Lemon Tree Hotels Limited (NSE: LEMONTREE) Q3 2025 Earnings Call dated Feb. 06, 2025
Corporate Participants:
Anoop Poojari — Investor Relations, CDR India
Patanjali Govind Keswani — Chairman & Managing Director
Kapil Sharma — Executive Vice President, Finance & Chief Financial Officer
Analysts:
Karan Khanna — Analyst
Jinesh Joshi — Analyst
Abhay Khaitan — Analyst
Raghav Malik — Analyst
Vikram — Analyst
Sumant Kumar — Analyst
Kunal Lakhan — Analyst
Prashant Kshirsagar — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Lemon Tree Hotels Limited Earnings Conference Call.
As a reminder, all participant lines will remain 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 the conference call, please signal the operator by pressing star then zero on your touchstone telephone. Please note that this conference is being recorded.
I now hand the conference over to Mr. Anoop Poojari from CDR India. Thank you, and over to you, sir.
Anoop Poojari — Investor Relations, CDR India
Thank you. Good evening, everyone, and thank you for joining us on Lemon Tree Hotel’s Q3 and IMM FY ’25 earnings conference call.
We have with us Mr. Patanjali Keswani, Chairman and Managing Director; and Mr. Kapil Sharma, Chief Financial Officer of the company. We will begin the call with opening remarks from the management, following which we’ll have the forum open for an interactive question-and-answer session.
Before we start, I would like to point out that some statements made in today’s call may be forward-looking in nature and a disclaimer to this effect has been included in the earnings presentation that was shared with you earlier.
I would now request Mr. Keswani to make his opening remarks.
Patanjali Govind Keswani — Chairman & Managing Director
Thank you. Good afternoon, everyone, and thank you for joining us on this call. I’ll be covering the business highlights and financial performance for Q3 ’25 and nine months of FY ’25, after which we’ll open the forum for your questions and suggestions. Due to-high seasonality in the hotel industry, please consider year-on-year performance rather than quarter-on-quarter.
So Lemon Tree recorded its highest-ever 3rd-quarter revenue this year at INR355.8 crores, our revenue grew 22% compared to Q3 last year, while net EBITDA grew 30% year-on-year to INR184.8 crores, translating into a net EBITDA margin of 51.9%, which increased by 316 bps year-on-year. Q3 FY ’25 recorded a gross ARR of 6,763, which increased 7% year-on-year. The occupancy for the quarter stood at 74.2%, an increase of 826 bps year-on-year. This translated into a RevPAR of 5,018, which increased 21% year-on-year. Fees from third-party-owned hotels for management and franchise contracts stood at INR18.4 crores in Q3 ’25, an increase of 24% year-on-year. Fees from FLOR Hotels stood at INR25.3 crores in Q3 ’25, an increase of 45% year-on-year. Total management fees for Lemon Tree stood at INR43.7 crores in Q3, an increase of 35% year-on-year. The company’s profit-after-tax stood at INR79.9 crores in Q3, an increase of 82% year-on-year. Cash profit for the company stood at INR114.9 crores, an increase of 49% year-on-year.
On the business development front, this quarter, Lemon Tree received a letter of award from the Directorate of Tourism Government of Mangalia for the develop — redevelopment, operation and maintenance of the existing Orchid hotel in Shalom under the Design build Finance, Operate and Transfer mode on a PPP basis. This will be redeveloped as Orika and will be operational within the next 2.5 years to three years. It will feature 120 rooms with all the additional facilities our Orika’s offer. This hotel is situated in the prime location of Polo Market opposite the Chief Minister of Bangalore and is the first PPP undertaken by us. Interestingly, this project qualifies for significant capital subsidy and incentives, including full GST reimbursement and interest subrention by 5% under the Nikhalia Industrial and Investment Promotion Policy 24 and various other policies.
On the asset-light side, we signed 13 new management and franchise contract contracts, adding 766 new rooms to our pipeline and operationalized one hotel adding 38 rooms to the portfolio. As of December 31, 2024, the total inventory of the Group, for those of you who like Cricket as I do, it was a double century. The total inventory stood at 200 hotels and 16,385 rooms, broken into 112 operational hotels with 10,317 rooms and a pipeline of 88 more hotels with 6,068 rooms. Going-forward, we are confident in the company’s ability to sustain this growth in the coming quarters by focusing on certain growth levers, which is obviously an accelerated growth in our management and franchise portfolio. But the timely completion of renovation activities in the owned portfolio to further improve gross ARR and occupancy.
Please note that the increased investment in renovation expenses will continue into FY ’26 and a little bit into FY ’27 until the entire portfolio of our owned hotels of about 6,000 rooms has been fully renovated and refurbished. Post this, renovation expenses will close at 1.5% to 1.7% of revenue on an ongoing basis. With demand growth expected to outpace supply and an expected significant increase in discretionary spending on branded mid-market hotels in India. We think this increased investment in renovation will allow us to position Lemon Tree as the largest and preferred brand in the mid-market segment.
With this, I come to the end of our — my opening remarks and would ask the moderator to open the forum for any questions you may have.
Questions and Answers:
Operator
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star L2. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
The first question comes from the line of Karan Khanna from Ambit Capital. Please go-ahead.
Karan Khanna
Yeah. Thanks for the opportunity and congrats on a great quarter. My first question, Patu, is on Orica, Mumbai. Congratulations on the ramp-up in terms of occupancies. You recently mentioned that you expect this property to stabilize by FY ’26. So what kind of RevPAR can we expect for FY ’26? And what according to you should be a sustainable growth rate for this property? And as a follow-up, for the Orica brand, you recently decided to shut-down operations at Orica Coolk. So can you talk a bit more about should we expect more Orica branded hotels to be added to your own pipeline given it’s still a small part of your overall portfolio.
