Shares of Apeejay Surrendra Park Hotels made an impressive debut on Dalal Street as the stock got listed at a premium of nearly 21% on BSE at ₹187 as against the IPO price of ₹155. On NSE, the stock listed at ₹186, up 20%.
Analysts had expected the company’s shares to list at a premium of 20-25% over the IPO price, somewhere between ₹185 and ₹195.
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Considering the optimistic momentum in the market and welcoming announcements made in the Interim Budget to promote the hospitality and tourism industry, the hotel sector is expected to outperform in coming years. “Park Hotels’ IPO received strong subscription demand from all sets of investors, based on these rationales and demand, we expect the stock to list around 20% higher than its issue price of ₹155 apiece,” said Prashanth Tapse of Mehta Equities.
Tapse believes the healthy listing is justified on the back of reasonable valuations when compared to its peers followed by the government’s push towards hospitality and tourism industry and its primary objective of reducing the debt, which could lighten interest burdens that can improve the bottom lines in coming years.
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Hence, the analyst recommended allotted investors to “HOLD” with a long-term perspective. For non allottees, he said that one can accumulate more in dips post listing and look to hold for a long term like 3-5 years’ time horizon.
Dhruv Mudaraadi of StoxBox expects the stock to list at a premium of around 25% to the issue price of ₹155 per share. “The issue received a strong oversubscription owing to the timing, which strategically positions the company to capitalise on the remarkable resurgence of the hotel sector and a post-pandemic economic rebound,” he said.
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Park Hotels GMP
Ahead of its debut, shares of Apeejay Surrendra Park Hotels were trading with a premium of 25% in the unlisted market. The grey market is an unofficial ecosystem where shares start trading before the allotment in the IPO and continue till the listing day. Most investors track the grey market premium (GMP) to get an idea of the listing price.
The initial public offering (IPO) of Park Hotels received a solid response from investors. The issue was subscribed nearly 60 times at close, driven by strong interest from all the categories. The Qualified Institutional Buyers (QIBs) portion of the issue was subscribed the most at 75 times, followed by Non-Institutional Investors at 52 times and the retail investors part was booked 30 times.
The company raised ₹920 crore through the initial stake sale. It consisted of a fresh issue of shares worth ₹600 crore and an offer for sale of shares worth ₹320 crore by promoter and investors. The selling shareholders included Apeejay Pvt Ltd (₹296 crore), RECP IV Park Hotel Investors (₹23 crore) and RECP IV Park Hotel Co-Investors (₹1 crore).
The hotel chain plans to use ₹550 crore from the net proceeds to repay certain outstanding borrowings availed by the company. The remaining funds will be used for general corporate purposes.
Company overview
Appejay Surendra Park Hotels ranks as the eighth largest in India in terms of chain affiliated hotel rooms inventory as of September 30, 2023. Of the 45,800 rooms owned by chained affiliated hotels across the country as of September 30, 2023, the company comprises of about 1,300 rooms constituting 2.80% of the total inventory.
The company reported a net profit of ₹22.95 crore with a revenue of ₹272.31 crore for the period ended on September 30, 2023. It had a bottomline of ₹48.06 crore with a revenue of ₹524.43 crore for the financial year ended on March 31, 2023. As of January 2, 2024, its total outstanding borrowings amounted to ₹582.28 crore.
