Apeejay Surrendra Park Hotels Limited IPO – Get Date, Price, Review and Details

In this article, we will discuss

• About the company
• Objects of the Offer
• Key Strengths and Opportunities
• Risks
• Financial Snapshot
• Conclusion

About the company:

Incorporated in 1987, Apeejay Surrendra Park Hotels Ltd., among hotel chains with asset ownership, ranks as the eighth largest in India in terms of chain-affiliated hotel rooms inventory as of September 30, 2023. The company’s hotel portfolio has a PAN-India presence, and they continue to attract their customers with their diversified portfolio. The company operates hospitality assets under its own brands, “THE PARK”, “THE PARK Collection”, “Zone by The Park”, “Zone Connect by The Park” and “Stop by Zone”. The company has also established its presence in the retail food and beverage industry through its retail brand ‘Flurys’.

As of September 30, 2023, Apeejay Surrendra Park Hotels operates 81 restaurants, nightclubs and bars, offering a wide selection of culinary experiences. The nightclub and entertainment division contributes to its brand positioning and allows cross-selling opportunities. The company has created award-winning brands such as Zen, Someplace Else, Tantra, Roxy, iBar, The Leather Bar, Pasha and Aqua.

Objects of the Offer:

The company intends to utilize the net proceeds towards the following objects:

• Repayment/ prepayment, in full or in part of certain outstanding borrowings availed by the Company; and
• General corporate purposes

Key Strengths and Opportunities:

• The company has successfully built hospitality brands through product innovation and service excellence to attract customer through a diversified and holistic offering: Among hotel chains with asset ownership, Apeejay Surrendra Park Hotels Ltd. ranks as the eighth largest in India in terms of chain-affiliated hotel rooms inventory as of September 30, 2023. The company operates hospitality assets under its own brands, “THE PARK”, “THE PARK Collection”, “Zone by The Park”, “Zone Connect by The Park” and “Stop by Zone”. Further, the company has successfully created iconic brands as part of its food, beverage, and entertainment offerings, which include Zen, Someplace Else, Tantra, Roxy, iBar, The Leather Bar, Pasha, Aqua, Zen, Lotus, Fire, 601, The Bridge and its spa and wellness offering, “Aura”
• A diversified Pan India portfolio of owned, leased and managed hotels that are strategically located across metros and emerging cities: As on the date of the Red Herring Prospectus, the company operates 30 hotels across upscale to upper midscale category, with pan-India presence representing 2,298 rooms. It has grown its business geographically with the opening of 13 managed and leased hotels in the last 3 years, adding 686 rooms to its total portfolio.
• High occupancy rate and RevPAR with a strong financial and operational track record: The company has a strong operating track record of high occupancy, competitive average room rates and RevPAR for its hotel properties, during six months ended September 30, 2023 and September 30, 2022 and in last three Fiscals. It has been able to achieve an average occupancy level of 92.76%, 91.50% and 91.55% for its owned hotels for the six months ended September 30, 2023 and September 30, 2022 and the year ended March 31, 2023, respectively. The high occupancy level reflects its expertise and credentials in the hospitality sector.
• Dedicated and experienced leadership team with high standards of corporate governance: The company has an experienced and qualified management team and board of directors who have in-depth knowledge of hotel operations and hotel property development. It is led by Priya Paul, Chairperson of the Company, Vijay Dewan, Managing Director of the Company and Karan Paul, Chairman of the Apeejay Surrendra Group, who each have 35, 32 and 31 years of experience in the industry respectively. Its senior management team include qualified professionals with significant years of experience in the areas of finance, compliance and legal, project management, hospitality and public relations.

Risks:

• Apeejay Surrendra Park Hotels Ltd. is exposed to risks associated with the delay in development of its hotel properties and land banks. Any delay in the construction of new hotel buildings or expansion of its existing properties may have an adverse effect on the business, results of operations, financial condition, and cash flows.
• The company was not in compliance with certain covenants under certain of its financing agreements in the past and had delays in repayment of certain long-term rupee loans and working capital loans. In case of any breach of covenants or delay in repayment of facilities in the future, such non-compliance, if not waived, could adversely affect the business, results of operations, cash flows, and financial condition.
• The majority portion of the hotel bookings (approximately 49% of the total room bookings contributing about 49% of total room revenue for Fiscal 2023) originate from online travel agents and intermediaries. In the event such online travel agents and intermediaries continue to gain market share compared to the direct booking channels, they may be able to negotiate higher commissions for services provided, or demand significant concessions or reduced room rates causing an adverse effect on the margins, business, and results of operations.
• The company has certain instances of delays in payment of statutory dues or non-payment of statutory dues on account of certain disputes. Any delay in payment of such statutory dues or non-payment of statutory dues in dispute may attract financial penalties from the respective government authorities and, in turn, may have an adverse impact on the financial condition and cash flows.

Financial Snapshot:

Conclusion:

Apeejay Surrendra Park Hotels Ltd. has a diversified Pan India portfolio of owned, leased and managed hotels that are strategically located across metros and emerging cities. The company has successfully built hospitality brands through product innovation and service excellence to attract customers through a diversified and holistic offering. Further, it also operates the “Flurys” brand that has a successful and profitable track record of industry-leading EBITDA margins. Post Covid, the company has successfully managed to transform its business into a profitable one with high occupancy levels with an average occupancy level of 91.55% for its owned hotels the year ended March 31, 2023. The future business prospects for the company appear promising, particularly considering the anticipated double-digit demand growth in India's tourism sector from FY24 to FY27. The forecasted trend, where rooms demand is expected to surpass rooms supply during this period, positions the company favorably within the market. Further, debt repayment with the IPO proceeds would positively impact the bottomline of the company. In comparison with its peers, the valuation is reasonably priced. Considering these factors, we advise investors to subscribe the IPO for long term.