Lemon Tree Hotels Limited (LEMONTREE) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Lemon Tree Hotels Limited's Earnings Conference Call. As a reminder, all participant clients will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Anup Pujari from CDR India. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone, and thank you for joining us on Lemon Tree Hotels Q4 and FY26 earnings conference call. We have with us Mr. Patanjali Kiswani, Executive Chairman of the company, Mr. Nileendra Singh, Managing Director, Mr. Kapil Sharma, Executive Director and CFO, Mr. Saurabh Sardal, Managing Director and CEO of Floor Hotels, and Mr. Mank Sharma, CFO of Floor Hotels. We'd like to 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 will now request Mr. Keswani to make his opening remarks.

Thank you very much. Good afternoon, everyone, and thank you for joining us today. Neil, the new Managing Director of Lemontree Hotels, will be covering the business highlights and financial performance for Q4 in full year 26. Post with Sorabh, the Managing Director of Fleur Hotels, will share an update on Fleur's business development. And lastly, I will then share an update on the demerger scheme, which we have also included in the earnings presentation this time. Post which, of course, we will open the forum for your questions and suggestions. Over to you, Neil.

Thanks. Thanks, Patu. Hi. So despite intermittent global headwinds, including renewed geopolitical tensions in the Middle East, Aviation disruptions and GST changes during the year, F526 was the best year in Lemontree's history across occupancy, ARR, revenue, EBITDA, PBD, PADS, cash profit, and Q4, F526 was the best ever fourth quarter on the same parameters. For the full year FY26, the total revenue stood at Rs. 1,452.7 crores, up 13% year-on-year. Net EBITDA stood at Rs. 699.3 crores. Up 10%, PAC grew at 19% to 288.3 crores, and cash profit grew 16% to Rs. 443.1 crores. A gross ARR stood at Rs. 6875 for the full year, and occupancy was 73.5%, both the highest we have ever reported for a full financial year. For Q4 specifically, revenue stood at Rs. 419.5 crores, up 11% year-on-year. Net EBITDA was 218.3 crores, up 7%. BAT was Rs. 316.5 crores, up 8%. And occupancy with a quarter was at 78.5%. A net EBITDA margin for FI26 was 48.1% compared to 49.4% in FI25, a contraction of about 126. BIPs for Q4 specifically, margin was at 52%, down 198 basis points from Q4, FY25. In F526, our margins were impacted by 580 basis points due to significant step-up in renovation expenditure as we invest in upgrading our own hotel portfolio, investment in technology, and the GST-related change that came into effect during the year, which only had a half-year impact on F526 and will have a full-year impact going forward. The GST impact will decrease year-on-year as the numbers of customers paying a rate below 7,500 rupees keeps reducing in the medium term, with our price hikes and AR growth. Additionally, while our current future supply is being planned under the upper-upscale Orica brand, which remains largely unaffected by the change, we expect all three expense heads to reduce to approximately 3.7% of revenue by FY28 and onwards, leading to a corresponding expansion in EBITDA margins. On debt, we have brought our total borrowings down to 1,500 crores from 1,699 crores versus a year ago, and our cost of debt has fallen to 7.42%, down 1,15 basis points versus a year ago. Our combined operational and signed pipeline inventory now stands at 22,581 rooms across 268 hotels, of which 131 hotels and 11,811 rooms are already operational. For FY26, on the asset light side, we opened 20 managed and franchise hotels with 1,523 rooms and signed 55 managed and franchise hotels with 4,912 rooms. Fee from management and franchise contracts for third-party-owned hotels stood at $73.9 crores in FY26, an increase of 23% year-on-year. Fees from Fleur Hotels stood at $95.8 crores in FY26, an increase of 80% year-on-year, which is partially subdued due to the impact of GST chains and accelerated renovation in the Fleur portfolio. Total management fee for Lemon Tree stood at Rs. 169.7 crores in FY26, an increase of 14% year-on-year. Lastly, the Indian hospitality market continues to be in favorable structural position. Demand is consistently outpacing supply in the mid-market segment, and which is where exactly we operate. Now, I will hand over to Saurabh to give an update on FLIR.

Thank you, David. Thank you, everyone, for joining us on the call. I want to spend a few minutes on FLIR's business and pipeline. Clear will be India's largest hotel platform by new entry, with 5,600 rooms and 39 operational hotels. While we operate pan-India, our economics are concentrated in top six cities that have structurally high barriers to entry and growing demand. We currently have four hotels with 875 rooms in our confirmed pipeline of... Which 572 rooms at Nehru Place, which is going to be the North India's largest hotel, are under the final approval stage before we commence construction. We have finalized the design for Aureka Nehru Place, a glimpse of which you can see in the annexure section of the investor presentation. Secondly, we plan to open two out of three blocks of Aureka Naldera Shimla by Q2 this year. to capture the increased demand during the summer season. Thirdly, in January this year, we have signed a license deed for a 47-room Heritage Aureka Hotel at Varanasi, located right on the ghat adjoining the river Ganges. This hotel has the potential to do extremely high rates owing to both the strategic location and the deep demand of the Varanasi market throughout the year. I also want to highlight that Aureka is the highest ARR and margin product, and the growing portfolio of Aureka elevates the group's overall profile and improves financial metrics and the growing network, further strengthening the brand. Combined with Warburg Pinker's primary investment commitment and strong internal accruals, we now have the capital structure and the institutional backing to expand our... Even further, we are focused on urban markets with structurally deep demand, leisure markets, and international destinations that Indian travelers visit frequently. On the pipeline, I can tell you that we are evaluating a healthy and growing number of opportunities. We work across these types, whether that's acquiring an asset. Existing asset or development of new hotel, FLIR's peer-leaning margins, and in-house development capabilities are key differentiators that compress the time and risk in underwriting new opportunities. We are not very rigid on structures, but we are very disciplined on returns. There are only a few players in the market that can build hotels at this scale and efficiency as FLIR. This is a genuine competitive advantage in the market, where good assets don't always come packaged neatly. Now I hand over the forum to Patu, give an update on composite scheme of de-merger.

