Lemon Tree Hotels Limited (NSE:LEMONTREE) Q3 FY23 Earnings Concall dated Feb. 13, 2023.
Corporate Participants:
Patanjali Keswani — Chairman and Managing Director
Kapil Sharma — Chief Financial Officer
Analysts:
Anoop Poojari — CDR India — Analyst
Nihal Jham — Nuvama — Analyst
Archana Gude — IDBI Capital — Analyst
Karan Khanna — Ambit Capital — Analyst
Sumant Kumar — Motilal Oswal — Analyst
Sanjaya Satapathy — Ampersand Capital — Analyst
Prateek Kumar — Jefferies — Analyst
Kunal Lakhan — CLSA — Analyst
Rajiv Bharati — DAM Capital — Analyst
Nikhil Agrawal — VT Capital — Analyst
Aditya Damani — — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Lemon Tree Hotels Limited Earnings Conference Call. [Operator Instructions] 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 — CDR India — Analyst
Thank you. Good afternoon, everyone, and thank you for joining us on Lemon Tree Hotels’ Q3 and nine-month FY ’23 earnings conference call. We have with us today, Mr. Patanjali Keswani, Chairman and Managing Director; Mr. Kapil Sharma, Chief Financial Officer, and Mr. Vikramjit Singh, President of the Company.
We would like to begin the call with brief 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 results presentation that was shared with you earlier.
I will now request Mr. Keswani to make his opening remarks.
Patanjali Keswani — Chairman and Managing Director
Thank you. Good afternoon, everyone, and thank you for joining us on the call. I will be covering the business highlights and the financial performance of Q3 and for nine months FY ’23, post which we’ll open the forum for your questions and suggestions.
Q3 FY ’23 occupancy increased by 133 bps and gross ARR increased by 17% over Q2 FY ’23. The total revenue for the quarter stood at INR234.1 crores, which is 19% over Q2 FY ’23 and 15% up versus Q3 FY ’20. The net EBITDA margin for the company in Q3 FY ’23 was industry-leading at 54.3%, which is 648 bps above Q2 FY ’23 and 1,265 bps above Q3 FY ’20.
The PAT for Q3 FY ’23 stands for INR48.6 crores, which is 151% over Q2 FY ’23 and 338% up versus Q3 FY ’20. Q3 FY ’23 has been the best ever quarter for the company with most key metrics such as gross ARR, total revenue, EBITDA, EBITDA margin percentage, PBT and PAT growing significantly.
We are confident in the company’s ability to sustain this growth even more in the coming quarters by focusing on the following growth levers: opening of Aurika Mile in Q3 next year; accelerated growth in our management and franchise portfolio with proportionate increase in fee-based income; further improvement in gross ARRs and occupancy for the LTH portfolio; and a significant increase in ARR and occupancy in the Keys portfolio post renovation.
We are pleased to share that we have expanded our presence with the signing of seven new hotels in the cities of Thekkady, Haridwar, Jamshedpur, Dehradun, Chandausi, Banswara and Tezpur, and operationalized three hotels in this quarter, namely Lemon Tree Hotel in Kalina, Mumbai; Lemon Tree Hotel in Mukteshwar and Keys Lite by Lemon Tree in Visakhapatnam, which were in the pipeline in Q2 FY ’23.
Our total fee from managed hotels in the nine months of FY ’23 stood at INR25.1 crore, which is 94% up versus nine months of FY ’20. I would also like to mention that the opening dates of some of the hotels in our pipeline have been revised due to license delays and unforeseen circumstances on the owner side. Our team is working hard with them to avoid any disruptions in this schedule.
Moving on, our focus on cost optimization has translated into an expansion of EBITDA margin percentage by 648 bps versus Q2 FY ’23 and 1,265 bps versus Q3 FY ’20. Cash profit for Q3 FY ’23 stood at INR72.1 crore with a 63% up versus Q2 FY ’23 and 114% up versus Q3 FY ’20. We are optimistic that we will generate more cash in the coming quarters, allowing us to fund the Aurika Mile project through internal accruals. I would like to reiterate that the construction of our largest hotel, Aurika Mile, is on track and should open by October this year.
Compared to the industry, Lemon Tree same-store hotels RevPAR is 15% — is 18% up versus Q3 FY ’20, while the industry is 2% up. The company has outperformed in the markets of Mumbai, Hyderabad, Delhi, Bangalore, Pune, Gurgaon and Chandigarh, while Chennai and Goa have not performed to the expected level.
Lastly, diversity of team and gender inclusion is one of the key pillars of our corporate mission. We have been actively engaging with differently-abled or economically, educationally, socially or geographically challenged individuals over the years, which we classify as opportunity-deprived individuals. As we look forward, we aim to have around 30% of opportunity-deprived individuals in our team by FY ’26.
Thank you once again for your interest and support. I’ll now hand it over to CDR.
Questions and Answers:
Anoop Poojari — CDR India — Analyst
Thank you very much. [Operator Instructions] The first question is from the line of Nihal Mahesh Jham from Nuvama. Please go ahead.
Nihal Jham — Nuvama — Analyst
Thank you so much and good afternoon to the management. Sir, my first question was that we’ve seen a strong improvement in RevPAR versus pre-COVID, and there is also a mix in terms of the corporate segment going lower and the website segment growing higher. So, is there a mix element that is there, if you would just want to highlight that?
Patanjali Keswani — Chairman and Managing Director
No. Well, if you look at our segment mix, if you compare it to Q3 ’22 and Q3 FY ’23, in terms of room nights, actually we did have seen in room nights, but since the inventory has gone up, therefore, our percentage is a little down. So when we say that this year we have done in the portfolio 67.68%, actually Lemon Tree did 71.4% and Keys did 50.6% in this quarter. And if you look at it from that perspective, then actually we did the same number of room nights in Q3 FY ’20 as we did in Q3 FY ’23. What changed was that corporates were a little less and the retail segment was more. And from 61%-39% in Q3 FY ’20 — 61% and 39%, it is now 55% and 45%.
Nihal Jham — Nuvama — Analyst
Got that. The second question was, generally this is a period where the corporate rate negotiations happen. There are certain other players who are looking at flexi rates. I just wanted to get a sense if we have seen a renegotiation if you get a sense of the rates or if there are change in contract terms that you want to highlight?
Patanjali Keswani — Chairman and Managing Director
So, there is — but we haven’t increased rates as significantly this year. So, we do have fixed rates. From next October, that is this coming October, we are going to move into a little more dynamic pricing. So let me explain how this works.
