Started in 1986, Chalet Hotels Limited is a Mumbai based owner, developer and asset manager of high-end hotels in key metro cities in India. Company's hotel platform comprises five operating hotels, including a hotel with a co-located serviced residence, located in the Mumbai Metropolitan Region, Hyderabad and Bengaluru, representing 2,328 keys, as of September 30, 2018. The hotels are branded with globally recognized hospitality brands and are in the luxury-upper upscale and upscale hotel segments, according to the Horwath Report. Company seeks to brand its hotels with leading global hospitality brands, which they believe are well matched to the location, size, target customer base and intended hotel segment of the hotel properties. The hotels are currently branded with global brands such as JW Marriott, Westin, Marriott, Marriott Executive Apartments, Renaissance and FourPoints by Sheraton which are held by Marriott Hotels India Private Limited and its affiliates (collectively 'Marriott'). As of September 30, 2018, company's four hotels, including a hotel with a co-located serviced residence, which are managed by third parties, which represent 2,176 keys. These hotels accounted for 84.73% and 90.23% of the revenue from operations for the H1 FY19 and FY18. The hotels which are managed by third parties are located in three major metro cities in India, namely, Mumbai, Bengaluru and Hyderabad. As of September 30, 2018, company operates a hotel located in Vashi, Navi Mumbai, which represents 152 keys. This hotel accounted for 5.59% and 5.85% of the revenue from operations for the H1 FY19 and FY18. As of September 30, 2018, Chalet Hotels has developed two projects representing approximately 0.86 million square feet, adjacent to the hotel properties. These projects accounted for 3.62% and 2.76% of the revenue from operations for the H1 FY19 and FY18. These projects are located on freehold land owned directly by the Company. They earn lease and rental income from these properties. Chalet Hotels is part of K. Raheja Corp group which is a leading business group in India and company derives significant benefit from the confidence that consumers, lenders, hospitality partners, vendors and others place in the group. The companies forming part of the K. Raheja Corp group ('K. Raheja Companies') have extensive experience in developing large scale real estate, hospitality and commercial projects resulting in a strong understanding of industry and market trends, which they leverage to identify suitable locations and opportunities. Company employed 2457 permanent employees as of September 30, 2018 across its owned and leased or licensed properties As per financial performance, Chalet Hotels has posted total income/net profits (loss) of Rs. 534.59 cr. / Rs. - (109.12) cr. (FY14), Rs. 467.06 cr. / Rs. - (126.65) cr. (FY15), Rs. 597.56 cr. / Rs. - (112.36) cr. (FY16), Rs. 924.54 cr. / Rs. 127.45 cr. (FY17) and Rs. 929.51 cr. / Rs. 32.63 cr. (FY18). For upto H1 of FY19, it has reported net loss of Rs. 44.05 cr. on total revenue of Rs. 497.04 cr. So company has posted consistent growth over last couple of years. Chalet Hotels has posted an average EPS of Rs. 2.34 and average RoNW of 7.44% for last three fiscals. Issue is priced at a P/BV of 9.54 as per NAV of 29.36 on 31.03.18. Company has made loss in H1 of FY19 and If we take FY18 earnings on fully diluted equity post issue, then asking price is at a P/E of around 176. As per RHP, industry average P/E ratio is 149.81 and listed peers comparison shown in above table. So issue looks fully priced. On BRLM's front, three merchant bankers associated with this issue and have handled 56 public issues in the past three years. When we take recent 10 IPOs of each BRLM then out of those 3 issues opened below their offer price and 7 opened above issue price on listing dates. As per financials, company's growth is good, RoNW is 7.44% for last three fiscals and issue is priced at P/E of around 176 as per FY18 earnings. For Hotel companies due to higher finance cost and depreciation P/E ratio is not the best way to asses it. Also its expected that there will be good growth in this sector and occupancy ratio will also increase gradually. So we give NEUTRAL rating to this IPO.
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