Patanjali Govind Keswani
Thank you, Karan. That’s very question. So let me start with the first one. Orica, Bombay has not really stabilized in Q3. I think the occupancy was in the early 70s and the ARR was a little over 9,000. My expect — well, in Q4, it is doing much, much, much better. In fact, I think our occupancy is north of 85% and average rate is north of 9,500. So, but for me that is still stabilization because as I had mentioned, I think maybe a couple of con-calls before we would like this hotel to be at around 11,500,000 to 12,000 ARR at about 85% occupancy.
So in order to do it, first, we have to build demand such that we can then churn the demand and keep the higher price demand with us in this hotel. So to answer your question, although we are doing 85% in Q4 and we are doing INR9,500 ARR, to me, that is not stabilized. Stabilized to me would probably be H2 next year. When on a sustained basis, we will be north of 85% at 11,000 plus ARR. So that is the first one.
As far as Orica as a brand goes, we have, as you — as you know signed Shalong, we have amicably parted ways with the Kurg Hotel due to some reasons, I’m really not at liberty to disclose. But Orica is very much in our — in our in our strategy. We are very close to signing on long lease and outstanding Orica in Varanasi, which as you know is a INR50,000 a night market. So it is a little odd for a mid-market hotel company talking about an Orica brand, which will be north of 5x of the current. We are also looking at a few other for management contracts, which we’ve as and when they firm up, we will obviously inform the markets and you folks. But Orica Insured is a part of our — our capturing lifetime value of our customers’ strategy.
Karan Khanna
Sure. So thanks for the update. Patu. Just a follow-up on Orica, Mumbai and in particular, we are seeing a lot more hotels opening in the entire Mumbai airport micro-market. So with the new Navi Mumbai airport and new supply coming in that market, do you see that as a risk to, let’s say, growth beyond the INR12,500 price point that you’re seeing or you’re still quite confident that this market will continue growing at double-digit RevPAR or possibly a high single-digit ARR growth.
Patanjali Govind Keswani
Yes. You know, Karan, I’m ashamed to tell you that on and off, Lemon Tree Premium Mumbai does a higher ARR than Orica. This is because of the very large base of fixed business as which is what I had referred to earlier to build — to build a base of demand so that we could reprice it once it was sustainable. My view is the same as I had 10 years — 12 years ago when India was at a far different place and lot of people told me that why you buying and investing in a hotel in Delhi, Aero City? When the airport at you know in various other places like Greater Noida will open, 6,000 rooms will come up in Delhi, Aero City, the whole of Delhi has only 8,000 rooms, isn’t it highly risky?
And I said based on my experience about airport hotels in the major metros of any large economy worldwide. They have never ever not absorbed supply. Delhi is the highest-performing market, Delhi Aero City, although something like 3% of India’s branded supply came up here in one year or two years, it is absolutely not to be worried about. There may be a temporary blip of three months, six months, 12 months, but I don’t think it will significantly affect the RevPAR of the micro-market. What will happen is certain hotels that are not customers preferred choices you know, but customers go to it because of demand being more than supply.
Those — that type of demand will disappear and there will be more availability in the branded hotels. I don’t know if I’m making sense to you. But I don’t see — based on my experience in airport markets, I don’t see that really affecting Bombay, especially Bombay, I should say.
Karan Khanna
Sure. This is helpful. My second question, given your ambitious goal of expanding portfolio to about 20,000 rooms by 2027. Do you foresee any operational or other challenges that you may encounter in executing our growth pipeline?
Patanjali Govind Keswani
No. So I had said we would be 20,000 rooms in our, 26 ’27 vision. But we are already at over 16,000 and I’m pretty confident we’ll hit 20,000 in the next 12 to 15 months signed and operational. Where I see possible slippages is that we have in this pipeline of signed converting to operational, there have been slippages when owners have not been able to fund/finish their hotels on-time. So that is the only concern I have. But as far as our growth goes, we have — actually we are very gung-ho on the kind of demand we are seeing from asset owners in our space. There are something like three to four inquiries every single day. So 20,000 is actually a bit of an understatement. I think we’ll do far better than that.
Karan Khanna
Sure. And my last question, if you can highlight the benefits of renovation that you saw this quarter in terms of better pricing or occupancy, especially for portfolio where perhaps the delta for pricing should be a little higher.
Patanjali Govind Keswani
So I’ll give you an example. If you look at Una the portfolio I look at the occupancy and occupancy rate and price went up by the reason a significant part of the reason is that we have a 101 room keys in Puna that was the first hotel will be fully renovated. See it is still in all the other hotels there is still a lot of work still going on because we are renovating non-stop, it’s 936 rooms. But this hotel which has got fully renovated, the ARR is 24% over what it was pre-renovation. And now because the rooms are back, it is doing 90% occupancy, 18%, 90%. I’m talking also now about Q4 because that’s when the last bid happened. So I had said earlier that we will definitely target a INR60 crore EBITDA from Keys, which means really INR6.5 lakhs a key. Currently, if you look at our EBITDAR for the Keys portfolio, it is INR1 lakh a quarter or I think 3.5 lakhs a year, we will double that.
Karan Khanna
Sure. This is helpful. Thank you and all the best.
Patanjali Govind Keswani
Thank you.
Operator
Thank you. The next question comes from the line of Jinesh Joshi from PL Capital. Please go-ahead.
