Ventive Hospitality is present as a popular name in the world of hotels and tourism. Which is a better option for customers who prefer luxury. Because they don't just manage hotels, they create experiences. For those who are business professionals, who are looking for work life balance or travelers who set the goal of traveling on holidays and now this black stone bagged premium ventive hospitality brand is coming with its IPO of ₹ 1600 crore. This IPO is a strong contribution to the upcoming total IPO value of Rs 8000 crore for the hospitality sector. This is a sector which has very positive prospects for the future. The purpose of this article is to tell you about this company and its IPO.
For this we will understand these 5 categories-
1. Company's IPO details
2. Business Overview
3. Strengths and Weaknesses
4. Peer Valuations
5. Financials
1. Company's IPO details
This IPO will be open from 20th December to 24th December. Its price band is ₹610 to ₹643 per share and the lot size is 23 shares. Meaning an investor will have to invest at least ₹ 14789 to participate in this IPO. The face value of the shares is ₹1. The company will raise ₹1600 crore from this IPO, which is a completely fresh issue. The funds raised from the IPO will be used to repay existing debt and accrued interest. Which includes payments to the company's step down subsidiaries, SS&L Beach Private and Maldives Property Holdings Private Limited. All this will be done to strengthen the financial position of the company. Although their total outstanding loan till September 30, 2024 is ₹ 3609.5 crore, but out of the generator net proceeds of this IPO, ₹ 1400 crore will be used for repayment or prepayment of these loans.
2. Business Overview
India's hotel industry is growing very fast. The credit for which goes to the country's growing economy and increase in tourism. The hospitality sector plays a big role in GDP, employment and foreign exchange earnings. Travel and tourism added ₹19.1 trillion to GDP in 2023 and this figure is expected to double by 2034. Demand for hotels is increasing due to business and travel accommodations, weddings and conferences. But India's hotel sector is still under-penetrated compared to global standards, with only 195,000 chain affiliated hotel rooms in India by 2024. Whereas in a city like London alone there are 150000 rooms. This shows that there is huge growth potential in the luxury and up-scale segments. Domestic travel (ie travel within the country) saw a tremendous resurgence after Covid. 1.7 billion visits recorded in 2022. Religious tourism is also increasing rapidly. Pilgrimage will grow with a CAGR of 9% from 2023 to 2032. Internationally too, foreign tourist arrivals i.e. FTTS standstill are improving. Which is expected to cross 30 million by 2037. Due to which the demand for hotels will increase further. You must be aware that tourism demand is increasing not only in India but also in Maldives. Maldives' tourism sector contributes 42 percent to the GDP, according to calendar year 23. All these demand drivers are pointing towards a positive tourism sector and hospitality companies like Ventiv Hospitality will benefit from this. So let us understand what is the core business of Ventiv Hospitality?
Ventive Hospitality, incorporated in February 2002, is a hospitality venture. Which mainly focuses on business and leisure segments. Specifically, this luxury hospitality asset provides high-end experiences for owner business and leisure travel segments. With globally renowned partners such as Marriott, Hilton and Miner, their properties focus on premium service and guest satisfaction. The company's portfolio comprises 11 prestigious hospitality properties located in India and Maldives. Which has a total of 2036 keys, in primer, luxury and up-scale categories. These are some of the main highlights of their luxury property. Like JW Marriott Pune, it is the largest luxury hotel in Pune. In terms of number of rooms and it also hosts the largest ballroom in Western India. Which is ideal for grand weddings and MI events. The Ritz-Carlton Pune is one of only two such properties in India and is a perfect example of this applet from the Marriott portfolio. They have three luxury resorts in the Maldives, including the globally renowned Morakka Suites by Conrad Maldives. Which is famous as the world's first under-sea residence. Additionally, luxury properties generate more than 80 percent of Ventive Hospitality's hotel operation revenue, which reflects market strength. The contribution of their Food and Beverage i.e. FMB is also quite strong. In which 8 out of the top 10 fine dining restaurants of Pune are in their portfolio. Their completed hospitality assets include JW Marriott Pune, The Ritz Kalton Pune, Anantara Maldives, Conrad Maldives, etc. Ventiv Hospitality's significant revenue comes from its hotel operations. It was 49.26% in FY24 and by September 30, 2024, it has contributed 56.2%.
