Juniper Hotels IPO review (May apply)

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Review By Dilip Davda on February 16, 2024

•    JHL is the only hospitality company with global partner "Hyatt" as investor as well. 
•    The company used debt model to expand its capacities during the pandemic.
•    The company is repaying around 67% debt from the IPO proceeds that will bring finance cost saving in coming years. 
•    Though the issue is at a negative P/E due to its loss making status at the net level for the reported financial performance, it's a worthy bet.
•    Well-informed investors may park funds for medium to long term rewards.

ABOUT COMPANY:
Juniper Hotels Ltd. (JHL) is a luxury hotel development and ownership company, and are the largest owner, by number of Keys of "Hyatt" affiliated hotels in India as of September 30, 2023. (source: Horwath Report). It has a portfolio of seven hotels and serviced apartments and operate a total of 1,836 keys as of September 30, 2023. JHL benefits from a unique and longstanding partnership of over 40 years between Saraf Hotels (including erstwhile and current affiliates, collectively referred to as the "Saraf Group"), a hotel developer with a strong and well established track record in India, and affiliates of a globally recognized premier hospitality brand, Hyatt Hotels Corporation (NYSE: H) ("HHC") (collectively with its affiliates "Hyatt"). 

JHL is the only hotel development company in India with which Hyatt has a strategic investment. It owns 19.6% of Hyatt group affiliated hotel rooms and apartments in India as on September 30, 2023 (source: Horwath Report) and have extensive experience in identifying opportunities in hospitality destinations, developing high-end hotels in these locations and nurturing them through active asset management. The company is also focused on providing quality guest experience, while operating its assets efficiently.

Its hotels and serviced apartments are present across the luxury, upper upscale and upscale category of hotels and are established landmarks in Mumbai, Delhi, Ahmedabad, Lucknow, Raipur and Hampi. Besides Grand Hyatt Mumbai Hotel and Residences being the largest luxury hotel in India, the Hyatt Regency Lucknow and Hyatt Regency Ahmedabad are the largest upper upscale hotels in their respective markets and Hyatt Raipur is the only upper upscale hotel in Raipur (source: Horwath Report).

The Company is jointly held by Saraf Hotels and its affiliate, Juniper Investments and Two Seas Holdings (an indirect subsidiary of HHC). The partnership between its key stakeholders has been built over several decades. Saraf Group has over 40 years of industry experience and have developed a number of hotels across South Asia. HHC is a global hospitality company with widely recognized, industry-leading brands and a tradition of innovation developed over 65 years, with a hotel portfolio consisting of 1,310 hotels and 313,257 rooms, across full service hotels and resorts, all-inclusive resorts, select service hotels, lifestyle hotels and other properties, as of September 30, 2023. 

JHL benefits from the experience of its key shareholders and are able to leverage their long-standing brand heritage, in-depth market understanding, operational experience, and the World of Hyatt loyalty program with approximately 42 million members as of September 30, 2023. It currently owns a portfolio of seven hotels and serviced apartments which are located across six cities in India, comprising established metro cities (Mumbai and Delhi), emerging business destinations (Ahmedabad, Lucknow and Raipur) and upcoming tourist destinations (Hampi), providing guest and geographic diversification. Its hotels and serviced apartments are classified under three distinct segments: (a) luxury - the Grand Hyatt Mumbai Hotel and Residences and Andaz Delhi; (b) upper upscale - the Hyatt Delhi Residences, Hyatt Regency Ahmedabad, Hyatt Regency Lucknow and Hyatt Raipur; and (c) upscale - Hyatt Place Hampi (source: Horwath Report). 

It has the largest aggregate inventory of upper tier branded serviced apartments in Mumbai and New Delhi among hotels owned by major private investors (source: Horwath Report). As of September 30, 2023, (a) the Grand Hyatt Mumbai Hotel and Residences had 665 keys, which represents approximately 12% of the total supply of 5.4k luxury room inventory in Mumbai, and (b) Andaz Delhi had 401 keys, which represents approximately 12% of the total supply of 3.3k luxury room inventory in New Delhi (source: Horwath Report). JHL's significant presence in New Delhi and Mumbai provides it with a strategic advantage from both international and domestic travel through these cities and the well-established business ecosystems. Ahmedabad is a hub for economic growth in Gujarat and Lucknow stands to benefit from the push for active investments in Uttar Pradesh. As of September 30, 2023, (a) the Hyatt Regency Ahmedabad had 211 keys, which represents approximately 26% of the total supply of 0.8k upper upscale inventory in Ahmedabad; and (b) the Hyatt Regency Lucknow had 206 keys, which represents approximately 52% of the total supply of 0.4k upper upscale inventory in Lucknow (source: Horwath Report). In Raipur, the Hyatt Raipur was established to benefit from the industrial growth in the capital city of Chhattisgarh, the resource rich state. The Hyatt Place Hampi was established to cater to tourists visiting the Hampi UNESCO World Heritage Site, as well as to business travelers visiting the nearby steel manufacturing facilities.