I want to take this opportunity to continue the conversation on the de-merger scheme, this time with the results we have shared, pro forma financials for both Lementry Hotels Limited and Pure Hotels Limited, as they would appear upon the de-merger scheme becoming effective. The transaction itself is very simple. Warburg has completed the purchase of APG's stake in Fleur. Next, Lemon Tree will transfer 17 hotels and development capabilities in exchange for which Lemon Tree shareholders will get Fleur shares, leading to Fleur's listing as a separate entity. This scheme will result in two distinct financially sound businesses. Lemon Tree Hotels is a pure play. Asset-like company focused on offering hotel management, brand loyalty distribution, and digital services. Fleur Hotels will operate as a large-scale growth-oriented hotel ownership slash leasing platform with end-to-end in-house development capabilities and potentially, as Saurabh mentioned, a very large pipeline with a significant pool of available capital. Each entity will have its own management team, capital structure, and growth priorities, while continuing to benefit from long-term operating agreements and arrangements, and strategic alignment. Post-reorganization, Lemintree will emerge as a debt-free, high-margin, high-rosi company, generating strong free cash flows from fees and brand-related income. Fleur Hotels will consolidate ownership of our group's existing hotels, all of which will be fully renovated by the time of the demerger. From a shareholder perspective, the scheme is designed to unlock value while preserving continuity. Post-reorganization, Lemon Tree shareholders will effectively own close to 74% of Fleur hotels, 33% directly, and about 41% indirectly through Lemon Tree. This is, of course, before any primary infusion by Warburg Pinkers, and this is versus the 59% which Lemon Tree directly owns in Fleur today. Post-scheme Lementry and Fleur will continue to enjoy synergistic benefits. Long-term management contracts give Lementry stable and growing fee income from Fleur, and Fleur can also underwrite new opportunities with certainty and speed with Lementry as the management partner, while retaining strategic flexibility where the opportunity warrants for the other brands. Today, as Executive Chairman, I continue to chair both companies with direct ownership in each. My primary focus will be on delivering the FIOR pipeline and growth as its executive chair. In elementary, I will cease to hold an executive role March 27 onwards and transition to non-executive chair. Our core values, including our commitment to being an employer of choice and fostering an inclusive, diverse culture, will remain central to how both platforms operate as we enter this next phase of accelerated growth. With this, we come to the end of our opening remarks. And I would like to ask the moderator to open the forum for any questions that you may have.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to please use handsets while asking a question. Ladies and gentlemen, we will now wait for a moment while the question queue assembles. The first question is from the line of Archul Kumar with HSBC. Please go ahead.

Yeah, hi. Thanks for taking my question. I have two simple questions, actually. So, first of all, you know, tomorrow, after the merger, if fewer believe that its inventory can be managed by some other operator and not inventory, how would that happen? So, is it going to be on arm length basis or, you know, so can you please give a bit of a color on that?

Okay, first point, Hansal, is that even our management contracts, when Warburg came in, one of the things they did was check the quality and the economics of our management contracts and compare it to other similar operators, and I think they were quite happy with the fact that we were very much in sync with that. Now, the point is that If a new asset comes under development or acquisition, and it makes more sense for some other brand to operate it, then I can assure you as the FLEO chairman that we will make sure that happens. However, having said that, there is a long relationship between FLEO and Lementry, and if we continue to deliver the results that we do in the mid-market segment, especially in the upscale segment, then... There is also no reason why Lemon Tree will also be considered, and if the economics make sense, then Fleur will go with Lemon Tree. So, short answer, brand agnostic, but with one caveat that obviously Lemon Tree should not be discriminated against when opportunities arrive.

But then isn't that the loss of a management fee for Lemon Tree?

Yes, but Lemon Tree must be able to deliver best results in order to get it. Just because Lemon Tree has skin in the game with FLEO does not mean that it has an automatic right to any asset that FLEO develops. So, let me give you an example. It will, I think, answer your question. We bid recently for a five-star hotel. The economics were compelling. It was through NCLT. Unfortunately, we did not get it. It was run by another international brand and run very successfully by that international brand. The reason it was under NCLT was basically a financial structuring problem and the owner had obviously gone bust. We bid what would be a fair price for Fleur to buy it, assuming the same management contract. Unfortunately, it did not happen because we had an ultra-high network individual who outbid us, but my point here being that if we had bought it, we would have kept the contract with the existing operator.

Okay, understood. And then my second question, you know, within your brands, you have such a huge divergence in terms of rev par growth. So, Aureka was only 3%, while Key was 16%. So, what's going on there, and how do you see going ahead? I mean, do you think what kind of growth here, I mean, the kind of growth you're reporting at Keys, is the similar kind of growth is possible at Oracle also, or is it the sort of a high-end brand, so you don't see that kind of growth and the growth, AR or Red Park growth will be in low single-digit range? Thanks.

So, you know, I want to clarify one thing. Revpar growth is very subject to micromarket. Okay? Now, Keys operates in certain micromarkets, and Aureka Hotels operates in actually different micromarkets. Aureka is only two hotels. One is Bombay, and one is Udaipur. The keys is, you know, from Ludhiana to Vishakhapatnam to Bangalore in two markets to... Trivandrum, to Cochin, to Pune, and micro markets within those cities. So I would urge you not to look at, you know, I would urge you to look at micro market growth. So I'll give you an example. In Bombay, a very interesting thing has occurred. What happened was that in the last, I think, one year, about five hotels have opened in the micro market where Orica operates. I think it includes The Fraymont at the top end to Ginger, and then in between, at the lower end, you know, at the upper mid-scale end, there is something called Iconica, then there is some Novotel, some Radisson, multiple hotels opened, and temporarily, this is about 2,000 keys, temporarily, there was a supply glut, but Bombay always absorbed supply glut. So this is, I think, also a timing issue. I would urge you to really look at... A full year performance, and then look at how this grows over time. Udaipur is, of course, a very seasonal market and a wedding market, so I think I'm quite pleased with the way our Aureka Udaipur is also performing. But the growth was muted, and I think one very big reason which... What I don't know if any other hotel company has talked about is the impact of the Indigo shutdown in December, which had an impact in December, spilling over to January, and then, of course, the war, where the impact started marginally in early March, but by mid-March had become very significant and has, in fact, continued into April, too. So these uncertainties also affect, you know, because we are at the front, front end of discretionary consumption. And that affects some markets even more than others, especially airport markets. So, you know, one has to take all this into account. Now, if we look at the full-year performance, where is, do you have the full-year been done?

Rev power growth? I can take that. Yeah, just show me that. Yeah.

So, I'll tell you, we are looking at a quarter with some exceptional thing, but if I look at Rev power growth for Orica. FY 26 to FY 25, full year, it is 19%. And for Keys, it is 20%. And let me tell you an amusing thing. Keys is only reflecting the first two fully renovated hotels. When we finish the entire renovation, which is still ongoing, then Keys will show a much more, I mean, this 20% will continue for another year, another two years, till the entire portfolio is stable with the new fully renovated hotels. And I think I have mentioned this earlier too. Some past earnings call that Keyes is going to be, you know, a very positive addition to our brand. As far as the other portfolio goes, as I said, it's subject to local micromarkets and, you know, overall, we look at Repar as a group. Then, obviously, we do disaggregate and see where we could do better and so on.

