IHCL has Rs 3,000 cr cash instead of debt; to launch new brands, travel packages in next few months: Puneet Chhatwal

Economic Times

06-05-2025

Puneet Chhatwal, MD & CEO, IHCL, says demand will exceed supply for the next few years. India's GDP growth remains strong, despite potential adjustments. A growing number of people are moving into higher income brackets. They are seeking new experiences in food, hospitality, and luxury goods. New destinations and events like Maha Kumbh are boosting the economy. It is the beginning of the journey of the tourism, hospitality sector. Instead of Rs 3,000 crore debts, we have Rs 3,000 crore cash. The company has the means today unlike earlier. The company plans to introduce new brands, potentially in wellness and all-inclusive segments, offering comprehensive travel packages.
Q3 and Q4 were tough for corporate India. We had a slowdown that was visible across the categories from pizza sales to car sales.
Puneet Chhatwal: No, as you have followed us for so many years now, it would be fair to say that we worked on the foundation. The foundation is your brandscape. So, first we tackled the brandscape and re-imagined brands which were known and also new brands. At the same time, we never lost sight of our backbone which is the Taj and we kept strengthening it quarter after quarter, year after year, taking it to very different heights.
So, the operating leverage kept coming from the Taj saved for those 18 to 20 months of COVID where the sector got demolished, the new businesses started growing at like 30-40% topline compounded annual growth at a very rapid speed and in our quest to address the needs and wants of a heterogenous market in India, we doubled our footprint to 130 locations and still kept also doing selective international growth like three hotels in Dubai, more which we signed in Bahrain and about to open in six-eight months in Frankfurt and continuous efforts on asset management. We always tend to say capital heavy. But capital heavy also provides the opportunity to sweat your assets and the iconic assets that we had are really very well positioned and have been very well renovated.
Take the example of Taj Mahal Hotel, Delhi. Despite an 80% increase in rent, it makes more money than it made before the rent levels were lowered and also a Rs 250-crore investment that went into the asset, so that is a very good example of asset management. All in all, it is several levers coming together, built on a strong foundation of a comprehensive brand management strategy and a very aggressive growth strategy in which we have increased our portfolio by 2.5x and today getting very close to 50,000 rooms or almost 400 hotels and the guidance of 700 by 2030 and spread across various brands. I think that all coming together is definitely helping. If one thing does not work in a quarter, the other ones contribute to the ultimate goal of the company.
The first part of your investor presentation starts with a simple explanation that demand is going to be higher than supply. You have been maintaining this for a couple of years now. Would you like to maintain this for the next couple of years also?
Puneet Chhatwal: Absolutely. For the next couple of years, demand is going to outpace supply. Definitely, it is not going to lag behind supply. So, there are three-four reasons for it. The GDP growth numbers may be adjusted downwards, but still it is around 6%. Now, whether it is 6.4% or 5.9%, it is still a good growth scenario given what is happening in the world.
Number two, the number of people who are moving from middle class to high middle class and high middle class to rich is increasing at a rapid pace in India. That is how India is becoming the fifth largest economy. People are having higher per capita income and the new or what you call the 'nouveau riche' people want to experience more whether it is your food and beverage or it is your hotel stays or it is your luxury goods, everything they also want to have, they have always aspired to have that. So, I think that also will benefit the sector. Finally, with all the new destinations opening, there is something new happening which people have noticed and had never noticed before: that the numbers of Maha Kumbh will be the way they were and what a Maha Kumbh could do to the economy of a state like UP. I do not think UP ever witnessed that in its history, it is not the first time that Maha Kumbh happened or what Coldplay did for three or four nights in Mumbai and another three nights in Ahmedabad because nobody would come extra to Mumbai for one night. So, what you lost in G20, you made up with Maha Kumbh?
Puneet Chhatwal: We did not lose, we gained in G20.
No, the base effect of the last G20 was not there. In FY24, you had the advantage of G20. In FY25, we thought that no G20, what happens now?
