Indian Hotels’ debt levels will come down to healthy levels: Puneet Chhatwal

Puneet Chhatwal, MD & CEO, Indian Hotels Company Ltd (IHCL), spoke about the impact of GST rate cut on room tariff, the financial performance of the company, strategy behind the positioning of the brands, and expansion among others during an interview with Swati Khandelwal. Edited Excerpts:

Do you think the GST rate cut for rooms tariffs of Rs 7,500 and above to 18% from 28% will create a huge demand?

Yes, the government has taken a step in the right direction. This is an important step as tourism creates employment opportunities. Every job created in the tourism sector creates 8-10 jobs in other sectors, which, in turn, provides employment opportunities in the country. About 10% of the global GDP comes from tourism and 10% of all jobs created in the world also comes from tourism. Tata group through Taj and other brands will like to expand itself. .

Where is the profitability in the scheme of things in Aspiration 2022?

It has been said that the EBITDA margin will be increased to 25% from 18% and have reached around 21% today and don't have any doubt that we will not be able to reach the mark of 25%. That is almost a 50% increase in margins from 17 to 25, which is in-total 800 bps but percentage-wise it is almost 50% increase. It can be achieved by new hotels, topline growth and cost optimisation as well as new businesses like 'SeleQtions'. The brand has been launched in Goa and Cidade de Goa is an important property for us under SeleQtions.

What are the plans to reduce the debt of the company?

Debt has been halved by now, debt to EBITDA has been brought down from 6.4 to 2.2 in the last financial year and is likely to go below 2 in this financial year, which is a very healthy level. We have gone for rights issue for the same and haven't gone for any new debt. Apart from this, whenever, we sell any non-core assets like apartments and we have 40-50 apartments in Mumbai itself, which were bought in the 1970s and 80s, when we were supposed to provide staff accommodation to employees. The money collected through the sale of the property is used for debt payment.

What is your net debt at present?

Our debt stands below Rs 2,000 crore and will be brought down in time to come below Rs 1,000 crore in the foreseeable future.

Let us know about your current investment plans and how you will fund it?

Our brands are good, especially Taj is unbeatable at the global level as well. That's why we are not supposed to invest in any of the last forty contracts that have been signed. We have just invested in our existing portfolio to upgrade them to a higher level as we are the oldest operating company, almost 120 years of existence. Many of our portfolios are 30-40 years old including Taj Fort Aguada Resort. So, we are investing in maintaining and upgrading such properties. But we will make selective investments in new projects and it would be done through a platform that has been created with Government of Singapore, GIC, of Rs 4,000 crore, in which 50% will be debt and rest equity. We will take a small portion in that equity for various strategic and selective assets like the ones in Goa, Mumbai, Delhi, Kolkata and Bengaluru. So, to take our portfolio to the highest possible level because our ultimate aspiration 2022 aims at being the most iconic as well as the most profitable hospitality company in South Asia.

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