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Indian Hotels Company Ltd
Earnings Call Analysis
Q2-2024 Analysis
Indian Hotels Company Ltd
The conference call kicked off with optimism about India's economic prospects, projecting a doubling of per capita GDP over a decade, fostering more discretionary spending that bodes well for the travel and tourism sector. The hotel industry, in particular, is seen poised for growth with low current market penetration. IHCL reported that the hospitality demand is expected to outpace supply significantly, potentially leading to sustained growth. This tailwind contributed to IHCL's record performance, marking Q2 '23-'24 as their best Q2 ever and their sixth consecutive quarter of historic performance.
IHCL's strategic focus on asset management aims to drive operating leverage, particularly by enhancing performance through interventions and upgrades. The reintroduction of Taj Mahal, New Delhi is highlighted as a major achievement. The company's growth momentum saw 6 hotels signed and 3 new openings this quarter, positioning itself for sustained growth with 18 hotels signed and 9 opened year-to-date.
IHCL has been diversifying its revenue sources beyond traditional hotel operations. Initiatives like new verticals and asset-light growth have been pushed forward. The company mentions significant growth in its Enterprise revenue from Ginger, and the profitability of food and beverage brands like Qmin. Additionally, TajSATS recorded industry-leading EBITDA margins signaling operational success. On the horizon, initiatives such as investing in brands and capabilities, including the upcoming launch of a Ginger Hotel, promise further growth.
The company has proactively rebranded and expanded its food and beverage segment, launching new concepts such as the Captain's Cellar in Delhi and Loya in Bengaluru. The reception of these ventures, like the House of Ming’s performance in London, evidence the successful traction of IHCL's F&B brands.
IHCL is simplifying its corporate structure through the acquisition of a higher stake in Piem Hotels, lifting its ownership from 51.6% to 58.6%. This aligns with their strategy for simplification and focus on long-term goals like the Ahvaan 2025 strategy. The company is also on track with its 2030 ESG targets by achieving a water recycling rate of 47%.
On the international front, IHCL acknowledges current EBITDA challenges particularly in San Francisco and New York due to market conditions, but sees these as areas with upside potential for future improvement, especially if pre-COVID performance levels return. London, despite doing well, is expected to improve further with new investments. Despite inflationary pressures, the company remains optimistic about business momentum and does not foresee significant margin trajectory stresses in the immediate future.
IHCL noted strong occupancy levels, particularly in key markets like Goa. With the demand outstripping supply and the influx of foreign travelers, occupancy is expected to rise. In major metropolitan areas, IHCL anticipates occupancy rates could surpass 75%, a benchmark figure which has been observed with properties like Taj Lands End in Mumbai.
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Ladies and gentlemen, good day, and welcome to the Indian Hotels Company Limited Earnings Conference Call for Q2 FY '23-'24. On the call, we have with us Mr. Puneet Chhatwal, Managing Director and CEO, IHCL and Mr. Giridhar Sanjeevi, EVP and CFO, IHCL.
[Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Puneet Chhatwal. Thank you, and over to you, Mr. Chhatwal.
Good evening, everyone, and thank you for joining our global conference call for Q2 '23-'24. We've outlined 6 key themes for the call today, and we'll walk you through each of these in succession. The first one is the Indian story. Let me begin with the Indian growth story, which continues to remain intact. India's per capita GDP is expected to more than double in the next 10 years, leading to a surge in disposable income, driving higher discretionary spends, which will directly benefit the travel and tourism sector.
Moreover, we have recently heard through various sources in the government of the aspiration of 7 in 7, INR 7 trillion economy in 7 years, which is a kind of a possibility that has been talked about by various, as I said, dignitaries and journalists as well as consulting houses. I think the hospitality industry presents a significant potential for market penetration with just 0.1 branded room inventory per 1,000 people as against a global average of 2.2. With the current surge in demand and a tepid growth in supply, the ongoing cycle is likely to continue in the near to midterm.
According to Hotelivate Report, in the next 5 years hotel demand is expected to grow at a CAGR of 8% to 10%, while the supply growth is projected to grow at just 5% to 6% annually. The nature of the supply under development is also predominantly in the nonluxury segment, with close to 3/4 of the supply coming up in Tier 2 and Tier 3 cities. The robust growth in demand is on the back of a structural shift in consumers' behavioral mindset. This coupled with various other factors like governments push for infrastructure and short-term domestic triggers like the G20, like the ICC Cricket World Cup and [indiscernible] are further boosting domestic demand.
The second theme is IHCL continues to deliver on quarter-after-quarter as a record. And this Q2 is our best ever Q2. And we are very pleased to share that our record performance in Q2 makes it the sixth consecutive quarter or best ever performance. Our consolidated revenue grew by 18% year-on-year to INR 1,481 crores, and our EBITDA grew 26% year-on-year to INR 402 crores, yielding EBITDA margin of 27.2%. Our bottom line grew by 37% to INR 167 crores. And we are happy to report that our consolidated pack for the first half of this financial year stands at INR 389 crores, which surpassed the highest pre-COVID full year PAT of INR 370 crores in 2006-'07.
On a stand-alone basis, IHCL has delivered a growth of 23% in revenues to INR 949 crores with EBITDA of INR 330 crores, up 39% from the last year. On stand-alone EBITDA margin, we reported 34.7% in Q2 '23/'24, which marks an expansion of 4.1 percentage points over last year.
The third theme we have is asset management, which is driving the operating leverage. We, as management, have focused very strongly on asset management initiatives as 50% of our portfolio is considered asset-heavy. This is a great opportunity by developing and by executing on comprehensive asset management, we have been able to focus on enhancing the performance of our existing hotels through strategic interventions and continuous upgrade of our product.
Just as a reminder, our strategy that we have outlined, both under Aspiration 2022 as well as Ahvaan 2025 with the ultimate objective of being the most iconic and most profitable hospitality company from South Asia, it is important for us to keep focused on asset management initiatives. Our big machines are firing on all cylinders, achieving strong growth over the previous year. And I'm very happy to report that Taj Mahal, New Delhi, popularly known as Taj Mansingh is back in our portfolio with the bang. It did miss full renovation completion for the first 6 weeks of this financial year, but it has been now performing very well on a daily basis.
The next theme that I would come to the fourth one is our portfolio growth. Our growth momentum continued during the quarter. In the last quarter, we signed 6 new hotels and opened 3 new hotels. During the quarter, we signed 3 Taj hotels in international market, one as an operating lease in Frankfurt and 2 hotels in Bhutan. So far, in the current financial year to date, we have signed 18 new hotels and opened 9. Our new hotels opened last quarter include Taj The Trees in Vikhroli, in Mumbai; Taj Guras Kutir in Gangtok; and Wow Crest, IHCL SeleQtions in Indore.