In Q3, what we did is, whenever we were high occupancy, the lower category rooms and the lower category rates were not offered. Therefore, automatically, it was the higher category rate, room and rate that was offered even to corporates. So that itself led to some ARR increase. So when we say that our ARR increased by 17%, 18%, it really means corporates were 13% and the others were say 20% on a weighted average kind of basis. And so, when I look at it from October, what we will do is, we will take our top 20 key accounts who we treat as filler accounts, maybe those rates will go up 8% to 10%. And these accounts will account for about 20% of our total room nights. The other 15% of corporates, or 19%, will really be more dynamic. So we may give them — we will say, you look at the website and our rate for you. For the full year, we’ll be, say, 10% discount on the website or 15% or 20%, depending on the size of the account and how well they use that. And therefore, it will become automatically dynamic.
Nihal Jham — Nuvama — Analyst
Got that. Just to clarify then, in this last October, what is the kind of price hike versus pre-COVID in October ’22?
Patanjali Keswani — Chairman and Managing Director
So, see, when you look at our pre-COVID, I think we were about — let’s look at that — one moment. So we were INR4,644 in Q3 FY ’20, and now we were INR5,738. So there was a 24% hike. Now, the corporate rates were lower than this ARR that I have just given you. So in that sense, we did take the corporate rates up by 25%. And we took the non-corporate rates also up, so that the overall average was 24%.
But individual segments went differently. For example, the airline segment remained flat. The travel trade segment went up 30%. OTAs and retail went up 22%. So it’s a weighted average kind of thing because the rate anyway of the retail segment was 15% higher than the corporate segment. So when I say, I took both up by, say, 20%, 25%, the average rate of the corporate still is below the ARR of this declared ARR, which is INR5,738.
Nihal Jham — Nuvama — Analyst
Got that. One last question was, on the buyback from APG. If you could just highlight what are the terms ahead? Because I think when they made the investment in May, June 2020, maybe the thought was of transferring hotel assets to keep our stake at around 58%, 59% that we have in floor.
Patanjali Keswani — Chairman and Managing Director
Correct. So, I’ll ask Kapil to answer this. But fundamentally, they put in INR100, we had to put it INR150 to equalize. And that means, we had to put INR150 worth of assets. Now, slump sales are no longer tax effective. So to put INR150 worth of assets, the tax was an extremely high concurrent. So it was better for us in that sense to value the company. And since this is like an equity instrument and buy 60% from them.
And Kapil, if there’s anything you want to add, please do so.
Kapil Sharma — Chief Financial Officer
No, that is correct, Nihal. Because of the high transfer costs, we evaluated the transfer of assets does not make sense at this point of time. So it’s better to get a buyback of the CCPS, which is an equity instrument, and it is generally bought back at the current valuation of the company, which is generally done by the merchant banker, so — as per the normal FEMA regulations. So, that is what we have planned to do now, to ensure that our shareholding — Lemon Tree shareholding in Fleur remains the same as it was earlier before the issuance of CCPS.
Nihal Jham — Nuvama — Analyst
So does this take the stake to the idle 58% that we are targeting or there is still some more buybacks that is required?
Kapil Sharma — Chief Financial Officer
There would be some more, but major part is already happening now. There could be more, yes.
Nihal Jham — Nuvama — Analyst
Okay. I’ll come back in the queue for my further questions. Thank you.
Patanjali Keswani — Chairman and Managing Director
Sure, sure.
Operator
Thank you. The next question is from the line of Archana Gude from IDBI Capital. Please go ahead.
Archana Gude — IDBI Capital — Analyst
Hi, sir. Congrats on very strong set of numbers. I have two, three questions. So, firstly, on to follow up on what you discussed earlier. With this 24%, 25% increase in the gross ARR compared to the pre-COVID quarters, when the occupancy are still subdued, so is it fair to assume that the next leg of growth in sales would be from incremental occupancy rather than ARR? How we should look at it from the midterm perspective?
Patanjali Keswani — Chairman and Managing Director
See, in H1, just when COVID got over, we decided to take our rates up, and we took them up about 20%. So, when H1 got over, in H2, we took a further hike of 17%, 18%. So really, customers have seen two hikes within the space of six months. We try to equalize it. Now, the broad thought was that, in October 1, we repriced. So we repriced and the focus was on getting the price up. That’s why the occupancy was still a little muted. And that’s why I said, if you look at the occupancy of the two hotel divisions, so to speak, Lemon Tree did an occupancy of 71.4% at INR6,100 in Q3, okay? It was Keys which did an occupancy of INR3,500 at about 51%, which is why we did a weighted average of INR5,738 at 67.6%. But the focus was get the price hike done, so it automatically led to some churning of some low rate customers.
If you now move to Q4, our focus is now to increase the occupancy because we’ve done the price high. And what you will find is in Q4, broadly, I expect that we will do over 75% in the group occupancy, which means Lemon Tree will be at 80%, and the ARR will also be above what it was in Q3. So what you are seeing is a series of steps. First was a 20% price hike for H1, then a 20% — or nearly 20% price hike and a further small price hike in Q4 and a significant hike in occupancy. So it’s an ongoing process because this is one year after COVID, so obviously there are different things we have to do. But what I can tell you is in Q4 Lemon Tree will do its best ever occupancy at the highest ever ARR. In fact, Keys will also probably do much better.
Archana Gude — IDBI Capital — Analyst
Sure. Sir, my second question is like, when I look at our mix of inventory in terms of owned and managed currently stands at close to 60% and 40% respectively. So going forward, what number will be at comfort level and any guidance of incremental EBITDA margin due to this change in mix?
Patanjali Keswani — Chairman and Managing Director
Yeah. So keep one thing in mind. Anything we do is manage its 100% flow through, okay. So, to give you a number, this year, we have so far signed 20 hotels in about 1,100 rooms. We’ve also opened five hotels and about 220 rooms. Now, the hotels that we have signed will open next year and the following year. By the end of Q4, we are very confident that in this financial year, we will sign a total of 26 hotels with 1,400 rooms.
What do we expect in FY ’24? We will sign another 35 hotels with about 2,000 rooms. We will open 23 managed hotels with about 1,500 rooms, plus we will open Mumbai International Airport. So from the current, we have 87 hotels, they will grow by 24 more hotels to 111 hotels by the end of next year. We have 8,350 rooms. They will cross 11,500 rooms by the end of next year, operating. We operate in 53 cities. We will operate in 71 cities by the end of next year. And we will have another 2,000-odd rooms, which we will have signed, which will open in the next year or two, the following year or two. So, the guidance is 111 hotels, 11,500 rooms, 71 cities and the mix will be 50-50, home to manage.
