Highlights
Casa2 Stays Reports Fiscal Revenue Growth
Casa2 Stays, the parent company of FabHotels, announced a significant 34% rise in gross revenue for the fiscal year ending March 2024. However, the company experienced a 23% increase in losses, primarily attributed to a twofold surge in employee benefit expenses.
According to the financial statement obtained from the Registrar of Companies (RoC), FabHotels’ gross revenue ascended to Rs 552 crore in FY24, up from Rs 412 crore in the previous fiscal year (FY23).
Transition to Indian Accounting Standards
This year, FY23’s revenue figures appear distinct due to FabHotels’ first financial statements compiled under Indian Accounting Standards (Ind AS), including Ind AS 101, marking their inaugural adoption of these standards.
Overview of FabHotels’ Performance
FabHotels is a budget hotel chain boasting over 600 properties across more than 50 cities in India. The company derived 99.4% of its gross revenue from accommodation bookings under the “FabHotel” and “TravelPlus” brands, with gross revenue growing by 33.35% to reach Rs 549 crore in FY24. Additional revenue sources contributed Rs 3.3 crore.
Moreover, the firm recorded an extra Rs 11 crore in income from interest on deposits and write-offs of liabilities (non-operating), elevating its total revenue to Rs 563.6 crore for the last fiscal year.
Expense Management
In terms of costs, accommodation expenses constituted the largest portion, accounting for 74% of total expenditures, which rose by 32% to Rs 435 crore. Meanwhile, employee costs expanded twofold to Rs 92 crore in FY24, which included Rs 15 crore attributed to ESOP costs (non-cash).
- Commission expenses exhibited a moderate increase of 8% to Rs 27 crore.
- Other expenses contributed an additional Rs 34 crore.
Overall, total expenses surged by 38.5% to Rs 588 crore in FY24, increasing from Rs 424.7 crore in FY23.
Impact of Rising Employee Costs
The significant rise in employee benefits resulted in a 23% uptick in FabHotels’ losses, which amounted to Rs 114 crore in FY24, compared to Rs 93 crore in FY23. The recorded ROCE and EBITDA Margin were -84.09% and -19.52%, respectively. On a per unit basis, the company expended Rs 1.06 to generate a rupee in revenue. By the conclusion of FY24, FabHotels’ current assets totalled Rs 172 crore, which included cash and bank balances amounting to Rs 94 crore.
Funding and Market Positioning
FabHotels has secured approximately $70 million in funding to date, which includes a $15.6 million investment led by Panthera Growth Partners in October 2023, resulting in a post-money valuation of $141 million. As reported by various sources from the startup data intelligence platform, Accel is the primary external investor with a 21.39% stake, followed by Goldman Sachs.
In the competitive landscape, FabHotels faces direct rivalry from Treebo and Bloom Hotels. In FY24, Treebo exceeded Rs 100 crore in revenue, while Bloom Hotels achieved a remarkable 73.6% revenue increase, reaching Rs 250 crore, and recorded a profit of Rs 14 crore.
Although Bloom Hotels stands out in terms of metrics, FabHotels has demonstrated resilience amid numerous challenges since its inception in 2014. This journey has included navigating a market significantly influenced by the presence of OYO, along with the overarching effects of the pandemic. With its budget offerings and extensive reach, FabHotels now encounters a critical moment: to achieve sustainable profitability that fuels future expansion, or risk the prospect of seeking a merger to consolidate the industry. Industry experts remain optimistic about the growth potential in the budget hotel sector, raising the question of whether FabHotels’ legacy of challenges will ultimately serve as a valuable experience or a hindrance. Numerous hotels, shaped by past difficulties, have struggled to seize new opportunities in emerging markets such as Ayodhya or Varanasi, often wary of repeating earlier pitfalls. The hospitality industry allows little margin for significant errors.
Having focused primarily on major Indian cities and Goa, FabHotels has made its strategic investments, leaving limited room for further modifications. The coming months will be crucial in determining its future trajectory.