We will maintain this space and are well placed, as we have communicated and as we have guided in the past to open at a minimum 20 hotels in this financial year. Our diverse brand scale enables us to be present in every geography, in every segment and at every price point, creating new itineraries and offerings, thus giving us greater decrease of freedom and resilience in our portfolio.
The next theme is the diversification of our top line. My colleague, Giridhar Sanjeevi, our CFO, often talks about the importance of the diversification of top line. And with our new brands and businesses as well as our asset-light growth, we have embarked on a journey of this diversification. As we enter the next phase of growth, we are reorganizing the 3 brands or better said, we have already reorganized Ginger, Qmin and amã under a dedicated vertical of new businesses, which is being headed by Ms. Deepika Rao, Executive Vice President and Member of Executive Committee.
Our new businesses vertical clocked in a GMV of INR 240 crores in the first half of '23/'24. Enterprise revenue of Ginger exceeded INR 100 crores with a 24% growth over the previous year and continued reporting healthy EBITDA margins at 37% in Q2. With a proven and profitable business model, Ginger is very well here to scale up at a fast pace. Our Qmin and amã brands have established a strong customer connect and continue to scale up. The [indiscernible] of Ginger that we started with the all-day dining is now scaled up quite well, and we have almost 14 Qmin branded outlets, which function as already dining.
TajSATS continues to be a great success story for us. Yesterday, we signed a new concession agreement for a service and an outlet in Noida International Airport, which should start operations by end of next year. TajSATS has recorded its best-ever Q2 performance with revenues of INR 213 crores and an industry-leading EBITDA margin of 24.4%, which comes on the back of 9 percentage point margin expansion over the last year. With almost 60% market share, TajSATS continues to lead the Indian airline catering segment. Also, we are looking at further scaling up TajSATS' operations besides Noida in other locations, and we are very pleased that we started operations at the Mopa Airport in Goa, and that is beginning to stabilize also well.
Finally, I have to say there are 2 issues that come as theme status investments, investments in our brands, assets and capabilities and investing in Paathya. In line with our objectives of long-term value creation for all stakeholders, we continue to invest in our brands, assets and capabilities. We have recently launched the refurbished Chambers, the private membership club at Taj Lands End and have recently opened the Chambers at Taj West End in Bengaluru. Our flagship Ginger Hotel near Mumbai Airport is nearing its completion. We have guided that we should have opened Ginger already a few weeks ago. But we remain very confident that in the next 2 to 3 weeks, this flagship and a [ trophy ] Ginger changer we will be opening its doors.
We have also reimagined and scaled up our food and beverage brands. We launched a new concept in Taj Mahal Delhi, called the Captain's Cellar, which is one of its kind contemporary wine bar concept or as they call it in the West, a wonderful and one of its kind Vinothèque. After receiving tremendous response in Delhi, we launched Loya in Taj West End in Bengaluru as well. Similarly, House of Ming, which opened its stores at St. James' Court in London, less than a quarter ago is already trending as the #6 restaurant in London as per TripAdvisor ranking.
That takes me to investment in Paathya. Staying true to our ethos of doing business in a responsible way, our ESG Plus program, Paathya, has achieved significant milestones so far. IHCL now uses 37% energy from renewable sources and has installed 335 EV charging stations across 142 locations in India. Continuing our journey of eliminating single-use plastic, IHCL installed 27 bottling plants and achieved 47% recycling of water that is used. We are well on track to deliver our 2030 ESG targets.
Finally, simplification. That is the buyout of minority shareholding in Piem Hotels. Before concluding the call, we would like to update you that the Board has approved, subject to shareholders and other regulatory approvals, the buyout of additional shareholding of approximately 7% in Piem Hotels by way of a combination of share swap as well as cash. IHCL currently has a 51.6% stake in Piem Hotels, which will increase to 58.6% post the proposed transaction. This will help us further simplify our holding structure.
As always, we continue to stay focused on executing our Ahvaan 2025 strategy, and that focus has helped us win a lot of accolades also, which are not mentioned in the speech, but the range from being rated as the TripAdvisor of Best Hotel of the World, that's the Rambagh Palace, celebrating 50 years of Rambagh next month as well as getting rated with Condé Nast, Umaid Bhawan Palace as the #1 hotels. And further, awards with Condé Nas and Travel & Leisure and Golden Peacock as well as CNBC, ICICI Lombard that you can all have a look in our -- as a part of our press release.
Thank you so much for your attention. We now open the floor for questions.
[Operator Instructions] The first question is from the line of Binay from Morgan Stanley.
Congratulations for a very strong quarter. Just two questions. Firstly, on the international side. We've seen the EBITDA down on a Y-o-Y basis. Any comments on that? How should we see that playing out? Secondly, on the domestic side, I believe this is the time that we start to renegotiate our corporate contracts for the following year. So any read through about what kind of RevPAR growth are we sort of looking at as we are looking into 2024? So these two questions.
Thank you, Binay. I think -- let's take a step back and not look at just the corporate. I think the RevPAR growth numbers are in high double digits, driven still mainly by rates, which should help in the profitability on the domestic front. So I think we are very pleased to see that and with all our renovation efforts that are going in, we're seeing a huge shift in, as I mentioned before, Taj Mansingh. As we speak, we have shut down Malabar. We just have opened in a soft opening phase, Usha Kiran Palace in Gwalior. And whatever we renovate and comes back in its new avatar or new style usually is showing at least a doubling of revenue. But the RevPAR growth remains very strong, and the business on the books is very strong. The first 26 days of October have been very strong, and we expect this trend to continue.
The very important what you touched upon is international. On the international front, as you read yourself in -- here in the news, there are challenges in San Francisco, and it may take almost another 3 to 5 quarters for San Francisco to get back to where it used to be, not as a hotel market, but with all the other things that have happened in that market from a macroeconomic perspective and a social perspective. And unfortunately, both U.K. with our presence in London, which is doing very well, but it could do much, much better than what it is doing, and also New York, which is not still back to the pre-COVID level, but the inflation has increased the cost.
So there are certain challenges. But we, as management, looked at as our hidden upside potential going forward, because if they were to come back the way it used to be pre-COVID plus 10% to account for the inflation. And as well as if London was to come back and with all the investments that we have made in our asset in London in terms of renovations, in terms of adding the spa, in terms of adding the Chambers, in terms of adding House of Ming, in terms of adding the all-day dining there and doing a lot of work in the courtyard, I think we look at it as an upside potential that we have.
