Ventive Hospitality
IPO Size: Rs. 1,600 cr, Entirely Fresh Issue
- For Rs. 1,400 cr debt repayment, of Rs. 3,600 cr gross debt
Price band: Rs.610-643 per share
- Only 10% for retail and 75% for institutions, as company’s name changed from ICC Realty (India) in past 1 year
M cap: Rs. 15,017 cr, implying only 11% dilution
IPO Date: Fri 20th Dec to Tue 24th Dec 2024, Listing Mon 30th Dec 2024
Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.
Luxury Hotel and Office Property Owner
Ventive Hospitality, promoted by Pune’s Panchshil Realty and PE Blackstone, owns 2,036 operational keys, across 11 hotel properties in Pune, Bengaluru and Maldives. It has 367 keys under development across 3 hotels in Varanasi, Bengaluru and Sri Lanka, to be operational by FY27-28E. These are luxury and upscale hotels under brands Marriott, Ritz-Carlton, Anantara, Conrad, Hilton among others.
Besides, the company owns 3.4 million sq ft of office and retail space in Pune, fetching annuity income of Rs. 500 cr annually.
Healthy Operating Margin
Company’s average occupancy of 60% is lower than peers (70%+), but average room rent (ARR) of Rs. 20,000 is the highest in relation to listed luxury hospitality peers -Chalet (Rs. 10,700), Juniper (Rs. 10,150) and Indian Hotels (Rs. 15,400). This leads to industry-leading EBITDA margin of 45%.
Interest Expense Erases Operating Profit
FY24 revenue stood at Rs. 478 cr. Factoring in acquisition of hotel properties in Aug 2024, proforma FY24 revenue is at Rs. 1,842 cr, with Rs.870 cr EBITDA and 45% EBITDA margin. H1FY25 proforma revenue stood at Rs. 846 cr, with Rs. 364 cr EBITDA and 42% EBITDA margin, impacted due to seasonality.
Costly debt of Rs. 3,600 cr (raised to fund acquisition), at 12%+ interest pa, ate up operating profit, leading to a proforma net loss of Rs. 138 cr for H1FY25. Post repayment of Rs. 1,400 cr debt from IPO proceeds, bottomline is expected to be in the black, from H2FY25E onwards. It will also halve the net debt to equity ratio from 0.9:1 to 0.4:1, post repayments.
Reasonably Priced
Ventive’s enterprise value (EV) per operational key is at Rs. 8.4 cr, and a one year forward EV/EBITDA of 17x.
On the other hand, Chalet Hotels, with 3,052 keys, Rs. 1,400 cr topline and 43% EBITDA margin is ruling at an EV per key of Rs. 7.8 cr and EV/EBITDA multiple of 28x. Smaller peer Juniper Hotels, having 1,900 keys, Rs. 850 cr topline, 39% EBITDA in FY24 and 33% in H1FY25, discounts its enterprise value of Rs. 8,750 cr by one year forward EV/EBITDA of 23x.
Since’s Ventive’s ARR is higher than peers, its earning capacity is better. This will start trickling down to bottomline, post IPO. Also, Ventive’s EV per key may always be at a premium to peers, partly due to the numerator containing annuity value without a corresponding number in the denominator.
To summarize, Ventive’s EV is at Rs. 17,000 cr for expected EBITDA of Rs. 1,000 cr in FY26E, as against Chalet’s Rs. 24,000 cr EV for Rs. 850 cr EBITDA.
In Aug 2024, Ventive raised Rs. 1,450 cr via pre-IPO at Rs. 618 per share, from Blackstone. After 4 months, IPO price is 4% higher, which is acceptable. 99.6% pre-IPO promoter holding will drop to 89% post IPO, indicating low dilution.
20th Dec 2024 at 03:37 pm
20th Dec 2024 at 11:53 am