Jinesh Joshi
Thanks for the opportunity. Sir, with respect to the new partnership at Shillong, can you highlight how will the accounting happen as the hotel might be in an SPV with some kind of a JV structure. Also, if you can share what can be our prospective share in that JV and will the benefit be limited to the capital subsidy and the GST reimbursement that we have highlighted in the PPD or is the state government also expected to contribute towards the capex outgo? I know we have not shared the indicative capex number, but can you can share similar hotels in that region? What kind of capex per key do they command?
Patanjali Govind Keswani
Well, in Shillong there are two hotels, there is a Taj and there is. There is a by Mariott. So it’s doing I think about INR10,000 rupees and one is doing INR12,000. We think we will do 13,000 because it has the best location. The land is being given to us for 1% of the revenue-share and INR1 or INR2 crores a year. We don’t think we will invest more than INR120 crores for 120 rooms. Because we get a 5% interest sub-vention. So instead of borrowing money at 8%, 8.5%, we will effectively get debt at 3%, 3.5%.
Our estimate is this hotel will make about INR15 crores EBITDA a year to begin with. It is a joint-venture between Lemontree and another company. It is not announced yet, but I can tell you it is Ravi Jaipuria, RJ Corporation. We will be the majority owners, they will be the minority. The total equity requirement will be sub INR40 or INR35 crores. We will take a debt of about INR70 crores or INR80 crores. We will get INR15 crores back as capital subsidy on the day this hotel opens. So really our equity investment will be probably 20 crores. We get 100% GST back one for seven years I think that’s central and state is I think for 10 years.
So that means that if I add that to the EBITDA margins, the EBITDA margins will be about 65%, and we think we will have our equity payback, both partners within a year and a half. So really it is a — it is a fantastic opportunity and it is really maybe INR10 crores or more for Lemontree every year for the next 45 years.
Jinesh Joshi
Fairly elaborative, sir. Thank you for that. Sir, just one observation from my side. If I look at our standalone performance, I think the revenues were up by just about 2%, while the PAT was down by about 16% Y-o-Y. So apparently, it seems like the standalone business wherein we have, if I’m not mistaken, about 1,800 rooms faced some kind of challenges in this quarter. So if you can just talk a bit about that.
Patanjali Govind Keswani
No, there is no challenge. You see Lemon Tree has agreement to charge a fair amount of money from FLEOR for what is called development fees. Okay. And we got a very large sum when we developed Orica. So on a — if I remove that, actually we did better — significantly better this year than last year. So that was part of — you can say it was part of the project management fees that Lemon Tree charged and it is our agreement with Clear that every time we put up assets there, we take about 10% to 12% of the investment as our fees.
Jinesh Joshi
Understood. One last bookkeeping question from my side. Can you share what is the operating cash-flow generated so-far in nine months after interest and what is your debt repayment target for the next couple of years given new major capex is lined-up?
Patanjali Govind Keswani
So our cash profit for the nine months is INR240 crores and this is — how much did we pay-back of…
Kapil Sharma
INR150 crores.
Patanjali Govind Keswani
So we paid back INR150 odd crores of debt — repayment, which is reflecting in our gross debt fall and we had another INR40 odd crores of cash.
Jinesh Joshi
For the next two years, I mean, just in case if you have any number in mind in terms of prepayment.
Patanjali Govind Keswani
See, I had — what I had said is that we’ll be debt-free now that all this is over in three years. Now the point I’m trying to make is that we will be probably debt-free earlier the minute we list floor. That is very much on the annual — we are unable to right now brief the market in detail about it. But I can say with certainty, it will happen in the next 1.5 years or two years max. If that happens automatically, we go debt-free. In the absence of that, when we look at the cash-flow generation, let me give you an example. The most profitable quarter is Q4 from every perspective.
So typically — what is the cash profit for the full-year of ’24? Can you tell me? So — just let me know that. So we think our EBITDA will increase significantly next year to this year very significantly. And our debt-to-EBITDA will be under 1.7 by the end of next year. If that continues, then obviously interest savings plus improvement in — further improvement in performance. So somewhere in the next two to three years, we will be debt-free on that basis too.
So if you look at FY ’24, we did nearly INR300 crores of cash profit, but we got only that. But we got only 117 months late. 240 in — sorry, 176 in the first-nine months. Are you getting me? Last year, 176 was cash profit in the first-nine months, and nearly INR300 crores. So basically 40% of the cash profit came in Q4 and it would be no different this year.
Jinesh Joshi
Understood. Understood. Thank you. Thank you so much, sir.
Patanjali Govind Keswani
Thank you.
Operator
Thank you. Ladies and gentlemen, if you wish to ask a question, please press star and one. The next question comes from the line of Abhay Khaitan from Axis Capital. Please go-ahead.
Abhay Khaitan
Hi, thank you for the opportunity. So my question is on the ARR growth of other brands, particularly Lemon Tree, which has seen 5% growth Y-o-Y in the 3rd-quarter. And particularly for hotels outside metro cities, we have seen only a 1% growth. So is this an evidence to check that metro cities or business cities are doing significantly better than the Tier-2 cities or tourism cities? And do you see this trend changing in the coming quarters? And a follow-up on that would similarly for premium hotels versus mid-market hotels, would you see premium hotels continue to outgrow mid-market hotels in terms of ARR growth and when will it switch?
Patanjali Govind Keswani
So if you look at the last three markets that went through J-stick or hockey-stick growth in-demand at similar levels of household income, the most obvious example being China in 2006 to 2012. The first couple of years luxury took off. Then with the shift in media income and those — the number of households that earned more than $34,000 per — $35,000 per-capita or per household started consuming mid-market — branded mid-market supply. So it’s linked partly to age, partly to aspiration, partly to urbanization and so on.
