Apeejay Surrendra Hotels and “The Park”: A Brief Introduction

Apeejay Surrendra Hotels, established in 1967, is a leading hospitality chain in India known for its luxury boutique hotels under the brand name “The Park”. They operate over 30 hotels across 20 cities, offering unique experiences that combine contemporary design with local Indian influences.

Key characteristics of “The Park” brand:

• Luxury Experience: Upscale accommodations, personalized service, and signature amenities like Aura Spas and innovative restaurants.
• Boutique Flair: Each hotel boasts a distinct personality and design, reflecting the local culture and heritage.
• Modern Approach: Emphasis on technology integration, sustainability practices, and catering to the needs of modern travelers.
• Strong Brand Recognition: Renowned for its quality, service, and unique positioning in the Indian hospitality market.

• Founded by the Apeejay Surrendra Group, a diversified conglomerate with a strong reputation.
• Holds the 8th position among hotel chains with asset ownership in India.
• Offers multiple brands besides “The Park”, catering to different segments (Zone by The Park, Zone Connect by The Park).

Key details of the Apeejay Surrendra Hotels IPO:

• IPO Dates: February 5, 2024 – February 7, 2024
• Price Band: Rs 147 – Rs 155 per share
• Offer Size: Rs 920 crore
• Issue Type: Fresh issue of Rs 600 crore and Offer for Sale (OFS) of Rs 320 crore
• Listing Date: Tentatively February 12, 2024

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Company Analysis:

Apeejay Surrendra Hotels: Business Model Breakdown

Operations: Apeejay Surrendra Hotels primarily operates through ownership, management contracts, and franchise agreements. They own 12 hotels, manage 12 through management contracts, and have 5 franchisee-operated hotels under their “The Park” brand.

Revenue Streams:

• Room Revenue: This forms the core income, generated from room bookings across various brands (“The Park”, Zone by The Park, Zone Connect by The Park).
• Food & Beverage (F&B) Revenue: Restaurants, bars, and in-room dining services contribute significantly to income.
• Other Services: Revenue from business centers, event spaces, spas, and other amenities generates additional income.
• Management Fees: Earned from managing hotels under contract for other owners.
• Franchise Fees: Revenue from franchise agreements where another party operates a hotel under their brand.

Target Markets:

• Leisure Travelers: Catering to domestic and international tourists seeking luxury and boutique experiences.
• Business Travelers: Offering corporate packages and facilities suited for business needs.
• MICE Segment: Targeting meetings, incentives, conferences, and exhibitions through dedicated event spaces and services.
• Local Community: Restaurants and bars often attract local patrons, creating a broader clientele.

Key differentiators:

• Unique brand identity: “The Park” focuses on contemporary design, local influences, and a distinct personality for each hotel.
• Focus on guest experience: Personalized service, innovative dining concepts, and curated experiences set them apart.
• Multi-brand strategy: Catering to different segments through diverse brands like Zone by The Park for millennials and business travelers.
• Strong brand loyalty: Loyal customer base appreciates the unique offerings and service standards.

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Challenges:

• Competition: Intense competition in the Indian hospitality sector from both domestic and international players.
• Economic fluctuations: Sensitive to economic downturns that impact travel spending.
• Rising operational costs: Managing costs of manpower, food supplies, and maintenance can be challenging.

Overall, Apeejay Surrendra Hotels has a diversified business model with multiple revenue streams and a focus on distinct brand experiences. While facing competition and economic headwinds, they aim to leverage their brand and service differentiation for sustainable growth.

Apeejay Surrendra Hotels: Financial Analysis

Key financials	2Y growth (% pa)	TTM September 2023	FY23	FY22	FY21
Revenue (Rs cr)	68.2	545	506	255	179
EBIT (Rs cr)	148.2	125	109	5	-26
PAT (Rs cr)	62.3	52	48	-28	-76
Net worth (Rs cr)		579	556	509	536
Total debt (Rs cr)		645	617	654	616

Apeejay Surrendra Park IPO GMP today

The Apeejay Surrendra Park IPO’s Grey Market Premium (GMP) currently sits at +₹31, though it has slightly decreased in recent days. This signifies that unofficial trading suggests investors are willing to pay ₹31 more than the upper price band of the IPO (₹155) for shares in the grey market.

Based on this premium, the estimated listing price could be around ₹186, representing a 20% potential gain over the issue price. Analysts at investorgain.com predict a strong listing due to the positive GMP trend over the past 11 sessions, although historical GMP ranges widely from ₹0 to ₹70.

Remember:

• GMP is unofficial and doesn’t guarantee actual listing price.
• Investing based solely on GMP carries inherent risks.
• Conduct thorough research and consult a financial advisor before investing.

Apeejay Surrendra Park Hotels: Strengths and Weaknesses

Strengths:

• Strong Brand Presence: Renowned brand with 8 hotels across India in key locations like Kolkata, Delhi, and Pune.
• Diversified Portfolio: Mix of business and leisure hotels catering to different segments.
• Improved Financials: Increased occupancy rates (91.77% in FY 2023) and profitability (₹480.62 million profit in FY 2023) indicate business resilience.
• Focus on Growth: Strategic capital allocation for developing existing land and expanding presence in key markets.
• Experienced Management: Strong leadership team with extensive industry experience.

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Weaknesses:

• Reliance on Top Hotels: Top 5 hotels contribute significantly to revenue, raising concerns about concentration risk.
• Seasonality: Business fluctuates with seasons, impacting revenue stability.
• High Debt: Debt-to-equity ratio is slightly higher than the industry average, potentially affecting financial flexibility.
• Limited Geographic Presence: Compared to major competitors, the brand has a smaller geographical footprint.