Archana Gude — IDBI Capital — Analyst
Sure, sir. And sir, lastly, if you can give some color on the Bangalore and Goa markets?
Patanjali Keswani — Chairman and Managing Director
Yeah. So, Bangalore is — we have a lot of hotels in the very IT-dependent markets, which is Electronic City and Whitefield. So those have been a little subdued, both the Keys and the Lemon Tree Hotels. Gurgaon, you noticed, has picked up, and it has picked up fully now in this quarter. And you will find now all the nine key markets, we are kind of out — well, we are outperforming vis-a-vis our Q3 performance in Q4. I’ve given you a guidance, I said we’ll do 75% in Q4 and we will do a slightly better ARR, so you can work backwards.
Archana Gude — IDBI Capital — Analyst
Sure, sir. Thank you so much, and that was very helpful.
Operator
Thank you. The next question is from the line of Karan Khanna from AMBIT Capital. Please go ahead.
Karan Khanna — Ambit Capital — Analyst
Hi. Thanks for the opportunity, and congrats on a good set of results. So, firstly, regarding the transaction with APG Group, I’m just curious to understand how the 50% premium valuations were arrived at? Could you just comment on the rationale as to how these numbers arrived at? And secondly, how you plan to fund this acquisition?
Patanjali Keswani — Chairman and Managing Director
Kapil?
Kapil Sharma — Chief Financial Officer
Yeah. So, Karan, this is — as I just mentioned, that this is as per the current valuation of Fleur Hotels, which is done by the merchant banker. And based on that, whatever changes have happened, because you know the valuation as of June 2020 of the company and even if you look at from the industry perspective, was much lower at that point of time. And now, industry has come back very much on the business side and the kind of performance you have seen, especially this is the first quarter post-COVID, which is a season quarter, Q3, which performance you have just seen. So, based on this and further projections, which is generally done by the merchant banker, they have evaluated and the transaction is happening for purchase of the CCPS from APG at the valuation of Fleur Hotels. So, that’s how you are seeing the change in the value, which is FY ’21 versus ’23-’24 basically.
Karan Khanna — Ambit Capital — Analyst
Sir, regarding funding for the acquisition, will this add debt on the parent’s book, given most of the OCS will be used towards investing in the Nehal [Phonetic] project?
Kapil Sharma — Chief Financial Officer
Not really because as you have seen that in this quarter only in Q3, we have had a cash profit of INR2 crores. And this kind of performance is likely to — looking at from the market perspective is likely to continue. So there are a robust internal accrual in the company, which can take care of this acquisition as well as the capex which is required for the Aurika, Mumbai property. So that is not much difference from the debt level, which would happen. There could be small change, but it’s not a significant change, which would happen from here onwards.
Karan Khanna — Ambit Capital — Analyst
Sure. Sir, my second question is [Speech Overlap]
Patanjali Keswani — Chairman and Managing Director
Karan, if I could add something. You should look at our cash profit in Q4. You will get an understanding of what Kapil is saying. Number two, the stand — the transfer cost of an asset — firstly, the asset was not getting — the assets were not getting valued right. So we would have transferred it at a lower price than we said was fair. On top of it, there was a very high stamp duty cost, very high. So it did not make sense for us to transfer assets. Rather, it made sense for us to simply buy 58%.
Karan Khanna — Ambit Capital — Analyst
Sure. This is helpful. Thanks for the clarification. My second question is on the occupancy front. So, coming to Slide 9, while the ARRs are up across the board, occupancy is up in Lemon Tree Premier, while down 5%, 6% in Lemon Tree and Red Fox.
Patanjali Keswani — Chairman and Managing Director
Just refer to the slide.
Karan Khanna — Ambit Capital — Analyst
Yeah. Sir, what I wanted to understand is if you’re seeing any structural shift in demand towards more premium products like Lemon Tree Premier. And if that’s the case, how should one think about occupancies and the outlook for Red Fox and Keys hotels?
Patanjali Keswani — Chairman and Managing Director
See, Red Fox, if you look at the occupancy change in Q3 FY ’23, the point is that the ARR went up 20% and it is a relatively price-sensitive market. So actually, even though the occupancy came down by 5 percentage points versus Q3 FY ’20, the RevPAR went up 11%. And I think that’s the key number because we did not want very low rate business there, and Red Fox was operating in a low rate [Technical Issues].
So when you take the ARR up to INR4,300, you are really touching parts of Lemon Tree. So, I would not suggest to look at it like that. It is an ongoing process. As I said, obviously when we started hiking prices at the upper end of the band, there is less price sensitivity. At the lower end of the product like a Red Fox, there is more sensitivity. So, you will — what I’m saying is, wait for Q4, you will get a complete picture because this is an ongoing process. And Q4 will tell you the results of what we did in the previous nine months, what we stabilize at.
Karan Khanna — Ambit Capital — Analyst
Sure. So, third question, on the sustainability of the operating efficiencies, do you feel that the reductions that you’ve achieved post-COVID, especially on the employee front, is sustainable given the high [Indecipherable] rate that we are seeing in the industry?
Patanjali Keswani — Chairman and Managing Director
It is completely sustainable because for the last three quarters, every quarter, we increased it to the full occupancy level, if you noticed, in a certain slide in our presentation, we have shown that in December, we were doing 77% occupancy. October was a crash because there was Diwali and Dussehra, and then November picked up to about 72% and December was 77%, and we did not increase our staffing significantly.
So, if you just look at it from the P&L perspective, we have kind of stabilized at, I think, all in our costs are roughly, I would say, about INR105 crores to INR110 crores a quarter, and the balance is our EBITDA. And in increase in occupancy, there is an increase in variable cost of about 10%, 12%. If there is an increase in food sales, there is an increase in variable cost of 30%, the company average is about 23%.
Karan Khanna — Ambit Capital — Analyst
Sure, sure. That’s helpful. And my last question is on Aurika Mumbai. So, MAIL is one of the most hotly contested markets with premium names like JW Marriott, ITC and Grand Hyatt being in the market with another 600 on Fairmont that’s opening up closer to the date of Aurika launch. So how should one think about the demand uptake in terms of the ARRs and occupancies for Aurika in the first year of launch?
Patanjali Keswani — Chairman and Managing Director
Okay. I don’t want to give you a statement on this quarter. I suggest you look at how Lemon Tree Premier Bombay did in Q4, and it will completely answer your question. Remember, it is operating in the same market. It opened a few months before COVID hit. So it had no chance to stabilize. The hotel really started operating in a normal market only from April. And within six months — nine months from April to December, have a look at its performance in Q4.
