Juniper Hotels IPO: Should You Check-In to this Luxury Hospitality Company?
Get a detailed overview of Juniper Hotel Ltd’s IPO, including GMP, verdict, issue details, and the company's strengths and risks.
The initial public offer (IPO) of Juniper Hotels Ltd, which kicked off today, will close for subscription on Friday, February 23. The luxury hotel chain operator is looking to raise Rs 1,800 crore through its IPO. The firm has announced a price band of Rs 342 to Rs 360 per share for its IPO. Prospective investors can bid in lots, with each lot consisting of 40 shares. To apply for the IPO, the minimum investment is set at Rs 14,400 (calculated as 40 x 360).
According to market observers, shares of Juniper Hotels Ltd are trading at a grey market premium (GMP) of Rs 8 (a premium of 2% over IPO price) as of today. The public offer is anticipated to debut on BSE and NSE on the 28th of February, 2024.
Juniper Hotels Anchor Round
Prior to issue opening, on February 20, Juniper Hotels Ltd successfully secured Rs 810 crore from anchor investors, by allocating 2,25,00,000 equity shares at Rs 360/ share. Some notable Foreign and Domestic Institutions that participated in the anchor round include Fidelity, Kotak Mahindra MF, Government Pension Fund (Norges), White Oak, ICICI Prudential Life Insurance, HDFC Life Insurance and Quant Mutual Fund, among others.
About Juniper Hotels Ltd
Juniper Hotels operates a luxury hotel chain affiliated with the 'Hyatt' brand, boasting a collection of seven luxury hotels and serviced properties, with a total of 1,836 keys as of September 30, 2023.
Currently, the firm offers 116 serviced apartments at the Grand Hyatt Mumbai Hotel and Residences, alongside 129 serviced apartments at the Hyatt Delhi Residences. Furthermore, its portfolio includes a total of 22 distinguished restaurants and bars across its properties.
Strengths
- Impressive Financial Growth: From FY21 to FY23, Juniper Hotels showcased significant financial improvement, witnessing a 100% Compound Annual Growth Rate (CAGR) in its Revenue from Operations and an impressive 281% increase in EBITDA.
- Growth in Operating Efficiency: Throughout the past three fiscal years, Juniper Hotels has seen notable advancements in its EBITDA margin, escalating from 11.51% in FY21 to 44.94% in FY23.
- Improved Hotel Occupancy Rates: Juniper Hotels has observed substantial enhancements in its average hotel occupancy rates, climbing from 34.23% in FY21 to 75.74% in FY23.
- Strategic and Exclusive Partnership: Benefitting from a unique alliance spanning over 40 years with Saraf Hotels, an established hotel developer in India, and the globally renowned Hyatt Hotels Corporation, Juniper Hotels stands as the sole hotel development entity in India to receive strategic investment from Hyatt.
Key Concerns
- History of Financial Losses: Juniper Hotels and its subsidiaries have experienced financial setbacks, incurring losses over the past three fiscal years and the six-month period concluding in September 2023. There is uncertainty regarding the firm’s ability to achieve profitability.
- Revenue Concentration Risk: A considerable share of Juniper Hotels’ operational revenue (90.5% for the six months ending September 30, 2023) comes from three hotels/serviced apartments located in Mumbai and New Delhi. Negative developments in these properties or their operational regions could negatively impact Juniper Hotels’ business performance, operational results, cash flow, and overall financial health.
- Debt Burden: Juniper Hotels carries a significant amount of debt, necessitating substantial cash flow for servicing, which restricts its operational flexibility. The company is part of a capital-intensive sector, with total debt amounting to Rs 2252.74 crore as of September 30, 2023.
- Dependence on Brand Agreements: Its hotels and serviced apartments operate under ‘Hyatt’ brands on a non-exclusive basis. The firm has long-term agreements with Hyatt entities for the management and operation of these properties and the use of Hyatt's brands. Should these agreements end or not be renewed, its business, operational outcomes, cash flow, and financial stability could suffer adversely.
Final Verdict: Avoid
Although Juniper Hotels has experienced significant revenue growth over the last three years, its profitability has suffered due to high levels of debt, leading to substantial financial losses. Its struggle with losses is mainly due to high interest expenses, resulting in a debt-to-equity ratio of 2.6x, significantly above that of its competitors. Despite intentions to lower debt with IPO proceeds, the firm is likely to maintain high debt levels, particularly with its continuous expansion efforts.
Juniper Hotels boasts impressive average room rates and revenue per average room (RPAR), as well as a strong operating margin. Yet, its return on capital employed (ROCE) is notably low.
Even though the industry is showing positive trends, Juniper Hotels’ financial situation appears weak in comparison. Investors should exercise caution given the firm’s reliance on an asset-heavy business model, rising debt, and continuous losses. Instead of participating in the IPO, it would be prudent to wait for better opportunities to enter, following an assessment of its financial results in the ensuing quarters.
Unlock a world of financial opportunities with Liquide, the ultimate app for the modern investor. Featuring advanced tools like LiMo, India's pioneering AI co-pilot for stock investing, Liquide empowers you with insights that can guide your financial journey. Stay updated with thorough market analysis, expert recommendations, and real-time information. Download the Liquide App today from the Google Play Store or Apple Appstore and embark on a journey of informed and successful investing. Don't miss out on the powerful features that can shape your financial future.