SAMHI Hotels IPO booked only 10% on day two so far; retail portion nears halfway mark

The Rs 1,370-crore initial public offering (IPO) of SAMHI Hotels continued to witness a lackluster response from investors during the second day of the bidding process.

SAMHI Hotels is selling its shares in the range of Rs 119-126 apiece during the three-day bidding process and investors can make a bid of a minimum of 119 equity shares and its multiples thereafter. The issue includes a sale of fresh equity shares worth Rs 1,200 crore, while an offer-for sale (OFS) of up to 1.35 crore equity shares worth Rs 170 crore.

According to the data, the investors made bids for 60,28,064 equity shares, or merely ten per cent, compared to the 6,25,29,831 equity shares offered for the subscription by 1.10 pm on Friday, September 15. The bidding will conclude for bidding on Monday, September 18.

The allocation for retail investors was booked 47 per cent, while the portion for non-institutional investors saw a subscription of only four per cent. However, the portion reserved for qualified institutional bidders (QIBs) was not even off the mark at the same time.

Incorporated in 2010, SAMHI Hotels is a professionally managed branded hotel ownership and asset management platform in India. SAMHI's hotels operate under well-recognized hotel operators such as Courtyard by Marriott, Sheraton, Hyatt Regency, Hyatt Place, Fairfield by Marriott, Four Points by Sheraton, and Holiday Inn Express.

Majority of brokerages have a word of caution for the issue, citing its expensive valuations compared to peers, poor financials, seasonality in the operational performance and loss-making nature of the business. Majority of the analysts have suggested to give 'skip' to the issue, while some have suggested to subscribe to the issue.

As of March 2023, ROCE stood at 6.6 per cent which is further expected to improve on the back of debt repayment and growth planned for the upcoming few quarters. The issue is valued at 15.8x to EV/EBITDA based on FY23 proforma financials which is a discount to average valuation of 30.2x EV/EBITDA for its listed peers, said Nirmal Bang Securities with a 'subscribe' rating.

With occupancy levels reaching above 70 per cent levels across its portfolio during FY23, it intends to focus on increasing ARR and improving operating margins, while driving occupancies further. At the upper end of the price band, the EV/EBITDA translates to 17.41 times which is lower than the peer average. Thus, the IPO is attractively priced, said SMIFS.

Samhi Hotels has mobilized Rs 616.54 crore from 35 anchors by allotting them 4,89,32,143 equity shares at a price of Rs 126 apiece. Anchor book of the company includes Government of Singapore, Monetary Authority of Singapore, CLSA Global Markets, Think India Opportunities Master Fund, HSBC Global, Natixis International Funds, Imco Emerging Markets Public Equity LP and more.

Samhi has adopted an acquisition-led strategy, which is underpinned by their track record of acquiring and successfully turning around hotels to grow their business. The company’s ability to acquire dislocated hotels and demonstrated track record to re-rate hotel performance through renovation and/or rebranding, said Hensex Securities with a 'neutral' rating.

"Moreover, with an asset-heavy model, the company has increased net borrowings to Rs 2,614.41 crore in FY23 from Rs 2,254.1 crore in FY21," it added with an 'avoid' rating for the issue. It has cited seasonality of business and concentration of revenue from select geographical areas as the key risk to the business.

JM Financial and Kotak Mahindra Capital Company are the book-running managers to the issue, while Kfin Technologies has been appointed as the registrar to the issue. Shares of the company are likely to be listed on both BSE and NSE.
 

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