The initial public offering of Chalet Hotels will open for subscription on Tuesday. The Chalet Hotels IPO
consists of a fresh issue of shares worth up to Rs 9,500 million and an offer for sale of up to 24,685,000 equity shares. The IPO has a price band of Rs 275-280 per share and will close on January 31.
The K Raheja Corp-promoted company plans to use part of the proceeds from its Rs 1,640-crore IPO to pare debt. The balance amount from IPO would be used for general corporate purpose.
"The company's current net debt is around Rs 2,500 crore and after paying off debt from IPO proceeds and other reserves, the debt will be brought down to Rs 1,500 crore, which will bring them close to 1:1 debt equity ratio. This healthy ration will give us an opportunity to grow the business through greenfield as well as brownfield options,” MD Sanjay Sethi told CNBC-TV18 in an interview.
Ambit Capital said, “Chalet Hotels is best placed in the premium segment given its presence in strategic and demand-dense locations, tie-ups with marquee brands and superior scale.”
The IPO valuation imply 27xFY18 EV/EBITDA post issue, which is 10 percent discount to immediate peer Indian Hotels despite similar RoE, noted Ambit Capital. But REITs typically trade at 0.8-1.2x of NAV, which should cap the company’s valuation to market value of properties, the report added.
Axis Capital believes that the company is well positioned to benefit from the industry trends. "CHL has a competitive advantage in the key metro cities due to the significant time outlay required for companies to build and establish a profitable hotel or commercial office space or mall and their early mover advantage in large, mixed use developments in specific micro-markets."
Chalet Hotels has allotted 17.58 crore equity shares at Rs 280 per share aggregating to Rs 492.35 crore. SBI Small Cap Fund, Fidelity Funds, Goldman Sachs India, HDFC Small Cap Fund, HDFC Standard Life, Db International and Blackrock India Equities (Mauritius) are among the key anchor investors.
Chalet Hotels, the hospitality unit of K Raheja group, has about 2,328 rooms, managed by Marriott, spread across five properties in Mumbai, Bengaluru and Hyderabad. The properties serve mainly in the premium and above segments.
The company's shares will be listed on the BSE and the NSE. JM Financial, Axis Capital and Morgan Stanley India are the book-running managers.
First Published: Jan 29, 2019 11:37 AM IST