Leela Hotels shares may list at marginal gains, say experts; recommend 'long-term hold'

Leela Hotels shares may list at marginal gains.

Shares of Schloss Bangalore Ltd, which owns and operates the Leela Palaces Hotels and Resorts chain, are likely to list with marginal gains when they list on stock exchanges on Monday, June 2, market analysts said.

The Rs 3,500-crore initial public offer (IPO) of Schloss Bangalore received a subscription of 4.50 times on the final day of bidding, with demand driven largely by institutional investors.

As per NSE data, the IPO received bids for 20.96 crore shares against 4.66 crore shares on offer. The Qualified Institutional Buyers (QIBs) portion was subscribed 7.46 times, while the Non-Institutional Investors (NIIs) category was subscribed 1.02 times. The Retail Individual Investors (RIIs) segment was subscribed 83 percent.

Market participants, however, expect a subdued debut for the stock on listing day.

"At the upper price band, the company is valued at a price-to-earnings (P/E) ratio of 266.8x, price-to-sales (P/S) of 11.2x, and enterprise value-to-EBITDA (EV/EBITDA) of 30x. Given this steep valuation, we anticipate listing with only marginal gains," said Narendra Solanki, Head of Fundamental Research (Investment Services) at Anand Rathi Wealth Ltd.

Solanki added that Schloss Bangalore, which operates 13 luxury hotels across India with 3,553 keys, is among the largest players in the luxury hospitality segment. “Investors with a long-term horizon may consider holding the stock post-listing, depending on their risk appetite,” he noted.

Mahesh M Ojha, AVP – Research & Business Development at Hensex Securities, echoed similar views. "Short-term investors should moderate their expectations. The company has strong brand recognition, but it is advisable not to chase listing gains. Investors confident in the long-term potential of India’s luxury hotel industry can consider holding the stock," he said.

Prashanth Tapse, Senior VP (Research) at Mehta Equities, noted that although the IPO received decent subscription overall, interest from retail and high-net-worth investors remained muted.

"This tepid response is understandable, given concerns about the company’s high valuation, significant debt even after recent repayment efforts, and operational issues like below-industry-average occupancy rates," Tapse said.

Mehta Equities expects a flat listing, in line with subdued market sentiment, but views the stock as a promising long-term opportunity. "The company is well-positioned to benefit from structural growth in India’s luxury travel and hospitality space. Allotted investors are advised to hold the stock from a long-term perspective, while non-allottees may wait for a post-listing correction to enter at better valuations,” the brokerage said in its pre-listing note.

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