So if you look at Slide 11, we have said that in Bombay, our occupancy in Q3 was only 79% at INR8,500. Now, have a look at it in Q4 and then ask yourself what Aurika Mumbai would do. If a 300-room hotel can do nearly 90% occupancy at INR9,000-plus in Q4, then surely Aurika can do much better than that. In fact, you should have a look at how Aurika did in Q4 because I had said earlier that I’m not dropping prices in summer because I wanted to set a standard for this hotel. So we did only 53% in Q3 at about INR17,000. Now have a look at how we do in Q4. You will be astounded at how that hotel has done, and so will you be astounded at how the Bombay hotel has done. So it will give you an idea of how steep we can price Aurika and see the kind of occupancy of Bombay gets even for a Lemon Tree Premier.
Karan Khanna — Ambit Capital — Analyst
Great. That’s it from my side. Thank you, and all the best.
Patanjali Keswani — Chairman and Managing Director
Thank you.
Operator
Thank you. The next question is from the line of Sumant Kumar from Motilal Oswal. Please go ahead.
Sumant Kumar — Motilal Oswal — Analyst
Yeah. Hi, sir. So, my question is, except Mumbai and Pune, where we have seen a better than pre-pandemic occupancy, other key markets like Delhi, Gurugram and Hyderabad and Bengaluru, we are still lower than pre-pandemic occupancy rate. So, can we expect in the coming quarter the occupancy will reach the pre-pandemic level? And what are the key reasons for that, the occupancy going to the pre-pandemic level?
Patanjali Keswani — Chairman and Managing Director
So, I told you what we — in Q3 FY ’20, we did 71%. In Q3 FY ’23, Sumant, we did 68%, about 3%, 3.5% down — or nearly 4% down. But we took the ARR up by 24%. What I’ve told you is that this was a work-in-progress. Please wait to see a stable performance because we’ve taken prices up by nearly 40% in the space of nine months; first in April and then again in October, and then marginally in January also. So, if — let me assume we get to 75% occupancy in Q4 at a higher ARR than Q3 FY ’23, I think that will answer your question.
Sumant Kumar — Motilal Oswal — Analyst
No. What was Keys, sir? We have seen it is still struggling…
Operator
Sumant, your voice is not very clear, please use the handset.
Sumant Kumar — Motilal Oswal — Analyst
Yeah. So what was the Keys hotel, the occupancy is still at the lower side?
Patanjali Keswani — Chairman and Managing Director
Yes. Because Keys, what you are seeing in Slide 11 is the partial quarter. So we acquired Keys in the middle of Q3, and we are very clear that it has to be redone — renovated. So what we are selling today is, frankly, a very mediocre product. And in certain markets, it is very low demand even today, like Kerala or Ludhiana. It is only Bangalore and Pune where we are able to take prices up somewhat, though we are not able to really hike the occupancy because that market, Bangalore is quite low, the two IT districts.
So, you are right, the occupancy came down 15% versus Q3 FY ’20, but we did reprice the hotel up by 18%. And now you are seeing a 10% fall in RevPAR in Q3 FY ’23, but you will see we’ll catch up in Q4 because it’s an ongoing thing. But really, one of the key levers for our future growth in revenues is post renovating these hotels. So, I think I mentioned earlier that we have now designed the new rooms for the Keys portfolio. It’s actually in Pune, it’s been designed and done. All the designs are ready for all the hotels. We are putting in a fair amount of money in the Bangalore and Pune hotels in order to reprice it by at least INR1,000. And we are putting in the bare minimum in the other hotels to bring it up to what we consider are the minimum brand standards.
So, the total investment in Keys over the next two years will be INR5 lakhs for half the portfolio per room, that is about INR25 crores, and INR1 lakh per room for the other half, so we would spend INR30 crores. We have spent a little bit already, but we would spend INR30 crores over the next two years, and we are pretty confident that we will take the ARR north of INR4,500, and we’ll take the occupancy above pre-COVID, which was 66%.
Sumant Kumar — Motilal Oswal — Analyst
So, going at INR1,000 increase, I think Keys hotel ARR is likely to be near to Red Fox room rent?
Patanjali Keswani — Chairman and Managing Director
No, Red Fox will go up even further, as you will see in Q4. So, really the way to look at it is that Keys one year from now, or at least half the portfolio, will move to the Red Fox level today, which is about INR4,300 in Q3, and Keys did about INR3,500 in Q3. So what I’m saying is that we will take it up by INR700, INR800, but when it’s fully renovated, then I think you will see it even higher.
Sumant Kumar — Motilal Oswal — Analyst
So next two years, all the Keys hotel will be renovated and the product quality will be improved?
Patanjali Keswani — Chairman and Managing Director
Correct. In all aspects, because Keys is a very tired product. You see when we bought it, our intention was to renovate it the following summer. We had actually got approvals, etc, but COVID hit so it was put in [Technical Issues]. And for 2 years, these hotels were practically shut. So that was the problem.
Sumant Kumar — Motilal Oswal — Analyst
So we can expect the occupancy will improve post renovation?
Patanjali Keswani — Chairman and Managing Director
What I am saying is that we will exceed 66%, which is what we did in Q3 FY ’20, and we will increase the price by at least 20%.
Sumant Kumar — Motilal Oswal — Analyst
Understood.
Patanjali Keswani — Chairman and Managing Director
Thank you.
Operator
Thank you. The next question is from the line of Sanjaya Satapathy from Ampersand Capital. Please go ahead.
Sanjaya Satapathy — Ampersand Capital — Analyst
Yes. Just wanted to confirm that this 75% occupancy you’re talking about in Q4 that is against this 68% in Q3, right, sir?
Patanjali Keswani — Chairman and Managing Director
That is right. I’m talking group.
Sanjaya Satapathy — Ampersand Capital — Analyst
Sorry?
Patanjali Keswani — Chairman and Managing Director
I’m talking about the group, including Keys, the overall occupancy.
Sanjaya Satapathy — Ampersand Capital — Analyst
Yeah, overall occupancy, which you reported at 67.5% in Q3 will be going to 75% in Q4?
Patanjali Keswani — Chairman and Managing Director
Yes, about 75%.
Sanjaya Satapathy — Ampersand Capital — Analyst
And you are also talking about increasing ARR in almost all your — in the last three categories, that is Keys as well as Red Fox, etc, and that is where you were also talking about the price sensitiveness. So why — and the fact that the prices are already up 20%, 30% in last three years, why are you taking such aggressive stance in terms of pricing?