Okay, perfect. Thank you. I'll come back in the queue.

Thank you. Our next question is from the line of Karan Khanna with Ambit Capital. Please go ahead.

Yeah, thanks. Firstly, Patu, given the macro environment, especially with both the largest domestic carriers, now announcing capacity cuts for next three months, even in the domestic routes. How should one think about the occupancy and rep power growth environment for specifically the next two to three months, and if this were to continue, then for full-year FI27 as well, especially given most of this capacity reduction is in the metro-to-metro routes?

So, you know, Karan, we took a call about... We are focusing on occupancy growth rather than price growth. Because in an environment like this, you are constrained with demand shrinking, and therefore you have to look at innovative ways to grow demand. Therefore, our strategy in April, where the slowdown continued from March, going on into May, was very clear that we would... Adjust pricing so that our occupancy would still continue at a premium to the market. Having said that, obviously, our strategy was not to drop prices ridiculously, and therefore, we would at least maintain year-on-year price levels, but do interventions, practical interventions in markets like the ones you mentioned, in order to maintain an occupancy premium. What I can report to you is that has worked very successfully. It is obviously, you know, normally we would like to report both occupancy and year our growth still occupancy hits a ceiling. I can tell you that in this quarter, amazingly, our occupancy has hit some form of a ceiling. We have never seen this before. But our average rate growth has not been significant. It has been actually more or less flat. And we are going to continue with this strategy as long as this uncertainty of war continues.

Sure. And then secondly, on the signings to openings conversion, you know, while you signed 55 hotels during FI26, openings stood at just 20 hotels with only one hotel opened in 4Q. So how should one read this? And more importantly, FI27 and FI28, where you have about 4,500 keys to be opened, what are the confidence levels here and risks of slippages, if any? And as a follow-up, what should the total management fee look like for FI 27 and 28 if the 4,500 keys opening is on track?

So, you know, the way to look at that, and I'm going to give you, Neil, the comments for the following year, but I just want to say one thing. The way to look at openings and the way to look at signings is as follows. Openings typically take, because most of our management contracts are signed for hotels, is not conversions, but hotels under construction. So the best way to look at growth of openings is look at what we signed, say, three years ago and use that as a rough benchmark as to what we will open this year. Very rough. So what did we sign three years ago? Can you tell me? So the good news is that while we opened about 1,500 rooms, 1,600 rooms, we signed 5,000 rooms. So technically, three years later, we should open 5,000 rooms, but we may in that year sign 10,000 rooms. So going back three years, we, I think, signed a little under 2,000 rooms, and we opened a little under about 1,500, 1,600 rooms this year. So we just follow that. By and large, you will be in the right trajectory. So if I'm signing 5,000 rooms, assume three years later I will be opening them, plus minus. Some might get delayed. None will open earlier, that I can assure you, unfortunately. But all will open that time or maybe six months slippage or sometimes even a greater slippage if the owner runs out of finance.

And the number for total management fee that you're mentioning?

For what?

For FI 2720, how should we think about that? I don't want to give guidance.

What you can do is look back. Okay, let's give a number. How many hotel rooms do you... Look, this becomes guidance, and if there is a slippage tomorrow, you will correctly ask, why did you say this? But we expect broadly to open. How many rooms this year?

About two.

Badun and the same clicker last year, so open about 2,000 rooms. Yes, correct.

Sure. And then lastly on just Aureka Mumbai, you know, if you can provide some color in terms of how the ADR occupancy and customer mix tended in FI 26 and expectations for FI 27, especially given capacity ramp up at Navi Mumbai. And as a follow-up with, you know, two large airports becoming operational at Navi Mumbai and Jever, how are you thinking about expansion near these airports?

See, these airports are opening up not to shift demand, but to actually cater to increasing demand. So what really affects us, say, in a micro market is the growth of supply, the growth of demand continues. Because all these hotels, all these airports, I mean, it is the new airports are basically catering to growing demand. So what effect, as I mentioned earlier, what affected us in Bombay was the growth of those. It was the supply growth of those hotels I mentioned. We took a call this year that we would also now start focusing on non-airline sector because we had kind of stabilized our crew levels. But the crew levels themselves shrank quite dramatically because this year we didn't get the wet lease crew of last year because that shifted to a lower rated hotel. So these are, I mean, you know, costs of doing business or... I'm not too worried about it. Our strategy was, can we grow either the ERR or the occupancy based on opportunity in this? And as I said, the rev power of Aureka as a brand grew by about 16% this year?

Yeah, about 19%.

Sorry, 19%. 19% for the year. For the year. So FY26 to FY21, it grew 19%. I mean, the top two performers were the top-end and bottom-end, Keys and

Aureka. And can I just give a little bit current to your question around, let's say, expansion?

Sure.

Most of our expansion is relatively recent, so this clip… All about opening, let's say signing 55 hotels and opening about 20 hotels will safely continue in the future. If you see a density of our hotels on one of our slides, the first slide in the deck, you will see that a large majority of our hotels are populated in the north and west. If we start now looking at the southern region or the eastern coast of India or the east and far east, There's a fair amount of expansion available at this point of time still as we go deeper into India. So purely from a general direction perspective, opening about 55 hotels plus every year and signing about 55 hotels plus every year and opening about 25 hotels-ish for the next few years is not true.

You will catch up.

So you will not open 25 hotels three years later. We will certainly catch up because the pipeline starts building up. So that starts getting operational. So the hotel that we signed a couple of years ago will pick up that.

I think the right way to look at it is how many did you sign this year, and three years later you should open approximately those. Approximately.

We will be excited next time onward. Thanks Neer and thank you. All the best.

Thank you. Our next question comes from the line of Abhay Kaitan with Axis Capital. Please go ahead.

Yeah, hi, and thank you for the opportunity. So my first question is again on the near term demand trends. So I know that elementary as a portfolio is not very much dependent on foreign travel. However, based on the conversation that we had with your peers, now, some of them are now getting more aggressive to capture the domestic demand. And if that continues throughout FI27, do you see that as a risk for the portfolio? And is there any particular strategy that you can do to maintain the occupancy level that you have right now?

