IPO Analysis: Juniper Hotels Ltd

IPO Rating: Avoid

About the Issue  

Juniper Hotels Ltd is launching its initial public offering (IPO) for equity shares valued at Rs 10 each. The IPO price range is set between Rs 342 and Rs 360 per equity share, resulting in a total issue size of Rs 1,800 crore at the upper price band.  

The IPO is scheduled to commence on February 21, 2024, and will conclude on February 23, 2024. The market lot size for the IPO is 40 shares, with the option to apply for multiples of this lot. Individual retail investors have the opportunity to apply for a maximum of 13 lots, equivalent to 520 shares or a total investment of Rs 1,87,200 assuming the upper price band.   

Objects of the Issue  

Considering that the offer is exclusively a fresh issue, it is crucial to note that the company will directly profit from the offer proceeds. The company plans to allocate the net proceeds raised from the fresh issue for the repayment or prepayment, in full or in part, of certain outstanding borrowings availed by the company and its recent acquisitions, namely CHPL and CHHPL and for general corporate purposes.

Promoter holding  

Arun Kumar Saraf, Saraf Hotels Limited, Two Seas Holdings Limited and Juniper Investments Limited are the promoters of the company. The promoters currently hold a pre-issue shareholding stake of 100 per cent in the company.   

Company profile  

The company specializes in the development and ownership of luxury hotels, holding the distinction of being the largest owner of ‘Hyatt’ affiliated hotels in India as of September 30, 2023, based on the number of keys. Its portfolio consists of seven hotels and serviced apartments, totalling 1,836 keys as of the same date. It leverages a distinctive and enduring collaboration spanning over 40 years between Saraf Hotels, a renowned hotel developer with a proven track record in India, and affiliates of the globally acclaimed premier hospitality brand, Hyatt Hotels Corporation.

The company's hotels and serviced apartments span across the luxury, upper upscale, and upscale categories, serving as prominent landmarks in Mumbai, Delhi, Ahmedabad, Lucknow, Raipur, and Hampi. Notably, the Grand Hyatt Mumbai Hotel and Residences stand out as the largest luxury hotel in India. Additionally, the Hyatt Regency Lucknow and Hyatt Regency Ahmedabad hold the distinction of being the largest upper upscale hotels in their respective markets, while Hyatt Raipur stands as the sole upper upscale hotel in Raipur.

Financials  

Following the recovery from the COVID-19 pandemic, the company experienced robust growth in average occupancy rates, reaching approximately 75 per cent in the fiscal year 2023 and maintaining similar levels during the first half of the fiscal year 2024. Despite achieving strong revenue growth in recent years, the company has struggled to turn profitable. 

While there was a downward trend in losses from FY21 to FY23, offering hope for a business recovery, the considerable losses incurred during H1FY24 have dampened prospects. The company's expenditure on finance costs, particularly on loans, appears to be excessive. The significant indebtedness the company carries necessitates substantial cash flows for servicing, potentially restricting its freedom to operate.

Valuation and outlook  

The issue is priced with a P/BV ratio of 6.09 times, calculated using its Net Asset Value (NAV) of Rs 59.11 as of September 30, 2023. The stock exhibits a negative price-to-earnings (PE) ratio due to the company's inability to generate earnings per share, stemming from its loss-making status. 

Given the lacklustre performance of the company and the associated risks, we advise investors to refrain from engaging with the issue at this time.