Ventive Hospitality, a leading name in luxury hospitality, is set to debut on the stock market with its Initial Public Offering (IPO) scheduled from 20 – 24 December 2024. The company has established a price band of INR 610 – 643 per share, aiming to raise approximately INR 1,600 crore. Notably, a significant INR 1,400 crore of the proceeds will be allocated to debt repayment, addressing its substantial gross debt of INR 3,600 crore.
Ventive Hospitality – Company Overview
Ventive Hospitality, previously known as ICC Realty (India), manages a robust portfolio of luxury hotels and office properties. With 2,036 operational keys spanning 11 hotel properties in Pune, Bengaluru, and the Maldives, the company also has 367 keys under development in Varanasi and Sri Lanka, slated to become operational by FY27-28. In addition to its hospitality ventures, Ventive boasts 3.4 million sq ft of office and retail space in Pune, generating an annual annuity income of INR 500 crore.
Financial Performance: High Debt and Net Losses
Despite its extensive portfolio, Ventive’s financial health has raised concerns. In FY24, the company reported a net loss of INR 66.7 crore against revenues of INR 1,374 crore. Its elevated debt levels have led to significant interest expenses, eroding operating profits. With an average occupancy rate of 60%, lower than the industry average of over 70%, the company compensates by commanding the highest average room rent (ARR) among peers at INR 20,000.
Ventive Hospitality IPO Analyst Views: Should Investors Participate?
Swastika Investmart’s Perspective: Valuation Concerns
Swastika Investmart has rated the IPO as “AVOID.” Her analysis highlights steep valuation metrics, including a P/E ratio of 40.38x and a Price-to-Book Value (P/BV) ratio of 3.66x. Mishra notes that despite Ventive’s collaboration with global operators like Marriott and Hilton, its financial instability and high debt overshadow its luxury offerings.
Geetanjali Kedia, SPTulsian Investment Advisors: Balanced View
Geetanjali Kedia of SPTulsian Investment Advisors offers a more nuanced take. While she acknowledges the company’s challenges, Kedia highlights that the planned debt repayment could significantly reduce its net debt-to-equity ratio from 0.9:1 to 0.4:1. She predicts potential profitability improvements from H2 FY25 onwards.
The following analyst insights highlight the common trends in brokerage house recommendations for the upcoming IPO. Here’s a more extensive list of broker suggestions:
Jainam Broking – Avoid
BP Wealth – Subscribe
Canara Bank Securities – Neutral
Jainam Broking – Avoid
Samco Securities – Not rated
SBI Securities – Not rated
Swastika Investmart – Avoid
Ventura Securities – Subscribe
Market Positioning: Competitive Metrics and Valuation
Ventive Hospitality’s enterprise value (EV) per operational key stands at approximately INR 8.4 crore, with a forward EV/EBITDA multiple of 17x. In comparison, peers like Chalet Hotels have an EV per key of INR 7.8 crore but at a higher EV/EBITDA multiple of 28x. Ventive’s EBITDA margins of 45% reflect operational efficiency, though its financial struggles remain a concern for potential investors.
Conclusion
Ventive Hospitality’s IPO offers a mix of potential and caution. While its strong brand associations and expansive asset base position it as a prominent player in luxury hospitality, its financial instability and significant debt levels are notable red flags. Analysts recommend that investors carefully weigh these risks against their investment goals.
As of November 2024, the Indian primary market has seen a total of 76 IPOs. Out of this, 58 listings have achieved positive performance. However, there were challenges as well, with 18 IPOs. Notably, the average listing day return stands at an impressive 27.47%, underscoring the potential for significant gains in this dynamic market. For more information related to IPO GMP, SEBI IPO Approval, and Live Subscription stay tuned to IPO Central.