But yes, Cape Town is doing fine. Dubai is doing fine. Maldives is a bit soft. Sri Lanka is on the way up. So all is all in all, it's good. Lusaka is doing very well for us. So I think it's just really New York, San Francisco and upside potential in London, which we are looking forward to and that will hopefully change when we present Q3 and Q4 results in the next quarters.
Just lastly, any comments on any inflationary pressures that you are seeing in the system [indiscernible] up some? I saw that your staff cost is up 18%, but still lagging revenue growth. But anything apart from that, that you would call out would be sort of a headwind to watch from a margin trajectory next year?
Not really. I think we are -- as I said, we are seeing very strong business momentum, and we are also seeing very strong not like-for-like growth for us. I think important is, as we have guided since our Capital Markets Day and in the previous quarters, that we are making investments in our future, be it through comprehensive asset management. So you -- the more you invest, the more you displace. When you displace and when things come back, it just takes time. And that is one, but is taking care of not just the short term, we are taking care of the mid and the long-term brand scape for the company as well as our investment in new businesses.
So as I mentioned, under Deepika Rao, we have created a new organization, because when we went through a pandemic, people were double hatting and doing amã or Qmin or other things on the side. But now there is a dedicated focused organization with its own marketing, whether it's own finance, whether it's own sales, whether it's own revenue management in these 3 new business verticals under the leadership of Deepika Rao. And of course, that is an investment in our future. And as we said, this quarter, we have guided a bit more on Ginger. As of next quarter, we'll do more on Qmin. The following quarter, we'll guide more on amã. And we'll start reporting more comprehensively on also on the new businesses.
And just one other comment, Binay, that, if you look at the segmental growth, the F&B revenue growth has been about 10% or so in this -- in the second quarter. We expect that to pick up in -- as we go along. So we don't see any stresses because of inflation, as we pointed out, and we don't see stresses at this point in time.
And just on the occupancy, right, like in the last call, you mentioned that Goa is now a 365-day destination. Again, in Q2, we see very good occupancy levels. And this question has come to you many times in the past also that what is -- where can occupancy go to? So any comments on that?
I think number one is that we have seen that the stand-alone occupancy went up to 75%, Binay, actually. We have seen that [indiscernible] next year, actually. And I think -- and if you combine it with the -- there are 2, 3 factors, which could aid in occupancy. Number one, I would say, is the whole supply demand thing. And you saw the chart, which shows that most of the supply is actually coming not in the key metros, but the outside of the key metros actually. So that does means that existing micro markets in key metros should be well protected and should benefit from rising occupancy.
Secondly, all that demand factors like, for instance, FTAs, the foreign travel visitors, all that should help. So my own sense is that occupancy would still go up a little bit, actually. However, I think, as we have always been saying, on the profitability, Binay, I think in the key metros, one thing, as we have always mentioned, in the key metros, in anywhere [indiscernible] whether it's Singapore or Hong Kong or anywhere else, the hotels generally tend to do an occupancy in excess of 75%. 75% is typically the seat like in Bombay, you will see 85% occupancy.
So occupancy is tend to be very -- around 75% plus actually. And rest of it what really happens is that asset management helps in terms of driving profitability actually. And asset management is very health, for instance, in Taj Lands End, I mean Taj Lands End in the recent past has been running at effectively 100% -- 99% to 100% occupancy on several days negative in terms of, what you say, oversold days actually.
And that's fundamentally happened, because the shape of the hotel currently is completely different from what it was about 18 months ago in terms of all the efforts taken, in terms of renovation, whether in this case the Chambers, business lounge, the gymnasium and all of that actually. So I think -- therefore, there are levers available beyond just supply and demand in terms of driving occupancy actually.
Yes. No, no, that are all good points. And we look forward to Ginger, Santacruz .
The next question is from the line of Achal Kumar from HSBC.
So I had a couple of questions actually. So first of all, just want to understand on this mix, wherein you said that a lot of capacity growth will be coming in nonluxury Tier 2, Tier 3 segments. So I mean do you expect since the capacity growth will be coming that we expect there's a potential risk of a pressure on the pricing on -- in those Tier 2, Tier 3 cities nonluxury segment? Or do you see the demand growth will actually change the supply growth and hence, you don't see any pressure?
And that means, effectively, the overall average ARR system should decline, because if the capacity -- if the mix is trending towards nonluxury segment, then the ARR should decline. So how do you see that impact of the mix? And how do you see the growth?
Achal, on a lighter note, if I may answer it seems it seems as if you're always looking for reasons to reduce the rates. And we are -- hoteliers are always looking at reasons to increase the rates. Since there is less supply coming into Mumbai or Delhi or Bengaluru and the demand remains strong and the occupancy increases, our ability to charge as a sector, forget Taj or which brand, which [indiscernible] we talk about should be normally higher, because the new supply is coming in Tier 2 or 3 cities, right? So not -- like they're not 10 or 20 hotels coming into Mumbai. There's not 10 or 20 hotels coming into Delhi.
So I think that is -- and if you have large event halls like a Jio, like Bharat Mandapam and Pragati Maidan, like YashoBhoomi in Dwarka in Delhi. Even if you have one event, which is going to host 2,000, 3,000, 5,000 people in a single hall and half of them need accommodation, the city will be sold out. So I think there is a structural change that is happening, and it may not bring in results tomorrow, because some of these events need to be booked 9 months, 15 months, 18 months in advance. But today, we have that infrastructure available and these metros will benefit significantly. And if new supply additions have to come, they will take 3 to 5 years to get added. And by that time, the demand in theory, I repeat in theory, should grow faster in these cities than the supply wood.
And I don't know whether you picked up the other statistics that we have put up on Slide 13, which hoteliers say that 65% of the share of luxury pipeline is with Taj actually.
Yes. Yes. No, I saw that. Actually, I was coming to Slide 13. I mean -- sorry, it was a different slide. But Slide 13, I mean, in -- you have shown -- you presented about the ARRs occupancy and RevPAR in Q2 in different segments, Taj, SeleQtions, Vivanta and Ginger. So while ARRs were up sharply 8%, 11% in Taj and SeleQtions, Vivanta, it was up only 1% in Ginger.
So just -- I mean, just want to understand the reason of such a low growth in Ginger. Is it like -- was it underlying trend that the prices are not going up in Ginger? Or is it strategically sort of you were holding prices in Ginger so that will inflate the occupancy level? Because occupancy in Ginger is significantly high. So is it a normalized trend -- is it a normal trend that pricing in Ginger may not go up sharply? I mean what's going on there? I mean I just want to understand the sort of background there, please, if you could help?
