Did you know that India is working towards being one of the top tourist destinations in the world by 2047? And one of the sectors that will benefit from this development is the hospitality sector. But is every hospitality stock worth investing in? Let’s find out.
Apeejay Surrendra Park Hotels, one of the well-known names in the hospitality field, is a new entrant to the stock market. In today’s article, let’s go through the details of the IPO and the benefits and risks of investing in it.
Overview of Apeejay Surrendra Park Hotels IPO
One of the largest Indian conglomerates, the Apeejay group, began functioning over a hundred years ago. With businesses in real estate, hospitality, shipping, FMCG, etc., the brand continues to be a popular name in the industry.
History
It was in 1910 that Mr Pyare Lal, a patriot, established a small steel manufacturing unit to meet the domestic needs of the country. His sons took over the business in the 1940s to expand operations in the shipping industry. After wide recognition, the group ventured into real estate, hotels, pharmaceuticals and construction. In the 1980s, Mr Surrendra Paul (one of the sons) became the chairman, with his children joining the business in the 1990s.
The hospitality wing particularly, began gaining fame with the first branch of THE PARK hotel established in Kolkata in 1967. It had modern facilities with 149 rooms.
Also read: Economics of the tourism and hospitality industry in India
Mission
Vision: Leadership through differentiation
Mission: To establish global standards of product quality and service excellence, to enhance customer experience, to encourage their people in personal and professional development, to ensure the company’s growth and profitability, and to be a good corporate citizen and serve the society.
Apeejay Surrendra Park Hotels today
Headed by the Chairman, Mr Karan Paul, Apeejay Surrendra Park Hotels is the eighth largest hotel chain in India. Today, the hotel has branches across all major Indian cities. It operates under five brands – THE Park, THE Park Collection, Zone by The Park, Zone Connect by The Park and Stop by Zone.
Apeejay Surrendra Park Hotels’ financials
| Particulars | FY 2023 (in ₹ millions) | FY 2022 (in ₹ millions) | FY 2021 (in ₹ millions) |
| Revenue from operations | 5,061.30 | 2,550.20 | 1,788.30 |
| Expenses | 4,589.63 | 3,096.19 | 2,620.24 |
| Profit after tax | 480.62 | (282.02) | (758.84) |
| EPS (Basic) ₹ | 2.75 | (1.61) | (4.34) |
| EBITDA | 1,770.95 | 582.93 | 228.46 |
| No. of hotels (Owned, leased, managed) | 25 | 21 | 17 |
| Average room rent (Owned) in ₹ | ₹6,070.51 | ₹3,804.27 | ₹3,250.90 |
Apeejay Surrendra Park Hotels Limited IPO
| Apeejay Surrendra Park’s IPO opening date | 05 February 2024 |
| IPO closing date | 07 February 2024 |
| Bidding date for anchor investors | 02 February 2024 |
| Face value | ₹1 |
| Price band | ₹147 to ₹155 |
| Issue size | ₹920 crores |
| Fresh issue | ₹600 crores |
| Offer for sale | ₹320 crores |
| Minimum bids | 96 shares |
| Employee discounts | ₹7 per share |
Shareholding pattern before IPO
| Name of the shareholder | Shareholding percentage |
| Apeejay Surrendra Trust | 17.18% |
| Great Eastern Stores Private Limited | 30.06% |
| Apeejay Private Limited | 19.75% |
| Apeejay Engineering Private Limited | 8.30% |
| Apeejay Agencies Private Limited | 8.30% |
| Apeejay House Private Limited | 8.30% |
| Apeejay Surrendra Management Services Private Limited | 2.29% |
| RECP IV Park Hotel Investors Ltd | 5.53% |
| RECP IV Park Hotel Co-Investors Ltd | 0.29% |
Fund utilisation plan
- The ₹320 crores raised through the offer for sale will be used to pay selling shareholders after deducting offer-related expenses.
- ₹500 crores from the fresh issue will be divided between fiscal years 2024 and 2025 to repay the company’s existing debts.
- As per Apeejay Surrendra Park Hotels Limited DRHP, the remaining funds will be directed towards other general corporate requirements.
Also read: From print to digital: The story of India’s media and entertainment sector
Apeejay Surrendra Park Hotels’ IPO so far
Excluding the shares issued to anchor investors, Apeejay issued 32,965,998 shares to the public in its IPO. Between 05 February and 06 February, 20,33,08,992 shares have been subscribed.
The issue has been subscribed 2.69 times on 05th February and 6.17 times on 06th February 2024.
Is this IPO for you?
| Peer comparison | |||||
| Company | Revenue from operations (₹ million) | P/E | EPS (Basic) in ₹ | RoNW (%) | NAV (₹ million) |
| Apeejay Surrendra ParkHotels Limited | 5,061.30 | NA | 2.75 | 8.65% | 5,556.82 |
| Chalet Hotels Limited | 11,284.67 | 79.78 | 9.06 | 12.03% | 15,444.85 |
| Lemon Tree Hotels Limited | 8,749.90 | 92.34 | 1.45 | 16.46% | 8,537.27 |
| Indian Hotels CompanyLimited | 58,099.10 | 65.67 | 7.06 | 13.19% | 79,819.60 |
| EIH Limited | 20,188.10 | 56.59 | 5.03 | 9.75% | 33,745.70 |
| SAMHI Hotels Limited | 9,328.09 | NA | (47.48) | NA | 547.32 |
Consider investing because
- Apeejay Surrendra Park Hotels is the eighth-largest hotel chain in the country. Of the total hotel chain rooms in India, 2.80% belong to the Apeejay group.
- Apeejay has a diverse portfolio of hotels across the country. Besides owning hotels, the brand actively focuses on leasing and managing hotels to expand its business profile. The brand has specialised knowledge gathered from years of experience in the industry, in site selection based on customer analytics.
- The brand has been consistent in maintaining a high occupancy rate over the past years. The recent average occupancy rates are as follows:
Six months ending September 2022: 91.50%
FY March 2023: 91.55%
Six months ending September 2023: 92.76%
- Besides its business in renting hotel rooms, the brand is busily involved in food, beverage and entertainment businesses, too. More than 40% of the firm’s operational revenue comes from this area, contributing to the brand’s performance during non-cyclical seasons.
- The brand has a proficient team of members, with over 30 years of experience in the hotel industry.
Watch out for
- The brand is currently constructing more hotel properties across different cities. A delay in these projects may affect the firm’s revenue, growth and goodwill.
- Apeejay has breached certain compliance requirements of the financing agreements in the past, including delayed repayment of loans. If there is a repetition of such actions, the brand’s reputation may adversely be affected.
- There has also been a delay in paying statutory and non-statutory dues in the past, such as property tax and service tax. A similar occurrence in the future may attract penalties, affecting the firm’s cash flow and profits.
- 49% of the brand’s bookings happen through online agents. If they decide to increase their commissions, the firm’s profitability will reduce.
- The hotel underwent losses in FY 2021 and 2022, and such situations may arise in the future, too.
Also read: Indian Hotels Company Ltd.
Bottomline
Apeejay Surrendra Park Hotels Limited has been successful in the first two days of its IPO. Considering the growth of India’s travel and tourism sector, this stock might be worth investing in. However, every investor must go through the risk factors in detail to assess how well the stock fits in their portfolio. Since the brand has made losses in the past, analysing the financials thoroughly is essential before deciding to invest.
