Juniper Hotels IPO: Should you subscribe to the Rs 1,800-crore issue?

Juniper Hotels IPO: The price band for the issue, which will close on February 23, has been fixed at Rs 342-360 a share

Juniper Hotels initial public offering (IPO) was off to a slow start on February 21 despite receiving favourable ratings from several brokerages. It is the only hotel development company in India with which Hyatt has a strategic investment.

The business

Juniper Hotels is a luxury hotel development and ownership company and is the largest owner, by number of keys, of Hyatt-affiliated hotels in India. The company has a portfolio of seven hotels and serviced apartments and operates 1,836 keys, as of September 30, 2023. The company is jointly held by Saraf Hotels and its affiliate, Juniper Investments, and Two Seas Holdings, an indirect subsidiary of Hyatt Hotels Corporation.

Offer details

The price band for the issue, which will close on February 23, has been fixed at Rs 342-360 a share. The Rs 1,800-crore public offer is entirely a fresh issue of 5 crore shares. The company will use the proceeds to repay its loans and those of its recent acquisitions— CHPL and CHHPL. The remaining money will be used for general corporate purposes.

Also Read: Juniper Hotels IPO: 10 things to know before subscribing to Rs 1,800-crore issue

The lead managers to the IPO are JM Financial, CLSA India and ICICI Securities, while Kfin Technologies is the registrar. The company's promoters are Arun Kumar Saraf, Saraf Hotels, Two Seas Holdings and Juniper Investments.

Anchor investors

The anchor book opened on February 20 with the company raising Rs 810 crore from several anchor investors. Marquee investors including Fidelity Funds, Government Pension Fund Global, Camrignac Portfolio, The Prudential Assurance Company, HSBC Global Investment Funds, Nedgroup Investment Funds, Marshall Wace Investment Strategies, Natixis International Funds, Schroder International, GAM Multistock, Goldman Sachs and Societe Generale participated in the anchor book.

Financials

Juniper reported a net loss of Rs 1.5 crore in FY23, significantly lower from Rs 188 crore in the previous year. Revenue more than doubled to Rs 666.85 crore from Rs 308.7 crore in the same period.

For the six months ended September 30, net loss widened to Rs 26.5 crore from Rs 17.5 crore in the year-ago period. Average occupancy was 74.84 percent and net borrowings stood at Rs 2,240 crore. The net borrowings to total equity ratio was 2.61 times in the same period.

Also Read: Juniper Hotels working to bring down debt and turn profitable post IPO: Management

Should you subscribe to Juniper Hotels IPO?

Mehta Equities: Subscribe

Based on annualised FY24 earnings and fully diluted post-IPO paid-up capital, the company’s operational metrics remain healthy but interest costs are weighing on profitability, bringing the bottom line to net loss, so with historical losses on books, it won’t be practical to go with PE valuation.

“Instead, if we analyse it based on Price to Book Value, which stands at ~3x of FY24 annualised compared to the industry average of ~5-8x, it seems this IPO is fairly priced to its peers. Looking at its sector growth and losses on the books of the company we recommend only high-risk investors can ‘Subscribe’ to the IPO for the long term while conservative investors can wait and watch the space post listing,” said Rajan Shinde, Research Analyst at Mehta Equities.

Also Read: Juniper Hotels’ fundamentals in 5 charts

Anand Rathi: Subscribe for long term

At the upper price band, the company is valued at EV/EBITDA 36.9x with a market cap of Rs 8,010 crore post-issue of equity shares.

“Since the company is using most of its IPO proceeds to repay its debt which is going to reduce interest costs, it will have a positive impact on profitability going forward. Apart from that demand-supply mismatch in terms of hotel rooms, foreign tourists’ arrival is one of the key growth factors for the hospitality industry going forward. We believe that the IPO is fairly priced and recommend a ‘Subscribe-Long term’ rating to the IPO,” said Manan Goyal, Equity Research Analyst at Anand Rathi.

Ventura: Subscribe

“The company’s unique partnership is backed by strong and well-recognized parentage and robust asset management capabilities with a focus on enhancing operating efficiency and profitability and is expected to drive growth. At the IPO price of Rs 360, Juniper Hotels is valued at an EV/EBITDA multiple of 22.6,” said analysts at Ventura Securities.

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