Yes. Thank you for pointing that out. It's an interesting one. See, Ginger, we have moved now -- 70% of Ginger portfolio has got renovated and repositioned. And when the hotel is undergoing renovation or the inventory is not available, you don't see that change in the rate. But as we get into Q3, Q4 and Q1, in the next 9, 12 months, you'll see a significant increase in that rate. And we did that. We did also, as I told you, Qmin rebranding. And because of that, once the work is finished, they happen -- you reopened the inventory, then you start seeing the impact.
And actually, the growth in Ginger, as a percentage going forward, we feel will be much higher than what you are seeing here. Here, you're seeing 14% RevPAR growth, you could see that number easily cross 20% going forward. So because of the change in the business mix and the model, which does not happen over time, it has taken time and still 30% of the portfolio needs to be done. So maybe it will not be in hands and it will be 90% or 85% in the next few quarters, but that will start showing results.
Right. Right. Fair enough, Puneet. That's quite interesting. The other thing I wanted to understand about the demand trend. So basically, I mean, we recently initiated on the U.S. hotel industry and we found that the impact -- COVID impact is still there. The demand is still -- there is a lot of bleisure demand as we call business plus leisure. So how do you see the trend in India? I mean do you see the COVID-driven trend has completely gone? Or you still see the demand -- the bleisure demand, the people taking multiple short trips? So I just want to understand the mix. I mean is it -- how you see, I mean, now in Q2 and but going forward, how do you see the demand trend, please?
Yes. See, when you have events whether it's a Black Swan or another major event like COVID, there are certain things that change forever. And I've given this example in the few quarters before also. If from 1.4 billion people in India, only 5% is relevant for our sector, then you're talking about 70 million people, right? And from that 70 million, if only 10%, that means 7 million have changed their behavior pattern forever. That means they are now doing what you're calling bleisure, combining business and leisure of spending 5 extra nights in hotels in a year, then you have 35 million room nights, which was not there before from the same people in a year.
So that's the kind of change that is not just relevant for India. If you look at the hospitality sector in general across the globe, the recovery has been led by domestic. And this partial reasons could be risk of travel, visas, whatever else was there. But there is another reason. All -- in India, Dekho Apna Desh. The other reason is that these are incremental room nights, which were not happening before where people were not comfortable driving themselves. They always needed somebody to drive them. Now they get into the car and drive. And the number that I've taken is like very, very small base. This base in reality could be much higher.
Right. Right. Interesting. Fair enough. My last question is around your strategy towards international, I guess. I think you recently invested in Netherlands. You recently invested something in Germany. So I mean, are you strategically looking at the international markets? Or you remain opportunistic wherever you see the growth and potential, you just invest there?
And what kind of impact? I mean, international market, of course, you've been facing difficulty in the U.S. U.K. is doing pretty well. So overall, how -- I mean how do you expect -- don't you think the investment in the international market could actually be a bit of a challenge initially maybe until you really settled down there?
I fully agree with you. I don't disagree with you, but we have not invested in the international market. We announced a hotel in Frankfurt, the investment comes from someone else. We just signing an operating lease, which means we are just going to pay a rent. We're spending some money on the Taj brand like Chambers, et cetera, but it pays itself faster than we think. So our investments will be very much India-centric.
We are not having any strategic intent to invest in international markets on our own money, but we are going to signing management contracts. We signed management contracts in Riadh for over 250th hotel. In [indiscernible] we signed recently 2 contracts in Bhutan on management contract. Before that, we signed 2 management contracts in Dhaka, because in the Indian subcontinent, even Dhaka is very important to us, for both Taj and Vivanta.
But international, we will be very selective, and we are very focused with Taj Lands End. We will keep doing 1 or maximum 2 hotels per annum, but preferably on a management contract basis. And if it's a Western Hemisphere, using other people's institutional capital on an operating lease basis, where we might end up just paying for the investments in the brand or in the upgrade, which is a very nominal and a small amount, we end up doing that even in India. Our investments in the short and medium term, if we do very selectively, will be in our own home turf and not outside.
See, Achal, everyone is looking to invest in India. It would be foolish of us to go and invest outside.
The next question is from the line of Lavanya from UBS.
Am I audible?
Yes, Shaleen.
Am I audible? So Lavanya and I will both cover [indiscernible]. I have two questions, right? In our weakest quarter, you guys have achieved 75% occupancy, right? And so I think our full year occupancy will be definitely higher than 75%. Now at what juncture do you start thinking about changing your [indiscernible]
Sorry, you were breaking up, Shaleen. Hello? We can't hear you, Shaleen.
We seem to have lost the line from Shaleen. We move to the next question. The next question Is from the line of Prateek Kumar from Jefferies.
[indiscernible] events highlighted [indiscernible]
Prateek, your voice is breaking. If you're on a hand-free, request you to use the handset. Prateek? We seem to have lost the line for Prateek as well. We move to the next question. The next question is from the line of Nihal Mahesh Jham from Nuvama.
My first question was that you keep giving this data of the premium that our properties have been able to achieve over and above the industry, which has only increased versus pre-COVID. If I ask you, say, within a specific city, what are the factors that is making -- is giving us a better pricing?
Yes. Well, we have -- there are various factors. It depends from city to city. But generally speaking, one could say your ability to charge is higher if the city is going through a very high occupancy and it's sold out. And you know that for several years, Taj especially, which is the backbone of our company, still in other businesses being relatively, either in the infancy or a growth phase, Taj commands the premium, because it is India's strongest brand across all sectors, and it has been rated for 3 years now among the world's strongest hotel brands.
So if the occupancy levels are high and healthy, your ability to charge is higher. And we are seeing that across our portfolio in a very, very strong way. As Giri just now mentioned, it's not just a hotel or demand coming because the occupancy is high. It's your ability to charge because of the new spa in Lands End. It's your ability to charge because we've opened a theater in a nonrevenue-generating space, which can do previews, but people can also book it to watch cricket matches. We have completely redone the chambers out there. We have done a new lounge for our club floor there.
So all these things put together help you to charge. But of course, they also cost money and they also cost displacement, as I mentioned before. But our investments in our iconic assets and our asset management initiatives are definitely showing a very big jump for us in absolute amounts. If you go and look at the historic performance of Indian hotels, let's say, for the last 10, 15 years on Q1 and Q2, you will see that the difference is like massive in terms of performance. And that is because of all these investments that are happening. It's not just you're able to charge a premium. You're able to charge a premium for a variety of reasons.
Got that. Second question was Mr. Giri alluded to it. Any specific reason this quarter, there was a divergence between how room and F&B worked? And would that normalize in the coming quarters?
I think it should, because F&B, the wedding dates are all in this quarter. So I think that is one of the reasons why the F&B was a bit more [ mutant ] actually. And in general, I think on the longer-term basis, I think there is significantly more opportunity in F&B. So you will see some of our efforts in F&B kind of paying off as we go forward.