So, I'll just say one thing. Every player in the market competes to maximize their outcomes. We are one of the players. What we do find is that our B2C business, which is direct customers booking us, whether through our own direct channels or through OTAs, has gone through the roof. It is the corporate travel that has slowed down. The other day, I was with a friend of mine who is the CEO of a large company in India, and they have 100,000 employees, and they typically give 100,000 room nights a year to the hotel sector. And he told me, this is late March, that they have given instructions that all travel must reduce to the maximum extent possible, partly because of the rising airfares and partly because they themselves are worried about what's happening with the war. So, corporate travel is the first that kind of dries up. When, when, when, when war happens, because it is under the control normally of the CEO or an equivalent CXO, and it is a one person decision. What is encouraging, however, is that the retail segment or what I would say the non-corporate segment has continued growing. And we have got more than our share than last year. So, as I alluded to earlier, our occupancy is much better than last year, same period. And of course, if you recollect, last year I think there was Sindhu roughly here. So we are in a peculiar situation where last year we had a short war in our engagement, whatever, in this Q1, and this year there is a war right next door to us. But we are coming out, I think, quite well. We are more concerned, personally, not about the fact that, you see, revenue is not in our hands. In a certain way, it is a function of how the economy is performing. What we are bothered about is how do we look at our cost structure, which we consider our moat. I did because of certain hard calls we took to do a catch-up renovation. And I think if I look at the JATKAs that we got this year, I mean, simply from, you know, renovation and from Exgracia and from Labour Code Impact and from GST Impact and so on, that has affected us to a significant level. And our intent now is how do we manage to... To bring that under control, and how do we increase our EBITDA margins to the levels they were earlier. And we have alluded to that in our investor presentation, and I think that's our current focus. And I'm pretty confident that we will do reasonably well in the cost side from this year on, so that... You know, even with a high single-digit to early double-digit growth, quarter-on-quarter, we still manage to maintain a high operating leverage.

Got it. That is very helpful. My second question is on floyer. So regarding the expansion to, you know, the 2500 extra room that it's supposed to be added. So just wanting to understand the thought process, are we going to more auricas, more premiums within that, or is it going to be more evenly spread between elementary and elementary premiums as well? And even across markets, are we looking at more metros? Are we looking at non-leisure markets? So any particular thought process, and also if it would be going to be greenfield investments or. Are we also looking at expansion strategies, you know, and what would be the timeline for that? And just brought on that would be very helpful.

I'll ask Saurabh as the CEO of Fleur to answer that.

Thank you. Hi, Ben. So, you know, the rooms which we are talking about 2,500, they are under various stages of discussions, and we are very sure that the capital coming in from Burbank Pinkus. And the strength of the balance sheet, as well as our entire project's team sitting on the player side. So it's a combination which I would say none of the NEPs have. Given that, we are fairly confident that we'll be able to add that many rooms. From a strategy of investment locations, we are, like we said, you know, around a large amount of players. You know, revenue comes from the top six cities in India, and these remains a core city. I think the question, Saurabh, is a different one.

He is saying, where are you going to invest? That's what I was coming to. Yeah, you're going to invest basically in upscale and upper upscale.

So upscale and upper upscale, which is between Aureka and Leventry Premier. And from a location perspective, we would like to be more in the top six cities. And from the kind of investment, we are looking at green fields, we are looking at operating hotels, We are looking at ground fields, all kind of assets we are looking at. However, it has to be core. Micromarket within those 6-7 cities and some international destinations where Indians are travelling. And very selective leisure markets.

But the timeline would be then close to 5-6 years for all the entire 2,500 rooms? Is that our life of that assumption?

Well, I can say that it is not 5-6 years. Those which we acquire is immediate. Those which we... Acquire, but need renovation will be a one-year period or two-year period. Those which are green fields will be four years. We never take five years. We take, you know, unless there is a post-major, we normally take three and a half, three to four years to build a hotel. So, it is a complication of all, but whatever I think Saurav was mentioning, it's also covered in the presentation. We are focused on deep markets, which are structurally deep demand in India. We are focused on... International destinations where Indians travel, we are focused on leisure markets, as far as destinations go, as far as brands go, when we invest our own money for green fields, we are focused more on Lemontree, Premier and Orica. So that is investment in green fields. But this is the broad strategy. There may be opportunities for us to acquire mid-market hotels, you know, which makes sense in their micro market, and we would very happily look at those two.

Thank you. This is very helpful.

Thank you. Our next question comes from the line of Samir with Macquarie Capital. Please go ahead.

Yes, thank you. So, a couple of questions here. So, if you can talk about GSP and the headwind that's creating, obviously, it's been significant. And yes, we'll see it go down, but it'll go down only marginally in fiscal 28. What are your plans there? How are you trying to achieve that offset? That's my first question. Second question is, it seems like in terms of renovations, we are seeing that slipping into fiscal 28 as well. Can you comment on that? How should we think about it? Are those the final handful of rooms or are the major rooms being shifted?

So, what's happening, Zahmet, is... You know, I think two, three quarters ago, I said the total spend we will do in FY27 in renovation will be a shade under 4%. I think I've forgotten I said 3.6 or 3.8. Typically, 50% is OPEX, 50% is CAPEX. A bunch of it is also replacement of air conditioning systems, you know, pumps, DG sets, so on and so forth for the GEES portfolio. And some of the very old hotels that we have in our own lemon trees. So if you notice, if you go to which slide is it? Slide 29 in our presentation, we try to give a color on the impact of these things and how we see them playing out with our revenue in terms of how it will affect our cost structure. So, in FY26, we spent 5.8% of our revenue on GST, tech, and renovation. In FY27, we have said the impact of GST will go from 1% of revenue to 2% of revenue because it's full year. We will continue our tech investment at a higher level because it will be 0.9% of a higher income rather than higher revenue rather than 0.6% of a lower revenue in FY26.

But renovation will come down to 1.9.

At that point, more or less the entire portfolio is done.

Then we will revert to our normal renovation. And I think I have mentioned this time and again that our

normal renovation is 1.2 to 1.4 kind of percent. Okay. So we are just showing, we are assuming that we are doing that 1.3 percent. It may be less, by the way, but it will certainly not be more. In some ways, this will compensate for the cost of the GST. But even GST, if we continue with a 7-8% price hike every year, as we normally achieve,

then the GST impact will come down to 1.7%,

and technology will then stabilize at about 0.6-0.7% of our revenue. And that's why we see that from 5.8% of these three crossheads, it will drop to 4.8% in this financial year and then 3.7% in the next financial year, about 1% a year. Besides this, what will change is that roughly 25 to 30 crores that we spent this year, incrementally, one-offs, on excretia, on the property tax at Delhi, the new labour code impact. That will disappear from the P&L from FY27, which is another 2% of income. So, to synopsize, we expect to save 1% of revenue every year from the GST.

Okay, thanks for the clarification. Thank you.

Thank you. Our next question is from the line of Vahibab Mulay with Hightong. Please go ahead.