3. Strengths and Weaknesses
1. Strength
Wide Assets and Premium Portfolio:- Ventive Hospitality Limited has a premium and wide asset portfolio. Which includes luxury properties that cater to the up-scale and luxury market. Its portfolio includes renowned global brands such as JW Marriott, The Ritz Kalton Conrad and Anantara. Which has also made its strong presence in India and Maldives. These premium assets contribute more than 80 percent of the company's hotel operations revenue, clearly demonstrating their dominance in the luxury hospitality market. The ARR i.e. average room rate of these properties is also premium compared to the competitors in the market. Which highlights the company's strong market position and exceptional asset quality.
Established Track Record of Development and Acquisition Led Growth in India and Maldives:- As of September 30, 2024, Ventiv's operating portfolio is based on 11 hospitality assets, of which 1331 keys are self-developed assets and 705 keys are acquired properties. This highlights a large scale and strategic planning. This company, in collaboration with its promoters, is able to leverage its deep industry knowledge very well. Due to which it is able to identify key concerns and deliver optimal solutions for them. This proves that both Ventiv's operating strategy and asset quality give them a computing edge. Establish a sustainable and growth-oriented foundation for their brand.
Renowned Promoters Professional and Experienced Management Team:- Ventive Hospitality's strength also lies in their Renowned Promoters and professional management team. Both their promoters, Panchsheel Group and BRE Group, are leaders in their respective domains. Panchsheel Group is among India's top luxury real estate developers and BRE Group is affiliated with Black Stone, the world's largest hotel investor.161000 Plus Keys as of 30 September 2024. This combination brings together local market expertise and global best practices. Their team has a proven track record of developing iconic projects like JW Marriott and The Ritz Kalton Pune. Which reinforces their operation and strategic capabilities.
Well-Positioned to Benefit from Strong Industry Tail Winds:- Ventive Hospitality Limited is well-positioned to face the growth trends of the global and Indian hospitality industry. India is the 5th largest and fastest growing economy in the world. Known for the strong multiplier effect of its hotel sector. This sector is a major contributor to GDP, employment and investments. This company is well prepared to benefit from the demand growth boost.
2. Weaknesses
Dependence on Third Party Brands:- Ventive Hospitality's business is largely dependent on third party hotel brands such as Marriott, Hilton, Miner and Atmosphere. These brands manage the operations and marketing of their 11 operational hospitality assets i.e. 2036 Keys. As of September 30, 2024, Ventiv has 6 hotels operated under Marriott, 2 Hilton and one each Minor, Atmosphere Core and Oak Wood. Ventiv's reliance on its group company A2Z Online Services Pvt Ltd for asset and development management is also another dependency factor. All these factors challenge their business sustainability and autonomy.
Limited Operating History and Challengeable:- A major portion of Ventiv Hospitality's portfolio was limited to an integrated development until August 2024. Which included JW Marriott Pune and ICC office. The remaining 14 properties have been acquired in August 2024. Because of which their consolidated operational history has not been established yet. There was a significant impact of Covid-19 on their financial and operational performance in FY 2022 and subsequent years. In which the traveler traffic reduced significantly and due to government mandated restrictions imposed on traveling and movement, for example, movement restrictor was given at the time of lockdown. This disrupted the hospitality sector. They reported a loss of Rs 2.76 crore in the sixth month of FY 24. According to the company, this was due to high finance cost, pre-launch expenses of the Maldives project and seasonal variations in the hospitality industry. This limited operational history and integration challenges could have an adverse impact on the company's performance.
Geographical Concentration Risk: Out of the 17 properties of Ventiv post acquisition, 10 are located in Pune India and three in Maldives and the rest in other cities of India, meaning the revenue generated from Pune and Maldives is a major part of the pro forma revenue of this company. Till 30 September 2024, where 58.4% revenue has been generated from the total assets of Pune. 32.03% from Maldives, which shows their geographical concentration risk.
