The Park Hotels has engaged ICICI Securities as the merchant banker, sources told Moneycontrol.
Luxury boutique hotel chain The Park Hotels, owned by Kolkata-based diversified conglomerate Apeejay Surrendra Group, has kickstarted preliminary work for an initial public offer in 2020 and has appointed advisors for the proposed listing, multiple sources with knowledge of the matter told Moneycontrol.
The Paul family-owned group's first hotel opened on the eponymous Park Street in Kolkata in 1967. It has interests in tea, shipping, logistics, real estate and financial services. It also backs the popular Oxford Bookstores and Flury's tea-cafe.
"The Park Hotels has engaged ICICI Securities as the merchant banker for now and is looking to hit the markets post March 2020. Additional bankers may be appointed later. These are early days so there is no clarity on the valuations as yet, but as of now, the plan is to offload 20-25 percent stake to the public and the issue is likely to be a mixture of primary and secondary issue of shares ," said one of the sources.
"Prior to the proposed initial public offer of the company, there will be some internal restructuring. Need for growth capital and deleveraging the balance-sheet are likely to be the main triggers for choosing the listing route. A suitable sectoral peer for The Park Hotels would be Lemon Tree Hotels," another source told Moneycontrol.
Lemon Tree Hotels which got listed in April 2018 is currently trading marginally below its IPO issue price of Rs 56/share. In comparison, Chalet Hotels which hit the markets in February 2019 with an issue price of Rs 280/share was trading higher at Rs 327.5/share at the end of market hours on Friday, 23rd August, 2019.
"The Indian hospitality industry, which experienced a prolonged downturn during FY2009–FY2015 because of excess supply in several key markets in India, posted improvement (as measured by Revenue per Available Room or RevPAR) over the past two-three years. Apeejay Surrendra Park Hotels Ltd properties have recorded a considerable increase in both average room revenues (ARRs) and occupancy levels in FY2018 and FY2019, with ARRs increasing by 11% in FY2019 and average occupancy across the properties standing at 90% at present," according to an ICRA report on the company dated April 30th, 2019.
"High share of food and beverage income provides some cushion against the cyclicality of the hotel business. Share of revenue from the F&B income has historically been high for Apeejay Surrendra Park Hotels Ltd, relative to peers, with the share standing at around 45-46% of total revenues on an average over the period FY2013-2019, notwithstanding some decline in the quarters post-demonetisation due to an overall economic slowdown. With the positive trend expected to sustain over the near-to-medium term, ICRA expects the company to record increased profitability from its core operations, going forward," the report said. However, it also added that "overall group liquidity has been impacted because of consistent operating losses suffered in the group’s tea business in the last few years."
As of April, 2019 the hospitality firm had a portfolio of 20 hotels (including 13 under the management contracts), comprising 1,798 rooms across locations like Bengaluru, Chennai, Hyderabad, Mumbai, New Delhi , Vishakhapatnam and the Kerala backwaters. The hotel portfolio is diversified across categories, with presence in luxury and upscale segments through 'THE PARK' brand, and in the economy segment through the 'Zone by THE PARK' brand (operated through management contracts). The company reported a net loss of Rs.8.10 crore on an operating income of Rs. 385.21 crore in FY2018. In FY2017, the company reported an operating income of Rs. 366.45 crore, and a net profit of Rs. 10.16 crore.
"We will be adding atleast 10 more hotels with 1239 rooms in our portfolio by the end of 2020 across the country. But we expect the numbers to go up based on the signings we are doing. The upcoming hotels will be in locations such as Indore, Pune, Vishakhapatnam, Goa, Srinagar, Amritsar, Tirupati and Vijayawada amongst others," said Apeejay Surrendra Park Hotels Chairperson Priyanka Paul, according to a report dated July 28, 2019.Moneycontrol is awaiting the response to an email query sent to the Apeejay Surrendra Group despite several email and text reminders. ICICI Securities too did not respond to a Moneycontrol query at the time of publishing this article.
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