Now if I look at India, it’s very simple to me. I don’t like to draw comparisons with China, but 50% of India plus-minus depends on agriculture, which is only one seventh of our GDP. So really to me, India has two-parts. One is the 50% agricultural and the 50% population, which is non-agricultural, of which 70% lives in urban areas in the 160, 170 cities of 0.5 million-plus population. So this is where consumption resides in India in my opinion. Hotel consumption, well, the truth be told, only about 2% of Indian households, about 6 million households consume branded hotel rooms.
If the GDP of India grows by 6%, 7% in real terms for the next six, seven years, what will happen is the number of households who consume luxury items will grow from 1.5 million to 6 million, 7 million and the number of mid-market households who will consume branded hotel rooms will grow from 3.5 million, 4 million to 30 million. Put together, it is still a small number. It is roughly 10% of Indian households, which is about 320 million. So looking at these other markets, the first two years, the growth is in luxury because of base effect, because it’s such a small base. The next four, five years growth is in upscale and mid-scale. So we are waiting for our turn.
Obviously, this is a more price-sensitive market than luxury. And I think India is going to follow something similar. In fact, somebody asked me in an interview once that how do you tell this? I said the first indication is sale of SUVs, intend to travel and connectivity by four lane highways. It’s very visible in India, very visible that the number of aircraft on offer are on order are 2.5 times of current supply. Airports 130 — 138 are becoming 240. Runways are growing by double. It’s all evident. It’s all-out there. So we are betting on that, which is why we are so aggressively going after Tier-2 and Tier-3 cities.
Now coming to ARR growth, it is paramedical or reverse paramedical. The highest-growth is in the deepest markets, but — and this is precisely because of the reasons I just told you. So if we’ll say price change as significantly, whether it’s a five-star or a two-star hotel as in say as in say Puna and will Puna change as significantly as? Absolutely not. But they all catch-up over-time. And the reflection is very simple. If the input costs or the cost to build a hotel room, including land is lower in Puna, then obviously — and because that is partly because the earnings also per room is lower in Puna, otherwise all capital would flow there. So this is a — this is an automatic thing, so to speak, self-regulating.
Abhay Khaitan
Thank you. Thank you for this elaborate answer. So just as a quick follow-up on this as well. So is that the reason why in the current pipeline that we can see, we see mostly either Lemontree hotels or keys hotels, but we hardly see any Orica or Lemontree Premier for that matter. So do we expect this trend or do we see some sort of pipeline coming in? You mentioned Orica Srirang today, but apart from that, anything in Lemontree premier that we can expect in the coming quarters?
Patanjali Govind Keswani
No, there is a fair amount of Lemon Tree premiers even in the in the portfolio. But let me put it this way. The way Lemontree strategy goes is network. What I’m most interested in is future demand. If I say there are 160 170 cities in India with 0.5 million-plus population and technically, I can put one hotel up in each of these cities strategically, the demand I capture out of these cities into other cities where we have Lemon Tree hotels or other branded hotels of ours gives us what I call is a competitive moat, which is a network effect, which is very, very, very difficult to overcome. So I’m just interested in creating a boat, building our brand and having a network presence, which is in every single city where there is a consumer or branded mid-market hotels in India in the next five years. So that is our strategy.
We are looking at multiple datasets. One is where — which four lane highways connect from which city to which city. As I think many of you know, the number — there are 153,000 kilometers of highways in India, 50,000 are four lanes and just FYI, this doubled in the last five years, hats off to Mr. Gadkari. He has said he will double it in the next four years. Where are these highways coming? Where are the next airports coming, which airports are going to have twice the number of runways? Where-is the next set of commercial activity happening in India? It’s visible through international property consultants talking about rented buildings, commercial buildings. Where are announcements of projects. We are looking at all kinds of datasets. We’ve created proprietary algorithms and we are saying we want to go to these 20 cities next strategically and opportunistically to any of these 170 cities. So that’s the way we are looking at it and it’s all asset-light.
But the minute lifts, the question will then arise because Fluor will be an independent company and we think it will have a really solid listing because we think its EBITDA will be $100 million when it lifts. Here’s the thought, where will FLOR deploys capital, especially if it is debt-free. So we will have certain principles, a hurdle rate of expectation, we will have principles of, you know, what is the ideal optimum debt structure, which may be at no point should the debt for new hotels be more than 2x of the EBITDA of old hotels. So it’s a waterfall process. And beyond that, how — so how will we allocate capital, where will we distribute this cash-flow that we generate. So these are many, many moving parts. But I am very sanguine. In fact, fact, confident that in the next two years, the stock market in India will start seeing how this whole — all these balls in the air start playing together.
Abhay Khaitan
Got it. Thanks for this. I will step out.
Operator
Thank you. The next question comes from the line of Raghav Malik from Jefferies. Please go-ahead.
Raghav Malik
Yeah, hi. Am I audible?
Patanjali Govind Keswani
Yes.
Raghav Malik
Yeah. Hi, sir. Thank you for the opportunity. So I just wanted to understand like get a bit more color maybe on city-wise. So if I see like our performance for Bangalore specifically, there has been a significant jump, but of course, that’s on a slightly lower base of occupancy. So is that like more a reflection of how the market is doing? And could you provide some color just comparing it to other markets like how they are shaping up at this point of time?
Patanjali Govind Keswani
Yeah. Well, it’s not how markets are doing, Raghav, it’s how a micro markets are doing and what is the supply we have in each of these micro markets. So to give you an example, if let’s assume we are operating in Delhi, if I say Delhi, it includes Aero City and it includes East Delhi. East Delhi is a poor market. Five-star hotels average price in an East Delhi location is one-third what it is in Central Delhi or 50% of what it is in say airport hotels. So we have some hotels in different micro markets in each of these cities, Bangalore, for example, out of these 874 rooms, 370 rooms or 380 rooms are keys hotels. Half of them are — at any time, 30% 40% of those rooms are shut. I’m reflecting the full inventory and occupancy on full inventory.
