The ₹1,370 crore initial public offering (IPO) of SAMHI Hotels opened for bidding today, Thursday, September 14 and will close on September 18. The hotel chain has decided a price band in the range of ₹119-126 per share for the issue.
Issue size: The IPO consists of a fresh equity sale worth ₹1,200 crore and an offer-for-sale (OFS) of 1.35 crore equity shares amounting to ₹170 crore by Blue Chandra, Goldman Sachs Investments Holdings (Asia) and GTI Capital Alpha. Compared to the DRHP, the company has increased the fresh issue size from ₹1,000 crore to ₹1,200 crore.
Subscription status: The issue has received a weak response from investors. At 12:30 pm on its first day of bidding, the IPO was subscribed just 4 percent against its offer. It has received bids for 21.74 lakh shares against 5.98 crore shares on offer. The category for retail investors was bid the most, 19 percent, followed by that of non-institutional investors (NII), which was subscribed to just 1 percent. However, the qualified institutional buyers (QIBs) portion has not received any bids till now.
GMP: Shares are commanding a premium of ₹16 apiece in the grey market today, indicating a decent 12.7 percent premium at listing.
However, it is important to note that grey market premiums are just an indicator of how the company's shares are stacked up in the unlisted market and are subject to change rapidly.
Objective: Net proceeds from the issue shall be utilised towards repayment or prepayment of borrowings by the company or its subsidiaries, and general corporate purposes.
Lot size: Potential investors can bid for a minimum of 119 shares and in multiples of 20 shares thereafter. Hence, one lot will cost investors ₹14,994.
Reservation: The company has reserved 75 percent of the net offer for qualified institutional bidders (QIBs), while non-institutional investors (NIIs) will get 15 percent of the offering. The remaining 10 percent of the offer shall go to retail investors.
Anchor investors: SAMHI Hotels has mobilised ₹616.54 crore from 35 anchors by allotting them 4,89,32,143 equity shares at a price of ₹126 apiece. Anchor book of the company includes Government of Singapore, Monetary Authority of Singapore, CLSA Global Markets, Think India Opportunities Master Fund, HSBC Global, Natixis International Funds, Imco Emerging Markets Public Equity LP and more.
About the firm: Incorporated in 2010, SAMHI Hotels is a professionally managed branded hotel ownership and asset management platform in India. SAMHI's hotels operate under well-recognised hotel operators such as Courtyard by Marriott, Sheraton, Hyatt Regency, Hyatt Place, Fairfield by Marriott, Four Points by Sheraton, and Holiday Inn Express.
Within 13 years of its inception, SHL became India’s 3rd largest hotel owner by number of rooms (owned and leased). It is the largest multi-brand hotel owner and has a portfolio of 3,839 hotel rooms across 25 operating hotels in key urban consumption centers like Bengaluru, Hyderabad, National Capital Region, Pune, Chennai and Ahmedabad. Of the 25 hotels, 23 (representing 92.7 percent of the room inventory) are managed by third-party operators like Marriott (11 hotels), Hyatt (two hotels) and IHG (10 hotels).
Financials: For the year ended on March 31, 2023, SAMHI Hotels reported a net loss of ₹338.59 crore against a net loss of ₹443.25 crore in FY22. Meanwhile, its total revenue from operations soared 128 percent to ₹761.43 crore versus ₹333.10 crore in the previous year ended March 2022.
Over FY20-23, SHL reported a mixed set of performance. Its operating performance was robust, mainly due to improved occupancy levels and higher hotel room rents. However, financially, it reported a net loss during the period. FY21 and FY22 operations were impacted by the Covid-19-led travel restrictions. The company reported a 6.8 percent compound annual growth rate (CAGR) growth in the consolidated operating revenue to ₹738.6 crore in FY23.
Book-running managers: JM Financial and Kotak Mahindra Capital Company are the book-running managers of the issue, while Kfin Technologies has been appointed as the registrar to the issue.
Important dates: Shares of the company will be listed on both BSE and NSE with Tuesday, September 27, as the tentative date of listing of shares.
Brokerage views
The majority of brokerages are cautious about the issue amid concerns regarding profitability, expensive valuations, weak financials and seasonality in operational performance.
Choice Broking: Subscribe with Caution
In its review note, brokerage house Choice Broking stated that on the back of favorable macros like continued higher domestic business & personal travels, hotel room demand in excess of supply and improving occupancy levels & room rents, the hotel sector is showing positive traction in the operating and financial performance.
"SAMHI Hotels is demanding an EV/Sales multiple of 4.6 times (to its FY23 sales), which is at a discount to the peer average. Its multi-brand presence across the price points is likely to benefit from this up-cycle. SAMHI has reported net loss during FY20-23, further, we are anticipating continued losses in the medium term but of lower magnitude," it said with a 'subscribe with caution' rating.
It further added that SHL with its multi-brand presence across the price points is likely to benefit from this up-cycle. The company has reported net loss during FY20-23 and the brokerage anticipates continued losses in the medium term but of lower magnitude.
Swastika Investmart: Avoid
SAMHI Hotels is currently a loss-making hospitality company. The company's financial performance has been poor for the last three years, but it is making progress in cutting losses. However, business is subject to seasonal and cyclical variations that could result in fluctuations in the results of operations, it said, adding, “as the company is in financial trouble, we won't apply for this IPO.”
Stoxbox: Avoid
While the industry tailwinds paint a rosy picture for the business, the company-specific characteristics such as loss-making status and negative net worth for the past three fiscals - FY21, FY22, and FY23 paint an overall bleak picture for the business compared to improvement in metrics of its listed peers like Chalet Hotels and Indian Hotels over the fiscals, it said, with an 'avoid' rating.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie. We advise investors to check with certified experts before taking any investment decisions.
