Crisil assigns grade 1/5 to Bhagwati Banquets IPO

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Bhagwati Banquets and Hotels proposes to enter capital market with a public issue of 23 million equity shares at a target price of Rs 30 per share aggregating Rs 690 million, as per press release.
 
Crisil has assigned a CRISIL IPO grade "1/5" grade to the proposed initial public offer, IPO of Bhagwati Banquets and Hotels, BBHL. This grade indicates that the fundamentals of the issue are poor relative to other listed equity securities in India.
 
The grading reflects Crisil's opinion that the business prospects of the company's planned 5-star hotel in Surat are significantly sub-par. The grade also reflects the underdeveloped corporate governance system in the company, the fact that other promoter owned entities operate in similar lines of business and that the current management team may need to be strengthened to carry out the company's plan of entering the 5-star hotel business. However, Crisil notes the exceptionally successful track record of the promoters in the catering business in Ahmedabad aided by its large centralized kitchen and large banqueting facilities at 'The Grand Bhagwati'.
 
About the company

Bhagwati Banquets and Hotels, BBHL was incorporated in November 1999 as a private limited company. The company was subsequently converted to a public limited company in April 2000. BBHL currently has a presence in Ahmedabad with its indoor catering and banquet hotel, outdoor catering, contract-catering & club rooms and restaurants.

Other business activities by promoter companies outside the purview of BBHL include banqueting (small gatherings accommodating 60 to 200 people), bakery products and a 70-room hotel in Ahmedabad.  For the year ended March 2006, BBHL reported a net profit of Rs 13.7 million on operating income of Rs 230.4 million.