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Royal Orchid Hotels Limited — Credit Ratings, 11-02-2025: Credit Rating- Revision
Royal Orchid Hotels Limited reported consolidated revenues of ₹157.6 crore, reflecting a year-over-year growth of 5.8%. This increase is attributed to a rise in occupancy rates and average room rates, driven by demand from leisure travel, social events, and a resurgence in business travel, despite a temporary slow-down due to general elections in the first quarter.
Net profit for the half-year was reported at ₹47.4 crore, showing a slight increase compared to the previous period. The earnings per share (EPS) for this period stands at ₹2.56, indicating healthy profitability. However, the company's operating margin decreased to 20.7%, down from 26.0% in the prior half-year, primarily due to higher employee costs and the impact of renovations on newly opened hotels.
Total operational costs increased, influenced by expansion efforts and staffing expenses. Despite these pressures, the company's ability to maintain operational efficiency has helped it retain comfortable debt metrics with a total debt/EBITDA ratio of 2.3x, net debt/EBITDA at 1.7x, and an interest coverage ratio of 4.7x.
The balance sheet appears solid, supported by adequate liquidity with unencumbered cash and bank balances of ₹56.5 crore. The asset-light operational model, with 80% of properties under management contracts or franchises, mitigates capital expenditure risks and enhances flexibility.
Strategically, the company continues to focus on expanding its portfolio, despite inherent geographic concentration risks, particularly in Karnataka and Gujarat, which contribute over 40% of total inventory. The overall market sentiment remains positive, buoyed by favorable industry dynamics and anticipated recovery in the hospitality sector.
Given the current financial performance, strengthened operational capabilities, and positive market outlook, maintaining a hold on the stock appears prudent, while also being cognizant of potential cyclicality and execution risks that could impact future growth.