VENTIVE HOSPITALITY IPO

Ventive Hospitality Limited IPO

Ventive Hospitality Limited (VHL) is in the hospitality business with a primary focus on business and leisure segments. The IPO opens for subscription on 20 December and closes on 24 December. Let us examine the various aspects of VHL's business to help you decide whether to subscribe or invest in the IPO.

Below are the key details related to the VHL IPO:

• Issue Size: Rs 1600 crore
• Price Band: Rs 610 - Rs 643
• Lot Size: 23 Shares
• Issue Details: Only Fresh Issue
• Retail Share Offered: 10%
• Minimum Investment: Rs 14,789

Ventive Hospitality IPO: The Business

They are a hospitality asset owner with a primary focus on luxury offerings across business and leisure segments. All of their hospitality assets are operated by or franchised by global operators, including Marriott, Hilton, Minor, and Atmosphere. Among listed hospitality companies in India,

(i) Their pro forma revenue was the third highest in each of FY24 and FY23 and second highest for FY22

(ii) their pro forma EBITDA was the third highest in FY24 and second highest for each of FY23 and FY22.  

Their portfolio comprises 11 operational hospitality assets in India and Maldives, totaling 2,036 keys across the luxury, upper upscale, and upscale segments as of September 30, 2024. The company's hospitality assets command an ARR premium vis-à-vis their peers in India and Maldives, which they believe is a testament to their superior asset quality, contemporary offerings, and customer experience.

They have a proven track record of developing and acquiring marquee hotel assets across various geographies and different hospitality segments. Through their development and acquisition-led expansion, they have scaled up the Portfolio and forayed into new geographies such as Bengaluru, Varanasi, and the Maldives within the past few years.

They plan to continue focusing on our core strength of developing luxury and upscale hospitality assets and to increase the number of keys across their hospitality assets by an estimated 367 keys or 18.02%, from 2,036 keys as of September 30, 2024, to approximately 2,403 keys in FY2028 through their planned development and expansion initiatives in different cities.

Ventive Hospitality IPO: Industry Overview

The travel and tourism sector contributed Rs 19.1 tn in CY23 (5.6% of GDP) and is expected to contribute about Rs 21.2 tn in CY24 and over Rs 43 tn by 2034. The sector was estimated to employ about 43 mn persons by CY23. Demand for chain-affiliated hotel rooms has increased to 120k rooms per day (2.48 rooms per Rs crore of GDP) in FY24 from 71k rooms per day (2.24 rooms per Rs. crore of GDP) in FY16 and is expected to increase further to 167k rooms per day by FY275.

India has only 195k chain-affiliated hotel rooms, across segments, as of 30 September 2024 compared to 56k keys in San Francisco and 150k keys in London as of 31 December 2023. The sector is underpenetrated compared to global counterparts in terms of the ratio of rooms to commercial office stock with the top 8 cities of India having 118 keys per msf of office space, compared to 637 keys per msf of office space in London and 486 keys per msf of office space in San Francisco as of 31 December 20236.

Total hotel keys penetration basis population as of 31 December 2023 is also lower in India at 0.3 keys per 1,000 people compared to 22.1 / 2.7 keys per 1,000 people in the USA / globally.  

Ventive Hospitality IPO: Listed Peers

The company has highlighted 7 companies as listed peers - Chalet Hotels, Samhi Hotels, Juniper Hotels, The Indian Hotels Company, EIH, Lemon Trees and Apeejay Surrendra Park Hotels. In this section, we look at the financials of the company(FY24) and see where VHL stands among its peers:

• In terms of total income, The Indian Hotels Company is at the top of the table followed by EIH and VHL (proforma)
• Chalet Hotels has the highest (Rs 13.54) earning per share (EPS), followed by EIH (Rs 10.22) and the Indian Hotels Company (Rs 8.86).
• EIH (16.58%) has the highest return on net worth (RoNW), followed by Chalet Hotels (15.03%).

For more details, please check the below table.

Ventive Hospitality IPO: Financials

In the RHP, the company has given normal and Proforma financials. Proforma financials refer to financial statements that are prepared based on assumptions or hypothetical scenarios rather than actual, historical data (more details under risks). We are going to look at the Performa financial numbers of the company from recent years:

• VHL reported total income of Rs 1197.61 crore, Rs 1762.19 crore, and Rs 1907.38 crore for FY22, FY23, and FY24, respectively. Revenue has grown at a CAGR of 26.20 in this period.
• The pro forma revenue from hotel operations constituted 68.47%, 72.04%, 72.71%, and 68.53% of their pro forma total income for the six months ended September 30, 2024, and FY24, FY23, and FY22 respectively.
• The EBITDA for FY22, FY23, and FY24 were Rs 492.43 crore, Rs 771.12 crore, and Rs 869.77 crore, respectively. The EBITDA grew at a CAGR of 32.90% in this period. The EBITDA margins for the same period were 41.12%, 43.76%, and 45.60%, respectively.
• The company has posted a profit/(loss) of Rs (146.20) crore for FY22, Rs 15.68 crore for FY23, and Rs 66.75 crore for FY24. The PAT margins for the same period were (12.21)%, 0.89%, and (3.50)%, respectively.
• The average occupancy for FY22, FY23, and FY24 was 34.82%, 63.67% and 59.47%, respectively.

Ventive Hospitality IPO: Competitive Strengths

Below are some of the competitive strengths of the company:

• The company offers premium hospitality assets complemented by Grade A annuity assets.
• They have an established track record of development and acquisition-led growth in India and the Maldives.
• Ventive Hospitality has renowned Promoters with global and local expertise.
• They have a proven track record of adding value through active asset management.

Ventive Hospitality IPO: Risks

Below are some of the risks associated with their business:

• The company acquired the New Portfolio recently (in FY25) from Promoters and may undertake such acquisitions in the future. Further, the Pro Forma Financial Information prepared for RHP is presented for illustrative purposes only to illustrate the impact of such acquisition of New Portfolio as if the acquisition had taken place at the beginning of the applicable period/year and may not accurately reflect their future financial condition or results of operations.
• The companies rely on third parties for the quality of services at their hospitality assets and their hospitality assets are operated by or franchised from third-party brands.
• They do not have a consolidated operating history through which their overall performance may be evaluated and have incurred losses in the recent past.
• Their annuity assets contributed to 28.02% and 24.44% of their pro forma total income for the six months ended September 30, 2024, and FY24, respectively.