Thanks for the opportunity. My first question was on our fewer de-merger timeline. Earlier, we had mentioned that a merger will be completed in 12 months in Jan. So, now the slide mentions that it will take another 12 to 15 months for SEBI and other approvals. So, can you just highlight the new timeline for the de-merger?

Okay. So, the CCI approval came in April. We are still waiting. Kapil, can you give some flavor on this, you and Mayan? Yes, so we are currently at the stage of shareholder approval and the safety approval.

So, that is the normal process before we file with the MCLT.

No, but you say, did it get delayed and why? I think there is a two month slip in. Yeah, so there is, not two months, rather I would say one month only, from that perspective. Generally, it takes three months for stock exchange, so I would say one month. But this estimate, which has been given a little conservative estimate, and because there are certain things which are procedural,

and especially I would talk about the NCLT, which is a process, depends on many factors, actually. So it could be shorter also.

We will try our best to how fast it could be done. But looking at the procedural of first motion order, second motion, and in between

there would be shareholder approval and creditors approval as well. So that's why we are taking that much. But it doesn't mean that it would go to end of CY27. That's not the case. So we would not be far away from what we said earlier.

Actually, the real issue is NCLT. Will it take 6 months? Will it take 9 months? Will it take 12 months? We have been given multiple possible timelines by experts in this. So, if that happens earlier, then it will be 12 months from now. If it happens later, then it will be 18 months. So, I am giving you an outer limit.

Understood. My second question was on the pro forma financials for the elementary standalone entity. We have reported 60% margins. My impression was that since a flow through for the management fee income would be near 75% to 80%, with 300 odd keys that will be under the lease model, overall margin should be somewhere in the range of 70%. So, can you just highlight why the margins are slightly at the lower end, despite the asset-like portfolio, and where do you think this margin trajectory could go towards?

Good question, because that's something we were discussing ourselves. Our expectation is that what we have said as guidance is that our steady state flow through will be 70% plus. We are currently at 60 for a very simple reason. One is that a bunch of our operating expenses in the corporate side of Lemon Tree have gone up. One of them being our tech investments and one of them being our hiring of new people. So we've got a whole bunch of new people in which actually Neil has brought in terms of operations, in terms of marketing, in terms of revenue, in terms of digital, in terms of whatever I missed out, and sales. So, these... This is top-level talent, and it will contribute to the growth of the revenue of the company, but has, you know, a lag effect to that, but has immediately come on the P&L. Second is, this is not steady state, what you are seeing. Pro forma, as we do better, this 60 will become 70, and maybe one day it will be 75 to 80. But that is when all the hotels that we are signing start giving us fee income. But it is very much true that we expect also north of 70% steady state, hopefully 75.

Understood, sir. Can I squeeze in the last question?

Please do.

On the renovations bit, can you highlight the current status of the renovation in terms of how much inventory is already renovated? And in the current quarter, in Q4 and Q1, how much part of the inventory is shut for the renovations? That's it from myself. Thank you.

In the current quarter, it could be maybe 400 rooms. Now, right now would be more, sorry, it would be, sorry, I was thinking, are you talking Q4 or Q1? It's current, right? Now it would be maybe, yeah. Fourth quarter. Fourth quarter would be 400-500 rooms because we normally maximize renovation in summer and minimize it in winter. But certain rooms like Keys, Whitefield is not complete. I think it will be complete in the next four months. Certain parts of Lemon Tree, Premier, Bangalore are under renovation. Keys, Hosu Road is under renovation. Keys, Pimpri, Pune is completely renovated. Red Fox Hotel, Delhi, which has now been rebranded to Lemon Tree Hotel, Delhi, has, I think, about 40 rooms to be renovated in this H1. But broadly, we, of the key, I mean, if I look at our portfolio, we had about... You know, the non-renovated rooms were about 17, the rooms we did not have to renovate were about 1,700 rooms, which is Aureka Bombay, Lementary Premier, Bombay, Lementary Premier, Pune, Lementary Premier, Calcutta, and Aureka, Kudaipur. So, if I take those out and say that the amount, the ones we wanted to renovate are 5,000, of which every renovation is in 4,000, the 4,000, I would say about 85% is done. Okay, but renovation does not only include renovating rooms and public areas. It was also a catch-up in major repairs and maintenance and in replacement of equipment. That too is continuing. That is why in this year, our capex is as high as our renovation spend. In fact, a little higher. But from next year onwards, while we are showing, I think, 1.8, 1.9.

1.9 in F527, 1.3 in F527.

Yeah, so next year onwards, it will be 1.3 or more likely. I think that's quite aggressive. It will probably be 1.2, 1.1 for next year. In fact, actually, I think it will be 1%. But we have given you, you know, an outer limit because there is always some stuff that happens, some equipment that needs replacement and so on.

Understood, sir. Perfect. Thank you so much for the detailed answer and all the best.

Thank you. The next question comes from the line of Sumanth Kumar with Motilal Oswal. Please go ahead.

Yeah, hi sir. So, in Aureka, the occupancy has declined by 2%. So, can we assume this decline is majorly due to Udaipur?

No. This is because very large wet leaves in Aureka, Bombay went away. And one can assume that actually, you know, that was a one-off. So it has affected us. We were happy to take it when we needed it. But you will notice that has been commensurately compensated by the rate change because the segment changed, therefore. So occupancy dropped by 2%, but the wet lease was about 8% of occupancy. It means really the wet lease went, but we replaced it with 6% of other demand, and that's how it flowed. And I think, Sumat, also keep in mind that we had a big impact due to this Indigo, and we also had a big impact due to the war. And I would urge you to look at the full year figures, which is, what were you saying, Neil? Why didn't you say it?

Yeah, so much, I think the best way to look at Orica, or any hotel business in this case, because last year, every quarter had some extraneous event. So, especially to your question, the Q4 performance in Orica is essentially a March performance. In fact, January was, let's say... Reasonably good. February was excellent. It's only March when the war happened and the air traffic declined that we had challenges in filling the hotel up. But if you look at the full year, Orica, both the brands moved from occupancy of 62% to 74% as an aggregate, and therefore the 19% ref car growth. So very, very healthy as a brand portfolio.

And price, error increase of 5% is all because of a change in product mix in Aureka Mumbai.

You're talking about Q4?

Yeah, Q4, yeah, quarter, yeah, this quarter.

So in Q4, March, the price went down, retail price, because demand dropped. In February, it went up. First two weeks of January, it went down because demand dropped. But second two weeks of January it went up. So it's a question of... You know, these extraneous circumstances Neil was referring to, that determine our retail pricing. Corporate pricing does not change, but even corporate demand came down in March.

So, 5% increase is because of Aureka Mumbai or Udaipur?

