Loss-making Samhi Hotels to see lukewarm listing on bourses, say analysts

The initial public offer (IPO) received relatively lower applications from investors – seeing a subscription of 5.57 times, largely thanks to qualified institutional buyers (QIB). The issue has not received enough support from high net-worth individuals and retail investors, who subscribed 1.22 times and 1.11 times, respectively.

Samhi Hotels, a prominent branded hotel ownership and asset management platform in India, raised Rs 1,370.1 crore from the public issue at the upper price band. It comprised a fresh issue of shares worth Rs 1,200 crore, and an offer-for-sale (OFS) of 1.35 crore shares worth Rs 170.1 crore by three selling shareholders.

The company, backed by global investors Equity International, ACIC Mauritius and Goldman Sachs, will utilise the net fresh issue proceeds for repaying debt worth Rs 900 crore, and the rest for general corporate purposes.

Samhi Hotels, which acquires or builds primarily business hotels, owns a portfolio of 4,801 keys across 31 operating hotels in key urban consumption centres in India as of August.

Astha Jain, Senior Research Analyst at Hem Securities, said she expects Samhi Hotels to list at 3-5 percent premium to issue price. She advised to book partial profit and hold partial allotment for long term as the company’s ability to acquire dislocated hotels and demonstrated track record to re-rate hotel performance through renovation and/or rebranding is infusing optimism.

“Company’s portfolio’s scale and diversification further enhanced by sector tailwinds along with the company’s track record to manage hotels efficiently is also looking positive. Company’s ability to create operating efficiencies and long-term performance using analytics tools and strong governance and seasoned management team makes this issue a decent one,” she said.

A big short-term negative is that it has been a loss-making company as per the financials available for the last three years. The net loss narrowed to Rs 338.59 crore in the year ended March FY23, from Rs 443.25 in FY22, but revenue from operations more than doubled to Rs 738.57 crore, from Rs 322.74 crore during the same period.

“With the Samhi Hotels IPO receiving a relatively subdued subscription of about 5.6x compared to the high subscription issues that hit the markets recently, we expect a tepid listing for the issue when it lists on the bourses,” said Anushi Vakharia, Research Analyst, StoxBox.

“We expect the IPO to open close to the issuance price of Rs. 126 per share due to the company-specific characteristics such as loss-making status, negative net worth and increased borrowings. This paints an overall bleak picture for the business compared to its listed peers such as Chalet Hotels and Indian Hotels. We, therefore, remain cautious on the issue and recommend investors who have received allotment to sell their shares on the opening day and consider other avenues for investment.”

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