Patanjali Keswani — Chairman and Managing Director
Because we think we can get that price. We think the products are capable of that price. And if the segments above us are going 20%, then we will naturally also go at 20%.
Sanjaya Satapathy — Ampersand Capital — Analyst
Understood. And sir, when you also spoke about the Q4 and considering that you have already become so profitable in terms of EBITDA margin in the industry and probably with the kind of air and occupancy you’re talking about in Q4, the profit margin probably will go up a lot higher. So is there some kind of sustainable number that which you can share with us?
Patanjali Keswani — Chairman and Managing Director
So let me say one thing, Sanjay. No analyst believed us when we said that we will do double our income this year, and we will do minimum 50% net EBITDA. And what I can tell you is that if you look at the nine months, we have already crossed 50% net EBITDA. This quarter, I’m already indirectly told you is much better than Q3, where we did nearly 53% net EBITDA. And therefore, we will be over 50% net EBITDA, in fact, significantly over 50% net EBITDA and certainly well over double the income of the last year.
Is it sustainable? Well, this is a business that operates on demand and supply. For the next four years, supply will not grow more than 5%. Demand of the branded hotel rooms is growing at 12% to 14% annually. That was the normal situation pre-COVID, and I presume it will continue now. So, therefore, you are going to end, plus a lot of hotels shut down during COVID and have not come back. Therefore, there has been a constraint in supply. There has been an improvement in occupancy, it is not linked to revenge travel. Revenge travel for leisure purposes may have occurred in the first six to nine months. I don’t think it will be at that level now that international travel has opened. But for Lemon Tree where 85% of our inventory is business with us, it is the business hotels that have bounced. And I — unless there is some Blackstone event, this imbalance or demand being more than supplied will definitely continue for the next four years. And you are going to be surprised that the kind of pricing hikes we will see.
I’ll give you an example. Lemon Tree’s ARR in 2006, 2006, when we had only six hotels, was INR9,000. So it’s — those kind of prices are going to come back. And you will see it yourself. In fact, I think you will start seeing it in Q4 itself, this Q4. And every quarter, there will be an increase in price.
Sanjaya Satapathy — Ampersand Capital — Analyst
The reason why we’re asking that, that is because we are seeing quite a few consumer-durable as well as consumer companies, who have taken massive price hike over the last one-odd year or the last three years, in fact, are starting to see some kind of a consumer backlash against prices and several segments are starting to see softness in demand. And most categories have stopped taking price hikes because of that. Of course, you have a compelling case for hotel industry, but we’ll appreciate your thoughts on this, if you can just help us, and also the demand outlook for…
Patanjali Keswani — Chairman and Managing Director
See, let me answer that, Sanjay. No supply will come in at current prices, because the cost of — the replacement cost of building a hotel today with the kind of inflation we have seen and the high cost of debt, nobody will build a hotel at the current rates, ARR, even at the current ARRs. It will make sense to build a hotel, say, a Lemon Tree Premier equivalent only a INR8,000, INR8,500, okay? And we are still 15%, 20% below that. So until there is a sustainable price at that level, supply will automatically be constrained. So I would not worry about it because this is a situation where you have to see two or three years of sustained pricing before new supplies planned. Otherwise, it’s a self-regulating kind of thing, like a commodity cycle. So, sure, some customers won’t like it, they will move down. So some Fiesta customers will come to Lemon Tree Premier, some Lemon Tree Premier customers will go to Lemon Tree, some Lemon Tree customers who go to Red Fox and so on. But we operate across the entire chain, right?
We operate from — well, from Lemon Tree Premier, which is four-star to Red Fox which is two-star. So, if there is a movement, it will be within our system. And what I want you to realize is, if you look at Slide 11, Lemon Tree Premier’s ARR in Q3 ’20 was slightly higher than the Lemon Tree Hotel’s ARR in Q3 ’23. Similarly, Lemon Tree Hotel’s ARR in Q3 ’20 was just slightly higher than the Red Fox Hotel ARR this quarter. And Red Fox’s ARR in Q3 ’20 was equal to the Keys’ ARR today. So, basically, the customer, if you want that price point will go down. So, Lemon Tree — you can see it in the diagrams, if you just look at the slide. We are not losing any customers. We may go down at the ARR of the lower hotels, but we are getting enough customers at Lemon Tree Premier from the five stars.
Sanjaya Satapathy — Ampersand Capital — Analyst
Understood. And thanks a lot, sir, for your questions.
Patanjali Keswani — Chairman and Managing Director
My pleasure.
Sanjaya Satapathy — Ampersand Capital — Analyst
Just throw some light about the summer season and subsequent period, that will be great. Thanks a lot.
Patanjali Keswani — Chairman and Managing Director
Hello?
Sanjaya Satapathy — Ampersand Capital — Analyst
Yeah. Sir, just wanted to hear that, I mean, you’re fairly confident about Q4, but if you can just give a bit of color about the demand for the subsequent period. Otherwise, it is fine. That’s all from my side.
Patanjali Keswani — Chairman and Managing Director
So, typically what happens in H1 is, there is a 5% fall in ARR, and 3%, 4%, 5% fall in occupancy because it is off-season. So, it is like, if you look at pricing in — so let me explain, if pricing in summer — in one year is $100, and in winter, it goes to INR120, then in summer, it comes down to, say, INR110 or INR112. So INR100, INR120, then it comes down to INR112, then it goes back to INR130. So it’s a step up, step down, step up, step down and each time the step down is higher than the previous summer. That’s the first point. As far as occupancy goes, if you do 65% in summer and say, 72% in winter, then the next summer, you will do 68%, 69%, if it’s an upswing, and the following winter, you will do 75%. So, again, it’s a step-up, step-down, step-up, step down. And if you look at our performance pre-COVID, it is very clearly reflected there.
Sanjaya Satapathy — Ampersand Capital — Analyst
Understood, sir. Thanks a lot.
Patanjali Keswani — Chairman and Managing Director
My pleasure.
Operator
Thank you. The next question is from the line of Prateek from Jefferies. Please go ahead.
Prateek Kumar — Jefferies — Analyst
Hello, yeah. [Technical Issues]
Operator
Your voice is breaking. May I request you to use the handset, please or keep the mic closer?
Prateek Kumar — Jefferies — Analyst
Hello? Yeah, can you hear me now?
Operator
Yes, better.
Patanjali Keswani — Chairman and Managing Director
Yeah.
