The initial public offering (IPO) of Apeejay Surrendra Park Hotels, a noted entity in the hospitality industry, commenced on Monday, February 5, and is slated for closure on Wednesday, February 7. The IPO has garnered full subscription on its opening day, with significant interest from retail and non-institutional investors. The pricing for the Apeejay Surrendra Park Hotels IPO has been set between ₹147 and ₹155 per equity share, each with a nominal value of ₹1. Prior to the public offering, the company successfully raised ₹409 crore from anchor investors on February 2.
The offering has allocated a minimum of 75% of its shares to qualified institutional buyers (QIBs), up to 15% to non-institutional investors (NIIs), and a maximum of 10% to retail investors. This IPO, valued at ₹920 crore, comprises a fresh issue of equity shares amounting to ₹600 crore and an offer-for-sale (OFS) totaling ₹320 crore.
The proceeds from this IPO are earmarked for general corporate purposes and for the repayment or prepayment, fully or partially, of the company’s existing borrowings. Among the sellers in the offer-for-sale segment, Apeejay Private Ltd, a promoter group entity, intends to sell shares worth ₹296 crore, RECP IV Park Hotel Investors Ltd aims to offload shares amounting to ₹23 crore, and RECP IV Park Hotel Co-Investors Ltd plans to sell shares valued at ₹1 crore.
Link Intime India Private Ltd serves as the registrar for the IPO, with JM Financial Limited, ICICI Securities Limited, and Axis Capital Limited acting as the book running lead managers.
In comparison to its industry counterparts such as Chalet Hotels Limited, Lemon Tree Hotels Limited, Indian Hotels Company Limited, EIH Limited, and SAMHI Hotels Limited, Apeejay Surrendra Park Hotels Limited has showcased remarkable growth. Between the fiscal years ending March 31, 2023, and March 31, 2022, the company reported a revenue increase of 95.81% and a surge in profit after tax (PAT) of 270.42%.
Despite these impressive figures, potential investors are advised to consider several risk factors outlined in the company’s Red-Herring Prospectus (RHP) before making investment decisions:
- Project Delays: The company faces risks related to the delayed development of its land banks and hotel assets. Any postponements in the construction of new hotels or the expansion of existing ones could adversely affect the company’s operations, financial health, cash flows, and results.
- New Ventures: The company’s venture into the development and construction of serviced apartments at EM Bypass, a project outside its traditional expertise, introduces significant risks.
- Statutory Dues: Occasional delays or failures in the payment of statutory dues can lead to financial penalties and negatively impact the company’s financial standing and cash flows.
- Dependency on Online Booking Channels: A significant portion of the company’s bookings comes from online travel agencies and intermediaries. An increase in their market share could lead to higher commissions or demands for lower rates, impacting the company’s profitability.
- Past Financial Losses: The company has reported restated losses in the past, and any future losses could negatively impact its financial condition and operational results.
- Debt Repayment: The company’s existing debt obligations require substantial cash outflows, and the terms of these financing agreements could restrict its operational flexibility and growth potential.
- Legal Proceedings: Ongoing legal actions against the company, its subsidiaries, directors, and promoters could, if resolved unfavorably, affect its profitability, reputation, and overall business performance.
- Concentration of Revenue: A significant portion of the company’s revenue is generated from its top five owned hotels, making it vulnerable to adverse events affecting these properties or their locations.
- Lease Dependencies: The company’s operations could be impacted if it fails to comply with lease agreements, renew existing leases, or secure new ones for several of its hotel properties.
- Historical Negative Cash Flows: The company has experienced negative cash flows from financing and investment activities in the past. Continued negative cash flows could adversely affect its financial health and operational efficiency.
Investors considering participation in the Apeejay Surrendra Park Hotels IPO should weigh these risks carefully against the company’s growth prospects, industry position, and the broader economic context of the hospitality sector.