Exposure to Seasonal and Cyclical Demand Fluctuations:- The hospitality industry in India and Maldives is prone to seasonal variations. In which higher revenues occur in the second half of the financial year. ARR and RevPAR (Revenue per Available Room) are generally higher in the second half. Seasonal changes, new hotel openings and renovations may cause fluctuations in quarterly revenues and profits. The hospitality industry is also cyclical, depending on macroeconomic indicators. This means that demand and room rates fluctuate with economic conditions. Which can make the business volatile.
4. Peer Valuations
The listed peers of this company are Charlotte Hotels Limited, Samhi Hotels Limited, Juniper Hotels Limited, The Indian Hotels Company Limited, EIH Limited, Lemon Lemon Tree Hotels Limited and Apeejay Surrendra Park Hotels Limited. Their bid till 30 September 2024 is Rs 0.39 crore and Samhi Hotels whose revenue was Rs 15.43 crore but EBITDA is Rs 186.16 crore. Juniper Hotels whose revenue was Rs 414.21 crore. His bid is Rs 140.62 crore and APJ Surendra Park's bid is Rs 98.02 crore. This means that despite having the second lowest revenue, they are still giving better EBITDA than the companies earning more revenue than them. Meaning they can be more profitable. Ventiv recorded a loss of Rs 20.7 crore till September 30, 2024. Which according to them is due to high financing cost and seasonality of the industry. However, some of its competitors have also recorded losses during this period. But Samhi Hotels, Indian Hotels Company, EIH Limited, Lemon Tree Hotels Limited, APJ Surendra Park have shown good profits.
The leaders in market cap are Indian Hotels Company Limited, EIH Limited and Salet Hotels Limited and if compared with the IPO issue i.e. ₹1600 crore, then Ventive will be at the lowest market cap in this category. Return on Network is led by EIH Limited at 17.6%, followed by Chalet Hotels at 16.4% followed by Lemon Tree Hotels at 16.3%. Ventiv's Return on Net Worth as of September 30, 2024 has been -0.55%.
5. Financials
This company has recorded a 2-year Sales Compound Annual Growth i.e. CAGR of 44.32% and the two-year PAT i.e. Profit Tax CAGR is a bumper 137.72%. This signifies that this company is growing rapidly in its sales and profits. In the last two years, the company made some big acquisition transactions which were helpful in boosting its revenue and profitability. Through these acquisitions they have built a premium assets portfolio that targets higher ARRs and the luxury market. Margins would have been stronger from higher ARR properties targeting the luxury and up-scale segments. But the performance should not be seen only on the basis of last two years, friends, but the trends of the past year should be seen. These figures have been quite positive till the end of FY 2024, but till 30 September 2024 this company has recorded a loss. That too of Rs 20.7 crore, which can prove to be a big challenge for this company to integrate the acquired properties and operate them profitably. Which will be contributing to losses till September. But this company in its RHP has given its region to the seasonal variations of the hospitality industry in India and Maldives. Total income and revenue have given good performance even till the end of September. But one more thing where Borings's turnover in the last three years was not more than Rs 425 crore. This year it is Rs 3599.16 crore in just 6 months. But out of the proceeds generated from this IPO, Rs 1400 crore will be utilized. Still, a significant amount of Rs 2199.16 crore remained due to pay for these borings. Which will have to be paid off regularly and for that the financing cost can be even higher. Due to which the internal bottom line can be impacted. If we look at the debt to equity ratio of Vantive Hospitality, it fluctuates, like in 2021 it was at 2.5 and in 2022 it decreased by 22 percent to 1.95. In 2023 it was 2.5 percent, increasing by 30 percent. The primary reason for this was equity share buy back and also a decreased shareholders equity due to dividend distributorship and in 2023 to 2024 it has come down from 2.53 to 1.23, which is a decrement of 51. This is credited to the company's increasing shareholders' equity as well as the decreasing debt that has been repaid during the same period. The company's rapid growth reflects a strong operational and strategic planning.
Friends, now we have come to the conclusion, this was Ventive Hospitality Limited which is already established as a key and premium player in the hospitality industry. Now it remains to be seen whether this key player will be able to become a key performer after its launch in the stock market. Not again.
Link to RHP (Red Heading Prospectus) of Ventive Hospitality for your research
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Let us tell you that this article is only for educational purpose. Any information given in this article is not a recommendation to buy or sell.
By Anil Paal
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