Samhi Hotels Ltd - May 2025 Earnings Call Transcript Analysis

May 2, 2025 · 5 min read

Earnings Call Transcript Analysis Report #

Total Investment by GIC: Rs. 752 crores for a 35% stake in three subsidiaries.
- Upfront: Rs. 603 crores, primarily for debt reduction.
- Deferred: Rs. 149 crores over two years for CAPEX.
Debt Reduction: Expected reduction of “Rs. 580-odd crores” in SAMHI’s overall debt.
PAT Impact: Anticipated “15% to 20% upward impact on PAT” for SAMHI due to the transaction, after factoring in minority interest.
Net Debt to EBITDA: Expected to be “less than 3.5x” at closing, aiming for “less than 3.0x in the next 12 months.”
Valuation of Seed Assets: The three subsidiaries are valued at approximately “Rs. 2,200 crores.”
Trailing EBITDA of Seed Assets: Rs. 133.8 crores as of December 2024.
Interest Cost Reduction: Expected decrease from “9.4%” to “lower than 9%.”
Asset Management Fee: SAMHI will receive a “4% of the EBITDA” fee from the hotels within the GIC platform.

EBITDA CAGR for SAMHI’s overall portfolio (excluding new acquisitions beyond the current pipeline) is conservatively estimated at “15% to 20%,” projected to generate “Rs. 1,000 crores to Rs. 1200 crores of cash” over the next three to four years.
After identified CAPEX of Rs. 500 crores, an “investable surplus of about Rs. 500 crores” is expected.

Significant deleveraging strengthens the balance sheet and “boosts future cash flows.”
The partnership is a vehicle for future growth in the upscale segment.

Strategic Partnership with GIC: Establishes an “investment platform for upscale and higher category of hotels in India.”
- GIC acquires a 35% stake in three SAMHI subsidiaries:
  1. Courtyard and Fairfield by Marriott Bangalore Outer Ring Road
  2. Hyatt Regency in Pune
  3. Trinity Hotels in Bangalore, Whitefield (to be redeveloped into Westin & Tribute Portfolio)
Capital Recycling Strategy: The transaction is a core part of SAMHI’s “stated strategy of capital recycling.”
Investment Platform Details:
- Indicative commitment of “$300 million,” including seed assets. GIC’s share is 35%, SAMHI’s 65%.
- The platform has “first right on upscale hotels that we find as an acquisition opportunity.”
Ongoing/Completed Projects:
- Rs. 149 crores from GIC will part-fund CAPEX for the “proposed Westin & Tribute Portfolio Bangalore Whitefield dual branded hotel” (Total CAPEX: Rs. 275 crores).
- Other growth drivers: “New Holiday Inn Express is coming alive across the three markets, the W in Hyderabad which is under development.”
Operational Changes:
- Post-transaction, SAMHI JV and Innmar will become debt-free. Ascent Hotels will retain about Rs. 200 crores of debt.
- Shareholder loans from SAMHI to these SPVs will be repaid.

Industry Trends & Opportunities:
- The partnership targets “upscale and higher category of hotels in India,” indicating opportunity in this segment.
- Focus on “acquisition and turnaround.”
- Continued opportunities on “long term variable leases,” particularly in the broader midscale segment.
Competitive Positioning:
- The ability to attract GIC is highlighted as a competitive strength.
- The partnership aims to make SAMHI “a fairly competitive platform for future growth.”
Market Cycle: The partnership is starting in a “very strong market cycle.”

Leverage: High leverage was a significant concern addressed by the transaction.
Capital Intensity: Upscale hotels are “capital intensive.” The GIC partnership helps mitigate this.
Project Execution: Project development and rebranding (like Whitefield) carry execution risks.
Market Uncertainties: The hotel business is inherently “volatile.”

Deleveraging: Net debt to EBITDA to be “< 3.5x” on closing, “< 3.0x” in the next 12 months, and aiming for “2.5x.”
PAT Growth: 15-20% upward impact on reported PAT due to the transaction.
Cash Flow Generation: SAMHI projects accumulating “Rs. 1,000 crores to Rs. 1200 crores of cash” in the next 3-4 years, with “clear visibility on an investable surplus of about Rs. 500 crores.”
Interest Rates: Expectation for overall borrowing costs to fall “lower than 9%.”
Growth of GIC Platform: Intention to “grow this platform beyond the three seed assets.” The platform has a “$300 million” indicative commitment (including seed assets).
Continued evaluation of asset recycling in the midscale portfolio, with optimism of “concluding one of that at least in the course of the next six to eight months.”
Future growth: Focus on “acquisition and turnaround” for the GIC platform.
Maintaining a healthy balance sheet is a priority.

Most Pressing Analyst Questions:
- Details of debt reduction at SPV vs. parent level.
- Rationale for structuring the deal at the subsidiary level vs. listed entity level.
- Future growth capacity of the GIC platform and SAMHI.
- Financial impact specifics: PAT accretion, interest savings, asset management fee.
- Exclusivity terms with GIC and plans for remaining upscale assets.
- Valuation metrics of the deal.
Management’s Responses to Challenging Questions:
- Subsidiary vs. Parent Level Investment: Allows for GIC’s “active participation.”
- Debt Allocation: Explained mechanics of upstreaming capital and repaying shareholder loans within SPVs to optimize overall debt reduction.
- Future GIC commitment beyond seed: Clarified the $300M platform target is indicative and both partners are well-capitalized.
Questions Evaded or Answered Indirectly:
- Forward-looking EBITDA projections for specific assets.
- Specific key/hotel count targets for the GIC platform.
New Information Revealed During Q&A:
- TTM Dec 2024 EBITDA of the 3 assets: Rs. 133.8 crores (SAMHI JV: Rs. 74.1 cr, Ascent: Rs. 47.6 cr, Innmar: Rs. 6.7 cr).
- SAMHI JV: GIC buying 14% from SAMHI for Rs. 115 crores, balance through primary infusion.

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