Apeejay Surrendra Park Hotels IPO: 10 key risks investors should consider before investing in Park IPO
- Apeejay Surrendra Park Hotels IPO has opened and will close on February 7. The IPO has been fully subscribed on day one, with retail and non-institutional investors leading the way.
Apeejay Surrendra Park Hotels IPO has opened today (Monday, February 5), and will close on Wednesday, February 7. The Park IPO has been completely subscribed as of day one, with retail and non-institutional investors leading the way. Apeejay Surrendra Park Hotels IPO price band has been fixed in the range of ₹147 to ₹155 per equity share of the face value of ₹1 each. Apeejay Surrendra Park Hotels IPO raised ₹409 crore from anchor investors on Friday, February 2.
Apeejay Surrendra Park Hotels IPO has reserved not less than 75% of the shares in the public issue for qualified institutional buyers (QIB), not more than 15% for non-institutional Institutional Investors (NII), and not more than 10% of the offer is reserved for retail investors.
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Apeejay Surrendra Park IPO, which is worth ₹920 crore, consists of fresh issue of equity shares aggregating up to ₹600 crore and offer-for-sale (OFS) aggregating up to ₹320 crore.
The company plans to use the net proceeds to fund general corporate operations as well as the return or prepayment, in full or in part, of any outstanding borrowings that the company has taken out.
Apeejay Private Ltd, promoter group selling shareholder, would be offloading shares worth ₹296 crore, RECP IV Park Hotel Investors Ltd will be selling shares worth ₹23 crore, and RECP IV Park Hotel Co-Investors Lts will be offloading shares worth ₹1 crore.
The registrar for the Apeejay Surrendra Park IPO is Link Intime India Private Ltd, and the book running lead managers are JM Financial Limited, ICICI Securities Limited, and Axis Capital Limited.
As per red herring prospectus (RHP), the company's listed peers are Chalet Hotels Limited (with P/E of 79.78), Lemon Tree Hotels Limited (with P/E of 92.34), Indian Hotels Company Limited (with P/E of 65.67), EIH Limited (with P/E of 56.59), and SAMHI Hotels Limited.
Between the fiscal year ending on March 31, 2023, and March 31, 2022, Apeejay Surrendra Park Hotels Limited had a growth in revenue of 95.81% and profit after tax (PAT) of 270.42%.
Here are some of the key risks listed by the company in its Red-Herring Prospectus (RHP):
- Due to the delays in developing its land banks and hotel assets, the firm is subject to risks. The company's operations, financial situation, cash flows, and operating results might all suffer from any delays in the development of new hotel buildings or the extension of their current facilities.
- The development and construction of serviced apartments at EM Bypass, a one-time project for which the firm has no prior expertise, exposes the company to risks.
- Due to specific disagreements, there are times when statutory dues are not paid in whole or are paid late. The company's financial standing and cash flows might be negatively impacted by any late or non-payment of these statutory obligations, which could result in financial penalties from the relevant government agencies.
- Online travel agencies and middlemen account for the majority of the company's hotel reservations. If these online travel agencies and middlemen keep growing in market share relative to the company's direct booking channels, they might be able to demand larger commissions for the services rendered or major concessions, such as lower hotel rates, which would hurt the company's profits and operational outcomes.
- The company had restated losses in the past. Any losses in the future could adversely affect our financial condition, results of operations and cash flows.
- The company has debt that needs to be paid off with large cash flows, and this, together with the terms and limitations set forth in the financing agreements, might make it more difficult for them to expand their business and function freely.
- A few legal actions involving the corporation, its subsidiaries, directors, and promoters. Their profitability, reputation, company, operational outcomes, financial situation, and cash flows might all suffer from a negative outcome in any of these procedures.
- Their top five owned hotels account for a significant amount of their earnings (about 75% of the total income in fiscal 2023), with THE PARK Kolkata making up 21.75% of the total income. Any unfavourable event that impacts the hotels or the areas in which they are located might have a negative impact on their operations, financial condition, cash flows, and company.
- A few of the hotels are situated on property and in buildings that they have leased from other people. Their business, operational results, financial situation, and cash flows might all suffer if they are unable to adhere to the conditions of the lease agreements, renew their existing ones, or sign new ones.
- The company has previously had negative cash flows as a result of financing and investment operations. Future negative cash flows might have an adverse effect on the company's financial situation and operational performance.
Also Read: Apeejay Surrendra Park Hotels IPO: Price band set at ₹147-155 per share; details here
Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.
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