IPO Size: Rs. 1,800 cr, Entirely Fresh Issue  

• To repay Rs. 1,500 cr of Rs. 2,240 cr net debt

Price band: Rs. 342-360 per share

• 75% reserved for the institutional investors and only 10% for retail, as loss making for past 3 fiscals

M cap: Rs. 8,010 cr, implying 22% dilution

IPO Date: Wed 21^st Feb to Fri 23^rd Feb 2024, Listing Wed 28^th Feb 2024

Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.

Luxury ‘Hyatt’ Hotels Owner

Juniper Hotels is a 50:50 joint venture between Kolkata-based Saraf Group and USD 14 billion Hyatt Hotels Corporation (held through Two Seas Holdings), being the only hotel development company in India, with strategic investment from Hyatt. Company has a portfolio of 7 ‘Hyatt’ hotels and serviced apartments aggregating to 1,836 keys, as of 30.9.23, comprising 20% of Hyatt inventory in India, including India’s largest luxury hotel 665-key Grand Hyatt Mumbai Hotel, accounting for over 50% of company’s Rs.667 cr revenue in FY23.  

Inorganic Growth from Group Companies

On 20.9.23, Juniper acquired 430 keys, across 3 Hyatt hotels housed under Chartered Hotels Private Limited, owned by company’s promoters, via fresh issue of 2.88 cr equity shares. Over the next 3 years, company aims to add 1,000 keys, through organic (Mumbai hotel adding 293 rooms by mid-FY27E) and inorganic route (plans merger of group hotel Hyatt Kolkata or Chennai housed in listed Asian Hotels East) through a non-cash merger or a leveraged buy-out.  

Operating Margins Lower than Peers

FY23 average occupancy stood at 76%, with an average room rate of about Rs. 9,900, leading to revenue of Rs. 667 cr. Reported EBITDA/room stood at Rs. 23 lakh for FY23, which includes high component of other income like profit on sale of assets, hence not best suited for comparison. Excluding other income, annual EBITDA/room is at around Rs. 19 lakh, lower than Chalet’s and EIH’s approximately Rs. 24 lakh each.

For H1FY24, average room rate rose to Rs. 10,140 with occupancy maintained at 75%, reporting revenue of Rs. 336 cr, up 14% YoY from Rs.294 cr in H1FY23. Excluding other income, EBITDA margin stood at 37-38% for H1FY24, as also FY23, again lower than Chalet and Lemon Tree operating at 45+%.

Deleveraging through IPO

Massive debt of Rs. 2,252 cr leads to an annual interest outgo of Rs. 270 cr, keeping bottomline in the red, even in H1FY24, one of the best years for hospitality industry. Post Rs. 1,500 cr debt repayment from IPO proceeds, PAT will turn positive FY25E onwards and debt equity ratio will shrink from a massive 2.6:1 to a more comfortable 0.3:1.

Fully Valued IPO

Enterprise value (EV) of Rs. 8,750 cr leads to EV/key of Rs. 4.8 cr and a one year forward EV/EBITDA multiple of 24x, on FY25E estimated EBITDA of about Rs. 370 cr.

• Chalet Hotels, having 2,894 Mariott brand keys, with an average room rate of Rs. 11,000, 71% occupancy and Rs. 23.5 lakh EBITDA per room, is ruling at an EV/EBITDA multiple of 30x with EV/key of Rs. 6.9 cr.
• EIH Limited, housing 4,269 keys under Oberoi and Trident brands and clocking higher EBITDA per room of Rs. 24 lakh, is ruling at similar EV/EBITDA multiple of 23x.
• Recently listed Park Hotels, operating 2,100 keys in the mid-premium segment with 90+% occupancy, EBITDA per room of Rs. 11.4 lakh and 12% RoE is quoting at an EV/EBITDA of 19x.
• 5,090-key Lemon Tree clocks Rs. 10.7 lakh EBITDA per room, with nearly 14% RoE, yet it is quoting at same EBITDA multiple of 24x, as Juniper’s IPO valuation.  

Juniper’s margin is lower than other luxury hotel peers Chalet and EIH, and even in FY25E, its RoE will be in only in mid-single digit of ~7% vis-à-vis 11-14% for all the above peers. This makes the IPO fully valued, leaving little incentive for potential investors.