With a target to raise a little over Rs 1,600 crore, Chalet Hotels has hit the primary market with an initial public offering (IPO). The issue opened on January 29, 2019.
The company owns, develops, and manages high-end hotels in metros in India.
Chalet IPO opens for subscription: Top 5 things you must know
It operates five 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 March 31, 2018.
Among 27 anchor investors, SBI Small Cap Fund has been allotted 17,85,729 equity shares, while Fidelity Funds – India Focus Fund and Goldman Sachs India have been allotted 14,28,615 equity shares each.
Here is a list of top things to know regarding the issue.
The IPO consists of a primary issue of Rs 950 crore and an offer-for-sale of up to 24,685,000 equity shares amounting to approximately Rs 691 crore. The price band for the offer is from Rs 275 to Rs 280 per equity share.
The issue opened on January 29, 2019 and will close on January 31, 2019.
Objects of the issue
The money raised through the IPO will be used to furnish the company’s debt to the tune of Rs 720 crore along with ‘other general corporate purposes’.
“In addition to the aforesaid objects, CHL expects that the listing of the equity shares will enhance its visibility and brand image among existing and potential customers,” analysts at HDFC Securities wrote in their note.
According to a research note by Choice Broking, Chalet reported a 17.6% CAGR rise in consolidated operating revenue to Rs 873.78 crore in FY18. Business from the hospitality segment (which contributed around an average 95% of total revenue over the period) increased by 19.3% CAGR.
In H1 FY19, total revenue stood at Rs 469.87 crore, of which the business from the hospitality segment stood at Rs 424.42 crore. Operating expenditure increased by 12.4% CAGR and stood at around an average of 75.6% of the revenue over FY16-18.
Among key risks for the IPO, brokerages believe that hotels business is a seasonal one and demand could take a hit in non-peak season.
Along with it, change in consumer demand, unexpected rise in land cost as it carries an asset-heavy model could also weigh.
According to analysts at Choice Broking competition could be a key risk to the IPO.
Currently, promoter and promoter group hold 100 percent stake in the company. After the issue, this is expected to come down to 71.41 percent, while the stake of public and employees will rise to 28.59 percent.