Prateek Kumar — Jefferies — Analyst
Yeah. Thanks for the opportunity, and thanks for the responses and [Indecipherable] earlier. So, sir, basically we have — we’ll exit this year probably on a high in terms of pricing and, factoring in the seasonality, which you mentioned for Q1 and Q2 thereafter, for FY ’24 basis, we should still be like higher by like close to double-digit in terms of ARR year-on-year in FY ’24 versus FY ’23?
Patanjali Keswani — Chairman and Managing Director
Let me put it this way. We will do better than 20% higher revenue in FY ’23 over — in FY ’24 over FY ’23, and our net EBITDA margin will be above the net EBITDA margin of FY ’23.
Prateek Kumar — Jefferies — Analyst
Okay. So, 20% higher revenues and margins higher than this year, okay?
Patanjali Keswani — Chairman and Managing Director
Yeah.
Prateek Kumar — Jefferies — Analyst
And just a small question on…
Patanjali Keswani — Chairman and Managing Director
So basically, I’m saying our PAT will be 40%, 50% higher.
Prateek Kumar — Jefferies — Analyst
Right. And on occupancies and demand, one small question. Basically — besides the IT sector, there’s some impact on micro markets related to IT sector. But is there any other segment which is showing any signs of softness except for the step-downing of some of the customers from one segment to another, but is there any specific slowdown from any segment which is witnessed now?
Patanjali Keswani — Chairman and Managing Director
Not really. In fact, the IT sector is also showing signs of being by the way. And typically, they take a lot of our rooms in electronic cities and in [Indecipherable] for new joinings. And we seem to have been given an indication that there will be a lot of hiring this summer, number one. Number two is that the sectors that we give us a lot of business, which is financial services, pharma and so on, we find those sectors are growing very fast. So, on an overall basis, the retail segment is growing super fast, and a large part of the corporate segment is growing super fast. In fact, IT only accounts for about 5%, 6% of our total business. So even if it drops by 20% or 25%, it will be 3%, 2% drop.
Prateek Kumar — Jefferies — Analyst
Right. And which will be like top five segments like the way you mentioned 5% for IT?
Patanjali Keswani — Chairman and Managing Director
Yeah, IT is a very important segment because it gives us a lot of business in our IT-heavy markets like Hinjawadi in Pune, or Electronic City or in Whitefield.
Prateek Kumar — Jefferies — Analyst
Right. No, so I was asking which should be under like top five segments for us, like pharma, you mentioned?
Patanjali Keswani — Chairman and Managing Director
Pharma, financial services, auto, retail.
Prateek Kumar — Jefferies — Analyst
Right. Okay. And one last question…
Patanjali Keswani — Chairman and Managing Director
Any of the large services sectors. See, when the Indian economy is growing at 6%, 7%, the services sector is growing at 10%, manufacturing may be at 4% now may be higher because of PLI and agriculture is anywhere from 1% to 3%. We are 85%, 90% dependent on the services sector. So when it grows at 10%, then our demand normally grows at 1.2, 1.3 times there. So that is why when I say demand for branded hotels is growing 12%, 13%, in fact, my guess is, it will be even more now. It is just for this reason.
Retail sector growing, and these segments of the — now what is not come back fully is the foreigners. Typically, foreigners account for 10% of our revenue, and that is — I know that the Tourism Minister recently said a lot of foreign travel has started. I think he was referring to the domestic — the Indians, the NRIs coming back, actual foreign travel is still — foreigners, foreign travel is still, I think, 40% down, and that will come from this coming year.
Prateek Kumar — Jefferies — Analyst
Sure. These are my questions. Thank you.
Operator
Thank you. The next question is from the line of Kunal Lakhan from CLSA. Please go ahead.
Kunal Lakhan — CLSA — Analyst
Hi. Good afternoon, Mr. Keswani and team. Sir, my first question was on Keys. You mentioned you’re doing some renovation to get this portfolio going. So, just to understand if the issue is with the markets there and the demand in those markets or the issue is with the kind of product that we have, which [Speech Overlap].
Patanjali Keswani — Chairman and Managing Director
Actually it is three problems. In certain markets, the issue is that the market itself is down, but we are not even able to get our fair share in that market because the product is even more down. So we feel that if we spend, say, a lack of room in those markets, we’ll be able to bring the product back and it may not take the ARR up, but it will take the occupancy up. So in those hotels, it’s an occupancy strategy, like Kerala, two hotels in Kerala and a hotel in Ludhiana, which is 350 rooms put together, and partly in Visakhapatnam where we have another 100 rooms.
In the other two markets, which is Pune and Bangalore, where we have another 450 rooms, there, if we upgrade the product, we will be able to reprice. So, there it’s an occupancy and pricing strategy for Bangalore and Pune. And in the others, it is merely an occupancy strategy.
Kunal Lakhan — CLSA — Analyst
Sure, sure.
Patanjali Keswani — Chairman and Managing Director
And the capital allocation is done on that basis, the return on the incremental capital. So let me tell you an interesting thing. We feel that by spending INR30 crores, we will get a more than 100% return in EBITDA per year from Keys.
Kunal Lakhan — CLSA — Analyst
That’s great. That’s very helpful, sir. And my second question was on Fleur transaction. So, we’re buying 22 lakh CCPS before 31st March, that would still be about 31 lakh CCPS to be bought, and what will be the timeline for this? And I would assume that, that will entail again based on current valuation spend of INR150 crore-plus, and how will we fund that?
Patanjali Keswani — Chairman and Managing Director
Kapil, will you answer?
Kapil Sharma — Chief Financial Officer
Yeah. So, which number you are referring to, I think you are looking at the entire CCPS block. But need not buy actually entire CCPS which were issued to the APG. Second thing is that as you already know that the conversion date was extended till 30th June 2023. So that would happen in June. So, what we are doing is, we have to make sure that we acquire enough CCPS to ensure our existing shareholding before conversion remains the same. So, if you look at the current quantum which we have declared and which has been approved by the Board, which is 22 lakh CCPS out of roughly 54 lakh CCPS, so that brings Lemon Tree shareholding in Fleur to roughly 58%, which is close to the current one only. So that is the situation after this conversion happens for the current acquired share CCPS of only 22 lakhs.
Kunal Lakhan — CLSA — Analyst
Yes. So incrementally, we may not buy any further CCPS shares, that is what you are saying?
Kapil Sharma — Chief Financial Officer
We’ll have to look at that. But as I mentioned earlier, that major part is already being done now.
Kunal Lakhan — CLSA — Analyst
Sure. That’s helpful. And just two follow-ups on that. Will we pay any preference dividend to APG in the last three years on the CCPS?
Kapil Sharma — Chief Financial Officer
No. These were 0.01% CCPS, but no dividend has been paid.
