2 weeks Ago
India's hospitality sector is gearing up for a significant expansion in its listed universe, with four new players set to debut on the stock market. According to a Jefferies report, Schloss Bangalore (Leela), Ventive Hospitality, and Brigade Hotels are collectively aiming to raise approximately ₹80 billion through Initial Public Offerings (IPOs). Additionally, ITC Hotels is preparing for a demerger in Q4 FY25, further diversifying the sector's public representation.
The three IPO-bound companies have collectively filed for offerings worth ₹80 billion, which includes a fresh issue of ₹60 billion.This surge follows earlier fundraisers in the sector, such as Chalet Hotels' ₹10 billion through Qualified Institutional Placement (QIP) and three IPOs by Samhi, Park, and Juniper Hotels, which cumulatively raised ₹40 billion. While ITC Hotels' demerger will not involve new fundraising, it marks a strategic move to enhance focus on standalone hotel operations.
Recent hotel IPOs have shown mixed performance, with stock prices currently trading between 0% and 52% above their issue price. While post-listing movement has been sideways, the long-term potential of the hospitality industry remains robust. Elevated travel demand, coupled with increasing Average Room Rates (ARRs) and high occupancy levels, reflects strong consumer preferences for travel experiences over other spending categories.
The IPO entrants bring distinct business models and growth plans to the table. Schloss Bangalore, operating under the Leela brand, is an owner-operator with a mix of owned and managed properties across key metro cities. Ventive Hospitality, a hospitality arm of Pune-based Panchshil Realty, has adopted a development and acquisition model and operates in Pune, Bangalore, and the Maldives.
Meanwhile, Brigade Hotels, an offshoot of Brigade Group, focuses on South Indian cities and boasts the largest growth pipeline, planning to add 996 keys to its existing 1,604.Despite their growth prospects, these companies face challenges. All three have reported small profits or marginal losses at the PAT level, and their balance sheets are leveraged, with Net Debt-to-EBITDA ratios ranging from 4x to 7x for FY24.
Schloss and Ventive lead in Revenue Per Available Room (RevPAR) metrics due to their strong presence in the luxury segment, while Brigade is positioned as a mid-tier player with a substantial pipeline. The broader industry outlook remains optimistic. Travel demand has remained resilient despite normalization in other sectors post-COVID.
Elevated pricing has not deterred demand, underscoring the rising importance of travel among Indian consumers. The supply-demand imbalance continues to support ARR growth, creating a favorable environment for new listings.Real estate players are also eyeing the hospitality sector for public listings.
Companies like DB Realty and Prestige Estates are reportedly considering similar moves, following the path of asset-heavy developers like Chalet Hotels and Juniper Hotels.These companies often collaborate with international brands like Marriott, Hilton, and IHG for operational expertise, enhancing their market appeal. Comments.
