Capitaline

Analyst Meet / AGM 05-Aug-06

Analyst Meet

Royal Orchid Hotels

Plans Rs 500 crore capex in the next 2 years

Royal Orchid Hotels held its analyst meet on August 3, 2006 to discuss the financial results for the quarter ended June 2006 & the future plans. Mr Chander K Baljee, Chairman & Managing Director addressed the meet.
Highlights of the meet

Financial & Operational Highlights

For the quarter ended June 2006, Royal Orchid reported 56% growth in the consolidated revenues to Rs 25.57 crore. The operating margins dipped by 140 basis points to 42.1% with the operating profits increased by 51% to Rs 10.76 crore. Other Income for the quarter grew by 821% to Rs 2.21 crore aided by income from investing of IPO funds. PBIDT grew by 76% to Rs 12.97 crore. Interest cost for the quarter grew by 46% to Rs 57 lakh. PBDT for the quarter was up by 78% to Rs 12.4 crore. Depreciation cost for the quarter increased by 148% to Rs 1.04 crore resulting in PBT growing by 74% to Rs 11.6 crore. Tax provision including current tax, deferred tax & FBT increased by 79% to Rs 2.8 crore. PAT before minority interest grew by 72% to Rs 8.56 crore. Minority interest for the quarter was down by 41% to Rs 24 lakh. PAT after minority interest stood at Rs 8.32 crore up by 82%.

Currently the company operates with 405 rooms in Bangalore. Royal Orchid 5 star business owned hotel with 195 rooms, Royal Orchid Central 4 star hotel on lease & revenue sharing with 130 rooms & Royal Orchid Harsha 3 star hotel on lease & revenue sharing with 80 rooms. In Mysore the company maintains Royal Orchid Metropole a heritage hotel with 30 rooms on revenue sharing basis. After the IPO the company bought 51% in Maruti Comforts & Inn Pvt. Ltd to manage Royal Orchid Resorts in Bangalore with 54 rooms.

The company has sales offices in New Delhi, Mumbai, Hyderabad, Ahmedabad & Chennai. It also has tie-ups with major agents all across India. It is featuring on the Global Distribution System Amadeus, Galileo, Worldspan & Sabre.

The flagship hotel, Hotel Royal Orchid is a premium business hotel with 195 rooms including 9 suites & 16 service apartments has three popular F&B outlets & business centre & fitness centre. This property is surrounded by major IT companies. The ARRs have increased from Rs 5958 in Q1FY06 to Rs 8299 in Q4FY06 to Rs 8161 in Q1FY07. The occupancies have dipped from 87% in Q1FY06 to 82% in Q4FY06 to 80% in Q1FY07.

Hotel Royal Orchid Central a 4 star business hotel with 130 rooms including 5 suites is on lease by Icon Hospitality Pvt. Ltd., a 51% subsidiary of the company on revenue sharing. The ARRs have increased from Rs 4154 in Q1FY06 to Rs 5754 in Q4FY06 to Rs 5775 in Q1FY07. The occupancies have dipped from 86% in Q1FY06 to 82% in Q4FY06 to 75% in Q1FY07. The company is renovating one floor at a time & will be completed in Q4FY07.

Hotel Royal Harsha a 3 star hotel with 80 rooms & 4 banquet halls. The target customers are economy business travellers i.e. the middle & junior level executives. The ARRs have shown a steady trend from Rs 1805 in Q1FY06 to Rs 3252 in Q4FY06 to Rs 2825 in Q1FY07. The occupancies have been 78% in Q1FY06 to 70% in Q4FY06 to 59% in Q1FY07. The occupancies are down due to IT companies delaying their recruitments.

Hotel Royal Orchid Metropole is a Heritage hotel located in Mysore with 30 rooms. It has been lease from Jungle Lodges & Resorts Ltd on revenue sharing. The ARRs have shown a steady trend from Rs 3047 in Q1FY06 to Rs 3879 in Q4FY06 to Rs 3471 in Q1FY07. The occupancies have been 39% in Q1FY06 to 65% in Q4FY06 to 52% in Q1FY07.

Hotel Royal Orchid Resorts is a luxury resort located in Bangalore with 54 rooms. It has been lease from Maruti Comforts & Inn Pvt. Ltd on revenue sharing. The ARRs have shown a steady trend from Rs 1379 in Q2FY06 to Rs 1715 in Q4FY06 to Rs 1725 in Q1FY07. The occupancies have been 41% in Q2FY06 to 52% in Q4FY06 to 53% in Q1FY07. The company will further add 100 rooms after the renovation.

Future Expansion

The company has already started expansion in Pune, Mysore, Bangalore & Hyderabad. It is in negotiating in Chennai, Kolkata & Mumbai.

The company is planning to enter the Tier II cities like Jaipur, Simla, Indore, Chandigarh, Ahmedabad, Goa, Cochin etc to set up 4 star hotels or budget hotels.

In Delhi the company has signed up a property, which will be ready within 2 years on revenue sharing & minimum guarantee.

Royal Orchid Central, Pune will be 115 rooms hotel expected to commence operations in Q4FY07 on lease with minimum guarantee.

Royal Orchid Central, Hyderabad will be 65 rooms expected to commence in Q4FY07. It is an investment through Royal Orchid Hyderabad Pvt. Ltd., 51% subsidiary.

Royal Orchid Central, Jaipur will be 70 rooms expected to commence in Q4FY07.

Royal Orchid Brindavan Garden, Mysore will be 25 rooms expected to commence in Q4FY07.

The company is planning a capex of Rs 500 crore during the next 2 years, which will be funded from the IPO funds, debt & internal accruals. The long term plan of the company to have 6 hotels in 5 star category, 14 hotels in 4 star & 20 in budget category.

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