I think Aureka Mumbai would, Aureka, same. Yeah, it would both be, maybe Aureka Udaipur was a little higher. You know, it would not be material. Let me put it this way. Because if Aureka Bombay grows by 4% and Aureka Udaipur, which has one quarter of the inventory and similar occupancy, grows by 15%, the average is still 5%.

Okay. Got it.

Got it.

Okay. And see, we have seen a significant growth in KEYS and what we were talking about post-innovation, the ARR is going to increase. And currently, the KEYS ARR is 2,900+. And you were talking about 16% kind of growth every quarter and couple of years. So can we assume this KEYS ARR REVPAR can reach to 4,000 level?

The keys ARR currently is what I do. Two years ago, I think I said that keys was in 3000 something and Red Fox was 4000 something ARR. And I said keys should move towards Red Fox's ARR. I think this was in an earnings call maybe 18 months ago. And I was referring to post-renovation. So let me give you one example, because you have one fully renovated hotel. If you go to the investor presentation, which slide is it, where we show what happens? The case study. See, which slide? Go to slide 56. This is the first fully renovated hotel from last year. So we've been able to focus both on occupancy and on ARR. Because the others, when you kind of either rebrand or you renovate fully, then you can, you start with the price change and build up the occupancy because now you are targeting a different segment. Okay? Are you on that slide? 56, Suman? Yes, sir. You will see what I mean. So, this is a 100-room hotel, and today the EBITDA is 11 lakhs a room. Now, obviously, all Keyes hotels won't have 11 lakhs a room. I've actually been conservative and said we want 60 crores EBITDA, which means over 930 rooms. We want less than 6 lakhs a room EBITDA from Keyes.

Yes, yes. Yeah, yeah, yeah. I got it. I got it. So, overall, my question was, what you were talking about, the ARR is going to reach at the Red Fox level, okay? So, next two years, overall, currently, we have ARR of 4,700 in Q4, and average might be maybe in the range of, say, 4,200, 4,300. So, is there potential to reach this ARR, hotel ARR to 6,000 in next two years?

That is market-driven. I can't comment on it, but what I can tell you is, Key's ARR is today close to RedFox ARR, but when I say we did an occupancy rate of 64% in Q4, there were a bunch of rooms also shut. You know, I don't know the exact number, but a few hundred rooms of keys were shut, because those were the ones that we were renovating around the year. So, I do not see it as ambitious to say that we would like keys occupancy to be like Red Fox's occupancy, which is about mid-70s. And in ARR, obviously, even if you assume that it is not 6,000, but 5455, you should get to your 60 crore EBITDA number. Which is our target for this portfolio, at present.

Got it. Got it. Thank you so much.

Thank you. Our next question comes from the line of Jinesh Joshi with PL Capital. Please go ahead.

Yeah, thanks for the opportunity. Just one small observation. Our management fee income from third party was up by about 29%, which was a very healthy growth. But the same from FLIR was up by only 3%. So, does it imply that the managed portfolio was relatively less insulated from the Middle East crisis as compared to FLIR? Or is there something more to read into this?

No. You see, a large part of our fees comes from incentive fees, which is delivery of Tibet at different slabs. So, you know, our incentive fees can go from 1% of revenue to 5% of revenue based on which slab of GOP or hotel level EBITDA we are at. Now, what happened was that during this year, we aggressively renovated a lot of the owned portfolio with a lot of obviously fewer hotels in that portfolio. So, GST impact and elevated renovation impact dropped the EBITDA mansions. As a result, our incentive fees were significantly affected. So that is, again, linked to our delivery of EBITDA. Now, if it picks up as I am, you know, hoping it will, then obviously our fee will pick up proportionately.

Plus, Janesh, the only other thing to add apart from what Patu was saying is that when you look at the management of third-furchase hotels, the full year, I'll give you the full year picture now, the full year fee growth was 23% in the third-party hotels and flow was 8%. 8% broadly because of the same reason as Patu said. And the reason is 23% is because it's both same store and scale driven. There were net additions in the third-party owner. Let's say base of hotels. And therefore, it's a 23% increase on base to base. For free hotels, the 8% full year number is based on the same store basis because there was no additional rooms added in that base. Make sense?

Sure, sir. And secondly, if I look at our presentation, I think in one slide we have given the ratio of negotiated room lines. So I think that figure in this quarter was about 55% versus 59% in the base quarter. So just wanted to get some understanding. I mean, have we lost some corporate contracts or is it that due to fall in occupancy due to the Middle East crisis? Some of these nights got reallocated to the retail category and hence temporarily the mix has changed. Because I think there's a differential.

In a downtime, And Janesh, what you're looking at is the Q4 picture. It is not as material when you start looking at the full year picture. Thank you.

No, our long-term strategy is to focus on building more and more. See, what insulates a company? Dependence on large aggregators or large, you know, concentrated demand or distributed demand. We are very clear, as we grow our portfolio and network, we want distributed demand. You know, we have a joke within our company that it is better to have 100 individuals booking you than one company giving you 100 room nights, because that one company can disappear tomorrow, but the 100 won't. So we are very clear that as we grow to 20,000, 25,000 rooms, operating, we want 65% of our business to be retail, which is. Direct to us, so it is really a C2B business, customers coming to us directly, sometimes through OTAs, who are our partners in this endeavor, and more and more directly through our website, our loyalty program, and our direct-to-hotel or call center.

Sure, sir. Got it. Thank you so much and all the best.

Thank you. Our next question is from the line of Anu Juppate with Investec. Please go ahead.

Yes, thanks for the opportunity. Just one question from my side.

Have we set aside any total capex or capital outlay specifically for this proposed addition of 2,500 keys across LAR going ahead, which I believe is our next two to three years time period?

So, you know, if you look at acquisitions today, Depending on seller's need and buyer's need, it is available anywhere from 8x of EBITDA to 16x of EBITDA. In some trophy assets which we are not interested in, it could be even higher. So, the capital we put aside is two. One is, if we are buying an existing asset, we obviously will have to pay a higher price for it because It is an operating asset, it has a bidda up front, and the maximum investment we would make would be in renovation if required, which obviously we adjust in our acquisition price. If we build ourselves, then it is naturally much cheaper, but there is time to market in that case. If I look at the committed capital firm, Warburg, this is entirely contingent upon availability of the right deals. And that 2,500 active discussions are, many of them, right deals, then we have the potential, if I take Fleur and Warburg's investment into account, we have the potential to deploy up to 3,000 crores in the next 12 to 18 months. Now, will we deploy it? If all the 2,500 come, plus everything that we are doing, then yes, we will deploy it. If it doesn't happen, we will deploy less. That is one. Point number two is our current assets like Nehru Place. Nehru Place will, best guess, require 700 crores. As Saurabh had mentioned earlier, it is the single largest asset in North India. The next largest is actually a neighbor of ours here called Andaz, which is 525 rooms. This hotel, the cash flow will be over the next three and a half years, with 60% in the last 18 months, because that's when real money goes into finishing our hotel. So we feel that we can build through our internal accruals. So the cash that we have available, which is from Warburg, and our own, you know, likely free cash flow in this financial year, plus debt. Should safely enable us to buy these 2,500 rooms, if all fructify, and any other opportunistic acquisitions which align with the strategy of core markets, high leisure demand markets, or international markets where millions of Indians travel.