Kunal Lakhan — CLSA — Analyst
Sure. And if you can share some numbers on Fleur in the nine months, like what kind of revenue growth and what kind of margins we are doing there in Q3?
Patanjali Keswani — Chairman and Managing Director
So, I think we’ll share with you offline about this, because we do not, in our earnings presentation, bifurcate in that manner because it’s by brand, by markets and on a group level.
Kunal Lakhan — CLSA — Analyst
Sure. I’ll take it offline. Thanks so much, and all the best.
Patanjali Keswani — Chairman and Managing Director
Thank you.
Operator
Thank you. The next question is from the line of Rajiv from DAM Capital. Please go ahead.
Rajiv Bharati — DAM Capital — Analyst
Yeah. Good afternoon, sir, and thanks for the opportunity. Sir, on the CCPS thing, so another 18%, 19% needs to be bought. So the valuation will be recalibrated from here onwards or the current valuation will hold for that?
Anoop Poojari — CDR India — Analyst
No. As per regulation — as per FEMA regulation, whenever you do a transaction, you have to get a current valuation done at the time of the transaction. So it would depend on what valuation comes at if there is any further transaction.
Rajiv Bharati — DAM Capital — Analyst
And is it possible to provide what is the, say, ARR assumption for Aurika Bombay have taken — the banker considered…
Patanjali Keswani — Chairman and Managing Director
I have said INR12,500 in the first stable year, which will be obviously FY ’25. But we are pretty confident we’ll stabilize it in — open it in October. October and November will be very low months because of Diwali, now moving into November in this year and Dussehra being in October. So during that period, people generally don’t travel, whether it’s — definitely not for business reasons. So, that is why you will see this year in this last nine months, in October, we only did 54%, which was actually low because we had also repriced. So, our thought is that Aurika had earlier given a guidance would do INR12,500, but if it — so let me give you a range, it will do anywhere from INR13,000 to INR15,000.
Rajiv Bharati — DAM Capital — Analyst
Sure. And so on the — from Q2 to Q3, if we do, let’s say, incremental EBITDAR margin, it looks like you are actually doing a better EBITDAR, I mean, even higher than the revenue growth sequentially, in the sense of the incremental EBITDAR margin for some of the assets are over 100%. How is that happening? For example, for Lemon Tree, Lemon Tree Premier, Lemon Tree Hotels, your incremental EBITDAR is actually higher than the revenue growth.
Patanjali Keswani — Chairman and Managing Director
Yeah, because we are expensing renovation in some hotels. So what I have always told you, gentlemen is that — and ladies — is that for us, we spend significant amounts of money every year in renovation. And therefore for us, the depreciation is just cash because it is effectively double depict, because I’m already showing as pre-EBITDA as an operating expense with a little bit of capex later. But typically, of my renovation, 75% is opex. And depreciation therefore, which is about INR110 crores a year, is pure cash profit because I’ve already spent the money in renovating and upgrading the hotel. So, it depends sometimes on the hotel. If we spend a lot of money in renovating it, then obviously the EBITDA comes down. If you stop the next year, then the EBITDA goes up. So I don’t know which hotel you are specifically referring to, but what I can tell you is that I see that there was a certain amount of skepticism about us saying that this is our cost structure.
And now, you will see it over four quarters. And I think you will find that any increase in our expenses is linked to the net increase in the room revenue and the other income. So, if the room revenue goes up mostly and not for food, then the margin is — the contribution is 90%. If the F&B revenue goes up, then the contribution is 70%. And if some other revenue goes up, which is like spa and so on, then the contribution is 40%. So it’s a question of which part of the mix went up. But broadly, since we are driving room sales first, the EBITDA margins will keep going up.
Rajiv Bharati — DAM Capital — Analyst
So let me specify on your — Page 10 of your slide. If you look at, for example, Lemon Tree Premier, your revenue — I’ve back-calculated your revenue for the quarter must be close to INR942 crores. And for the last quarter, in a sense of Q2 FY ’23 must be INR843 crores, so there is INR100 crores — sorry, INR99 million swing in terms of your revenue, and the EBITDA swing is INR157 million — EBITDAR swing, sorry.
Patanjali Keswani — Chairman and Managing Director
Sure. There may have been some renovation that did occur. I don’t know exactly — let me put it this way. We are the lowest cost operator. That is why we can talk at our level of ARR and occupancy, we can talk at north of 50% EBITDA. Some of the EBITDA gets reduced because there was renovation and so on. So, if we can talk offline and you can give me specific figures, I’ll answer that.
Rajiv Bharati — DAM Capital — Analyst
Sure. And in terms of, let’s say, because other hoteliers have been talking about renovation, which was due from COVID period onwards, do we have a similar quantum, which is, for example, lined up in this year versus the subsequent year?
Patanjali Keswani — Chairman and Managing Director
Yeah. We normally spend INR30 crores, INR35 crores this year, we’ll spend INR50 crores.
Rajiv Bharati — DAM Capital — Analyst
And this will continue in the next fiscal as well, similar contribution?
Patanjali Keswani — Chairman and Managing Director
Yeah, yeah, 100%. But when I report to you, my EBITDA, it will be — it will not come from the cash flow post it will be pre the net EBITDA. So if I say I’m going to spend INR50 crores, you can assume INR35 crores is going pre-EBITDA and INR15 crores is going post EBITDA as capex.
Rajiv Bharati — DAM Capital — Analyst
Sure. Sure. And just 1 clarification. On the revenue side, the revenue growth for FY ’24, you said it’s a 20% revenue growth or 20% RevPAR?
Patanjali Keswani — Chairman and Managing Director
I said revenue growth. I don’t want to give specifics. It will be a 20% revenue growth and our net EBITDA margin will be higher than this year. And therefore, PAT will be at least 40% higher than this year.
Rajiv Bharati — DAM Capital — Analyst
Sure. And lastly, some counterparts, for example, Hilton during the recent con-call had kind of subdued or given a slightly subdued commentary in terms of flat occupancy for the current calendar year and less than 5% ARR growth. I mean the main reason we cited was inflation. And a participant asked a similar question. I was just wondering whether are we seeing — any risk of that playing out in Indian context as well?
Patanjali Keswani — Chairman and Managing Director
You are talking about Hilton’s global con-call?
Rajiv Bharati — DAM Capital — Analyst
Yes, yes.