Puneet Chhatwal: I did not think so. A lot of analysts thought that way, a lot of people in the media too. I think India is changing. It is the beginning of the journey of the tourism, hospitality sector in terms of its contribution to the GDP, in terms of its contribution to job growth both direct-indirect jobs going forward. We will see very different numbers when India is at 100 at 2047. So, India at 75 to India at 100 is really the time and the chance for this sector to thrive. There will be headwinds, every time something will come every 16-18 months, but eventually it has a very bright future.
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In April, 2025, you had issues because of the election, a bit of a slowdown because of the heat wave. Is the current month better than last year or last time?
Puneet Chhatwal: Absolutely, a brilliant observation. So, the base was not as high. We tend to do very well as a sector in Q3, Q4 as Diwali, Christmas, New Year, wedding dates all come in. Really the important part where you tend to lag behind is Q1 and Q2. But in the last five years, we have seen India becoming a 365-day destination; something is always happening in some parts of the country. Having said that, we have the April numbers, we have given that guidance yesterday in the conference call. We did 17% higher topline versus April of last year and the number looks similar for May going forward, maybe not 17, maybe it will be 14 or 15, this is a very healthy growth because if we can convert 50% of that as a healthy good flow through, then that gives a very solid EBITDA hike and also on the margin front, helps you to keep and maintain the margins at a high level.
Five years ago, Covid had hit us. The stock had plummeted almost to Rs 80 and from Rs 80 it is now almost at Rs 800, a 10x jump. Profits have gone up from sub-20% to 35% and 30%, 32% is becoming the new normal. What was your annual EBITDA is now becoming the quarterly EBITDA. It has been phenomenal. But that has also come because of change, resilience, and what is happening at an industry level. What are the other changes we should expect from Indian Hotels? To reach your Vision 2030 where would you pivot?
Puneet Chhatwal: Wow that is a lot of questions in one question. Number one is to keep doing what we have been doing well and which is working. As I mentioned before, our asset management initiatives are not for growth, our focus on new businesses is for getting scale in them. But one thing which has changed dramatically from pre-Covid to today is from a gross debt of more than Rs 3,000 crore, we are net debt zero company today. Instead of Rs 3,000 crore debts, we have Rs 3,000 crore cash. So, we are very well positioned to participate in any kind of consolidation in the sector or to invest in key assets which are brand enhancing, which are the torchbearers of any of the brands. This is a new situation. This is really the new normal for us and a lot of our own assets that are opening have already been paid for from the accruals that we have created internally in the last three years. This year we will be opening two hotels in Ekta Nagar where the Statue of Unity is, one Vivanta and one Ginger which is company owned. Over the last few years, we opened Ginger Mumbai airport, all paid from internal accruals. These are our assets with the exception of a small debt in London, we are debt-free and that also hopefully we will pay off. It is a very small, 20% loan to value. So, this is an interesting time because consolidation is not going to happen now. This time we have the ability to participate and with our focus clearly on India in the last five years and going forward in the next five years positions us very well.I am quite confident like in the last few years, we have added Claridges Collection; relaunching and reimagining Gateway. Similarly, we would be introducing a few more brands in segments that we are not yet present in. It could be a wellness driven business, but it could also be an all-inclusive business which is so successful in southern Europe, in Northern Africa. With the connect that we have with airlines to have for a family of four, you buy one package for the family which includes your air ticket, which includes your transfer from the airport to the hotel, which includes everything that you want to eat or drink over the five or six or seven days' holiday that you have. So, we are very excited and working on it as we speak. You can expect some news on that in the next 100 or 120 days. Today we have the means. Earlier, whatever we did, we did not have those kinds of means like we have today.
Globally we see the airlines and hotels coming together. So, now with Air India and the whole Taj and Air India the Tata brands could come together?
Puneet Chhatwal: Not come together, even before Air India returned to the Tata Group, we were a very strong partner with Air India, but now it is even stronger. We can do much more and end up in similar working groups and CSR initiatives or Tata business excellence groups. The interactions between formal and informal are very positive and are at all-time high, which is not possible when you belong to two different groups.