Ventive Hospitality IPO: All you need to know

Ventive Hospitality IPO (initial public offering) will open for subscription on December 20, 2024, and close on December 24, 2024. Below is a breakdown of this hospitality company's strengths, weaknesses and growth prospects to help investors make an informed decision.

Ventive Hospitality IPO in a nutshell

• Quality: During FY22-24, Ventive Hospitality reported a three-year average ROE and ROCE of 50.4 and 23.6 per cent, respectively.
  
• Growth: During FY22-24, its revenue and profit after tax grew by 44.4 and 137.7 per cent per annum, respectively.
  
• Valuation: At the upper end of the price band of Rs 643, the stock is valued at a P/E and P/B ratio of 90.3 and 2.8 times, respectively.
  
• Overview: Growing demand for tourism will help the company to scale up its business. However, increasing supply from other well-established players can impact earnings in the future. Reliance on third-party brands to operate hotels may also pose a threat to Ventive Hospitality's financials.

About Ventive Hospitality

Incorporated in 2002, Ventive Hospitality operates premium hotels, malls and windmills and leases commercial spaces.

Ventive Hospitality's operations are based in India (Pune and Bengaluru) and the Maldives. The company owns a portfolio of high-end hospitality properties managed by global brands like JW Marriott, The Ritz-Carlton, Conrad and Anantara. As of H1 FY25, the company operates 11 hotels with 2,036 rooms.

A sizable portion of Ventive Hospitality's revenue comes from its properties in Pune and the Maldives (92 per cent as of H1FY25). The company also plans to expand by developing a new hotel in Varanasi, Uttar Pradesh.

Strengths of Ventive Hospitality

• Reputed clientele: The company's portfolio includes marquee luxury assets operated by global hospitality brands such as JW Marriott, The Ritz-Carlton, Conrad and Anantara. These brands are well-established, and all their hospitality assets are in prime locations.

Weaknesses of Ventive Hospitality

• Debt-funded acquisitions : The company has recently acquired a new portfolio, which was funded by raising debt along with equity. This has increased the company's financial leverage. Moreover, post acquisitions, goodwill accounts for 42 per cent of Ventive Hospitality's net worth.

Risk report

Company and business

• Were Ventive Hospitality's earnings before tax more than Rs 50 crore in the last 12 months?
  Yes. Its earnings before tax was Rs 205 crore in FY24.
  
• Will Ventive Hospitality be able to scale up its business?
  Yes. Domestic travel is growing rapidly in India. To capitalise on these opportunities, the company plans to increase its number of keys across its hospitality assets from 2,036 keys as of H1FY25 to approximately 2,403 keys in FY28. Moreover, the current situation of excess demand over supply in the Indian hotel industry will ensure that room rates will remain at elevated levels in the near future.
  
• Do Ventive Hospitality have recognisable brands with client stickiness?
  No. It uses third-party brands to operate or franchise its hospitality assets.
  
• Does the company have a credible moat?
  No. Ventive Hospitality faces stiff competition from established and more reputed players.

Management

• Do any of the company's founders still hold at least a 5 per cent stake? Or do promoters have over 25 per cent stake in the company?
  Yes. After the IPO, the promoters will hold an 89 per cent stake in the company.
  
• Do the top three managers have over 15 years of combined leadership experience at Ventive Hospitality?
  Yes. The company's chairman, Atul I. Chordia, has been with it since its incorporation in 2002.
  
• Is the company's management trustworthy? Is it transparent in its disclosures, which are consistent with SEBI guidelines?
  Yes. There is no information to suggest otherwise.
  
• Is the company's accounting policy stable?
  Yes. There is no information to suggest otherwise.
  
• Is Ventive Hospitality free of promoters pledging their shares?
  Yes. The company is free of promoters pledging their shares.

Financials

• Did the company generate a current and three-year average ROE of more than 15 per cent and an ROCE of more than 18 per cent?
  Yes. Between FY22-24, Ventive Hospitality's three-year average ROE and ROCE were 50.4 and 23.6 per cent, respectively. In FY24, it reported an ROE and ROCE of nearly 67.3 and 32.6 per cent, respectively.
  
• Was the company's operating cash flow positive during the last three years?
  Yes. The company reported positive cash flows over the last three years.
  
• Is Ventive Hospitality's net debt-to-equity ratio less than one?
  No. As of H1 FY25, the company's net debt-to-equity ratio stood at one.
  
• Is Ventive Hospitality free from reliance on significant working capital for day-to-day affairs?
  Yes. The business in which the company operates is less working capital intensive.
  
• Can the company operate its business without relying on external funding in the next three years?
  No. In the past, Ventive Hospitality has relied on external funding to scale its business. It may require additional funding for capex in the future to expand its operations and stay competitive in the hospitality industry.
  
• Is Ventive Hospitality free from meaningful contingent liabilities?
  Yes. As of FY24, its contingent liabilities as a percentage of equity stood at 0.2 per cent.

Valuations

• Does the stock offer an operating earnings yield of more than 8 per cent on its enterprise value?
  No. The stock offers an operating earnings yield of 1.3 per cent.
  
• Is the stock's P/E ratio less than its peers' median level?
  No. The stock is valued at a P/E ratio of 90.3 times compared to its peers' median level of 83 times.
  
• Is the stock's P/B value less than its peers' average level?
  Yes. The stock is valued at a P/B ratio of nearly 2.8 times compared to its peers' average level of 5 times.

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Disclaimer: This is not a stock recommendation. Investors should do their due diligence before investing.

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