JHL identifies and acquires sites to develop its hotels and serviced apartments, accounting for factors such as location, economic potential of the location, target customers and branding. The Grand Hyatt Mumbai Hotel and Residences is located between the Bandra Kurla Complex ("BKC") (which is the business center of the city) and the Chhatrapati Shivaji Maharaj International Airport, situated in Mumbai. Similarly, Andaz Delhi and Hyatt Delhi Residences are located at the Indira Gandhi International Airport hospitality district (Delhi Aerocity), between Gurgaon and New Delhi. Once the company identifies and acquires sites, its expertise in development allows it to move swiftly from a capital deployment phase to a revenue generation phase by making assets operational.

JHL is the flagship entity for the Saraf Group, through ownership of a unique portfolio of luxury, upper upscale and upscale hospitality assets, located in highly desirable locations across key locations. As of September 30, 2023, it had a total 1993 employees on its payroll (including CHPL group of hotels).

According to the management, post-IPO since it will clear around 67% of its total debt, it will turn positive PAT entity and will continue to enjoy its leadership with hospitality segment. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden book building route IPO worth Rs. 1800 cr. (approx. 50000000 shares at the upper band). The company has announced a price band of Rs. 342 - Rs. 360 for equity shares of Rs.10 each. The issue opens for subscription on February 21, m2024, and will close on February 23, 2024. The minimum application is to be made for xxx shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 22.47% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO funds, it will utilize Rs. 1500.00 cr. for repayment/prepayment of certain borrowings by it and its recently acquired VHPL and CHHPL, and the rest for general corporate purposes. 

The company has allocated not less than 75% for QIBS, not more than 15% for HNIs and not more than 10% for Retail investors. 

The three joint Book Running Lead Managers to this issue are JM Financial Ltd., CLSA India Pvt. Ltd., and ICICI Securities Ltd., while KFin Technologies Ltd. is the registrar of the issue. 

Having issued initial equity shares at par, the company converted further equity shares at a fixed price of Rs. 184.51 per share in September 2023. It has also issued 94500000 bonus shares in July 2000. The average cost of acquisition of shares by the promoters is Rs. 17.90, Rs. 35.62, and Rs. 184.51 per share. 

Post-IPO, JHL's current paid-up equity capital of Rs. 172.50 cr. will stand enhanced to Rs. 222.50 cr. Based on the upper band of the IPO price, the company is looking for a market cap of Rs. 8010.09 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total income/net profit/- (loss) of Rs. 192.85 cr. / Rs. - (199.49) cr. (FY21), Rs. 343.76 cr. / Rs. - (188.03) cr. (FY22), and Rs. 717.29 cr. / Rs. - (1.50) cr. (FY23).  De H1 of FY24 ended on September 30, 2023, it posted a net loss of Rs. - (26.50) cr. on a total income of Rs. 337.43 cr. Thus it posted loss for all these reported years amidst growth in its top line. 

For the last three fiscals, the company reported an average EPS of Rs. - (6.72), and an average RoNW of - (23.91) %. The issue is priced at a P/BV of xx based on its NAV of Rs. 59.11 as of September 30, 2023, and at a P/BV of xx based on its post-IPO NAV of Rs. 119.53 per share (at the upper cap).

The issue is negatively priced as the company has posted losses for the reported periods. It is also at a negative P/E. However, its debt repayment from the IPO funds will bring finance cost saving as it opted for debt funding that was used during the Pandemic to expand at desired levels. 

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer documents. It has already adopted a dividend policy in the month of February 2024, based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Chalet Hotels, Lemon Tree, Indian Hotels, and EIH Ltd. as their listed peers. They are trading at a P/E of 72.9, 86.0, 65.4, and 45.0 (as of February 16, 2024). However, they are not comparable on an apple-to-apple basis. 

MERCHANT BANKER'S TRACK RECORD:
The three BRLMs associated with the issue have handled 85 public issues in the past three fiscals, out of which 22 issues closed below the offer price on the listing date.

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