Leela Palaces Hotels & Resorts Ltd (THELEELA) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day, and welcome to the Q2 FY '27 earnings call of Leela Palaces Hotels and Resorts Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand over the conference call over to Mr. Abhishek Agarwal, Senior Vice President, FP&A and Investor Relations at The Leela Palaces Hotels and Resorts Limited. Thank you, and over to you, sir.
Abhishek Agarwal (The Leela Palaces Hotels and Resorts Limited): Thank you, operator. Good evening, everyone. Welcome to the earnings call of Leela Palaces Hotels and Resorts Limited for the quarter and half year ended 30th September 2026. We have published our quarterly results and investor presentation on the stock exchanges earlier today. The same is also available on our investor relations website www.theleela.com/investors. Before we start, a disclaimer. We would like to inform you that the management may make certain comments on this call that one could deem forward-looking statements. Specifically, the financial
Abhishek Agarwal (The Leela Palaces Hotels and Resorts Limited): and perform a information that he will provide on the call of management estimates based on certain assumptions and have not been subjected to any audit, review or examination procedures. The company does not guarantee these statements and is not obliged to update them at any time. Participants are cautioned not to place undue reliance on these forward-looking statements. Joining me today are Mr. Anurag Bhatnagar, Whole-Time Director and CEO, and Mr. Ravi Shankar, Head of Asset Management and CFO. I will now hand over the call to Mr. Bhatnagar. Over to you, Anurag.
Anurag Bhatnagar (The Leela Palaces Hotels and Resorts Limited): Thank you, Abhishek. Good evening, everyone, and thank you for joining us. Q2 FY27 was another quarter of exceptional performance for The Leela. More importantly, it reinforced what we believe is the core of our story. Luxury demand in India is broadening and deepening, supply remains constrained, and the value in this market accrues to the brands which with the most iconic assets and the strongest guest franchise. We delivered 30% RevPAR growth, 33% growth in operating revenue, and 36% growth in operating EBITDA, our second consecutive year quarter of 35% plus EBITDA growth. The momentum we built earlier in the year has carried through, while we continue to gain market share and sustain industry-leading guest satisfaction. For the first half as a whole, operating revenue grew 30% and operating EBITDA grew 38% with margin expanding by 246 basis points. Overall, we have delivered significantly ahead of our guidance in H1 and as we enter H2, which is the strongest stronger season for the hospitality sector. Rather than walk through the quarter line by line, I would like to focus on what is driving this performance, why we believe it is durable and sustainable, and how we are positioning The Leela for its next phase of growth. The operating environment during the quarter was particularly favorable. Demand was strong across corporate travel, leisure, celebration and events. Domestic demand continued to demonstrate robust growth and international demand also returned in strength. This diversity of demand is an important source of resilience for our business. Premiumization was also broad-based across customer segments, clearly highlighted by higher sales of suites and premium room categories, where the suite occupancy rose by over 700 basis points. India is increasingly the venue of choice for global summits and marquee events, and that plays directly to our strengths. During the BRICS summit period, The Leela Palace New Delhi recorded exceptional operating performance as our iconic location and premium positioning allowed us to capture compression demand at premium rates and further strengthen our market leadership. We see India's growing events and MICE calendar as a structural tailwind for rates and we have a strong lineup of events in New Delhi and Bangalore in the second half. On pricing power and market leadership, our Net Promoter Score for the first half stood at an industry-leading 87, about 13 points ahead of the luxury hospitality average for the Asia Pacific region. This consistency is what sustains guest loyalty, repeat visitation and our ability to price ahead of the market. Alongside The Leela's ranking as the world's second best hotel brand in the Travel + Leisure World's Best Awards 2026, three of our palaces, New Delhi, Jaipur, and Chennai, were awarded Michelin Keys for the second consecutive year, with New Delhi and Jaipur each holding two Michelin Keys. Our owned domestic hotels including Coorg delivered strong RevPAR growth of 30% year-on-year. This growth was led primarily by 30% ADR growth to 25,046, with the India headline occupancy at 69% and the same-store occupancy rising to over 70%. Achieving this on an already elevated base demonstrates the durability of our pricing power. The quality of this growth matters as much as its scale. Even excluding Coorg, which was not part of our portfolio last year, our hotels delivered a similar RevPAR trajectory. Domestic revenue at our owned hotels grew by more than 30%. Occupancy is also becoming structurally stronger across our city hotels and resorts, with no trade-off against ADR growth. Our city hotels reached record occupancy at 74% for the first half against 69% last year.
