Apeejay Surrendra Park Hotels IPO booked 3.7x in three hours; retail portion books over 9 times

The initial public offering (IPO) of Apeejay Surrendra Park Hotels continued to receive a strong response from the investors during the second day of the bidding process, across all categories of investors. The issue, which kicked off Monday, February 5, was booked 2.4 times on day one.

The Kolkata-based Apeejay Surrendra Park is selling its shares in the price band of Rs 147-155 apiece with a lot size of 96 shares and its multiples thereafter. The Rs 920-crore issue includes a fresh share sale of Rs 600 crore and offer-for-sale shares worth Rs 320 crore.

According to the data, the investors made bids for 12,92,54,976 equity shares, or 3.72 times, compared to the 3,47,61,903 equity shares offered for the subscription by 12.25 pm on Tuesday, February 6. The three-day bidding for the issue will conclude on February 7, Wednesday.

The allocation for retail investors was subscribed 9.22 times, while the portion reserved for non-institutional investors saw a subscription of 5.32 times. However, the quota set aside for qualified institutional bidders (QIBs) attracted bids for 1.17 times and the portion reserved for eligible employees of the company was booked 1.37 times as of the same time.

Incorporated in 1987, Apeejay Surrendra Park Hotels is engaged in the hospitality business operating under the brand names of 'The Park', 'The Park Collection', 'Zone by The Park', 'Zone Connect by The Park' and 'Stop by Zone'. The company is also engaged in the business of retail food and beverage industry through its retail brand 'Flurys'.

Brokerage firms are mostly positive on the issue and suggest to subscribe to the issue citing its sound management, efficient track record, expansion plans, asset light model and rise in the travel. However, higher operational capital, delayed plans and payments and other regulatory issues are key risks to the company.

In a bid to enhance operational efficiency, the company is implementing holistic management plans for its hotels. This involves streamlining sourcing costs,  leveraging technology for workforce management, and implementing energyefficient practices, said Ventura Securities.

To embrace their asset light business model, the company plans to expand its portfolio through operation and management agreements, as well as lease or license deeds, particularly for properties under the "Zone by The Park" and "Zone Connect by The Park" brands, it added with a 'subscribe' rating.

Ahead of its IPO, Apeejay Surrendra Park Hotels raised Rs 409.5 crore from anchor investors as it issued over 2.64 crore equity shares at an issue price of Rs 155 apiece. The company has reserved 75 per cent of the offer to qualified institutional bidders (QIBs), with non-institutional investors receiving 15 per cent, and the remaining 10 per cent allocated to retail investors.

The hospitality sector in India consists of hotels offering rooms to tourists and business travelers, as well as restaurants, bars, and banquet facilities for events. India's hospitality industry is expected to grow rapidly, with an overall supply CAGR of 8.6% from September 2023 to FY 2027, said SMC Global's IPO note.

Apeejay Surrendra Park has carved a unique space in the hospitality industry. Leading the segment with impressive occupancy rates, the company consistently outperforms competitors. A significant portion of its earnings will be directed towards debt reduction, leading to a healthier bottom line and lower financing costs, it added while giving its 2.5 stars out of 5.

ICICI Securities, JM Financial and Axis Capital are the book running lead managers of the Apeejay Surrendra Park IPO, while Link Intime India is the registrar for the issue. Shares of the company are likely to debut on both BSE and NSE with Monday, February 12 as the tentative date of listing.

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