So, that's helpful, sir. Thanks for this. That's it, sir, my friend. Thank you.

Thank you. Our next question is from the line of Nikhil with Kizuna Well. Please go ahead.

Hi, sir. Thank you for giving me the opportunity. So, my first question is on margin side, like for the lemon tree hotels and the flower hotels. So, when I look at our cost savings that we are estimating is going forward. So, most of the cost savings is coming from the renovation expense coming down. So, all the flow through in the margins will go to flower hotels. Is that understanding correct? And so, how much steady state margin or in FY27, FY28 margin, how much are we thinking for the flower hotels?

Margin. Well, pre-feels, these same stores should be in the late 50s. Pre-feels.

Yes, sir. And so, my second question would be on which January when we did this D-Motor announcement. So, we said that our pack margins for the elementary hotels would be somewhere between 60%. What? During the January call for the DMOJR announcement, we said that on LevelCutors, PAT margin would be around 60%. PAT margin? Yes.

No, not PAT margin. I assume you are talking EBITDA margins.

In the January call, we stated that's it. That's why. I was just coming up with you.

No, I only talk EBITDA. PAT, I never talk about. I think to review what I said, it could be EBITDA. So, anyway, let's assume it's EBITDA. What is the question? Please ask.

Yes, sir. Then the question is answered. So, that is it, sir. Thank you. Thank you very much.

Thank you. Thank you. Our next question comes from the line of Vikram Shah with Vikram Securities. Please go ahead.

Good evening, Namaste, sir, and congratulations on a great set of numbers. My question was towards the 2,500 room deal, and with or without it, what sort of peak debt number are you comfortable with?

So, if you look at our debt to EBITDA today, it is about 2.1, 2.2, is that correct? 2.25. So, see, in a high-growth company with stable earnings, you can technically go forex debt to EBITDA, but we are, I think, much more conservative. We would, if we deploy 1,500 crores of capital, and we would probably borrow, you know, our debt would go to mid-2,500 to 3,000 crores as a consolidated entity of FLEO. Which means that our, you know, our debt to EBITDA would temporarily go up till the EBITDA started flowing in. Now, this is, of course, also a question of how much of these 2,500 rooms have existing EBITDA and how many will give EBITDA after a year or two. So, it would be a mix and match. I can't comment. It depends on which of these 2,500 rooms we finalize. And I think this question you could perhaps ask us 12 months from now, or earlier as possible.

Okay. And so regarding the Iran war, how has it been in the last three months, and if status quo is maintained for the next six months, how worried will we be?

So we are in the middle of the war, and as I said, we find that our occupancies have improved, not diminished. But I cannot comment because what happens is as uncertainty and volatility continues. Then I am more concerned about the impact on the Indian economy. See, oil, inflation, current account deficit, all this will start hitting our country very hard. And by the way, it's not Iran war, it's the U.S. war against Iran, I would say. But anyway, so, and the thing is that if there is a conclusion to the war, then this question is irrelevant, but if there is no conclusion, Then we have taken the necessary steps, you know, to mitigate our cost structure appropriately, and I think we will be fine. Fortunately, this war has not had actually an impact on us other than in the months of March and April. May has been surprisingly good. And I'm just hoping that, you know, if it doesn't deteriorate further, then we should do reasonably well. And if it repairs and, you know, the economy is not significantly hurt, then we would do even better than that. So you're asking me a very difficult question.

I can't really answer it. It was just directional in the, you know, more than anything, but I'll just squeeze in a quick last one, if you don't mind. For the next five years, again, directionally, could you give us an understanding where you foresee, like, CAGR growth for LemonCree, the platform owner, the asset-like, over the next five years, now that you've freed up, you know, it's a very asset-like company and a lot of capital is deployed and so much opportunity. How do you see the next five years?

See, let's go back for a minute. I don't want to give guidance, but I can give you a direction. We are signing 5,000 rooms a year. I think that will accelerate. One of the key resources we have hired, or Neil has hired, is a top-line business development head who has aggressively gone with his team to go and get more and more hotels. Remember, 2.5 million rooms in India are unbranded. We have strong strengths to convert most of them because they are in our sweet spot, which is the mid-market, to upper-mid-scale segment. We have grown our fees at only 23%, and I'm using the word only. But if we, and that is with about 6,000 branded rooms under the management contract side. Keep Fleur aside for a moment. If your, now, if your adds the two and a half plus the thousand rooms under construction or 800 rooms under construction, then your size will increase 60% in the next three years in terms of operating assets. Those fees will come directly to Lemon Tree, hopefully, unless there are some hotels which go to some other brand. As far as the managed portfolio goes, we are talking about... Maybe 2,000 rooms opening in FY27. In FY23, I don't know the number, but certainly by FY, another 2-3 years from now, we'll be opening 5,000 rooms a year because that's what we are signing now. So, you can do the math then. You say, FY27, you know, we'll open 2,000 rooms and we have 11,000 rooms. In FY28, you know, Fleur will start contributing more. We will open maybe 3,000 rooms. In FY29, maybe we will open 4,000 rooms. One can have a range. How many rooms we open, and you have a simple number, which is the following, and this is where I would be very careful about assessment. In the first one or two years of opening a hotel, normally one year, the income is not stable. So our fees are subdued. The minute the hotel gets stable, then our fees start kicking in on a full basis. So really, the fees can increase by 50-60% on a stable hotel. So one has to compensate for that and say, okay, I'm opening 2,000 rooms this year. Maybe I'll earn 100 rupees a room. But next year, these 2,000 rooms will give me 150 rupees a year. And then it will be 150 going forward. And therefore, you have to do this adjustment also in the fee income for the first 12 to 18 months, depending, of lower fees till stability. Okay, but if you look at 23 to 26, our fee income of the managed portfolio grew at 27% a year. Got it. I would obviously expect it to be larger. Although the base has become larger, this fee income should also grow much faster. I mean, we have projections, but I'm not going to share it with you.

Okay. Thank you so much. Congratulations again. Thank you. Thank you.

Thank you. Our next question comes from the line of Rahul with ER. Please go ahead.

