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Grand Continent Hotels: H2 FY26 surge, FY26 scale-up, and the GST margin headwind

Grand Continent Hotels Limited ended FY26 with a sharp second-half acceleration, even as a GST rule change weighed on reported margins. On a consolidated basis, revenue from operations grew to 140.54 crore in FY26, up 94% year on year. The real surprise was the back-ended performance: H2 FY26 revenue from operations reached 84.83 crore, up 108% year on year, with PAT of 10.10 crore.

The operating story behind these numbers is a mix of rapid portfolio expansion, improving occupancy, and a widening geographic footprint that now includes India, the USA, and a franchise-linked presence in Dubai. As of 15 May 2026, the company reported 31 properties and about 1,855 keys, compared with 29 properties and 1,769 keys as of FY26, highlighting continued additions even after year-end.

A key theme in management commentary was that mature business hotels continue to drive profitability, while leisure and newer hotels are still stabilising. The company also acknowledged that a change in the GST regime at the end of September 2025 materially reduced margin conversion, and that FY27 will be shaped by mitigation steps.

FY26 in numbers: strong growth, but margins under pressure

The consolidated performance shows a near doubling of total income, but a more muted expansion in PAT because of the GST impact and higher scale-related operating costs.

Two points matter in interpreting this.

First, the company presented an adjusted EBITDA metric, explicitly adjusting for “ineligible GST input credit”. Adjusted EBITDA was 21.48 crore in H2 FY26 and 27.96 crore in FY26. That adjustment highlights how much the GST shift affected reported profitability.

Second, management went a step further and provided an operating PBT bridge for H2 FY26. It disclosed PBT of 14.23 crore, ineligible GST of 5.88 crore, and an operating PBT of 20.11 crore, with an improvement over FY24-25 of 54.7%. While investors should still focus on statutory numbers, the bridge is useful to understand underlying unit performance.

Portfolio and operating engine: business hotels remain the profit core

Grand Continent positions itself as a mid-scale operator with an asset-light model, typically signing 10 to 15 year leases and launching new properties quickly. The investor presentation highlighted a 3 to 6 month go-live timeline after signing an LOI and a break-even target within 24 months for new properties.

In FY26, India operations were reported with a segmental table that breaks down performance by maturity and by business segment. The takeaway is clear: business hotels deliver the best mix of occupancy and margin.

For mature business hotels in India, the company reported 703 keys generating 76.58 crore of revenue with a unit EBITDA margin of 28.1%. New business hotels, despite being under one year old, were reported at a similar 28.7% EBITDA margin on 22.75 crore of revenue, suggesting that the corporate travel playbook is repeatable.

Leisure and spiritual properties show high variability.

Leisure hotels reported lower occupancy in the data set and significantly lower margins in mature properties. Spiritual properties showed very high occupancy in parts of the year, but still reported single-digit EBITDA margins in the segment table. On the concall, management attributed this to newer openings in locations like Dwarka and Rameshwaram and the time required to build market penetration and repeat customers.

The company also disclosed India segment occupancy trends month by month for FY26. Business occupancy peaked above 80% in some months, while leisure occupancy remained lower and more volatile. Spiritual occupancy stayed high across most months, but management believes rate and penetration improvements are needed for margin uplift.

Growth strategy and what changes in FY27

FY26 was positioned by management as a defining year, mainly because of the scale jump and the first meaningful international entry.

In the USA, the company entered through a lease-led model with three hotels, totaling about 367 keys, under flags such as Holiday Inn, Comfort Suites, and Ramada. In H2 FY26, US operations contributed 2.89 crore of revenue, while India contributed 81.94 crore. Management stated that US operations achieved strong profitability during a short tenure, helped by rent-free periods and higher-than-average profit.

At the same time, management signaled that the company will not aggressively expand internationally right away. The US portfolio is expected to remain at three hotels until at least one full season and half-year performance is reviewed.

Dubai is currently the uncertain piece. Management said Dubai operations have been affected by geopolitical factors, and it may exit if conditions do not improve. The company also clarified that a Dubai MOU was mutually cancelled, and that there was no meaningful capital investment as it was structured as a franchise arrangement.

The bigger operational change for FY27 is how management plans to respond to the GST issue.

The steps discussed were:

1. Increasing room rentals by roughly 8% to 10% based on demand.
2. Exploring a revenue-share structure with owners instead of fixed leases, which could reduce the effective GST burden.
3. Expanding into management contracts as an alternative to leases.
4. Structuring certain premises as “specified premises” to claim eligible input credits related to F&B and proportionate credits.

None of these is a quick fix, and management acknowledged that rates cannot be raised sharply without improving guest experience. Still, the company indicated that the mitigation steps are already showing some impact in April and May, as per the CFO.

Balance sheet snapshot: leverage remains moderate, but cash is tied up

On the balance sheet, total assets increased to 184 crore as on March 2026 from 139 crore as on March 2025. Fixed assets rose to 84 crore from 62 crore, and other non-current assets increased to 53 crore from 20 crore.

In the concall, management linked the rise in other non-current assets largely to refundable security deposits, which are a standard feature of a lease-led model. This also explains why operating cash flow can look weak in a high-growth year, even if reported profits are rising.

Key ratios disclosed in the deck were:

• Debt to equity: 0.2 in FY26 (0.1 in FY25)
• Current ratio: 1.23 in FY26 (3.74 in FY25)
• ROE: 10% in FY26
• ROCE: 14% in FY26

The drop in current ratio suggests working capital needs to be watched as the portfolio expands, especially with higher receivables from corporate customers and higher deposits for new leases.

What to track from here

Management’s stated goal is to reach 3,000 keys by FY28. In the concall, it said it has already signed about 600 keys for FY27 and expects to end FY27 with around 2,400 to 2,450 keys. For FY28, it indicated it is evaluating another 500 to 600 keys but will be more selective on location and profitability.

Investors tracking Grand Continent’s next phase should focus on three practical indicators.

First, whether the GST mitigation steps show up in reported EBITDA margins, not just adjusted metrics.

Second, how quickly the upcoming pipeline stabilises, especially in spiritual and leisure markets where management itself acknowledged longer ramp-up periods.

Third, cash discipline. Lease deposits and pre-opening capex per key can constrain cash flows, even when the P&L looks strong.

FY26 proved the company can scale rapidly and still deliver a strong second half. FY27 will test whether it can keep expanding while repairing margin structure in a changed tax environment.