But the reality is they are all undergoing significant renovation. So what you are seeing in Bangalore is actually performance on an aggregate basis and not a specific hotel wise now the minute keys is fully renovated, which is 222 rooms, this number and this ARR will change also quite significantly, because right now the ARR is only I think 5,000 INR5,000. But Keys Whitefield, ARR is INR3,000 bucks. The minute is renovated and parts of it we have renovated. That’s at INR5,500 alone. So you will have to wait for the renovation to get done. So I would guide you specifically towards Bangalore, Puna, which is where the Keys hotels are and the rest of India, because that is where there is some degree of, I don’t know-how to describe it, walk until those hotels start producing fully, you know it is still going to reflect — it may appear an underperformance, but it is not so.
Raghav Malik
Okay. Okay, sir. Got it. And sir, just a follow-up on that itself, like this ARR or like the kind of growth you see in occupancies is much stronger. So is that like a conscious sort of effort or is it based on the phenomenon you mentioned of once you’re and then getting the inventory back on, it just reflects that bit and obviously like the strong performance and that’s what you can use to capitalize on RevPAR tailwinds, so to speak.
Patanjali Govind Keswani
See, now that we intend to list, we are looking very specifically at return per square-foot and our investment per square-foot. And the way to maximize return per square-foot is to maximize revenue per square-foot, which is RevPAR, which is what you will see on the — on the on the three columns on the extreme left. We are agnostic about occupancy and ARR. What is the best combo of RevPAR that we can achieve? And that is actually neither the maximum occupancy nor the maximum ARR. It is some intermediate combination that maximizes.
The other thing we are very cognizant of is we want to look at the GOP per square-foot. So obviously, if the rate of growth of revenue is through utilization of rooms, then what flows through to the bottom-line is contribution because you have to account for a variable-cost. But if you increase the rate, then what flows through to the bottom-line depending on which channel is used can be a higher or a lower number. For example, if your occupancy goes up due to OTAs, then you are paying some form of commission in the mid-teens. If your occupancy goes up because of another source which is 5% lower in price, but does not pay any commission, that gives you a higher profit margin.
So it’s a combination of so many variables based on so many different sources of demand, which you are trying to get to which flow into your funnel that you know, I would say broadly we look at only one thing which is how do we maximize RevPAR in order to maximize our GOPAR or our GOP per available room.
Raghav Malik
Okay, sir. Got it. That’s very clear. And if I can just squeeze in one last quick question. Just on your pan-India kind of RevPARs, is there any sort of color or guidance that you could give us like is the strong double-digit trend kind of continuing?
Patanjali Govind Keswani
Yes but I want you to keep one thing in mind that Orika became a more or less fully performing hotel in Q3 last year. So the — there is still some base effect in Q3. In Q4 last year, Orica, if I remember right, did occupancy is in the mid 60s. So you will really see same-store performance in Q4 and I think you will, I think I am very satisfied with how we are doing there.
Raghav Malik
Okay, sir. Got it. And you mentioned that we’ve stabilized in the early 70s already. So that’s a great sign of this. Got it.
Patanjali Govind Keswani
No, it is now in the 80s, but I’m saying still you will see same-store performance to a large extent in Q4.
Raghav Malik
Okay sir thank you, thank you so much.
Operator
Thank you, ladies and gentlemen, if you wish to ask a question please press star and one. The next question comes from the line of Vikram from Vikram Securities. Please go-ahead.
Vikram
Hello, good afternoon. Congratulations on a great set of numbers, sir. Forgive me for asking you this, but I struggled to understand the exact structure of. If you could just simplify it for me what it looks like right now and what will look like post listing in terms of your holding structure and what part of your EBITDA and what part of your assets go into flow and by the time it lists?
Patanjali Govind Keswani
So in some form or the other, in the most tax-friendly form, we would like all assets that we own to be in fluor, number-one. Number two, fluor will then become a pure asset coke. Fluor post listing will raise will well during and post listing will raise some form of capital and it will deploy that capital for the objectives as defined by the Board of Floor. We will continue to be very significant shareholders of. There are a few conversations within our company as to, A, how should FLOO be listed? Should it be through a scheme of arrangement, should it be through a direct listing? Two, what should the shareholding of Lemontree be in FLOO? Three, how do we ensure for the satisfaction of all shareholders that there is a Chinese firewall between how floor runs and how Lemontree operates.
So Lemontree ideally should be a asset as a — as an operating company and it runs hotels in the portfolio. But how do we ensure is independent and if and when required can also go for other operators. So that is broadly where we are. I am summarizing it, but obviously, our discussions are very, very advanced. And I reckon that in the next three months-to four months, you will have a very, very clear defined picture as to what is happening with, what is Lemontree shareholding likely to be in incured and when is we are going to list.
Vikram
So right okay so will shareholders enjoy a will they have something before like I don’t understand how to ask you this, but what I’m trying to say is…
Patanjali Govind Keswani
You are saying will it be like ITC hotels? It could be — it could be like ITC hotels, it could be like Reliance Jio, it could be like a simple listing so let’s keep the suspense on for a moment.
Vikram
That’s what I was worried about. We want to have a holding company discount, that’s all.
Patanjali Govind Keswani
Yeah, but we would want the shareholders of Lemon Tree to get a massive upside. And I mean I’m using this word very clearly, massive upside when we list clear.
