Samhi Hotels IPO subscribed 4% on first day of bidding
The initial public offering (IPO) of Samhi Hotels received a muted response from investors on its first day of bidding, which took place on September 14. The subscription figures reveal that the IPO garnered bids for 26.73 lakh shares against the total issue size of 6.25 crore shares, resulting in a subscription rate of approximately 4 percent.
Among the categories of investors, retail investors showed relatively more interest in the offering, accounting for 21 percent of the shares reserved for them, which represents 10 percent of the total IPO size. High net worth individuals subscribed to one percent of their allotted portion, which constitutes 15 percent of the total offering. However, the portion set aside for qualified institutional buyers (QIBs), which comprises 75 percent of the IPO, witnessed minimal subscription at just 0.005 percent.
These initial subscription figures suggest a cautious response from investors during the first day of bidding for the Samhi Hotels IPO. The subscription trend will be closely monitored as the offering progresses to determine investor sentiment and overall demand for the shares.
Samhi Hotels, a company specializing in acquiring or constructing primarily business hotels and enhancing their value through partnerships with established branded hotel operators, aims to raise approximately Rs 1,370.1 crore through its initial public offering (IPO) at the upper price band.
The IPO is being offered within a price range of Rs 119 to Rs 126 per share. Investors have the opportunity to subscribe to the offering until September 18, the closing date of the IPO.
Samhi Hotels’ strategy of focusing on business hotels and collaborating with well-known hotel operators reflects its approach to generating value in the hospitality sector. The funds raised through this IPO will likely be used to further its expansion and investment initiatives within the hotel industry.
The public offering of Samhi Hotels encompasses two key elements. First, the company plans to raise Rs 1,200 crore through the issuance of fresh shares as part of the IPO. These funds are earmarked primarily for the purpose of debt repayment, with a focus on settling debts amounting to Rs 900 crore. As of June 2023, Samhi Hotels reported consolidated outstanding debts of Rs 2,812.5 crore, including Rs 142.9 crore in Foreign Currency Convertible Debentures (FCCDs).
Simultaneously, the IPO includes an offer-for-sale component, in which three existing investors—Blue Chandra Pte Ltd based in Singapore, Goldman Sachs Investments Holdings (Asia), and GTI Capital Alpha—intend to sell a total of 1.35 crore shares, valued at Rs 170.1 crore.
The utilization of the proceeds from the fresh share issuance to significantly reduce the debt burden is expected to bolster Samhi Hotels’ financial stability. This strategic move is aimed at enhancing the company’s financial position and providing greater flexibility for its future endeavors and expansion initiatives within the hotel industry.
On September 13, Samhi Hotels successfully raised Rs 616.54 crore through anchor investors, indicating strong interest from institutional investors. Among the notable anchor investors are the Government of Singapore, Monetary Authority of Singapore, CLSA Global Markets, HSBC Global, Citigroup, Societe Generale, SBI Mutual Fund, ICICI Prudential, and Elara India Opportunities Fund. These anchor investments demonstrate confidence in the company’s prospects and the IPO.
Samhi Hotels, which has built an impressive portfolio of 4,801 keys across 31 hotels in India in just 12 years of business operations, has not yet turned a profit according to the financials reported in the prospectus. However, it is worth noting that the company has consistently narrowed its losses year after year, which suggests a positive trajectory toward profitability. This track record, combined with investor interest, underlines the potential seen in the company’s growth story within the hospitality sector.
For the fiscal year ended in March FY23, Samhi Hotels reported a consolidated net loss of Rs 338.6 crore. While this represents a loss, it’s noteworthy that the company managed to significantly narrow its losses compared to the previous fiscal year when the consolidated net loss was Rs 443.25 crore. This improvement in financial performance can be attributed to robust operating numbers and a strong topline performance.
In FY23, the company witnessed substantial growth in its consolidated revenue from operations, with a remarkable increase of 129 percent compared to the previous year, reaching Rs 738.6 crore. Additionally, the company’s EBITDA (earnings before interest, tax, depreciation, and amortization) experienced a remarkable surge, increasing nearly 21-fold to Rs 237.7 crore from Rs 11.4 crore. This significant expansion in EBITDA is particularly notable, and it highlights the company’s improved operational efficiency. Furthermore, the margin expanded sharply to 32.2 percent from 3.54 percent during the same period, underscoring the positive impact of the company’s efforts to enhance profitability.
While the company continues to operate with a net loss, its impressive revenue growth and substantial improvement in EBITDA and margin suggest a positive trajectory. These financial indicators reflect the company’s dedication to strengthening its financial position and moving closer to profitability.