Hi, yeah, so I just wanted to ask about this loyalty program of yours.

So a lot of your international peers have very certain loyalty programs and tie-ups with banks and credit card issuers. I'm very surprised to see that as an asset-right company, which is becoming now, why don't we have a very exhaustive application, a mobile app, a loyalty program, because that will really drive consumers towards you, more particularly on the retail side, which will be booked directly through

you, rather than through OTS. That's my question.

Fair point, Rahul. And that needs, of course, significant technology investments. So if you want to answer this in a broader way before I come to the key points. So far, let's say, our technology investments have been focused on essentially making the operations. Seamless, getting our data aligned, making sure we are fit for purpose, for scale, and therefore we've invested in our revenue management system, we've invested in a market tool, we've invested in, let's say, salesforce automation. And what remains? Now, going forward, is when we should be able to direct our technology investments in some legacy systems transformation, like a PMS system, and working on our loyalty engine, which means essentially working on our website, our booking engine, and the loyalty program. So the benchmarks that you're talking about through international hotels is a very, let's say, opt. Let's say, executed playbook. It helps us, of course, in rebalancing our segments more towards the direct business, and that's what we can expect from us in the next couple of years. We're currently at the early stages of driving investments on the loyalty side. Though the loyalty program was rehashed a couple of years ago, we have about 24 lakh guests there. 48% of them are... I would say, off-the-room nights that we sell in a year, 48% or almost 50% of them are driven by our guests. From a loyalty guest, if I execute or sorry, if I eliminate the first-time sign-up of the loyalty guest, 25% of our room nights, so the volume that we deliver every year, is given by our loyalty program. So it shows all good signs. The benchmarks versus international chains are also pretty solid at this point of time, and therefore, the next stage is what you just alluded to.

That would be all. I think I just look forward to a really great app being an elementary customer myself. That would be all.

Likewise. Thank you.

Thank you. One question, sorry. Is Nishant of Kizuna Capital still on the line? Anoop, can I talk to him?

One moment, please. I will just check.

Sorry, it's nickel. Nickel and Zona capital. Checking for one moment, please.

Sir, the line for Nikhil from Kizuna. Wealth has been unmuted.

Nikhil, are you on the line?

Hello.

Nikhil, you are there?

Yes, sir.

My apologies. We just referred to the transcript. You were talking about what I said about lemon tree steady state, that when it becomes a pure, what is it called? Pure play, brand and asset owner, on a steady state, when our EBITDA hits 75-80% and tax is 22-25%, then you are absolutely right. There is no depreciation, there is no interest, and our PAT will be 60% of the revenue. So, thank you. You said something correct and I was incorrect. Thank you.

Thank you, sir. Thank you for clarifying that, sir. So, sir, let's say now my second follow-up question would be on that only. So, now coming to the server pad margins, in our recent quarter that we have reported, our pad margins are coming out to be 40%, and for the effort modifier, it was 45%. So, how are we planning to increase those to 60%? And because most of the margin flow-through is going to go to floor rather than lemon tree. Because all the technical expenses are going to be staying at 0.7 or 0.9% of the revenue. So, can you help us understand a bit more on how the margins will increase? Because all the technical expenses will go to Lemon Tree, if I'm not wrong.

You're absolutely right. So, let's put it this way. See, Lemon Tree's current investment in technology, you must consider, although it is in the P&L, must be considered as an investment, which we have to monetize. Okay. So, on a steady state basis, we are not going to significantly increase our main expense, which are two, in Lementry as a brand, which is corporate expenses and technology expenses. So, as our revenue grows, in terms of management fee income, and we've been discussing this, if you do some rough modeling, then on a steady state basis, hopefully earlier rather than later, The growth of management fee income will translate to a flow through of about 75-80%, okay, on a steady state basis. And that is what you should track over the next two years, two and a half years. How is this happening? And of that, this is including technology, by the way, then 75% flow through means that if you take tax at 22-23%, then you have a 60% tax. This is broad, okay? Obviously, if the fee income grows much faster than the fixed costs of lemon tree, then what will happen is that we will then hopefully achieve that 80% EBITDA, take out 25% tax, and you have 60% back. Does that make sense?

Yes, sir. Makes sense. Thank you, sir. Thank you very much.

Thank you. Our next question is from the line of Sriram R, an individual investor. Please go ahead.

Thank you for the opportunity. Post restructuring, Lemon Tree is expected to generate substantial free cash flow over the coming years, right? So how are you thinking about capital allocation? Like, would the priority be to reinvest in adjacent growth opportunities or return the excess capital to shareholders through buybacks?

So Lemon Tree will not need any significant capital other than potentially investments in technology or in marketing and so on. So it will be essentially a zero-debt cash-ecrative company, and what we will do is, I think, we will sit down as a board and decide what our dividend distribution or give back to shareholder policy is. So lemon tree will effectively move into Distribution of profit to shareholders. As far as Fleur goes, Fleur is not currently seen as a dividend distributing company, at least currently. We would like to deploy capital because we see we can really add to shareholder value by growing the business, and so it will be more focused towards capital growth or share capital growth. And share value growth rather than distribution to shareholders, because we think we can give a better return to shareholders simply by growing the business.

So basically, we are thinking about shareholder buyback or dividend for the elementary standalone. So that means we are ruling out any investments into adjacent growth areas, let's say F&B or some other areas, right? So we won't be investing in those lines. Am I right?

Currently, we don't see growth in F&B because F&B has specialists. They have, you know, it's not our core competence, frankly. What we might, look, it's obviously not on the top of my mind or even our board at present, but there are interesting opportunities to acquire asset-like platforms. At the right value, which adds value to our entire portfolio of brands or to our customers or to our technology platform, then it is possible we would invest there. But frankly, we would have a very high hurdle rate there because our view is that if we are not sure we can adequately reward the shareholders by not giving the level of dividend we should, then there should be a compelling reason to then do this acquisition, whatever that is.

Thank you so much.

Thank you. Next question comes from the line of Web of Mulay. Hi, Tom. Please go ahead.

Hi, sir. Thanks for the follow-up. Just small bookkeeping question. Can you share the room revenue and F&B revenue for full year as well as Q4 if it's possible?

Okay. Nippon, our head of strategy will call you and explain that to you. Thank you.

Thank you. Ladies and gentlemen, as there are no further questions, we have reached the end of question and answer session. I now hand the conference over to the manager for closing comments.

Thank you once again, everybody, for your interest and support. We'll 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. Thank you and have a good weekend.

Thank you. Thank you.

Thank you. On behalf of Lemon Tree Limited, that concludes this content. Thank you for joining us. You may now disconnect your line.