What you must know about SAMHI Hotels IPO?

SAMHI Hotels Ltd, is a branded hotel ownership and hotel property management platform operating out of India. It has a total portfolio comprising of over 4,801 keys across a total of 31 operating properties. Most of them are located in the key urban consumption centres of India. Its hotels are spread across Bengaluru, Hyderabad, Delhi-NCR, Pune, Chennai, and Ahmedabad. It is also currently developing 2 hotels with a combined capacity of 461 keys in Navi Mumbai and in Kolkata. The recent acquisition of Asiya Capital and ACIC SPV has given SAMHI Hotels Ltd access to an additional 962 keys across 6 operating hotels. It has its keys under well recognized hotels operators like Courtyard Marriott, Sheraton, Hyatt, and Holiday Inn, among others. This provides SAMHI Hotels Ltd access to the loyalty programs of these hotel chains and their online reservation systems. SAMHI Hotels Ltd counts Equity International (led by Sam Zell), GTI Capital and International Finance Corporation (IFC) among its key shareholders.

The 4,801 keys held by SAMHI Hotels Ltd are spread across several premium properties across major destinations. These include 170 keys at the Courtyard by Marriott in Bengaluru, 270 keys at Fairfield by Marriott, Bengaluru across Whitefield and ORR properties, 153 keys in Fairfield by Marriott, Chennai, 148 keys at Fairfield by Marriott in Rajajinagar Bengaluru, 123 keys at Four Points by Sheraton, Vizag, 130 keys at Fairfield by Marriott, Goa, 109 keys at Fairfield by Marriott, Pune, 126 keys at Fairfield by Marriott, Coimbatore, 130 keys at Holiday Inn Express, Ahmedabad, 170 keys at Holiday Inn Express, Hyderabad and 161 keys by Holiday Inn Express, Bengaluru. In addition, SAMHI Hotels Ltd also has substantial number of keys across Holiday Inn properties in Chennai, Gurugram, Nashik and Pune. The IPO will be lead managed by JM Financial and Kotak Mahindra Capital. KFIN Technologies (formerly Karvy Computershare is appointed the registrar to the IPO.

Highlights of the SAMHI Hotels IPO issues

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

• SAMHI Hotels IPO has a face value of ₹1 per share while the price band for the book building IPO has been set in the band of ₹119 to ₹126. The final price will be discovered within this band through the process of book building.
   
• SAMHI Hotels IPO will be a combination of a fresh issue and an offer for sale (OFS). The fresh issue portion comprises the issue of 9,52,38,095 shares (9.52 crore shares approximately), which at the upper price band of ₹126 per share will translate into fresh issue size of ₹1,200 crore.
   
• The offer for sale (OFS) portion of the IPO comprises the issue of 1,35,00,00 shares (1.35 crore shares), which at the upper price band of ₹126 per share will translate into an offer for sale (OFS) size of ₹170.10 crore.
   
• Out of the 1.35 crore shares put up under the OFS, Blue Chandra will sell 84.29 lakh shares, Goldman Sachs Investment Holdings Asia will sell 49.31 lakh shares and GTI Capital Alpha will sell 1.40 lakh shares as part of the offer for sale (OFS).
   
• Therefore, the overall IPO of SAMHI Hotels Ltd will comprise of the issue of 10,87,38,095 shares (10.87 crore shares approximately), which at the upper price band of ₹126 per share will translate into a total IPO issue size of ₹1,370.10 crore.

While the fresh issue will be capital and EPS dilutive, the offer for sale portion will only result in transfer of ownership. There will be 3 holders offering shares under the OFS portion as mentioned above and all are non-promoter early investors in the company. The proceeds of the fresh issue portion will be used to repay / prepay outstanding loans availed by SAMHI Hotels Ltd and its subsidiaries; including payment of accrued interest.

Promoter holdings and investor quota allocation quota

There is no identifiable promoter group in this case and all are public shareholders only. As per the terms of the offer, 75% of the net offer is reserved for the qualified institutional buyers (QIBs), while only 10% of the total issue size is reserved for the retail investors. The residual 15% is kept aside for the HNI / NII investors . The stock of SAMHI Hotels Ltd will be listed on the NSE and on the BSE. The table below captures the gist of the allocation to various categories.

Lot sizes for investing in the SAMHI 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 TVS Supply Chain Solutions, the minimum lot size is 119 shares with upper band indicative value of ₹14,994. The table below captures the minimum and maximum lots sizes applicable for different categories of investors in the IPO of SAMHI 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 SAMHI Hotels IPO and how to apply?

The issue opens for subscription on 14th September 2023 and closes for subscription on 18th September 2023 (both days inclusive). The basis of allotment will be finalized on 22nd September 2023 and the refunds will be initiated on 25th September 2023. In addition, the demat credits are expected to happen on 26th September 2023 and the stock will list on 27th September 2023 on the NSE and the BSE. SAMHI Hotels Ltd offers a very unique combination. It has an established and tested business model; it is into an industry that is considered the future of how this business is likely to conducted. Let us now turn to the more practical issue of how to apply for the IPO of SAMHI 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 SAMHI Hotels Ltd

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

Data Source: Company RHP filed with SEBI

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

1. In the last 2 years, the revenues growth has been robust showing the potential that this particular segment of hotel property ownership and management has. However, this is a long gestation project as is evident from the consistent losses and the negative net worth of the company. That makes it a very risky choice for the investors.
    
2. The net margins or the return on assets are not really relevant as the company is loss making and the net worth of the company is negative. Hence, investors have to take a view purely based on the potential of this sector and the number of keys to which it plans to expand over the next few years.
    
3. The company has maintained very low rate of sweating assets as is evident from the asset turnover ratio. It has consistently been below 0.25 on an average, but that is the nature of the hotel management and asset ownership industry. There is a lot of front ending of costs. Hotels are looking up, but whether the company can turnaround remains to be seen.

While pricing of the IPO does matter here, there is not much of a valuation play that you can assess considering the losses. Also, the net worth of the company is negative, so investors must be wary of what they are getting into. At an industry level, hotels are looking in line with the revival in the contact sensitive sector. The traction is great on the top line but there is no clarity on when there will be traction on the bottom line. A lot will depend on how the company is able to scale with the use of digital technologies. It has to be a bet on contact intensive sectors, although this would suit investors with long waiting period and higher risk appetite.