Final question was on -- we see that we're obviously increasing our stake in one of the subsidies that we are considering JVs and associates that we currently own. Is there a long-term plan to maybe increase the stake or make it a full subsidiary like we did with Ginger in the future?
Obviously, those plans are -- intentions are there, as we always said. I think these things are not easy to come back. So we use every opportunity which comes whether smaller or big to consolidate. Like in this case, we have an opportunity to take out 7% because those people wanted an exit. So anybody who wanting an exit, we will definitely use the opportunity to do. I mean this is something that we are always on the ball in terms of trying. So let's see where we get to.
And our cash reserve that we have built up today are having already at the end of the quarter, INR 1,400 crores or approximately cash, which keeps increasing every month. So we don't always have to just do share swap, we can also buy. We can have inorganic growth. We can have simplification. We can have consolidation. We have all possible opportunities now available to us, because we have no debt, and we also have cash reserves.
The next question is from the line of Prateek Kumar from Jefferies.
Hello? Puneet, sir, can you here me now?
Yes.
Yes. So my question was on -- you have mentioned in your presentation about the events -- impact of events is lesser now because we have a sort of -- I mean the overall impact within the asset is only 0.5% to 1% because of G20 or World Cup on a year-on-year basis. We get a lot of questions that what after FY '24 into FY '25 in terms of events? So overall, because the impact is only very miniscule, as what it appears, so it's business as usual like for FY '25 for the hotel industry, right?
We agree with you, Prateek.
Absolutely.
We not only agree with you, we strongly endorse that the hotel sector is very well positioned and all these things that you're hearing as a one-off now will become almost like a habit going forward. So it doesn't matter. It will be a game, whether it's a Hockey World Cup or it's a Cricket World Cup or it's us bidding for Olympics or these things really just keep happening. You become the fifth largest economy and the ambition or aspiration to become third. So all other things, including cost, including revenues, including events, all come with it. It will not be just GDP comes, it will be a combined impact of all these things happening.
And do you think it generally does improve the cyclicality of the sector? Or will it still remain like a deeply cyclical sector when the downturn comes maybe, which is still like many years away, but this is something which makes [indiscernible] reduces the cyclicality?
This cyclicality in this sector will always remain. And we have to differentiate here on the domestic versus international front. In the domestic front, because there is still so much to be done, and India is expected to grow at a certain rate on GDP. The cyclicality impact should be lower than what we have witnessed in the past. Or alternatively, the length of the cycle will start changing. Also, the way we have articulated our strategy, it's that we have had new businesses as well as not like-for-like growth based on asset-light model that should help us as Indian Hotels to mitigate to a great extent, cyclicality going forward.
So I think today -- when we were last time hit, we were at 17% EBITDA and we gave a guidance of 25% EBITDA margin. Today, we are giving a guidance of 33%. And if you were hit at 33% and your EBITDA margin drops by half, you are at what we would have been in '17-'18. That's the change in the business model and the change in our portfolio mix and the change in addressing all the customer touch points with different brands. Does that answer or looking for something else?
[indiscernible] And my next question is on international market. So while you are looking at like management contracts on new models in international markets, while some of the markets are impacted by global macro or other reasons. So there is a downside in international markets impact [indiscernible] Indian markets because now incrementally, we are only looking at management contracts. So the take rates also are like sort of lower in the Indian markets because of problems there?
Not really, Prateek. It's not our strategy to own single assets in international markets. It's not a part of our strategy. If we were to take a slimmer equity or do key money or spend some money in renovation to secure a long-term contract, we are happy to do that. That's not -- that's like a very small amounts that we talk about. But in fact, hotel investments are anticyclical. So if the markets are down, the kind of prices you get today, you would not get otherwise. But we would use our partners in India and outside of India to help us do that growth then us investing in 2 assets, that kind of capital, we don't want to block.
Okay. So I was asking earlier take rates, which should be very similar what we are like have in India at 5% to 7%. So even in a down market, we should have a similar take rates...
See, the management fees are generally quite healthy. In fact, if you see the management fees that we earn from Dubai and all that, very good actually. And these are long-term contracts. And so I think we don't compromise on take rates for the sake of getting a contract. It's not possible actually. It's not possible. We can't do it.
Sure. And my last question is on RevPAR growth. Obviously, first half have been like very strong in terms of year-on-year performance. So second half, we are getting in, I think, sweet pace because last year, second half was major record which we had. So likely this double digit should continue, right, as you say, that [indiscernible] strong since the year?
Yes, I think so. In fact, you've seen in the chart that we have presented on Slide 54, which shows some of the RevPAR growth is about 14% in second quarter. Normally, we do see that 30% jump between Q2 to Q3, and we have -- business is very strong at this point of time. So I don't see a problem in the overall double-digit RevPAR for the current year. No, not at all.
The next question is from the line of Lavanya from UBS.
Yes, it's Shaleen again. Sorry, last time I got dropped off. So Puneet, Giri, I was asking that you guys have been on 75% occupancy levels and -- in a weak quarter. And most likely, will end the year with higher than this occupancy. So at what occupancy level do you think that you will start thinking about changing your customer mix? And probably, we will see more of ARR growth. So right now, also it's going good. But the idea here is that -- the question we get is that how much ARR can improve from here? So where the mix is right now and where the mix can go of our customers? So any thought on near to medium term?
See, the double-digit growth, if we look at stand-alone, the ARR has increased by 18% and on the enterprise also by 11%. That's very healthy. RevPAR increases of like 28% on stand-alone and 16% on enterprise level at domestic markets, right? So I -- we have just discussed this before this call on a very different issue, and we are not seeing any change. We are seeing this trend continuing on the domestic front. There are some challenges on the international front. But on the domestic front, Mumbai is very strong, Delhi is very strong, Goa is very strong.
So all your top 10 markets in India are extremely strong. And the -- what we tend to forget, Shaleen, is we have been very successfully able to mitigate the impact of Nipah virus or all the landslides and flooding in Uttarakhand as well as in Gangtok, et cetera. So there has been a lot of disruption that happened. But you don't see that when you look at the consolidated picture, which shows that some of your markets are extremely strong in terms of occupancy. And if your occupancy increases, your ability to charge increases. Your more sold out dates when you have a very high occupancy rates. And that's when you start charging more and more.
And we don't think about customer mix or change at a certain level of occupancy. We think about that and our revenue managers have to think about that at least 5 to 6 times a day, if not every 2 hours. This is just a part and parcel of the business.
