DB Realty to Demerge, Create New Hospitality Asset

Rahul Pandit, industry hand with experience over three decades, joined DB Realty to build new plans in hospitality. Here, in a conversation with NDTV Profit, Rahul shares the growth plans going forward.

NDTV: They’ve recently decided to demerge their hospitality business from the real estate business. What is the kind of value unlocking that you’re seeing here, and what is the key rationale for demerging the two businesses and going forward? What are the key initiatives and plans for the hospitality business?

Rahul Pandit: The key rationale for doing the demerger essentially is three things. First is value unlocking in the sector, especially given the strong macros in the environment. And also, that Valor’s business primarily is real estate. And that after the demerger, the hospitality’s intent is to create a strong, sustainable EBITDA portfolio. And both the businesses also will attract different sorts of capital stock, delivering superior returns. So that’s the intent.

Currently our intention is to create a 4,300 keys upper upscale and luxury portfolio in the country in some of the densest micro markets across Bombay, Delhi, and Goa. Currently, we have 484 keys operating between two assets, which is the Grand Hyatt Goa, and the Hilton Mumbai.

We are in the midst of creating India’s largest integrated hospitality development at Aerocity Delhi, which is a 4,000 crore CapEx project. This will have India’s largest integrated hospitality complex, which is a 779 keys development of St. Regis and Marriott Marque, along with 600,000 square feet of office space and 200,000 square feet of convention space.

In addition to this, we are developing three assets in some of the most marque micro markets in Bombay, which is Sahar, BKC and Worli. So, at Sahar we are developing a 970 keys hotel, along with 450,000 square feet of office. At BKC, it’ll be an 1175 room hotel with 200,000 square feet of convention space. And Worli it’s going to be an 800 room hotel. So those are our plans right now.

NDTV: You have laid out quite a big plan for the hospitality business going forward, but if I were to look in the number of key contexts, we are almost seeing about a 10x jump. Wanted to just understand the kind of growth picture that we are to expect for this fiscal that is FFY 25 and going forward to about 2030, about 10 x jump in the number of keys. So, what is the kind of number should we look at from the current 200 crores that we have seen in hospitality to in the next five years?

Rahul Pandit: One is to say, you know, what’s the theory supporting this growth? And second is what numbers are we looking at? So, we are expecting a stabilised EBITDA in excess of a thousand crores for this portfolio. And to take a quick look at the macros, you know, if you see in India, the aviation sector, which has 771 planes in the sky, and there are 1400 new planes that have been ordered. So minus 200 aircraft, which are replacement, this is a 250% jump in our air capacity. And similar macros are going to play out in hospitality and especially today where demand is outpacing supply. So, we think that our addition of supply to key micro markets will deliver sustainable EBITDA over the continued long term.

NDTV: What is the time line for this 1000 crore figure?

Rahul Pandit: Yeah, so we expect this to be in FY 30. You know, when properties, you know, which are under development, they also stabilise. So currently we are also going to see a jump up. So, as I told you, by the end of next year, the combo assets in at Delhi Aerocity, they are going to operationalize and post stabilization, the EBITDA of those assets is going to be 500 crores. And it’s a 50-50 JV with Prestige Developers. So, our share, our economic interest is going to be 50, too, and once we add the three hotels in Bombay, this will be a thousand crore EBITDA portfolio.

NDTV: Understood. Can I also get some insights with regard to the real estate side of things? How is the execution pipeline looking like? What are the new projects that you are going be coming in with and what are the numbers that we’re going start seeing FY 25 onwards?

Rahul Pandit: Sure. See on the real estate side, we currently have over 31 million square feet, which is under development in MMR. And along with that, our land parcel is over 498 acres today. And interestingly, Valor, if you see BSE Sensex, you know, it’s delivered a 30% increase over the last year. And at Valor we have delivered about 200% – 197%. So, these strong fundamentals are going to continue, and we have a more B2B focus. So, we are working with, large, reputable developers to bring in, land parcels and supply to fruition in MMR.

NDTV: Sure. So now coming to the debt side, again, our focus had been to decrease the debt going forward, but now with the addition of more of these land parcels and the kind of hotels that we want to add going forward, how is the debt going to look like and are we looking for more funding plans in the future?

Rahul Pandit: So, one of the key imperatives of doing the demerger is also to effectively make Valor debt free. And essentially the new debt would be on the hospitality projects. And, hospitality, it is EBITDA generating and long-term gestation assets. So, the total CapEx outlay is going to be about 9,000 crores. And we are looking at one is to one, debt to equity plan for the portfolio.

The above conversation has been reproduced here with permission of DB Realty.

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