Patanjali Keswani — Chairman and Managing Director
I’m sorry, I’m not familiar with it. I can talk about India. And in India, I don’t see that as an issue because you see what happens is when demand grows. See it this way, four days in a week, I’m sold out. I mean, there is unconstrained demand, which is greater than my supply. So obviously, I churn — I keep increasing the prices, still I do a 98%, 100% occupancy, and I let go the bottom 10%, 15%, which is the lowest rate and which is how my retail segment ARR takes going. And I’m not seeing any slowdown in that in spite of inflation.
Rajiv Bharati — DAM Capital — Analyst
Thanks a lot, and all the best.
Patanjali Keswani — Chairman and Managing Director
Thank you.
Operator
Thank you. The next question is from the line of Nikhil Agrawal from VT Capital. Please go ahead.
Nikhil Agrawal — VT Capital — Analyst
Good evening, sir, and thank you for the opportunity. Sir, I wanted to know what is the retail and corporate contribution in Q3, if possible?
Patanjali Keswani — Chairman and Managing Director
Retail and corporate contribution is there in a certain slide. I have it here, just hold on. Retail gave us 1,532 rooms, corporate gave us 1,300 rooms, airlines gave us 290 and travel trade, which is the leisure side, gave us 370, totaling to 3,440, which is 67.6%.
Nikhil Agrawal — VT Capital — Analyst
Okay. So, that means retail is still a significant portion of your demand portfolio. Sir, wanted to know that like the [Indecipherable] of the world that is coming up like in all these tourist places. So, are you seeing that as a threat to your demand to — for demand for your hotels in any way?
Patanjali Keswani — Chairman and Managing Director
I don’t have any leisure — in the owned portfolio, I have very little leisure. It is Aurika, plus 100 rooms in Goa, and a few rooms in Alleppey and a few rooms in Bandhavgarh. And then, we are in markets where there is leisure and business like Aurangabad, Jaipur and so on, where we are doing quite fine. In fact, Chandigarh, I think we do over 80% or something like that. And Jaipur, we are doing 75% with 183 rooms. So it’s not really affected us. Talking about — not these guys, it is more the villas, which are on offer and go out and so on. And these are affecting more than five-star hotel villas, because they’re quite highly priced. But the demand in Goa is such that in spite of a lot of villa accommodation, hotels still continue to do well.
Nikhil Agrawal — VT Capital — Analyst
Okay. Got it. Great, sir. And sir, any guidance on the management fee, you’ve talked INR25 crores in the nine months this year…
Patanjali Keswani — Chairman and Managing Director
So I said we’ll do INR35 crores, INR36 crores this year, and we should do 50% more next year. Our broad intent is that we will increase our management fees by — we’ll hit INR100 crores hopefully by next to next year.
Nikhil Agrawal — VT Capital — Analyst
Great, sir. Thank you so much. That’s it from me.
Operator
Thank you. The next question is from the line of Aditya Damani [Phonetic] as an individual investor. Please go ahead.
Aditya Damani — — Analyst
Good afternoon, sir. Congratulations all around. You’ve answered most of my questions, but I have a question on — I recently read a news report where you were quoted in a Business Today forum, where you sell in 18 months, you’ll expect ARRs to go up 100% almost. Is that base case, best case or whether you see that stabilizing — maybe worst case?
Patanjali Keswani — Chairman and Managing Director
If things continue like this, and I’m making two assumptions that inflation will come under control. And number two is that this war will go and that there will be regular foreign travel, which I’m hoping will happen from this October, but it may take — go to the next October. So, yes, if that happens, prices will hit that level.
Aditya Damani — — Analyst
Wow. Okay. So then, is it fair to assume that obviously that if you’re hitting low-50%s in EBITDA, we could easily surpass 60% maybe?
Patanjali Keswani — Chairman and Managing Director
We did surpass 50% in 2005, ’06 and ’07.
Aditya Damani — — Analyst
Excellent, sir. Okay. That’s great, sir. And second question is, with all the wellness states like Yoga and the likes, we have a dearth in the country. We have Anandas and Banas in the North. We have your wind travel [Phonetic] for example, in the South. And these are — I mean, there is a massive shortage. There aren’t really very good spaces to go to. Is that under active consideration?
Patanjali Keswani — Chairman and Managing Director
Not for me because I think we are very, very focused on the two to four-star and now the upscale segment, and we want to saturate the Indian market. We want to go to 100 cities, which we hope we will reach, and we want to hit 25,000 rooms in the next four years.
Aditya Damani — — Analyst
Right, sir. In continuation to that question, when you say foreign travel comes in, a lot of that goes towards — a lot of value states, wouldn’t that be a low-hanging fruit?
Patanjali Keswani — Chairman and Managing Director
Yes, that’s true. But I’m not focused on that, I’m focused on the domestic Indian consumer.
Aditya Damani — — Analyst
Fair enough, fair enough.
Patanjali Keswani — Chairman and Managing Director
And I want to be focused, because if I go — I don’t want to go all over the place, plus I don’t have spa expertise. I outsource spa. And I’m quite happy with the results as they are because we want to, as I said, saturate the mid-market in India.
Aditya Damani — — Analyst
Absolutely, sir. Okay. And lastly, where are we in terms of largest rooms in terms of ranking? I’d say, Marriott, Taj or, if I say, [Indecipherable] in breadth, where are we ranked — because the reason…
Patanjali Keswani — Chairman and Managing Director
I don’t think you should bring [Indecipherable] into this. But we are the third largest owners of hotel rooms in India, and currently the sixth largest in terms of total managed and owned. But there are others like the international guys are number one and so on, because they only manage, they don’t have capital deployed in asset ownership.
Aditya Damani — — Analyst
The reason I asked was because of the IPO coming in and the kind of crazy valuation.
Patanjali Keswani — Chairman and Managing Director
I wish them the best, but they are not really competitors with us.
Aditya Damani — — Analyst
Yeah. Fair enough. No, I was only referring to the valuation [Indecipherable] was going to get. That’s all. And so that could increase our values absolutely in valuation directly, if that makes sense?
Patanjali Keswani — Chairman and Managing Director
Well, I hope you are right. Let us see.
Aditya Damani — — Analyst
Right, sir. I think I’m fine for now. Thank you very much.
Patanjali Keswani — Chairman and Managing Director
Thank you, Aditya.
Operator
Thank you. Ladies and gentlemen, that would be our last question for today. I now hand the conference back to the management for their closing comments. Thank you, and over to you, sir.
Patanjali Keswani — Chairman and Managing Director
So, thank you, everybody, for your interest and support and the questions. We will continue to stay engaged. Please be in touch with our Investor Relations team or CDR India for any further details or discussions, and I look forward to interacting with you soon.
Operator
[Operator Closing Remarks]