Vikram
You just brought a big smile to us. Thank you. And secondly, sir, is about your directional on ARPUs. I know you gave us some guidance if — what is your trajectory given the pipeline you’ve seen other in the industry-wide and how do you see that in the next 12 to 15 months, 18 months?
Patanjali Govind Keswani
See, we went through a — so I would — let me again come back to — you are asking actually about revenue per road growth.
Vikram
Correct. Yes.
Patanjali Govind Keswani
I have always said we would like to grow at — if depending on which combination of we follow, whether it’s a focus on occupancy or average rate in which market, we would like to have mid-teens growth at the least, number one. Number two, we would like to ensure that — you see our cost structure went through multiple, if I may say that in the last two years. One is, I think we — our wage bill went up somewhat significantly. Number two is our investment in renovation went up significantly, which I blame myself for not explaining to you folks that it is a three-year one-off of a catch-up on the three years I missed out due to COVID. But what is the intake? Our expenses went up. Now going-forward, what is the trend-line for our expenses? Well, if I use the last year as a basis for the next year, I use this year for next year, it will be a far less increase in expenses than it was this year versus last year. And then the following year, it will be even less because our innovation will more or less be over.
Therefore, my view is that if this mid-teens of RevPAR continues in plus-minus 15% and our expense increase is, you know, much less than that, then you will be have very clear visibility on operating leverage. So ultimately, we want to maximize EBITDA per room and EBITDA per square feet. And obviously, we would like to target north of 20%.
Vikram
Yes, just adding to that question. I think you’re going a bit hard on yourself. You did explain to us very thoroughly about how your — your renovation plan was for, was it Fox, what do you Call-IT? But has that been done? Have you finished with your — that renovation of that portfolio and if not, how much is left of it? Because I remember you saying that you would have finished it by the second-quarter of this year or 3rd-quarter.
Patanjali Govind Keswani
No, no, no, no, no. No, I said a significant portion will have been completed by H1 of this coming year, that is by September, October of calendar ’25 with a little bit leftover for the following year and that we are sticking to. And after that, we’ll go back to routine renovation, which is why when you spend money like this, there’s double counting because you are seeing — how much is our depreciation? INR160 crores?
Kapil Sharma
Yeah.
Patanjali Govind Keswani
You’re seeing depreciation as an expense of INR160 crores. But actually depreciation is a replacement reserve. I’m already spending that money under a different heading, which is called renovation. So depreciation for us is pure cash profit and that’s how we look at it going-forward too.
Vikram
Perfect. Thank you so much. Thank you for that detailed answer. Thank you, sir. Best of luck.
Patanjali Govind Keswani
Thank you.
Operator
Thank you. The next question comes from the line of Sumant Kumar from Motilal Oswal Financial Services Limited. Please go-ahead.
Sumant Kumar
Yeah, hi, sir. So can you talk about the Orica ARR strategy from here, how we are going to grow next year? When we see the Mumbai — Mumbai hotel ARR, the Premier and Orica almost — almost at the same level. So from here, how much increase we can see with the product mix, customer mix changes and how much is the pricing power?
Patanjali Govind Keswani
Okay. So let’s split this, Suman into two-parts. Take-out crew, then look at retail and look at corporate, right? So I’m not getting into which is which is break, but crew typically is, you know, less than $100 a room. So it’s maybe INR7,500, INR8,000 rupees. If you look at corporate, depending on the corporate, it varies from, say, INR9,000 to INR11,000. If you look at retail, retail varies from depending on-time of the year and day of the week from anywhere from 9,000 to 16,000.
The reason why Lemontree Premier Bombay has an ARR equal to Orica is because it has more of higher-value and relatively and lower of lower-value, less of lower-value. That is precisely where we will take Orica and Bombay 2 also. Now if I look at Lemontree Premier Delhi as the other airport city, we had a similar situation here. We had a large amount of crew, we stabilized it post COVID, then we churned it. And today the ARR of Lemontree Premier Delhi in many days is greater than Lemontree Premier Bombay and Orica Bombay. So this is an ongoing process.
Once you build demand and sustained demand, then you constantly churn the portfolio to constantly remove lower-priced business and replace it with higher price business. And that is what we will do. And obviously, if we get more of retail at, 15,000, 16,000, more of corporate at 10,000, 11,000, then the ARR target that we’ve set for ourselves of 11,500, 12,000 is very doable. Hello?
Sumant Kumar
And for Keys Hotel you are talking about 25 the renovation and refurbishment is going to over, right? Almost.
Patanjali Govind Keswani
Keys is going ongoing. So unlike other hotels where we typically renovate in H1 and operate those hotels in H2. The Keys portfolio is ongoing because we needed to renovate the entire 936 routes. So the key components of the hotels which we want to reprice, Lemontree — sorry, Keys Pipri, Puna done, Keys Whitefield, out of 220 rooms, I think about 120 rooms are innovated and we hopefully will renovate the next 100 in the next seven months. So wherever we see pricing power and demand, we are trying to accelerate that renovation first. And then in the other cases, later. So right now, we have fully renovated Keys Pemprinovated Keys Whitefield, 70% renovated Keys Ludhiana and Keys with Shaka Patnam, and we have to start with Keys and. So this will continue to trickle into FY ’27 also, but will not have a big impact either way on either renovation expenses or on incremental revenue plus.
Sumant Kumar
Yes, sir. Thank you.
Patanjali Govind Keswani
Thank you.
Operator
Thank you. The next question comes from the line of Kunal Lakhan from CLSA. Please go-ahead.
Kunal Lakhan
Hi, good evening. My first question was on the — on the 6,000 keys that we plan to renovate, how many are already in first-half and how much will be done in ’26 and if there’ll be any spillover in ’27 also if you can just lay out the plan.
