What you must know about Juniper Hotels IPO?

Juniper Hotels Ltd – About the company

Juniper Hotels Ltd was incorporated in the year 1985 and it is positioned as a luxury hotel development and ownership company. Across India, Juniper Hotels Ltd operates 7 hotels and serviced apartments with a total capacity of 1,836 rooms across all its properties. Juniper Hotels Ltd is co-owned by Saraf Hotels Ltd and Two Seas Holdings Ltd, which happens to be an affiliate of Hyatt Hotels Corporation. This offers a unique strategic partnership between a hotel developer and an international hospitality chain like the Hyatt group. Its hotels and service apartments are spread across Mumbai, Delhi, Ahmedabad, Lucknow, Raipur, and Hampi (in Karnataka). Hyatt properties are considered among the most premium hotel and hospitality properties across India and also across the world.

What does the portfolio of Juniper Hotels comprise of. It includes 549 rooms and 116 serviced apartments at the Grand Hyatt Mumbai. Juniper Hotels Ltd has 401 rooms at the ANDAZ Delhi and 129 serviced apartments at the Hyatt Delhi Residences. In addition, its portfolio includes 211 rooms at the Hyatt Regency Ahmedabad, 206 rooms at the Hyatt Regency Lucknow, 105 rooms at the Hyatt Raipur, and 119 rooms at the Hyatt Place, Hampi, which is a historical UNESCO certified location in Karnataka. The company employs a total of 1,993 employees across Juniper Hotels Ltd and the CHPL Group. Its 1,836 keys include 245 serviced apartments which are managed and branded by Hyatt group.

The fresh funds will be used to repay / prepay some of the high-cost borrowings of the business availed for the recent acquisitions of CHPL and CHHPL. Promoters currently hold 100% in the company, which will get diluted post the IPO to 77.53%. The IPO will be lead managed by JM Financial, CLSA India and ICICI Securities, while KFIN Technologies Ltd will be the registrar to the IPO.

Highlights of the Juniper Hotels IPO issue

Here are some of the key highlights to the public issue of Juniper Hotels IPO.

• Juniper Hotels IPO will be open from February 21st, 2024 to February 23rd, 2024; both days inclusive. The stock of Juniper Hotels Ltd has a face value of ₹10 per share and the price band for the book building IPO has been set in the range of ₹342 to ₹360 per share.
   
• The IPO of Juniper Hotels Ltd will entirely a fresh issue of shares with no offer for sale (OFS) component. The fresh issue tends to bring in fresh funds into the company, but is also EPS and equity dilutive. On the other hand, OFS is just a transfer of ownership, and hence the OFS is neither equity dilutive nor is it EPS dilutive.
   
• The fresh issue portion of the IPO of Juniper Hotels Ltd comprises the issue of 5,00,00,000 shares (500 lakh shares), which at the upper price band of ₹360 per share will translate into a fresh issue size of ₹1,800 crore.
   
• Since there is no offer for sale (OFS) component, the fresh issue size will also double as the overall size of the IPO. Therefore, the total IPO of Juniper Hotels Ltd will comprise of a fresh issue of 5,00,00,000 shares (500 lakh shares) which at the upper end of the price band of ₹360 per share aggregates to total issue size of ₹1,800 crore.

The IPO of Juniper Hotels Ltd will be listed on the NSE and the BSE on the IPO mainboard.

Promoter holdings and investor quota allocation quota

The company was promoted by Arun Kumar Saraf, Saraf Hotels Ltd, Two Seas Holdings Ltd and Juniper Investments Ltd. As per the terms of the offer, not less than 75% of the net offer is reserved for the qualified institutional buyers (QIBs), while not more than 10% of the net offer size is reserved for the retail investors. The residual 15% is kept aside for the HNI / NII investors. The table below captures the gist of the allocation to various categories.

It may be noted here that the Net Offer above refers to the quantity net of employee, as indicated above. There is no employee quota that has been communicated by the company, as far as data available in the RHP is concerned. The anchor portion, will be carved out of the QIB portion and the QIB portion available to the public will be reduced proportionately.