Anurag Bhatnagar (The Leela Palaces Hotels and Resorts Limited): occupancy on same store basis rose to nearly 60%. Alongside the strong weekday corporate base, our city palaces are witnessing increased occupancy over weekends, as affluent Indian travelers choose staycations close to home. Our resorts, in parallel, are becoming all season destinations. The Leela Palace Jaipur, for example, has traditionally been a winter season property, but it is now drawing strong demand through the summer and monsoon months, taking its H1 occupancy well above 60%. Events are a common thread across both corporate MICE underpins weekday business in our cities, while weddings and social celebration bring demand to our cities and resorts throughout the year. We still have meaningful occupancy headroom across the portfolio, which gives us the ability to grow volumes alongside rate. While the India luxury hospitality market delivered a healthy 13% RevPAR growth over April to August 2026, Leela once again outperformed with 17% RevPAR growth. This was driven by our superior luxury positioning, strong pricing power, and continued market gains across key destinations. As a result, our RevPAR Index expanded to 1.46x from 1.41x, reflecting a RevPAR premium of approximately 4,500 over the luxury market. A defining feature of The Leela business model is the diversity of our revenue streams. More than half of our revenue, 52% for the first half, comes from beyond rooms, spanning F&B, management fees, club revenues, wellness, transport and retail. This adds resilience to our earnings. F&B continued to deliver with 21% revenue growth, reflecting sustained traction across restaurants, bars, banqueting and experiential dining offerings. We have launched 8 F&B venues over the past last year. As a case study, Azulian House, our newest F&B outlet, delivering a botanical dining experience, was launched in May '26. Early performance has exceeded expectations with more than 90% of the covers coming from non-resident guests, which validates our strategy of creating differentiated luxury experiences and creating a funnel for the core ecosystem through the non-room businesses as well. As we manage our, sorry, as our managed properties portfolio continue to ramp up, management fees continue to grow and steadily increase the asset-light share of our earnings. Active asset management remains a key value creation lever for us. Our objective is simple, make every part of our iconic assets work harder for our guests and for our shareholders. The Leela Palace Bengaluru illustrates this well. The hotel has been ranked #1 by RGI index in its peer set over the last 4 years, delivered a RevPAR CAGR of approximately 16% between FY '26 and FY 20, sorry, FY '23 and FY '26, and is running at a 1.5x RGI index this year. We converted an idle parking area into the Maharaja Ballroom for MICE, turned unutilized space into ZLB 23, and launched Azulian House in Q1. Together, these initiatives have unlocked new demand segments, strengthened non-room revenues, and enhanced overall asset productivity. The next wave of value drivers is well underway. A释 by The Leela in New Delhi is operational, and The A释 Chennai is scheduled to open this quarter. Development is advancing well on the Ojasya wellness facility in Bengaluru and on renewable energy initiatives in Chennai and Coorg. These projects will deepen customer engagement, unlock incremental revenue from our existing assets and lower our fixed costs. Our development pipeline remains a significant driver of future growth, and we continue to scout for opportunities across both owned and managed assets, both greenfield and brownfield. We remain on track for our FY '27 openings. The Leela Jaisalmer, a luxury desert resort and spa, and The Leela Luxury Residences in Mumbai, that marks a new business vertical for us, are both in pre-opening phase with teams on board. As The Leela
Anurag Bhatnagar (The Leela Palaces Hotels and Resorts Limited): At the Leela Coorg forest sanctuary, a 71-key owned resort rebranded on 8th of July, the guest response has been very encouraging with market-leading ADRs, excellent guest satisfaction scores, and strong reviews across all digital platforms. We made steady progress across all pipeline projects during the quarter. Construction continues to advance across Srinagar, Bandhavgarh, Sikkim, Ayodhya, Agra, Ranthambore, Tadoba, and BKC Mumbai. And we now have more than 1,000 keys under development across marquee destinations. As we continue to expand our portfolio, talent development remains a strategic priority. We continue to deepen our partnerships with leading global educational and training institutions to build a future-ready talent pipeline. The Leela Center of Excellence has already delivered over 4,800 man-hours of training and engaged more than 280 participants since launch. We were also recognized amongst the top 100 of India's Best Workplaces for Women 2026 in the large category by Great Place to Work. To summarize, Q2 FY '27 was another quarter of strong execution and the first half as a whole shows that our growth is sustained rather than episodic. Our brand continues to strengthen. Our development pipeline is progressing well and several new growth platforms are beginning to scale. With that, I will hand over to Ravi to discuss the financial performance in greater detail.
