Eyeing asset-light model by managing properties; Powai land sale soon: Royal Orchid

The Royal Orchid Hotels stock has gained 115 percent in the last year. They have opened a new hotel in Dwarka which takes their total number of properties to 46.

Amit Jaiswal, CFO, Royal Orchid said the Dwarka hotel has been taken on management basis and expect to get management fees of Rs 3.5 to 4 lakhs per month.

The business for the hotel is expected to be very good because of close proximity to the Dwarkadish temple and the railway station.

Some of the other hotels that will be opened are in Somnath, Indore, Pushkar, Ajmer within a months’ time, said Jaiswal, adding that they are all management properties.

The company currently focuses on following an asset-light model of managing properties, he said.

The contribution to revenues from these hotels will be seen in FY19. This year to the company would see good growth of around 15-20 percent, but bottomline is becoming stronger because the management fees, he added.

The overall occupancy for the company is around 75 percent.

For FY19, in terms of standalone bottomline, there would be an improvement of over 20 percent compared to last year and the consolidate number is already showing profits.

On the land bank sale, he said for the Powai property they currently in advanced stage of negotiations, said Jaiwal, adding that they hope to get around Rs 60 crore.

Meanwhile, since credit rating has gone into investment grade, their interest costs have gone down. So post the property deal, the board will take a call on whether to pare debt or expand further or take some properties on lease.

With credit rating going up, the company is currently borrowing at 11.5 percent, which will further be reduced by 1-1.5 percent, said Jaiswal.

However, with respect to Tanzania also they are in talks but nothing is finalized yet, he said.