By Vivek K. Mobile: 09920183006 Email: firstname.lastname@example.org
The first mainboard IPO of CY2019 – Chalet Hotels Ltd., which is part of the K Raheja Corp. Group, made a positive debut with its listing on the national stock exchanges. The Chalet Hotels Ltd. IPO sized Rs. 1,641 crore was the largest IPO of 2019 and opened in choppy markets. The Offer was oversubscribed 1.58 times in volatile challenging market conditions on strong QIB/ institutional support (Rs. 1,552 crore as against the reserved portion of Rs. 328 crore). The Company attracted marquee anchor investors and allotted 1,75,84,071 equity shares to 27 anchor investors at Rs. 280 per equity share (upper end of the Price Band) aggregating to Rs. 492.35 crore. Anchor investors include: Goldman Sachs, Fidelity, Blackrock, Macquarie, Reliance Capital, HDFC, SBI, ICICI Prudential and UTI amongst others.
At closing market price, the Company will rank amongst the Top 300 on overall market cap basis. On the debut day, the stock closed at a price of Rs 290.40 (+3.71%) on BSE and Rs 291.70 (+4.18%) on NSE. The stock price reached a high of Rs. 300 per equity share, during the intraday trade today (7 February).
The Book Running Lead Managers (“BRLMs”) to the Offer are JM Financial Limited, Axis Capital Limited and Morgan Stanley India Company Private Limited.
The IPO comprised equity shares of Face Value of Rs. 10 each (“Equity Shares”) of the Company aggregating up to Rs. 950 crore (“Fresh Issue”) and an offer for sale of up to 24,685,000 equity shares (the “offered shares”) by Selling Shareholders the (“Offer For Sale”).
The proposed objects of the net proceeds of the Fresh Issue (“Net Proceeds”) are proposed to be utilized for: repayment/prepayment of certain indebtedness (Rs 720 crore); and general corporate purposes.
Some of the qualitative factors and the strengths/ investment highlights of the Offer are: High-End Branded Hotels Strategically Located in Key Metro Cities of India; Active Asset Management Model; Well Positioned to Benefit from Industry Trends; Experienced Management Team; and Backed by Leading Indian Real Estate Developer.
Brokerage house analysts have appreciated the “Premium Play at Relative Discount” offer. Chalet Hotels has a strong partnership with globally renowned Marriott chain in India, they said. ICICI Direct report stated that the IPO is priced attractively in comparison to listed premium players. “At the IPO price band of Rs. 275-280, the stock is available at one-year forward EV/EBITDA of 19.4-19.7x while comparable peers are trading at average multiple of 21-22x. Given the uptrend in the industry cycle led by strong demand and balanced room supply supported by strong brand, we recommend SUBSCRIBE to the issue from a long-term perspective.”
Phillip Capital report states referred to Chalet Hotels Ltd. as “Best-placed in the premium segment”. “We expect revenue/PAT CAGR of 8.3%/13.4% over the next two years (FY18-20). At the upper band of Rs 280, CHL would trade at an FY19/20 EV/EBITDA of 19x/17x (25% DISCOUNT TO INDUSTRY AVERAGE). We like the business model, brand association, and presence – which should lead to higher than industry margins and ROCE. We recommend SUBSCRIBE,” it said.