Ravi Shankar (The Leela Palaces Hotels and Resorts Limited): Thank you, Anurag. Good evening, everyone. Let me take you through our financial performance for the quarter and half year ended 30th September 2026. In quarter 2 FY '27, operating revenue increased by 33% year-on-year to INR4,119 million with every revenue stream growing by more than 20%. Room revenue grew 39% to INR2,041 million, driven by the ADR and occupancy gains and contribution from the Coorg. F&B revenue grew 21% to INR1,456 million. Management fees grew 76% to INR289 million. And other operational services revenue, which includes wellness, retail, club membership and transport, grew 25% to INR333 million. Operating EBITDA increased 36% to INR1,877 million. This translates into an operating EBITDA margin of 46%, a 118-basis-point improvement over the previous year, supported by operating leverage, pricing discipline, and a continued focus on cost efficiency. Profit after tax for the quarter increased 27% year-on-year to INR946 million, supported by a strong operating performance across the business. In terms of H1 FY '27, it was a very strong delivery with operating revenue growing 30%, operating EBITDA by 38%, PAT also grew by 72% to INR1,433 million. We continued to make progress in driving direct bookings. For H1 FY '27, the contribution to The Leela brand website to room revenue rose to 15.1%, from 10.5% last year and from 5.5% two years ago. This reduced our dependency on the higher cost third-party channels and improved distribution economics, while enhancing guest engagement. In terms of finance cost, it was broadly stable to INR384 million for the quarter. For the first half, finance cost fell 37% to INR777 million, reflecting the debt reduction through the IPO. Depreciation increased 24% to INR336 million on account of the addition of Coorg and our investment in value drivers. Our share of loss from joint ventures is primarily attributable to our 25% stake in the Dubai Palm Jumeirah hotel and has improved versus the last quarter. The asset is operating at high occupancy through local staycations, though ADRs are lagging given lower international tourism demand. We continue to monitor the on-ground situation and our plans and timeline for the asset have not changed. Tax expense was lower at INR158 million following the recognition of deferred tax asset for Coorg. Pursuant to this, the tax rate for H1 was 16% of the PBT prior to accounting for the share of profit from joint ventures. We anticipate an effective tax rate to be in 20s in FY '27. Our balance sheet remains exceptionally strong and growth ready. Net debt stood at INR12,150 million as of September 2026, and our net
Ravi Shankar (The Leela Palaces Hotels and Resorts Limited): to EBITDA improved to 1.4x from 1.6x in March 2026 and from 3.7x in March 2025, even as we continued invest in our pipeline assets. Our debt has a long-dated maturity profile for more than 10 years, and our AA-stable credit rating underscores our financial strength. This gives us ample capacity to pursue attractive growth opportunities while maintaining balance sheet discipline. Additionally, our borrowing cost has reduced by a further 30 basis point from mid-October, as we have actively renegotiated with our lenders, which provides a shield from potential transmission of policy rate hikes. For the Mumbai BKC project, we would like to update that the lease deed in respect of the land was executed in September 2026 with MMRDA. To recap, the mixed-use project is planned as a 250-key Leela Palace Hotel and a 700k square-feet office, with Leela and Brookfield owning 50% share each in the JV. To progress further and get the benefits of an existing government scheme, we will now look to buy the entire FSI required for the project. Since this is a material transaction with a related party, with the JV entity, Leela will shortly reach out to the shareholders for an approval of investment. Our long-term plan remains the same as it was previously. We intend to eventually divest our stake in our office portion, and keep our 50% stake in the hotel, subject to regulatory, shareholders, and other approvals. To summarize, with momentum sustained across the first half, a diversified revenue base, a strong balance sheet, and expanding pipeline, we remain confident in our ability to drive industry-leading growth. On behalf of the management team, I would like to thank our associates, guests, partners, and investors for their continued support.
Moderator: Sir, shall we open the floor?
Ravi Shankar (The Leela Palaces Hotels and Resorts Limited): Yes, operator. We can start the Q&A session now.
Moderator: Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press * and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press * and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
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