And if I just build on that, Shaleen, I think, if you look at Slide 68 in our presentation, Shaleen -- Slide 68 of our presentation [indiscernible] 59%. And that number has actually been going up. It was not 59% pre-pandemic. It was about 52% or so. So [indiscernible] mix will keep going up, also driven by the fact that it is not ADS and GDS. Yes, it's also about how we are investing in the benefit, loyalty and all that. All that is [indiscernible], so [indiscernible] proportion will keep going up. That's number one.
Number two, corporate is 12%, and that's deliberately strong. We have discourage a number of small corporates from getting into long-term contracts, and we've actually asked them to book on the web actually, which means that we are treating them like a transient. And third, as you know, we have spoken about it where we have changed the corporate contracts from a fixed rate to partially -- to a rate, which is linked to that base ARR actually, which means it is 25% of bar and things like that. So those kind of steps we anyway continue to take. And beyond it, of course, as Puneet said, the revenue management kicks, you don't need the [indiscernible] because they not really give you F&B but also rooms.
So all of those we do. You do need the crew because they give you a base occupancy. And I think -- hence, I think transient will continue to be a very important part of what drives the rates up actually, what drives the rates up. And that will continue to be a very important mix element in our business actually.
Right. No, sir, exactly. So I think that's what I was looking for that besides increase -- room increase, you have a lever in terms of changing your customer mix that will inherently change your -- or increase your ARR? That's what -- that's how you guys have already seen.
[indiscernible] and we have been doing it, Shaleen.
Yes, you've been doing it. Okay. So second question. While -- so when I look at your P&L right now, I think you guys can generate INR 1,200 crores to INR 1,400 crores of cash flow pre-CapEx after maintenance CapEx. And that probably can grow at 15% CAGR for next, let's say, 4, 5 years. So that would give you something like INR 8,000 crores kind of cash over the next 5-year time period. And if I, let's say, take a INR 2.5 crores per room kind of a number, right, so you guys can add anything around 3,000 to 3,500 rooms in the luxury segment, and even correct my calculation in terms of my CapEx per room, it's low.
But -- so on the current domestic owned room, which effectively means you can increase your capacity by 60-odd percent. My challenge is how are you going to do that, right? I mean are you thinking about some inorganic actively or start looking for the land faster, because gestation period itself would be like 3, 4 years?
Yes, I think you're right, Shaleen. There is definitely cash generation and the utilization of the cash and capital allocation is clearly a very important phase. And if you look at what we are currently doing, we are definitely doing greenfield projects, whether it is Lakshadweep or Gujarat and other places. And some of these places, we are not buying land. It's all lease actually, which means we're not really buying land. That's number one. So greenfields will continue to be an important part of how we will expand organically through adding capacity. That's number one.
As far as inorganic is concerned, we continue to look at opportunities, Shaleen. I think as we have always pointed out, I think the NCLT has been a very difficult way in terms of hotel properties so far actually. So we'll have to do some bilateral transactions. And we continue to look at. We've got a very good business development team, which kind of looks at all of this. And I think and ultimately, what is important is not just the opportunity, but also to make sure that we pay the right price as well actually.
So organic growth through greenfields, whether it is using extra available in lands rent to sort of build, all of those we will do, Shaleen, actually. I think -- and you're absolutely right that these are -- these take 3, 4 years to come. It's not as if that it comes overnight. Inorganic is important to be able to -- like we talk of conversions in management contracts like [indiscernible] coming on stream one fine day. I think -- I mean, inorganic will actually give us immediate capacity. But we are on the look of where we continue to sort of look at those opportunities provided the value -- these are value accretive actually.
The next question is from the line of Rajiv Bharati from DAM Capital.
Sir, my question is on -- on Slide #69. So you have seen the crew business growing by 50%. So -- and earlier the contribution used to be close to 3% pre-COVID if I'm not wrong, and now it's close to 2% now. So my question is in terms of sensitivity of the rates, which are rising -- increasing on each segment, which is the, let's say, bottom 3 segments in terms of more sensitive, if you take the rates a little higher, probably we'll be seeing a drop out.
No, no. I think the crew will always be a segment, which will be there in a different number of hotels actually, because revenue management is about base occupancy, which can come from crew, it can come from low-rated corporates and things like that. And then the rest of it, the revenue management will push up rates actually. So these are all elements of a business. You can't charge what do you say, the highest rate for every segment, and every segment has a role to play actually. So hence, I think -- so things like crew will certainly continue to play a certain role in every hotel.
My question is on that on the slide, you have shown a 50% [indiscernible], right, which the contribution there...
Yes, but that 50 -- but that 50% -- don't look at as 50%, crew share of revenue is 2%, yes.
My question is on the sensitivity of the segment in terms of, let's say, increasing rates and they will shift to probably a lower category hotel.
I think in the crew business sense, these are -- these businesses come at a certain rate for sure, actually, and they are lower rate for sure. And sensitivity of the crew rate, I don't know, because these are all contracts that you enter into with an Air India or Vistara and all of those actually. And these are fairly long-term contracts, and there are standard ways in which people operate. There are no sensitivity saying that if I increase the rate, crew will go away. If we don't want to crew in a hotel, we do that also.
There are some hotels where we say, you know what, we don't want crew and we will shift them to another hotel in the same city, because the good news is that we have multiple hotels in the same city. I think that's a call that we can take. So I think -- but I don't think we worry about sensitivity of rates to crew business in that sense. We don't think like that.
Sure. And on Slide 22, you have shown the operating leverage in some of your key hotels. But we -- when we go to, let's say, Slide 61 to 63 where you are given subsidiary-wise performance, and particularly for Piem, Roots and Oriental. We don't see the similar operating leverage play out in terms of the swing in EBITDA versus the swing in the top line.
See, we obviously -- go to slide -- first slide, which slide you got it?
Let me explain that. There are a few hotels in Piem, which have been under renovation. I explained that in earlier points about displacement. So Nashik is undergoing extensive refurbishment so that it can get upgraded to Taj. And Tajview in Agra has just finished some refurbishment and has come back into operation, and you will start seeing that impact of operating leverage as -- see 2 hotels out of a total of 607, they create a big impact, but it's going to be positive.
But maybe by the time they come back, we take also Blue Diamond in Pune, which is a part of that portfolio also under renovation. So there is some work to be done. We'll -- as I said, we'll keep investing in our assets. And we are very happy with the way Tajview, Agra has turned out in Piem, and we are really looking forward to completing the renovation of Nashik and starting the one with Blue Diamond.
The next question is from the line of Jaiveer Shekhawat from AMBIT Capital.
Sir, my first question is relating to TajSATS. Now given that it has been growing at a very fast pace and you also have plans of increasing operations to other locations as well. From an annual revenue run rate of roughly about INR 800 crores, INR 900 crores, where do you see that over the next few years?
