Strong Listing: Apeejay Surrendra Park Hotels Debuts At 21% Premium From IPO Price: Should You Buy?

Apeejay Surrendra Park Hotels made an impressive market debut today, with its shares listing at a premium of nearly 21% on BSE and 20% on NSE, surpassing analysts' expectations. The positive response is attributed to the optimistic market sentiment and favourable announcements in the Interim Budget aimed at boosting the hospitality and tourism industry.

Shares of Apeejay Surrendra Park Hotels started trading at Rs 187 on BSE, a 21% premium over the IPO price of Rs 155. On NSE, the stock is listed at Rs 186, marking a 20% increase. Analysts had predicted a premium ranging between 20-25% over the IPO price, with estimates falling between Rs 185 and Rs 195.

Before its official debut, Apeejay Surrendra Park Hotels' shares were already trading with a premium of 25% in the unlisted market. The grey market premium (GMP) serves as an unofficial gauge, providing insights into potential listing prices. Investors often track GMP to gauge market sentiment and estimate the demand for the IPO.

The initial public offering (IPO) of Park Hotels witnessed an overwhelming response from investors. The issue was subscribed nearly 60 times, showcasing robust interest across all categories. Qualified Institutional Buyers (QIBs) subscribed the most at 75 times, followed by Non-Institutional Investors at 52 times, and retail investors at 30 times. The company successfully raised Rs 920 crore through the IPO, with Rs 600 crore from a fresh issue of shares and Rs 320 crore from an offer for sale.

Apeejay Surrendra Park Hotels plans to allocate Rs 550 crore from the net proceeds to repay outstanding borrowings. The remaining funds will be earmarked for general corporate purposes. Prominent selling shareholders in the IPO included Apeejay Pvt Ltd (Rs 296 crore), RECP IV Park Hotel Investors (Rs 23 crore), and RECP IV Park Hotel Co-Investors (Rs 1 crore).

Ranked as the eighth-largest hotel chain in India by affiliated rooms inventory, Apeejay Surrendra Park Hotels boasts approximately 1,300 rooms, constituting 2.80% of the total inventory of 45,800 rooms owned by chain-affiliated hotels as of September 30, 2023. The company reported a net profit of Rs 22.95 crore and revenue of Rs 272.31 crore for the period ending on September 30, 2023. In the financial year ending March 31, 2023, it achieved a bottom line of Rs 48.06 crore with revenue totalling Rs 524.43 crore. As of January 2, 2024, the company's outstanding borrowings amounted to Rs 582.28 crore.

Analysts and industry experts foresee a bullish trend in the hospitality sector, fueled by the positive momentum in the market and supportive government policies. The Interim Budget announcements, particularly those aimed at promoting the hospitality and tourism industry, have added confidence among investors.

The ongoing recovery in travel and tourism, coupled with the gradual relaxation of COVID-19 restrictions, is expected to drive increased footfall for hotels. As the economy continues to rebound, business and leisure travel are likely to witness a surge, providing a favourable environment for companies in the hospitality sector to thrive.

Apeejay Surrendra Park Hotels' market debut, coupled with the robust response to its IPO, underscores the growing optimism surrounding the hospitality sector. With a strategic focus on reducing borrowings and utilizing funds for general corporate purposes, the hotel chain is well-positioned to capitalize on the anticipated growth in the sector.