Apeejay Surrendra Park Hotels lists at 21% premium over its issue price

Apeejay Surrendra Park Hotels (ASPHL) made a good stock market debut on Monday, with its shares getting listed at Rs 187, a 21 per cent premium over its issue price of Rs 155 per share on the BSE in an otherwise subdued market.

The stock opened at Rs 186 on the National Stock Exchange (NSE). The company is engaged in the hospitality business and runs hotels under its "The Park" brand.

At 10:02 am, ASPHL was trading at Rs 180.35, 16 per cent higher than its issue price. The stock hit a high of Rs 188.90 and a low of Rs 178.30 on the BSE during the day. A combined nearly 13 million equity shares had changed hands on the NSE and BSE. By comparison, the S&P BSE Sensex was down 0.37 per cent at 71,328. "The company benefits from decades of experience in the hospitality industry, reflected in high occupancy rates and a proven track record of service excellence. Its expansion plans indicate exciting possibilities for future revenue growth.

This listing paints a hopeful picture for ASPHL, but a cautious approach is still advised. Thus, those who want to book profit may exit their holdings, and those who want to hold for the long term may keep a stop loss at Rs 168," said Shivani Nyati, Head of Wealth, Swastika Investmart Ltd.

The IPO had received a robust response with the issue getting subscribed 62.91 times. While the qualified institutional buyer portion was subscribed 79.23 times, the non-institutional investors portion was subscribed 55.26 times. The retail portion also witnessed excellent participation and was subscribed 32 times.

As of September 30, 2023, they operated 81 restaurants, night clubs, and bars, offering a wide selection of culinary experiences. The night club and entertainment division contribute to their brand positioning and allow cross selling opportunities.

The company also operates a premium retail chain in the food and beverage business under the brand 'Flurys', which possesses a successful and profitable track record of Industry leading earnings before interest, tax, depreciation, and amortisation (ebidta) margins.

ASPHL is an well-established player in the Indian hotel industry with a portfolio of 30 hotels spread across attractive locations in key geographies in India, has a strong operating track record of high occupancy, competitive average room rates and revenue per available room (RevPAR) for its properties, its share of revenue from the food & beverages (F&B) segment has been historically high for the company relative to its peers.

Analysts at Reliance Securities believe the asset light model, repayment of debt, strong industry tailwinds, and development of new owned and managed properties with improved operational efficiency will help achieve superior performance.

India GDP per Capita is expected to increase from $2,238 in FY22 to $3,985 in FY29, and rise in individual incomes is expected to create additional discretionary spending will keep the demand levels at more than 11 per cent and recovery in strong tourism over the next few years will drive superlative growth for the industry, the brokerage firm said in IPO note.

"ASPHL has demonstrated robust revenue growth, with sales nearly tripling over the past three years. This turnaround is notable, considering the company's transition from losses to profitability, reflected in the sharp uptick in net profit in FY23. While the return on equity turned positive in FY23, the return on assets remains relatively modest, owing to the capital-intensive nature of the hotel industry. The valuation, although reasonable compared to peers, reflects market optimism in the relatively high P/E ratio, which stands at 56.4 times based on FY23 EPS.
Looking ahead, ASPH's strategic initiatives, including debt reduction and its unique blend of hotel and F&B services, position it favourably for sustainable growth and market leadership," brokerage firm BP Equities said in an IPO note.