Juniper Hotels IPO to open today: Should you subscribe to the issue?

The initial public offering (IPO) by Juniper Hotels will kick-off for public bidding on Wednesday, February 21.  Investors can bid for the issue by applying for a minimum of one lot of 40 shares and its multiples thereafter. The issue will be sold in the price band of Rs 342-360 per share.  Brokerages largely gave have mixed views on the IPO that is scheduled to conclude on Friday, February 23.

A few analysts see unfolding of opportunities on the back of improved efficiencies, acquisitions and expansion plans. Others advised investors to give the IPO a skip due to mounting debt, loss-making nature and asset-heavy model of the business.

Juniper Hotels, which owns and operates the hotel chain under 'Hyatt' brand name, is raising Rs 1,800 crore via IPO route, which entirely consists of 5 crore fresh equity shares. The net proceeds from the issue shall be utilised towards repayment/prepayment/redemption of certain outstanding borrowings, partly or fully, availed by the company.

Juniper Hotel's revenue grew at a CAGR of 100.20 per cent over FY21-23 period, while its Ebitda came in at Rs 271.9 crore in FY23 compared to a negative Ebitda of Rs 43 lakh in FY21. The company’s net loss decreased to Rs 1.5 crore in FY23 from the net loss of Rs 19.95 crore posted in FY21, said StoxBox.

"However, considering the asset-heavy business model of the company, rising debt levels and continued loss-making status, we would recommend an 'avoid' rating for the issue," it added. "We would reconsider the company for further evaluation following sustained financial performance over the next few quarters."

Ventura Securities has suggested to 'subscribe' to the issue on the back of enhancement of facilities at its existing assets; exploring value accretive acquisition of assets and selective expansion; and continued to improve efficiencies including by enhancing utilisation of space with a view to increase revenues.

Ahead of its IPO, Juniper Hotels has allocated 2.25 crore equity shares at Rs 360 apiece to garnered Rs 810 crore from several anchor investors including Fidelity Funds, Government Pension Fund Global, Carmignac Portfolio, HSBC Global Investment, Nedgroup Investment, Marshall Wace Investment Strategies, Natixis International Funds, Goldman Sachs and Societe Generale.

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.

Based on annualised FY24 earnings and fully diluted post-IPO paid up capital, company’s operational metrics remain healthy, but interest costs are weighing on profitability bringing bottom line to net loss, so with historical losses on books it won’t be practical to go with PE valuation, said Mehta Equities in its IPO note.

"Considering the optimistic momentum in the secondary market and welcoming announcements made in the interim Budget to promote the hospitality and tourism industry which will benefit the hotel sector to outperform in coming years and the primary objective of reducing the debt which could lighten interest burdens which can improve the bottom lines in coming years," it said while recommending only high risk investors to 'subscribe' to the IPO.

Juniper Hotels, incorporated in September 1985, is a luxury hotel development and ownership company. It operates seven hotels and serviced apartments with a total of 1,836 rooms as of September 30, 2023, It has hotels and serviced apartments in Mumbai, Delhi, Ahmedabad, Lucknow, Raipur, and Hampi in the luxury, upper upscale and upscale categories.

Grand Hyatt Mumbai Hotel and Residences is India's largest luxury hotel, while Hyatt Regency Lucknow and Hyatt Regency Ahmedabad are the biggest upper upscale hotels in their respective markets. Hyatt Raipur is the only upper upscale hotel in the city. Juniper Hotels is co-owned by Saraf Hotels Ltd and Two Seas Holdings.

“Juniper Hotels has partnerships between asset owner and operator brand backed by strong parentage, expertise in site selection and identifying opportunities to develop their hotels,” said Hensex Securities. It is well positioned to benefit from industry trends, robust asset management capabilities with a focus on enhancing operating efficiency and profitability, it said.

However, Hensex has cited historically negative operating cash flows, a capital intensive nature of business and various unsecured borrowings as the key risk for the issue. It has a 'neutral' rating on the issue.

JM Financial, CLSA India and ICICI Securities are the book running lead managers of the Juniper Hotels IPO, while Kfin Technologies Ltd is the registrar for the issue. Shares of the company are set to be listed on both BSE and NSE with Wednesday, February 28 as the tentative date of listing.

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

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