Patanjali Govind Keswani
See of the 6,000 rooms, the five — the 670 rooms of require no renovation, nor the 140 in Ozaipur. So that’s 800. Then the 300 rooms of Lemontree Premier Bombay, 200 in Puna and 140 in Calcutta, that is how much is that 640 require no renovation. So if you take this out, there are 4,500 rooms that need renovation, of which 900 are keys and 3,600 are the rest of the portfolio. We were — now if I look at it from the revenue-generating upside perspective of these 4,500, the most important hotels that we want to renovate to reprice is Lemontree Premier Delhi, Lemon Tree, Premier Hyderabad, Lemon Tree Premier, Bangalore, Lemontree, Boli and Lemontree Electronic City.
We have renovated 70% of these hotels, including public areas. So we are renovating also on where we think we can extract juice earlier rather than later. Am I making sense to you, Kunal? Now of these 4,500 rooms, this year, I think we renovated roughly 1,300 rooms. Last year, we renovated about this — about I think 1,000. And we have another — so of these 2,300 rooms we’ve already renovated, some will — are still going on. So by the end of this financial year, it will be probably 2,600, 2,700. The high-value hotels will all be renovated by next year. A few 100 rooms will be left with a low-value, I should say, refurbishment, which will basically be keys in coaching, keys in and so on and so forth, which will continue into FY ’27. Does it make sense what I said?
Kunal Lakhan
Yes, yes, yes, Patu. Thanks so much for laying out the plan. Yeah, okay. My second question is a related question on in terms of, yes, there’ll be an uptick on the ARRs post this renovation and which will have a direct flow-through to the margins. Where do you expect your margins to be post this renovation on an annualized basis?
Patanjali Govind Keswani
60%.
Kunal Lakhan
60%?
Patanjali Govind Keswani
Yeah. Why not? Why are we doing it?
Kunal Lakhan
Sustainable basis. Yeah. Okay. Okay. Understood, sir. Thank you so much.
Operator
Thank you. The next question comes from the line of Prashant Kshirsagar from Unived Corporate Research Private Limited. Please go-ahead.
Prashant Kshirsagar
Congratulations on an excellent set of numbers. I just wanted to ask you a bookkeeping question. What is the gross debt on standalone and consolidated basis and the net-debt on the same?
Patanjali Govind Keswani
What is it?
Kapil Sharma
So consol is INR1,760 crores as of 31st December.
Prashant Kshirsagar
That’s the gross.
Kapil Sharma
Yeah, gross. I’m talking about gross only and standalone is INR300 crores.
Prashant Kshirsagar
INR300 crore. And net-debt, if you can give us a figure?
Patanjali Govind Keswani
INR70 crores less.
Kapil Sharma
Yeah. So INR70 crores less in the consol.
Patanjali Govind Keswani
Consol. Yeah.
Prashant Kshirsagar
Yeah, okay. My second question is on Orica, Mumbai. You said that the — you expect in H2, the real stabilization, H2 of FY ’26, real stabilization of Orica. But there was a question asked on the Navi Mumbai airport. Now would Orica be of the — will come in the mid-market segment or comparing with the Navi Mumbai Airport and what rates do you expect in Navi Mumbai airport or the region?
Patanjali Govind Keswani
No, we have nothing with Navi Mumbai Airport. Orika is in the is at the international airport in…
Prashant Kshirsagar
That I know, but when the Navi Mumbai airport comes through, would there be a competition in the sense of on the reach of Orica?
Patanjali Govind Keswani
No, no, listen, listen, Prashant. Navi Mumbai comes, some airlines will have some flights from there okay, so there will be demand near that airport for airline related business and over an extended period of time, normally when an airport comes up, there is development around it, but that is many years over. The impact of Navi Mumbai on the Aero City side, which is where our hotel is and multiple other hotels are, will be there temporarily as a blink. But it will get absorbed because it’s very simple. If the Indian economy grows at 6%, there is a disproportionate growth in the main metros and an even more disproportionate growth near the airport. Okay.
So you know, I’m not a fortune teller, but I can tell you with my experience of what happened in Delhi, what I saw happening in Delhi was and even in Bangalore was all any disruption in-demand due to an alternate generation of supply or location and so on gets absorbed very fast. So it’s not something I am particularly concerned about. Number two, Orica is not in the mid-market, it is in the upscale segment. So it is somewhere between five-star hotels and say 3.5 star hotels.
Prashant Kshirsagar
But your mid-market like lemon tree premier or something they get affected by this — I’m asking you from the perspective that the rate of your hotels not rise as much as the…
Patanjali Govind Keswani
No, let me explain. No, no. Rates in Delhi are over 10,000 today. Rates in Hyderabad now are starting to creep up to 9,000. Rates in Bangalore have not crept up at the same rate — the same level. Rates in Bombay are also very-high. What happens when Navi Mumbai comes is there is a shift in flights. How it plays out in rates is only if there is a significant shift in-demand to Navi Mumbai, which normally will take a few years because Navi Mumbai already has some supply. And in that period, what happens is that shift of supply is more than compensated by shift — by creation of new demand. That is the broad point I’m making. Okay. This is therefore a temporary disruption and it’s not significant.
Prashant Kshirsagar
Okay.
Patanjali Govind Keswani
Okay?
Prashant Kshirsagar
Yeah, I understood. And second question about Orica, Mumbai is how much of the percentage of the traveler is from foreign countries and from India from domestic?
Patanjali Govind Keswani
Foreign demand would be maybe 15%, 15% 20% or yeah.
Prashant Kshirsagar
And would it be the same in Udaipur also or is it slightly different?
