IPO Analysis of Apeejay Surrendra Park

What Apeejay Surrendra Park Do? 

Under brand names "THE PARK," "THE PARK Collection," "Zone by Park," "Zone Connect by Park," & "Stop by Zone," Apeejay Surrendra Park Hotels Limited is hotel company. Through its retail brand "Flurys," corporation is also involved in food & beverage retail market.

Rationale Behind Investment

1. Increasing Brand awareness & Diversifying Portfolio to support Expansion

The firm's unwavering dedication to pioneering product innovation & delivering service excellence has garnered commendation & accolades across diverse categories, solidifying its stature as pivotal participant in Indian hospitality sector. Collaborating with eminent Indian & international designers has enabled ASPH to craft iconic spaces that resonate with patrons, cultivating brand loyalty & propelling its expansion endeavours.

Demonstrating strategic approach to geographical expansion, company achieved noteworthy 21.6% Compound Annual Growth Rate (CAGR) in its hotel portfolio from FY21 to H1FY24, underscored by its adeptness in identifying opportune locations & capitalizing on growth prospects. 

Positioned advantageously amidst expanding urban centers of India & surge in discretionary spending, ASPH stands poised to capitalize on escalating demand for upscale & upper-mid-scale accommodations. With well-established track record in curating distinctive hospitality experiences, company is poised for sustained success & market leadership.

2. Revenue stability is driven by synergies between food & beverage & hotel industries.

ASPH adopts integrated hospitality approach, encompassing accommodation, food, beverage, & entertainment offerings, which collectively contribute 40% to its revenue. Distinguished brands such as Zen, Lotus, & Someplace Else have become synonymous with quality & innovation, appealing to both local & international patrons. 

The established retail food & beverage brand, Flurys, operating under ASPH umbrella, boasts 73 outlets in various formats, including kiosk, café, & restaurant. Leveraging robust brand equity & operational proficiency, ASPH maintains high occupancy rates & competitive average room rates, achieving average occupancy level of 92.76% for owned hotels in H1FY24. 

The food, beverage, & entertainment segment, comprising 81 outlets & banquet spaces, adds non-cyclical dimension to earnings, mitigating seasonal fluctuations inherent in industry. Positioned strategically amid India's evolving demographic profile, marked by growing working-age population & increased discretionary spending, ASPH is poised to capitalize on shifting consumer preferences & lifestyle trends. Through offering diversified & holistic guest experience, company ensures resilience & stability in revenue streams, reinforcing its leadership position in hospitality sector.

Apeejay Surrendra Park Hotels Ltd.’s Finance Summary

Financial Analysis & Interpretation

1. Assets

The company's total assets have experienced steady increase, reaching 1383 Crore by September 2023.
This growth suggests effective capital deployment, potentially in expanding operations or acquiring strategic assets, contributing to overall financial health & business expansion.

2. Revenue

A substantial surge in revenue from 190 Crore in March 2021 to 524 Crore in March 2023, followed by slight decline to 272 Crore by September 2023.
The surge is likely due to increased business activities & expanded operations. subsequent decline might be attributed to seasonal factors, market dynamics, or industry-specific trends.

3. Profit After Tax (PAT)

The company has transitioned from negative PAT of -76 Crore in March 2021 to positive 48 Crore in March 2023, with subsequent decrease to 23 Crore by September 2023.
The positive shift indicates improved operational efficiency & profitability. decline might be influenced by factors such as increased costs, market challenges, or temporary fluctuations impacting profitability.

4. Net Worth

The net worth has seen consistent rise from 536 Crore in March 2021 to 579 Crore by September 2023.
This upward trajectory signifies sustained financial health & increase in company's overall value. It can be attributed to accumulation of profits, successful investments, or efficient management of resources.

5. Reserves & Surplus

A consistent increase in reserves & surplus from 519 Crore in March 2021 to 561 Crore by September 2023.
The growth in reserves & surplus reflects retained earnings, indicating company's ability to reinvest profits for future growth, debt repayment, or other strategic initiatives.

6. Total Borrowing

The total borrowing shows fluctuations, reaching 567 Crore in March 2023 & subsequent increase to 597 Crore by September 2023.
The increase in borrowing could be attributed to funding expansion plans or capital-intensive projects. It's crucial to assess whether borrowed funds are efficiently utilized to generate returns that exceed cost of borrowing.

Overall Impression

The company demonstrates positive financial trajectory with consistent growth in assets, net worth, & reserves. While decline in revenue & profit after tax by September 2023 warrants scrutiny, understanding industry-specific context, market conditions, & management strategies is essential for comprehensive assessment. Additionally, increase in total borrowing should be monitored to ensure prudent debt management & sustainable financial leverage. Investors should consider these financial indicators collectively to make informed decisions regarding company's IPO.

Apeejay Surrendra Park Hotels Ltd.’s Valuation

Apeejay Surrendra Park Hotels IPO strategically positions itself at confluence of evolving hospitality industry & post-pandemic economic resurgence. discernible recovery within hotel sector over past year mirrors positive market sentiment & anticipates robust rebound. 

The timing of Park Hotels' IPO strategically aligns with this optimistic trend, leveraging company's robust brand presence & credibility in hospitality sector, ensuring enduring valuations. With diversified Pan-India portfolio, company adeptly disperses risk across geographic regions & market segments, enabling agile response to granular opportunities.

Furthermore, company's historically elevated occupancy rates augur well for improved net margins, contributing to sustained financial stability & growth. meticulous examination of financial metrics reveals noteworthy milestones achieved, with substantial revenue growth, tripling sales over past three years. 

The commendable turnaround, marked by transition from losses to profitability, is underscored by significant increase in net profit in FY23. Although return on assets remains relatively modest due to capital-intensive nature of hotel industry, positive shift in return on equity in FY23 is indicative of company's financial strength.

While valuation remains reasonable compared to peers, market optimism is reflected in relatively high P/E ratio of 56.4 times based on FY23 EPS. Looking ahead, Apeejay Surrendra Park Hotels' strategic initiatives, including debt reduction & its unique blend of hotel & F&B services, position it favourably for sustainable growth & sustained market leadership.