Apeejay Surrendra Park Hotel IPO Review

Apeejay Surrendra Park Hotel IPO Review: The company is about to issue an IPO of Rs. 920 Cr, scheduled to be released on the 5th^Day February 2024. This issue closes on the 7th.^Day Listed on the exchange on February 12th^Day February 2024. In this article, we will look at the Apeejay Surrendra Park Hotels IPO review and analyze its strengths and weaknesses. Read on to find out!

Apeejay Surrendra Park Hotel IPO Review

About Us

Apeejay Surrendra Park Hotels or ASPH Group is ranked 8th.^Day It is India’s largest hotel chain by asset ownership. The company has more than 50 years of expertise in hotel ownership and operation.

It currently operates 30 premium luxury hotels across India in Kolkata, New Delhi, Chennai, Hyderabad, Bangalore, Mumbai and other major cities.

The Group holds the rights to the following brands: park, The Park Collection, Zone by the Park, Zone Connect by the Parkand stop by the areaEach represents a specific variant of luxury.

1. park: This is an Upscale brand for the wealthy and high-income class. The company focuses on creating hotels with unique experiences, design and style for consumers.
2. Park Collection: These are compact luxury properties located in select destinations.
3. Next to the precinct and precinct-connected parks: The brand’s category offers a balance of price and luxury, catering to the upper mid-range level.
4. Stop by the area: It is an economical motel brand that aims to provide convenient lodging at a low cost.

The company also has a presence in the retail food and beverage industry through its retail brands. fluris. It also operates 81 restaurants, nightclubs and bars, offering a variety of menus.

Cross-selling opportunities. Brands such as Zen, Someplace Else, Tantra, Roxy, iBar, The Leather Bar, Pasha and Aqua operate in the restaurant and nightclub space.

Industry introduction

The company operates in the chain hotel segment with a total market of approximately 1.78 million hotel rooms. The sector has grown nearly 7.5 times over FY01, with ownership patterns shifting from chain or chain-led ownership of hotels to greater ownership by private sector developers.

As a result, the international chain has built a strong presence, increasing its supply share from 21% in FY01 to 47% as of September 30, 2023. Eleven states have granted industrial status to hotels, providing benefits such as industrial rates for energy, water and property taxes. incentive.

According to a Howard HTL report, the market’s hotel room supply and demand grew at a CAGR of 5.5% and 6.2% respectively from FY16 to FY23. The growth rates from 2024 to 2027 are expected to be 8% and 10.6%, respectively.

Foreign tourist arrivals (FTA) hit a high of 1.09 Cr in CY19 before declining due to COVID-19. The FTA recovery rate after the COVID-19 incident was 66%, and is expected to reach full recovery in FY25. A significant portion of international travel demand comes from the IT sector, which is still underperforming in some areas and, unlike other sectors, its workforce is still working remotely.

Increasing demand for business and leisure travel, corporate, government conventions, weddings and diplomatic travel will be key tailwinds driving the hotel industry.

Apeejay Surrendra Park Hotel – Financial

ASPH reported revenue of Rs. 506 Cr in FY23, up 99% from Rs 255 Cr in FY22. It has maintained a growth rate of 68% CAGR over the past three years.

The revenue growth was driven by an increase in occupancy of company-owned hotels from 67% in FY21 to 93% in H1FY24. The average revenue for these 27 rooms is Rs. 6000 as of H1FY24.

The company has well-diversified revenue segments, with 50% of its revenue coming from rooms, with its Food & Beverages and Favorites & Spirits segments accounting for approximately 28% and 17% of revenue, respectively.

In terms of profitability, the company recorded a surplus of 50 billion won. 47 Cr in FY23, net loss of Rs. 28Cr in FY22. The loss steadily decreased from 1 million won. 75Cr loss in FY21.

The company’s profitability is increasing with EBITDA margins expanding from 12% in FY21 to 33.77% in FY23. However, the current return on equity remains low at 8.65%, up from -5.55% in FY22.

main players

ASPH is the smallest listed hotel group in terms of revenue. Additionally, the 96% revenue growth looks spectacular on an individual basis. It is the second largest company compared to listed companies.^nd The slowest company.

In terms of EBITDA, the company scores slightly above the industry average of 33%. However, in terms of net profit margin, ASPH only has a net profit margin of 9.16%, while the median for its listed peers is 15.74%.

The company maintains a high occupancy rate of 92% across all hotels, compared to the industry average of 72%. However, its average room revenue is the third highest after Chalet & Indian Hotel Company.

(Source: Company RHP)

Company Strengths

1. Product offered: Management understood the demographics of the market and created multiple brands for each segment. This allows the company to serve a variety of consumers.
2. Pan India Portfolio: The company has a presence across India, especially in metropolitan cities. This allows the company to benefit from the country’s booming economic activity.
3. High Occupancy: The company is maintaining fairly high occupancy rates as it recovers from the pandemic. This shows that the company has the potential to significantly expand its revenues as it expands its portfolio while maintaining a similar share.
4. Various sectors: Management has diversified the business so well that it makes less than half its revenue from hotel rooms. This allows the company to generate consistent revenue without deviating from the cyclicality of the hotel business.

company’s weaknesses

1. Details of loan repayment delays: The company has a track record of delaying repayments by up to 88 days and violating covenants set by its lenders. Although these violations were limited to FY21, it is a risk to be aware of.
2. Reliance on corporate and leisure bookings: The company gets nearly 80% of its revenue from these bookings. A recession could have a serious impact on the sector’s profits.
3. Rank downgrade: In FY22, the company’s term loan and fund-based limits were revised downward by ICRA. This downgrade can significantly increase your interest costs.

Apijay Surendra Park Hotel – GMP

Shares of Apeejay Surrendra Park Hotels Ltd were trading at a premium of 14.84 per cent in the gray market on January 31.^castle2024. The stock in Gray Market was trading at Rs 178. This gives a premium of Rs 23 per share on a ceiling price of Rs 155.

Key IPO Information

promoter: Karan Paul, Priya Paul, Apeejay Surrendra Trust and Great Eastern Stores Pvt Ltd.

Book Operations Lead Manager: JM Financial Ltd, Axis Capital Ltd and ICICI Securities Ltd

Proposal registered by: Link Intime India Pvt Ltd.

purpose of the problem

1. Of the net proceeds of Rs 550 Cr will be used to make advance payments to the company’s lenders.
2. The remaining amount will be utilized for general corporate purposes.

conclusion

Initially based in Kolkata, ASPH Group of Park Hotels has successfully expanded into a pan-India diversified venture. Over the past three years, the company has done enough to be called IPO-worthy.

However, if you only look at the few years prior to FY23, the company was a loss-making company with massive debt suffocating its balance sheet. But the company held firm in the face of the pandemic, as evidenced by its growing asset base and profits, and has since almost fully recovered.

So what do you think about this company? Will we continue to maintain our current profits, or will our margins be significantly reduced due to the capital-intensive nature of our business? What is your view? Let us know in the comments below.

Written by Nasir Hussein

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