In an interview with CNBC-TV18, Vishal Kamat, Director of Kamat Hotels (India) spoke about the latest happenings in his company and discussed FY18 business outlook.
Below is the verbatim transcript of the interview.
Sumaira: Give us a sense of how FY17 is set to wrap up for Kamat Hotels (India). You may not be able to share very many numbers since you would be declaring them in just a bit but if you can give us a sense of whether the financials are on the mend and what we can expect in FY18?
A: The results will be out soon and people will be quite happy because last quarter has been fairly good and that trend is continuing. There is a robust demand in general from both leisure and corporate and that is continuing. Even today the rates of hotels in the markets where we are, are quite attractive and buoyant because of the occupancy. So the outlook for the New Year though it started off very poorly with 500 meter rule, while that issue is going on but things have been good from room side.
Prashant: You have properties affected by the 500 meter rule?
A: Some of them were especially our flagship in Mumbai which is at the domestic airport - The Orchid Mumbai, but that has now not been affected now any more once it revoked, the denotification but there have been some of our other hotels though they are very small compared to our other hotels like in Nashik, which are still affected but overall we have been not affected by and large except for a few which have got recovered now.
Sumaira: There is news of a fund selling out over the last few days - Clearwater Capital Partners. Would you know if this is routine, if the fund cycle is ended or who the buyer might be?
A: Clearwater has invested in us many years back and their fund life had come down, their fund cycle was over. So they were looking at exiting but the market was very poor in the last one-and-a-half years as their fund had got over.
It has been a routine sell for them because they wanted to exit. However, I will know on Saturday, once the detail report comes of who bought what but from whatever I have heard it is a clutch of different investors who have taken there because they own 50 lakh shares. They sold it to multiple people who have seen the upswing in Kamat Hotels group.
Prashant: They are completely out now?
A: I will know on Saturday but looking at the kind of volumes - 48 lakh-50 lakh shares that have been traded in a day; I am assuming that they must have sold quite a bit of it.
Prashant: They got in at Rs 135, right?
A: Correct. We were at conversion at that time, those times were different and unfortunately we went into our own challenges but we have been able to recover from them and the future looks fairly positive.
Sumaira: If your financials are on an improving trajectory, when do you hope to turn into black on a full year basis?
A: Looking at the current trends, looking at how our team members are putting their best foot forward, how the market has been, I think next whole year we should be positive.
Prashant: Why is there a loss? I am going back five-six years and from what it seems you are saying '17 also will be a loss?
A: No, '17 will not because last quarter we have done Rs 30 crore profit. However, considering that last two quarters of hotel industry is very positive because a lot of people come during that time.
Prashant: My question is why there is a loss. What is the reason?
A: One of the reasons is that there is a high interest cost which has been reduced, a lot of finance cost which have gone down and we had a lot of operational efficiencies which we started working towards.
Prashant: In FY17, the year which ended, what will be interest cost at?
A: That will come out short.
Prashant: Talk about FY16, what was interest cost?
A: It was roughly around Rs 60 crore.
Prashant: The total debt was?
A: Our total debt was around Rs 550 crore which has also come down over a period of time and that is reflecting in our results.
Sumaira: In Q3 your performance was good but you also have a near Rs 20 crore in terms of an exceptional gain?
Sumaira: If I take that out then on the bottomline you just have about Rs 5 crore in terms of profit?
A: Yes. Turnaround takes time considering the minus, what we have been; Rs 5 crore profits is a large return.
Sumaira: In that case for the full year you would be making profit. You think in Q4 you will manage to cover up?
A: Definitely because it is one of the best quarters; the last two quarters are really good for the hospitality sector as a whole because that is when a whole lot of exhibitions happen in Mumbai, it's also a wedding season, so last two quarters are always traditionally very good. The monsoon is downtime which is June-July time.Prashant: What was the topline in FY16?
A: Roughly Rs 140 crore.
Prashant: Interest cost is Rs 60 crore?
A: Yes. Our nine month result is what we have done for the entire year last year, so that is something which will show the upside.
Prashant: What was the nine month profit?
A: Nine months profit was Rs 28 crore.
Prashant: You still have a debt of Rs 550 crore odd?
A: No that has come down substantially because of internal accruals being used to repay the bankers - that has been our main target to reduce debt because unnecessary interest costs were being borne. So as we have been performing, our first target has been to pay back our bankers, our lenders and others.
Prashant: What is the debt now?
A: The debt must be down to around Rs 450 crore.
Prashant: You expect this year to be good, right?
A: It started off very well and I think it will continue. There is a lot of buoyancy in the market, not only for Kamat Hotels but the entire industry will flourish in the coming year going ahead. There is a lot of good demand.
Prashant: What is the topline for the nine month period '17?
A: It was around Rs 114 crore, if I am not mistaken.
Prashant: You will still end up paying about Rs 40-45 crore in interest annually?
A: In last nine months we have paid around Rs 21 crore, so I do not think it the last quarter will have that much of interest. It would be proportionate.