Patanjali Govind Keswani
See, we are — Prashant, we are very focused on capturing the Indian demand because that’s where we see real growth.
Prashant Kshirsagar
Okay.
Patanjali Govind Keswani
Foreign demand, let me tell you is only 11 million guys coming to India as foreign tourist arrivals and total international tourist arrivals, if I add Indians, the diaspora is 18 million. That’s it. But in that same-period, 26 million Indians flew out of India. And I have no doubt this year it will be a larger number. So there are more Indians who are consuming than foreigners in India and going out of India. And we are very focused. We want to be the preferred brand for Indian consumers, full stock, not in the luxury, but in every other space. And I think we are. So maybe I’m incorrect, but we are on that assumption, we are going-forward to basically try and control that mid-market space in India.
Prashant Kshirsagar
My other question was about the margins front, which you said that may increase after — but would you say that the input costs would also be — will rise sharper than the revenue increases?
Patanjali Govind Keswani
Okay. So let’s look at our margin, say, in Q4. If I add-back extraordinary renovation, et-cetera, then basically in Q — in this year, we should be north of 50%. Yeah, right. So we are north of 50% already. Yeah. Now, when you — what is below-the-line after hotel level EBITDA, when you look at this hotel level EBITDA, to get to EBITDA, the only expenses below-the-line are — go there. Yeah, the only expenses below-the-line for EBITDA is corporate expenses.
Kapil Sharma
Yes.
Patanjali Govind Keswani
Nothing else. Our corporate expenses will get more than adjusted with the rate of increase of our management fee income. So what am I saying? I am saying that if I expect that our rate of growth of RevPAR will be in the mid-teens, the rate of growth of our cost structure will be in the mid-single digits. That is one-level of flow-through. And this is no rocket science. You can — I mean, if you do the flow-through, it’s very visible if you look at the last — our last eight quarters. What I’m saying is revenue grows 15 per room, expenses grow $5 per room and everything stabilizes after one year more of renovation, 10 bucks will flow. So therefore, your revenue will be 115, your cost will be 55 because that’s gone up five and that’s gone up 15%. Then your cop — your management fee income, we expect will double in the next two years. And management fee income will take care of your corporate expenses completely plus with something. So if you just add these numbers, I think we’ll be 60%.
Prashant Kshirsagar
But would you foresee a very sharp increase in the wage cost employee cost for that matter, because there is a — as the demand picks up, there’ll be a shortage of talent for the…
Patanjali Govind Keswani
No, not at all. In our case, we have a very clear strategy. We don’t compete for talent with the hotel industry. Let me start by telling you that. Only about 15% of our talent is talent which would be fungible across five-star hotels and us. Number two, we have a very different way of looking at our wage bill. If you look at our wage bill, it has gone down by 1% as a percentage of revenue if you go to Slide 15. As our revenue grows, the rate of growth of wage bill reduces. I mean, it’s well below the rate of growth of revenue.
Lastly, why do — it is only in the legacy hotel companies that wage bills grow because you are paying for — basically you are paying more-and-more for the same role. So a semi-skilled role, the guy is getting overpaid because of time spent rather than because of reskilling. Our principle is we are growing so fast in the managed portfolio that anytime there’s a good guy in our system, we transfer him on promotion to a newly opened hotel, typically at a lower-cost than a similar role would be filled at and we replace that guy at a much lower rate. Am I making sense?
I’m paying a guy 30,000 bucks. He gets transferred to another hotel, which is not enough, not owned by us at 40,000, instead of hiring a new guy at 50,000. So the new — that hotel saves 10,000. The guy we transfer who is paid at 30,000, the entry-level salary there is 20. So we replace him with 20. We saved 10,000 and the managed hotel portfolio also saves 10. And by the way, this has been a successful strategy for us for 15 years since this company more or less started running hotels and our average wage bill attrition inflation in 15 years is about 1.2%. You can also see those numbers.
Prashant Kshirsagar
Yeah. The last question is, as you grow faster, that’s the right way. But as you grow faster, would you be able to maintain the service quality across the — especially in the Tier 2, Tier 3 cities.
Patanjali Govind Keswani
You know you’re talking about one of the most important things we just have to deliver, Prashant. We are not interested in reckless growth. When I’m quoting some CEOs of very large travel agents — online travel agents who tell us that whenever you open a hotel, immediately 20% of your business comes of the entire demand of that hotel comes because of your brand. Now that is the most monetizable and valuable part of our company. We are very, very, very clear, we will not accept — just to show growth, we are not going to accept the poor hotels or badly run hotels. So while as long as we manage hotels, we are very careful about the Net Promoter score, we track it very, very, very frequently.
But when we grow through the franchise route, this will be the single most important thing we keep an eye on. And please rest assured, it will be a number-one priority of the management to ensure that growth does not come at the cost of the brand.
Prashant Kshirsagar
Last question on the brand, in the new structure which you are envisaging, where would the brand we look placed in Lemontree, Original Lemontree hotel?
Patanjali Govind Keswani
Yeah. Correct. All brands are in Lemontree. All tech and all brands and all distribution platforms will be in because over-time that becomes the single most important monetization opportunity.
Prashant Kshirsagar
Yeah. Thanks a lot. That answers all my questions.
Operator
Thank you. Ladies and gentlemen, that concludes the question-and-answer session. I now hand the conference over to the management for their closing remarks.
Patanjali Govind Keswani
So thank you, everybody once again for your interest and support and questions. We will continue to stay engaged. Please be in touch with our Investor Relations team for any further details or discussions, and we look-forward to interacting with you soon.
Operator
Thank you. On behalf of Lemon Tree Hotels Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.