Lot sizes for investing in the Juniper Hotels IPO

Lot size is the minimum number of shares that the investor has to put in as part of the IPO application. The lot size only applies for the IPO and once it is listed then it can be even traded in multiples of 1 shares since it is a mainboard issue. Investors in the IPO can only invest in minimum lot size and in multiples thereof. In the case of Juniper Hotels Ltd, the minimum lot size is 40 shares with upper band indicative value of ₹14,400. The table below captures the minimum and maximum lots sizes applicable for different categories of investors in the IPO of Juniper Hotels Ltd.

It may be noted here that for the B-HNI category and for the QIB (qualified institutional buyer) category, there are no upper limits applicable.

Key dates for Juniper Hotels IPO and how to apply?

The issue opens for subscription on 21st February 2024 and closes for subscription on 23rd February 2024 (both days inclusive). The basis of allotment will be finalized on 26th February 2024 and the refunds will be initiated on 27th February 2024. In addition, the demat credits are expected to also happen on 27th February 2024 and the stock will list on 28th February 2024 on the NSE and the BSE. Juniper Hotels Ltd will test the appetite for such hospitality stocks in India. The credits to the demat account to the extent of shares allotted will happen by the close of 27th February 2024 under ISIN (INE696F01016).

Let us now turn to the practical issue of how to apply for the IPO of Juniper Hotels Ltd. Investors can apply either through their existing trading account or the ASBA application can be directly logged through the internet banking account. This can only be done through the authorized list of self-certified syndicate banks (SCSB). In an ASBA application, the requisite amount is only blocked at the time of application and the necessary amount is debited only on allotment. Investors can apply in the retail quote (up to ₹2 lakh per application) or in the HNI / NII quota (above ₹2 lakh). Minimum lot sizes will be known after pricing.

Financial highlights of Juniper Hotels Ltd

The table below captures the key financials of Juniper Hotels Ltd for the last 3 completed financial years.

Data Source: Company RHP filed with SEBI (FY refers to Apr-Mar period)

There are few key takeaways from the financials of Juniper Hotels Ltd which can be enumerated as under

1. The company has seen robust growth in top line revenues in the last two years. In fact, revenues have grown nearly 4-fold over the last 2 years as the business traction of Juniper Hotels has expanded and it has been better able to improve the capacity utilization of its keys and also ensure much better fixed cost absorption.
    
2. While the fixed cost absorption has improved sharply, the company continues to make losses. Hence, traditional measures of P/E based valuations may not work in this case. However, the good trigger for the stock is that the net loss has narrowed from Rs188 crore to just Rs1.50 crore in the last one year between FY22 and FY23. However, with revenues stabilizing, the losses have widened in the first half of FY25.
    
3. The company has a very low sweating of assets of under 0.2X on average in the 3 years. The low asset turnover also gets compounded by the negative return on assets (ROA). Hotel industry is a business where the upfront costs are high and returns take time to be delivered as monetization takes time. That is something investors have to factor in about this business; and a risk they must be prepared to take on.

While the P/E ratio may not be too relevant due to the company being loss making, it would be instructive to look at the comparative P/E ratio of the peer group in the industry. On an average the P/E ratio of the hotels and hospitality industry in India commands a P/E ratio in the range of between 60X and 80X. Hence, the company does not require a very big bounce in EPS to justify its current IPO price of ₹360 at the upper end of the book building price band. However, it would be important to look at some of the key qualitative factors that can have a bearing on the future price performance of Juniper Hotels Ltd.

Here are some qualitative advantages that Juniper Hotels Ltd brings to the table.

• Juniper Hotels has, over the years, demonstrated high quality and finesse in hospitality property management. This is likely to boost operating efficiency in the future.
   
• The business model of Juniper Hotels Ltd is a blend of the asset ownership at the back-end and the global brand like Hyatt at the front end.
   
• In terms of downstream growth, hospitality is a natural corollary of rapidly growing GDP, rising per capital income and rising consumer spending. That puts the company in a demand sweet spot in the coming years as India transitions to a $5 trillion economy.

The nature of the hotels business is one of higher risk in the initial phase and lower risk in later phases, once the roll out is completed. That is what investors can bet on in the IPO of Juniper Hotels Ltd. However, investors in the IPO must be prepared for higher levels of risk, the possibility of cyclicality in returns and the need to take a much longer perspective for the stock to delivery on returns.