Yes, we think that this INR 800 crores, INR 900 crores could easily grow by another 30% to 40%, mainly dependent not just on the online traffic, it's the non-aviation business, which we are considering in the new kitchen, especially outside of the airport zone for cost efficiency reasons. And we do believe that TajSATS is very well positioned to go beyond INR 1,000 crores in the next financial year and far beyond INR 1,000 crores in the following year.
There are a number of drivers here. I think number one, as we talked about, the increase in the number of airports and obviously, these great opportunities in terms of expanding the business. Secondly, what's also happening is that airlines used to earlier is if there's -- Bombay's airport route as an example, airlines used to cater from different caterers, one Jaipur and one Bombay. Now you see on many of those routes, there is one -- there is catering from only one city, which means there's reverse catering, when means Bombay-Jaipur flight, we've seen the route from Jaipur-Bombay line also goes from Bombay. So those are also happening and smaller vendors in some destinations are also not being used by airlines, this is the second one.
The third is the nonaviation, as Puneet pointed out. Fourth is the whole synergies of Air India and Vistara and all, which should come in terms of developing. I think there are a number of different levers that are there, which can help to grow both the top line and the bottom line in this business actually.
And sir, what would be the current share of nonaviation business in the overall TajSATS revenue?
It's not very significant.
It's less than 10% at the moment. But our aspiration is to grow it to more than 20% over the next 3 to 5 years.
Understood. Similarly, in relation to your management fee guidance as well, now given that, again, growth has been pretty remarkable on that side as well. Where would your guidance stand as against what you had guided for about INR 550 crores by FY '26 on the Ahvaan?
I think we will come back on the Capital Market Day.
Yes, Capital Market Day, we'll guide you more on management fees. But we have 80 contracts in pipeline. If you take out 5 or 6 that are owned and maybe another 5 that might be leased, the rest is all management. So the management fee income will keep growing.
And sir, lastly, on your Ginger property as well. One, in terms of your renovation, what kind of a benefit are you expecting once you are done with the renovation? And will we still see some benefit during the second half? And also on your Santacruz property and what is going to be your pricing strategy there?
Which property are you seeing in Delhi?
No, no. Ginger Santacruz, I mean.
Ginger Santacruz, it's a trophy asset for that Ginger brand. We do believe that in 3 years of operation, it should reach INR 100 crores in revenue. That's what the market is for that 371 rooms. And it's a very fairly large property. If you're Mumbai-based and you're right by, then one sees the impact it has. We are waiting for some licenses and some cleaning up of the facade and access road. And as and when that happens, whether it takes 2 weeks, 3 weeks, 4 weeks. But we will be -- the opening is imminent. It will definitely open in very much foreseeable future, I would say, and foreseeable future is limited to weeks and not to months.
Sure. Sir, that's very helpful. Any comment on the renovation side of it? What kind of benefit should we expect in the second half? And then overall, what kind of benefits should we expect after renovation in terms of rates that you charge in your portfolio? Any indication there?
So Ginger as a portfolio for renovation. Yes, the Ginger, what we are seeing on the Lean Luxe as we call it, the Lean Luxe Hotels in almost all cities get north of INR 3,000 in Mumbai and all they even get much higher rate. So Ginger Santacruz should operate north of INR 6,500, INR 7,000 stabilized rate. So it depends on the city. It depends on the size of the property. But we are no longer into that category the way this brand was launched at like INR 999 or a cheap kind of hotel.
This is functional hotel that provides all possible services, except for a swimming pool and those kind of additions, but you'll have all-day dining restaurant. The F&B when we started the Ginger brand was outsourced. So actually, just the name is old. Everything else is just new-born Ginger. We have in-sourced the food and beverage. We have added meeting rooms and just be patient with us for a few weeks. We'll like to invite you for the opening of Ginger and Santacruz, all of you.
The next question is from the line of Anuj Upadhyay from Investec.
Sir, two questions. One is on the your initial remarks where you mentioned that the U.S. hotel business have been underperforming, likely to -- expected to remain stable or turn out to be a better performer after 5 business quarters from here on. Exactly what gives us this confidence of this turnaround kind of a thing? Is there anything happening or going to happen at a macro level in the U.S.? Or is there some change in strategy from our end that would lead to [indiscernible]?
There is very good performance we had in San Francisco pre-COVID. We had turned it profitable. It's a 0 debt. We own the asset. It's a relatively small-sized property in the middle of town, Union Square, which is a great location, but the market changed. So I don't think there is any issues in San Francisco in the mid and long term. It's a short term that, that city is suffering for a variety of reasons, which has nothing to do just in hospitality. It's a whole macroeconomic thing, as I said.
New York is New York. New York, London, Paris, these are the top lodging markets of the world. And we do see that there is a change and a shift that will come there. And that keeps happening. These kind of markets with one event in New York of a G20 kind UNGA, the United Nations General Assembly in the month of September and the whole revenue base changes there. So all we need is a few more events like that, which will come, which will happen. And that will drive the change that New York is seeing. Also, the dollar has become very expensive. So travel to New York is not moving as much as it used to boom when the dollar was weaker.
So all these things play out, but I don't think anything is permanent forever. So I'm not here to predict currency rates, but definitely, certain things have a short-term impact. And it's very important for our brand to be in New York and London, and that is what differentiates us. That's what gives us the strength of playing on the same pitch as many other equivalent or important international brands in this segment play on the global arena. You have to be in the top lodging markets of the world.
Got it, sir. And second, on the capital allocation, I know, sir, you have already answered this. But what -- you have mentioned that we have multiple options as of now for the allocation like financing stake across to JVs or subsidiaries, inorganic growth, renovations, still looking for assets, which are under [indiscernible] this do we have any other contract plan? Or we have covered almost everything on to this? Or is there any change in the strategy to have 55:45 manage and own property? Are we going back to having more of an owned or [indiscernible] property? I mean just curious to know where exactly that we plan to allocate this hotel [indiscernible] that we have.
See, we are -- we have given that guidance under Ahvaan 2025. There is no change. Only thing is as and when we achieve the targets, the own might marginally decrease because of the growth in the managed portfolio. But because we are iconic and we have some of these great assets, we can't just either sell them or get out of them. Actually, they do provide us, as we said, the absolute amount of profitability is coming from these iconic assets, like Giri just now mentioned with Lands End, the way it has been performing, Taj Mahal Palace in South Mumbai or now the way Taj Mansingh or Taj Palace is doing in Delhi.
So we are very pleased with that. We'll keep these kind of assets. Today, it represents on a total portfolio, including hotels under development, around 50-50, but in operation, still the asset-heavy side of the portfolio is higher. But with more and more openings of rooms and hotels under management contracts, we hope to have a balanced portfolio within the next 12 to 15 months. In operation, we have it when we include the pipeline.
