The Rs 1,600 crore-initial public offering (IPO) of Ventive Hospitality opens for bidding on Friday, December 20 and can be subscribed until Tuesday, December 24. The company shall be offering its shares in the range of Rs 610-643 apiece and investors can apply for a minimum of 23 equity shares and its multiples thereafter.
Incorporated in February 2002, Pune-based Ventive Hospitality is in the hospitality business with a primary focus on business and leisure segments, which primarily focuses on developing and managing high-end luxury hotels and resorts. It has 11 operational hospitality assets in India and the Maldives, with 2,036 keys across various upscale segments as of September 30, 2024.
Brokerage firms tracking the issue have mostly a positive view on the stock and suggested subscribing to it for a long term on the back of rising demand for luxury hotels, strong track record and in-demand locations. However, higher debt, rich valuation and asset heavy model are key concerns for the company.
Anand Rathi believes that the company comes with a clear focus on their core strength of developing luxury and upscale hospitality assets and to increase the number of keys across our hospitality assets. The issue is asking for a marketcap of Rs 15.016.7 crore. Based on FY24 earnings, the company is asking a PE of 90 times times which is fully priced, it said.
"The company will utilize Rs 1,400 crore to repay debt which will help reduce finance cost and improve profits for the company going forward. The company is well-positioned to benefit from growing hospitality demand in conjunction with relatively low new supply in their key markets and growing tourism industry. We give the 'subscribe for long-term' rating for the issue," it said.
The IPO of Ventive Hospitality is entirely a fresh share sale of up to 2,48,83,358 equity shares and the net proceeds from the issue shall be utilized towards repayment/prepayment of certain of borrowings availed by the company and its subsidiaries: for payment of interest accrued; and general corporate purposes.
The company's strategic focus on hotel development, rather than management, ensures streamlined operations and higher returns. Lower construction costs per room further enhance profitability. A robust development pipeline of over 1,000 keys across India and Sri Lanka supports future growth prospects, said Canara Bank Securities.
"Panchshil Realty’s commitment to innovation and sustainability strengthens its competitive differentiation. While the firm is positioned for steady growth, continuous monitoring of profitability trends is essential for accurate valuation reassessment. Given these considerations, we recommend maintaining a 'neutral' stance on this issue," it said.
Ahead of its IPO, Ventive Hospitality has raised Rs 719.5 crore from anchor investors as it allocated 1.11 crore shares at a price of Rs 643 apiece. Global investors like Government Pension Fund Global, Florida Retirement System, ABSL Umbrella Ucits Fund, Citigroup Global, Societe Generale, Copthall Mauritius Investment, and Tocu Europe invested in its via anchor book.
At a P/E of 40.4 times on the upper band, the company’s valuation is lower than its peers, making it an attractive investment opportunity. Ventive generates about 41 per cent of its revenue from annuity assets leased to marquee tenants such as HSBC, Deutsche Bank, and Starbucks, said StoxBox.
"With plans to expand its footprint with projects in Varanasi, Bengaluru, and Sri Lanka, aiming to add 367 keys by FY28, Ventive is well-positioned for sustained growth. Considering its strong market presence, financial performance, and expansion plans, we recommend a 'subscribe' rating for the issue, with a medium- to long-term investment horizon," it added.
For the six months ended on September 30, 2024, Ventive Hospitality reported a net loss of Rs 137.83 crore with a revenue of Rs 875.9 crore. 75 per cent of the net issue has been reserved for qualified institutional bidders (QIBs), while non-institutional investors (NIIs) will get 15 per cent of allocation. However, retail investors will get the remaining 10 per cent of the net issue.
JM Financial, Axis Capital, HSBC Securities & Capital Markets, ICICI Securities, IIFL Securities, Kotak Mahindra Capital Company, SBI Capital Markets are the book running lead managers of the Ventive Hospitality IPO, while Kfin Technologies is the registrar for the issue.