SAMHI Hotels IPO kicks off: What brokers say on valuations, future prospects

The Rs 1,370 crore initial public offering (IPO) of SAMHI Hotels will open for bidding on Thursday, September 14. The hotel chain player is selling its shares in the range of Rs 119-126 apiece, with a lot size of 119 equity shares and its multiples thereof. The three-day bidding will conclude on Monday, September 18.

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.

The IPO consists of fresh equity sale of Rs 1,200 crore an offer-for-sale (OFS) of 1.35 crore equity shares amounting to Rs 170 by Blue Chandra, Goldman Sachs Investments Holdings (Asia) and GTI Capital Alpha. Net proceeds from the issue shall be utilized towards repayment or prepayment of borrowings by the company or its subsidiaries, and general corporate purposes.

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 Hotels has a portfolio of 4,801 keys across 31 operating hotels in 14 of India's key urban consumption centers, including Bengaluru, Hyderabad, National Capital Region (NCR), Pune, Chennai, and Ahmedabad, Gujarat as of March 31, 2023. The company also has 2 hotels under development with a total of 461 keys in Kolkata and Navi Mumbai.

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 the industry tailwinds paint a rosy picture for the business, the company-specific characteristics such as loss-making status and negative net worth for the past three fiscals - FY 21-23 paint an overall bleak picture for the business compared to improvement in metrics of its listed peers like Chalet Hotels and Indian Hotels over the fiscals, said StoxBox.

"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.

For the year ended on March 31, 2023, SAMHI Hotels reported a net loss of Rs 338.59 crore with a total revenue from operations at Rs 761.43 crore. The company's net loss stood at Rs 443.25 crore with a revenue from operations at 333.10 crore in the previous year ended March 2022.

On the back of favorable macros like continued higher domestic business & personal travels, hotel room demand in excess of supply and improving occupancy levels & room rents, the hotel sector is showing positive traction in the operating and financial performance, said Choice Broking.

"SAMHI Hotels is demanding a EV/Sales multiple of 4.6 times (to its FY23 sales), which is at discount to the peer average. Its multi-brand presence across the price points is likely to benefit from this up-cycle. SAMHI has reported net loss during FY20-23, further we are anticipating continued losses in the medium term but of lower magnitude," it added with a 'subscribe with caution' rating.

The company has reserved 75 per cent of the net offer for qualified institutional bidders (QIBs), while non-institutional investors (NIIs) will get 15 per cent of the offering. Remaining 10 per cent of the offer shall go to retail investors.

Samhi Hotels is currently a loss-making hospitality company. The company's financial performance has been poor for the last three years, but it is making progress on cutting losses. But business is subject to seasonal and cyclical variations that could result in fluctuations in the results of operations, said Anubhuti Mishra, Equity Research Analyst at Swastika Investmart.

"The company is loss-making, so we do not have a P/E ratio. However, its sales multiple is 3.7 times, which is below when compared to the industry average. However, as the company is in financial trouble, we won't apply for this IPO," she added.

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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