IPO: Apeejay Surrendra Park Hotels

Apeejay Surrendra Park Hotels, a hotel operator, has come out with its IPO (initial public offering) on February 5, 2024. Here's a breakdown of the company's strengths, weaknesses, and growth prospects to help investors make an informed decision. In a nutshell Quality: Its three-year average ROE and ROCE are -3.2 per cent and 3.4 per cent, respectively. It also reported positive cash flow from operations in each of the last three financial years. Growth: Its revenue grew by 68 per cent annually over the last three years. Valuation: The stock is valued at a P/E and P/B of 63.1 and 2.8 times, respectively. Overview: Growth in tourism and discretionary spending will drive growth. However, high competitive intensity and an uptick in debt due to the high capital requirements of the business may pose considerable threats. About Apeejay Surrendra Park Hotels Apeejay Surrendra Park Hotels is a hotel operator. It operates under the brand "The Park" and has a pan-India presence with diverse product offerings, from economy to luxury hotels. Strengths of Apeejay Surrendra Park Hotels It is the eighth-largest hotel chain (among hotel chains that own the hotels they operate), comprising about 1,300 rooms. It has a diversified pan-India presence with over 30 hotels across 20 cities. Weaknesses of Apeejay Surrendra Park Hotels History of breaching financial covenants. As of FY23, it has breached covenants in financial agreements of around Rs 4,500 crore. Revenue concentration. Around 75 per cent of FY23 revenue came from its top five hotels. IPO details Total IPO size (Rs cr) 920 Offer for sale (Rs cr) 320 Fresh issue (Rs cr) 600 Price band (Rs) 147-155 Subscription dates February 5-7, 2024 Purpose of issue Repayment of debt Post-IPO M-cap (Rs cr) 3,307 Net worth (Rs cr) 1,179 Promoter holding (%) 68.1 Price/earnings ratio (P/E) 63.1 Price/book ratio (P/B) 2.8 Financial history Key financials 2Y growth (% pa) TTM September 2023 FY23 FY22 FY21 Revenue (Rs cr) 68.2 545 506 255 179 EBIT (Rs cr) 148.2 125 109 5 -26 PAT (Rs cr) 62.3