And going forward, maybe the whole part of the portfolio will become, let's say, 45 and the manage will become 55 because with the Ginger, we want to be more in operating leases, which is also considered as owned. The technically leased hotel is also owned hotel. So I think very carefully, we will manage this mix and the mix that gives us the best of absolute return, but also helps us to be a margin-enhancing company.
Okay. And lastly, any update on the [indiscernible]?
Yes, we have submitted the plans, and we are waiting to hear. So as and when we know, we will update. And if needed, we'll have a separate call. But yes, we have submitted plans online now for the development.
The next question is from the line of Pavas Pethia from Birla Mutual Fund.
I have two questions. One is regarding the branded supply. If I look at Slide 7 where there you are saying 5% to 6% CAGR growth. If I then look at your growth plans and also peers, everybody is talking about double-digit management contract growth. So how is this rest supply coming for you guys when the physical circulation is limited?
We have given the guidance. We remain quite bullish that as of this month or next month, you can say we'll be opening 1.8 hotels a month. We have 80 hotels in pipeline. If we even stopped signing any new contracts today, we would be opening 20 hotels every 12 months for the next 36 months, which means 60 hotels to open. So I think on that side, our pipeline is very strong and very healthy, and we expect to keep growing.
I understand your supply graph. I've seen that you almost doubling your management contract. But my question is if supply is not coming, how you are kind of ending up with the disproportionate share of the supply growth?
So we are not -- what we are saying is that we have not said that supply is not coming. I think we have said that there's other patterns we are seeing in terms of growth and eventually, I think funding will start and the funding has started. And eventually, in the next 3, 4 years, the new supply should emerge. New supply takes time. And I think -- and bear in mind that management contracts are not signed when the property is fully ready. Management contracts are signed when the owner is kind of trying to start the design process actually. And we get a share at that stage itself.
So if you look at Slide 76, where we talk of the number of inventory per year, you will see 3,000 rooms per year is what we have said we will open. And it is because these contracts have been signed today, which will open, say, in '27, '28. So we are signing at a greenfield before this project probably gets off the ground actually.
Okay. And secondly, continuing with the Shaleen question, your currently renewed -- signed a management contract, you only capture 1/5th or 1/6th of the potential EBITDA. Why not grow aggressive, you have the cash flows, you have the balance sheet in the asset creation or acquiring some of these contracts?
Sure.
We would consider any options that come. We are today, as we said, well positioned. We don't have debt, and we have cash reserves to do whatever makes sense. So as you said, it's being -- aggressive makes sense on the domestic front, we will be aggressive. If it makes sense to invest in a few more Ginger properties, we will invest it. If it makes sense to have an iconic Taj, we would do so like we are doing in Lakshadweep. We're building 2 Taj properties in line with the history of the company. We've built Goa. We've built Kerala. We've built Andaman.
So we are also building, now Lakshadweep will be world-class resorts. These are small, maybe like a total of 150 keys, both of them put together are 175. But that part will happen, and it takes time to build resource, 3 to 5 years to get into such remote locations and build a placement. Once it is built and ready, then it will be fine, but it is aggressive. If you're not aggressive, you would not go to these places.
The next question is from the line of Saurabh Patwa from Quest Investment Advisors.
[indiscernible] getting to on the renovation and all, what kind of return ratio is target? How do you identify this is a project that will generate specific kind of ROE or [indiscernible]...
Saurabh, we can't understand. You your line is not clear.
Saurabh, if you're on hands-free, request you to use the handset.
Is it better, sir?
Yes, speak maybe speak a little slowly, Saurabh, so that we can hear you clearly.
Is it better?
This is much better. Absolutely.
Hello?
Yes, it is better. It is better. We can hear you. So why don't you -- we just request you to speak a little slowly so that we can get the words...
Sure, sir. Sure. Sure. So I just wanted to understand your thoughts on when we get into a new CapEx or renovation, what kind of return ratio we target?
So I think, fundamentally, we look at the normal WACs. I think we look at our normal WACs. Normally, in this industry, we take about 11.5% WAC. And as long as the return continues to be above that, we will find renovations, which generally, there is absolutely no problem because of the renovation, what we are doing is an existing property or renovating for better returns. On greenfield, in general, 11.5% WAC is good, and we make sure that we earn better than that. So there's no problem.
And just on -- would you be able to give break up of [indiscernible] for India business and the outside India?
Sorry...
Sorry, we can't hear you.
You'll have to repeat, you'll have to repeat, yes.
It's separately the questions, please.
So just wanted to understand, would you be able to share the ROCE for properties in India and properties outside India?
So we have -- if you look at our Capital Markets Day presentation, if you look at it last May, please look at it on the website. We have clearly given the return on capital employed for domestic assets and the international assets. So you can pick it up from there. This is the appendix. This would be appendix, yes.
Maybe the last couple of questions, please.
Yes. We have the last question in queue. The last question is from the line of Nikhil Agrawal from Vt Capital.
Sir, my question is on the debt side. You've reduced your debt to quite a significant extent in the first half. But your finance costs have not reduced. So was it because you've paid your debt at far end -- close to far end of the quarter? Or is there any other element in that?
No, no, no. that's wrong. This is the accounting...
I think you are getting confused with the lease -- interest on lease capitalization. So I think it is nothing else actually. Otherwise, the finance cost is actually negative. It's, I think, about -- It's negative. So we -- I think when you say finance costs on the P&L use, those includes the cost of lease capitalization.
See Ind AS accounting standards are changed, what goes above and what goes below, but we don't have any debt.
Except the new...
Okay. Okay. Got it, sir. And sir, lastly, you said Q3 would also be a double-digit growth year-on-year, given that last year Q3 was also -- was your highest ever quarter. So you're confident of getting that double-digit growth in quarter 3 as well?
See, Q3 is always the best quarter, was not last year. If we go back in the history, Q3 would always come out to be the best quarter. And as we mentioned before, given the business on the books that we have for the month of November already, because the visibility is short and the 26 days that we have had of October, there is nothing that makes us believe that it should not have similar kind of growth that we have witnessed last year, year-on-year basis, if not higher, we even think it could be higher.
Thank you, everyone. Thank you for everyone who joined the call. Thank you for asking the questions that you did. For any other queries, please feel free to reach out us in our corporate office, our Investor Relations team. And we really look forward to talking to all of you at the end of next quarter. And our very best wishes for the upcoming festive season. And hopefully use all our hotels, all our brands and Taj properties and spend all your moneys in our restaurants. Thank you for joining. Thank you very much.
Thank you.
Thank you very much. On behalf of The Indian Hotels Company Limited, that concludes this conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.