Apeejay Surrendra Park Hotels IPO opens today: Should you subscribe to the issue?

The Rs 920-crore initial public offering (IPO) of Apeejay Surrendra Park Hotels opens for subscription on Monday, February 5 and can be subscribed till Wednesday, February 7. The company will be offering its shares in the fixed price band of Rs 147-155 apiece. Investors can bid for a minimum of 96 equity shares and its multiples thereafter.

Incorporated in 1987, Apeejay Surrendra Park Hotels is engaged in the hospitality business operating under the brand names of ‘The Park’, ‘The Park Collection’, ‘Zone by The Park’, ‘Zone Connect by The Park’ and ‘Stop by Zone’. The company is also engaged in the business of retail food and beverage industry through its retail brand ‘Flurys’.

The Rs 920-crore issue by Apeejay Surrendra Park includes a fresh share sale of Rs 600 crore and an offer-for-sale (OFS) of shares worth Rs 320 crore, including Apeejay Pvt Ltd, RECP IV Park Hotel Investors and RECP IV Park Hotel Co-Investors. It has reserved shares worth Rs 10 crore for the eligible employees of the company, who will get a discount of Rs 7 per share.

Ahead of its IPO, Apeejay Surrendra Park Hotels raised Rs 409.5 crore from anchor investors as it issued 2,64,19,354 equity shares at an issue price of Rs 155 apiece.  The anchor book included marquee investors like Troo Capital, Carnelian Capital, Julius Baer India, Citigroup Global, Integrated Core Strategies, and Societe Generale, along with various domestic mutual funds.

Apeejay Surrendra Park Hotels currently operates 27 hotels, which are spread across different categories such as luxury boutique, upscale, and upper midscale in cities like, New Delhi, Chennai, Hyderabad, Kolkata, Bangalore, Mumbai, Coimbatore, Indore, Goa, Jaipur, Jodhpur, Jammu, Navi Mumbai, Visakhapatnam, Port Blair, and Pathankot, offering 2,111 rooms as of August 2023.

The company operates 80 restaurants, night clubs and bars, offering a wide selection of culinary experiences as of March 31, 2023. The company owns restaurants under the brand name of Zen, Lotus, Aish, Saffron, Fire, Italia, 601, The Bridge, The Street, Verandah, Vista, Bamboo Bay, Monsoon, Mist, Love and Bazaar.

Apeejay Surrendra Park Hotels reported a net profit of Rs 22.95 crore with a revenue of Rs 272.31 crore for the period ended on September 30, 2023. The company had clocked a bottomline of Rs 48.06 crore with a revenue of Rs 524.43 crore for the financial year ended on March 31, 2023.

The company will be offering 75 per cent of the net offering for the qualified institutional investors (QIBs), whereas non-institutional investors (NIIs) will get 15 per cent of the net offering. Remaining 10 per cent of the net offer shall be allocated towards retail investors of the issue.

JM Financial, ICICI Securities and Axis Capital are the book running lead managers of the Apeejay Surrendra Park IPO, while Link Intime India is the registrar for the issue. Shares of the company are likely to debut on both BSE and NSE with Monday, February 12 as the tentative date of listing. Here’s what a host of brokerage firms said about the IPO Apeejay Surrendra Park Hotels IPO:

Anand Rathi Research

Rating: Subscribe for long-term

The organization has established thriving hospitality brands by combining product innovation and exceptional service, aiming to engage customers with a varied and comprehensive range of offerings, said Anand Rathi Research, which believes that valuations of the company are fairly priced and recommend a ‘subscribe for long term’ rating to the IPO.

“The company possesses a varied portfolio of hotels across India, including owned, leased, and managed properties strategically situated in both major metropolitan areas and emerging cities. At the upper price band company is valuing at P/E of 68.8 times, of its FY23 earnings,” it added further.

Choice Broking

Rating: Subscribe with Caution

At higher price band, the company is demanding a P/E multiple of 63.1 times, which is in-line to the peer average of 64.4 times. Thus, the issue is fully priced, said Choice Broking. “However, considering the positive macros for the hospitality sector, we are assigning a ‘subscribe with Caution’ rating for the issue,” it said.

Marwadi Financial Services

Rating: Subscribe

Considering the annualized EPS of Rs 2.46 on a post-issue basis, the company is going to list at a P/E of 62.99 times with a market cap of Rs 3,307.3 crore, whereas its peers namely Chalet Hotels Ltd, Lemon Tree Hotels Ltd, Indian Hotels Company Ltd, EIH Ltd are trading at a P/E of 66.3 times, 85.2 times, 63.6 times and 44.8 times, respectively, said Marwadi Financial Services.

“We assign a ‘subscribe’ rating to this IPO as the company has diversified Pan India portfolio of owned, leased, and managed hotels that are strategically located across metros and emerging cities. Also, it is available at a reasonable valuation as compared to its peers,” it said.

StoxBox by BP Equities

Rating: Subscribe

While the return on equity turned positive in FY23, the return on assets remains relatively modest, owing to the capital-intensive nature of the hotel industry. The valuation, although reasonable compared to peers, reflects market optimism in the relatively high P/E ratio, which stands at 56.4 times based on FY23 EPS, said StoxBobx.

Looking ahead, Apeejay Surrendra Park strategic initiatives, including debt reduction and its unique blend of hotel and F&B services, position it favourably for sustainable growth and market leadership. Based on the above-mentioned positives, we give the issue a ‘subscribe’ rating for the issue, it said.

Mehta Equities

Rating: Subscribe for long-term

Considering industrial and company’s future growth rationales along with the primary objective of reducing the debt which could lighten interest burdens which can improve the bottom lines in coming years, said Mehta Equities. “With established brands, strategic growth initiatives, and resilient business model the company is well-positioned to capitalize on emerging market trends.” it added with a subscribe tag.

Sushil Finance

Rating: Subscribe

Apeejay Surrendra Park Hotels has incurred losses in the past. Changes in travellers’ preferences due to increased use of telepresence equipment, cost of travel, spending habits, and other factors may adversely affect the demand for hotel rooms leading to adverse effects on the business, said Sushil Finance.

“The company business has become profitable from FY23 onwards and boasts successful hospitality brands with a diversified portfolio of hotels and restaurants across India, contributing  to stable earnings. Further develop and strengthen the ‘Flurys’ brand in the retail food and  beverage business through expansion plans,” it added with a ‘subscribe for long-term’ on the issue. 

 

 

 

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

 

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