Introduction:
With both Nifty and Sensex breaching their all-time highs, Indian stock market investors are currently full of confidence. They are looking to cash in on every opportunity to make money. Amid such euphoria, several companies have announced the launch of their Initial Public Offerings (IPOs) in the second week of September 2023.
One of these IPOs – Samhi Hotels IPO – is hitting the D-street on Thursday, 14 September 2023. Here’s everything you need to know about the issuing company, including its strengths, weaknesses, financials, and growth prospects.
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About Samhi Hotels Limited:
Samhi Hotels Limited is a leading hotel ownership and asset management company. It was incorporated in 2010 with its head office in Gurugram, Haryana. As of 31 March 2023, the company operated 31 hotels with 4,801 keys across 14 Indian cities, including Delhi, Bengaluru, Hyderabad, Chennai, and Pune. It has two hotels under construction in Navi Mumbai and Kolkata with 461 keys.
The company works on the acquisition strategy to expand its business. It has a successful track record of buying and rehabilitating hotels across India. Some marquee hotels under Samhi Hotels Ltd. include Hyatt Regency (Pune), Courtyard by Marriott (Bengaluru), Four Points by Sheraton, Fairfield by Marriott, and the Holiday Express Inn.
Key Strengths of Samhi Hotels Limited:
- An established track record of identifying, acquiring, and rehabilitating hotels for value accretion over the years
- The business is well-diversified across the Indian geography, price points, and hotel operators
- Has the potential to expand its inventory in the domestic market, and subsequently, benefit from scale
- A strong pipeline of under-construction projects can lead to a substantial revenue growth in the future
- Long-standing relationship with some marquee hotel chains, including Hyatt, Marriott, and IHG
- Besides a high demand for its hotels among domestic customers, the company is focussing on attracting international travelers
Key Risks or Weaknesses Highlighted:
- The company derives a significant portion of its revenues from some specific hotels concentrated in particular geographical regions
- The company and its subsidiaries are involved in outgoing legal proceedings
- Business is subject to seasonal and cyclical volatility
- The company has a high debt, which may limit its expansion in the future
- The net worth of the company is negative, and it hasn’t generated profits in the last three years
- Disputes with marquee hotel chains may hurt the company
Financial Snapshot of Samhi Hotels Limited:
The table below depicts the financials of Samhi Hotels Ltd. for the last three fiscal years. All details are as per the company’s Red Herring Prospectus (RHP) on the Securities and Exchange Board of India (SEBI) website dated 5 September 2023.
*Amount in Crores
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Below are a few takeaways from the financials of the company as seen in the above table:
- Although the company hasn’t made profits in the last three years, its revenue has grown robustly from Rs. 170 crores in FY21 to Rs. 739 crores in FY23. This indicates its potential to become a profit-making company soon
- The company has a high debit of Rs. 2788 crores as of 31 March 2023. It has not been able to reduce this margin despite best efforts
- The net worth, EPS, and net asset value have remained negative for the last three years
Details of Samhi Hotels IPO:
Samhi Hotels IPO opens for public subscription on Thursday, 14 September and closes on Monday, 18 September 2023. It will combine a fresh issue worth Rs. 1,200 crores and an offer for sale worth Rs. 170 crores. As a retail investor, you can apply for at least 119 equity shares (one lot) and in multiples thereof in the price band of Rs. 119 to Rs. 126 per share.
Refer to the table below for more IPO details:
The Final Verdict
Considering the high debt value, consistent losses, and negative net worth, only investors with a high-risk appetite should proceed to invest in Samhi Hotels IPO. That being said, robust revenue growth reflects some positivity. You can open a free Demat accountwith Motilal Oswal and start investing in IPOs conveniently.
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