conveniently located from an asset perspective.

[Jinesh Joshi, analyst]

Sir, 1 follow-up on this part, the INR 1,500 crores of guidance in terms of CapEx that we have given for the next 6 quarters. Does it include anything for our Goa hotel, if not, when are we expected to kind of start incurring the CapEx towards that?

[Sanjay Sethi, executive]

So yes, it includes go, but Goa will, of course, build up over the next few quarters. We expect to spend at least another 6 months to get the approval. And therefore, there'll be that much of limited spend in the quarter the next 2 quarters.

[Jinesh Joshi, analyst]

Understood. Sir, 1 last question from my side. I mean, if I look at our net debt, it has gone up from about INR 15 crores, INR 30 crores in the last quarter to about INR 1,665 crores. Now given that we sit raised money to repay the debt and we have a CF generation of about INR 385 crores in 1. And I think also in the opening remarks, the CFO mentioned that majority of the CapEx that we did in 1 which was funded by internal approval itself. Then any specific reason why the debt levels have gone up when I compare it with the previous quarter?

[Sanjay Sethi, executive]

So look, we had raised INR 1,000 crores from a QIP to enable our balance sheet to be able to handle growth opportunities. And that's what's getting executed now. There will be variations on the net debt side as we grow the portfolio. And expect us to peak at no more than 50 1,900 as earnings go.

[Operator]

[Operator Instructions] The next question is from the line of Aman Goyal from Axis Securities.

[Unknown Analyst]

Sir, my question is regarding, for example, the economy is stating sluggish growth, like FMCG reflecting not growth. So how do you see that impact economy-wise on hospitality sector?

[Sanjay Sethi, executive]

So Aman, thank you for the question. So look, I think the dynamics are a little different on the hospitality side in the country, driven by the arbitrage that we have between demand and supply. The that demand and supply arbitrage hasn't changed since we last spoke. We believe that the demand will continue to grow in double digits. Supply side is expected to grow at about 7%. So we've got between 300 to 400 bps gap between new supply and the demand growth and therefore, the dynamics of the industry will be different than dynamics of CD.

[Unknown Analyst]

Okay. Okay. So my second question is regarding the residential development in Bangalore. So correct me if I'm wrong, so I can see as of now, whatever you sold in the residential, we have not incorporated in your top line, it is all the revenue related to registrate. So when we can expect that to be added into your top line?

[Sanjay Sethi, executive]

So Aman, revenue recognition is governed by certain laws of the country. Whilst our sales are very strong, the rates per square foot are very strong and the cash flows are very strong. revelation can happen after a couple of triggers are activated. One of them is access of usable electricity right now in project stage electricity on the site. Number two, a certain amount of completion of access points and development of public areas within the property. And of course, OCC have already cleared. Electricity connection we should get maybe by December also and the completion of access also around December. We do expect a significant reporting in last quarter of the year on the residential side. which will have revenue recognition and of course, all the cost recognition that we've had to continue to keep on the CapEx sinter now until we are able to bring it to the P&L. So expect who have a recognition of revenue and cost for the residential project.

[Operator]

The next question is from the line of [indiscernible] from JM Financial.

[Unknown Analyst]

I just wanted to get your sense on if we are seeing different demand trends across industry, like not for sale more from an industry point of view? Are we seeing some different demand trends, for example, metro versus nonmetro and so on? That's the first one. And second, I know Q3, Q4, we are expecting these to be strong quarters. But what's your sense like from here on as well, is there a further scope for ADRs to increase further in FY '26? That's the second one. And third would be what was during the last hotel upcycle, what was the peak occupancy versus what it is now currently.

[Sanjay Sethi, executive]

So [indiscernible], I'll try and answer these questions, the same seat plane. In terms of market-wise or steadywise performances across India, we've seen Hyderabad clearly do extremely well. In recent weeks, we've seen Bangalore picking up and doing extremely well. We've seen Aruna hotels is called welded occupancies despite having the largest inventory in the city of 311 rooms. And Mumbai, we see a steady growth on a RevPAR basis. resistance, if any, I mean, as far and this is purely my personal understanding. I have -- we have seen in the very expensive rate brackets of north of 25,000 where we've seen some resilience in the prior year at the 1,500 [indiscernible] point, we have seen 0 to negligible.

[Unknown Analyst]

All right. Understood. And -- so remaining [indiscernible].

[Sanjay Sethi, executive]

Peak occupancies right, on India, right? Yes. So ADR is to your question on Q3, Q4. Yes, Q3, Q4 will see increase in ADS for sure, for 20 I'm not at liberty to share what the forward-looking numbers are. But on the back of the positive arbitrage and demand supply, I see no reason why we still country should not see computed growth both on [indiscernible]. On your question about occupancies, I think they're very different in a city. For example, cities like Bangalore and Hyderabad, where they have a sharp debt on Friday evenings and continues till about Monday morning. that will continue. So they will have a different occupancy trend, which would be in the mid-70s to high 70s at a max Mumbai or thanks to report 87% on the occupancies at peak, and therefore, I expect Mumbai to be able to do that. Delhi also sees typically 75% to 80% of an intrastate levels, and we expect them to be in range. Hyderabad city center Hyderabad has had some challenges, but the new district where both hotels are present, we've seen extremely that. The other element that I must mention here is that saw almost negligible readings in the country due to a specialty something there. H2 is likely to, on all-India basis, have a material pickup on account of the weddings. We expect that to have a robot as a benefit to us in our Ravinder, JW Mariama and provide.

[Unknown Analyst]

Sir, my question on peak occupancy was more from a cycle perspective rather than the colonies.

[Sanjay Sethi, executive]

It's difficult to average our peak occupancy on a country as large as India very types in terms of a demand trend. So I've given you what the peak occupancies should be city-wise. From the main cities. So Mumbai, I think occupancy, as I said, should be in the '80s, the royalties, they between 75 and 80 Hyderabad and Bangalore around the 75 to 80 mark.

[Unknown Analyst]

Okay. This is for it on a -- for the cycle you are seeing, right, like during the hotel peak cycle or something of that.

[Sanjay Sethi, executive]

That's right.

[Operator]

As there are no further questions, we have reached the end of our Q&A session. I would now like to hand the conference over to Mr. Sanjay Sethi for the closing comments.

[Sanjay Sethi, executive]

Thank you so much. Thank you, everyone, for your time, and we look forward to engaging with you in the near future.

[Operator]

On behalf of Shale Hotels Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.