JUNIPER HOTELS LIMITED IPO: ISSUE SIZE, PRICE BAND AND MORE

After a small pause, the IPO market looks busy this week. Earlier in the month, we saw the listing of The Park Hotel at a 22% premium. We have one more company from the same sector - Juniper Hotels, a luxury hotel development and ownership company. The IPO opened for subscription on the 21st of February and closes on the 23rd of February. In this article, we look at the various aspects of JHL's business to help you decide whether to subscribe or invest in the IPO.

Juniper Hotels IPO: Key Details

Below are the key details related to the Jana SFB IPO:

• Issue Size: Rs 1,800 crore
• Price Band: Rs 342 - Rs 360
• Lot Size: 40 Shares
• Issue Details: Only fresh issue
• Market Cap: At the upper price band, Rs 8,010 crore
• Minimum Investment: Rs 14,400

Juniper Hotels IPO: The Business

Juniper Hotels is a luxury hotel development and ownership company and is the largest owner, by number of Keys of “Hyatt” affiliated hotels in India (September 2023). They have seven hotels and serviced apartments and operate a total of 1,836 keys. The company benefits from

a unique and longstanding partnership of over 40 years between Saraf Hotels, a hotel developer with a strong and well-established

track record in India, and affiliates of a globally recognized premier hospitality brand, Hyatt Hotels Corporation. 

They are the only hotel development company in India with which Hyatt has a strategic investment. Juniper owns 19.6% of Hyatt group-affiliated hotel rooms and apartments in India and has extensive experience in identifying opportunities in hospitality destinations, developing high-end hotels in these locations, and nurturing them through active asset management. They are also focused on providing quality guest experience while operating their assets efficiently. Juniper Hotels has the largest aggregate inventory of upper-tier branded serviced apartments in Mumbai and New Delhi among hotels owned by major private investors.

Juniper Hotels IPO: Industry Overview

Major supply growth occurred between FY08 and FY15, fuelled by strong business conditions from FY05 through the initial months of FY09 when occupancies and ADR were strong in most markets. On the other hand, declining demand and economic activity from FY10 through FY14 were not supportive of new development commitments, leading to slower supply growth from FY16 to FY23; this was exacerbated by the COVID-19 pandemic. 

Supply growth has picked up pace, buoyed by the strong demand conditions, with about 7,600 new rooms added between April 2023 and September 2023. The overall CAGR of 9.4% over a period of 22.5 years reflects material supply addition, although of a small supply base as of FY21.

60k rooms are expected to be added between October 1, 2023, and March 31, 2027 – given the past track record of materialized supply being at a slower rate, actual inventory growth may be smaller. Growth may happen somewhat speedily if more conversions occur as these need a shorter lead time to fruition. Pipeline data included in this report is based on deals signed and announced as of November 30, 2023, by various chains.

Juniper Hotels IPO: Listed Peers

The company has quite a few listed peers - Chalet Hotels, Lemon Tree Hotels, The Indian Hotels Company, and EIH Limited. Let us compare their FY23 financials to see where Juniper stands among its peers:

• In revenue terms, Juniper Hotels is the smallest company, while The Indian Hotel Company is the largest player.
• The company has reported losses hence its EPS is negative, while all other listed peers have positive EPS.
• Similarly, Juniper has negative RoNW. The Indian Hotel Company has the highest RoNW.

Check the below table for exact numbers.

Juniper Hotels IPO: Financial Performance

Below is the financial performance of Juniper Hotels from the recent financial years:

• The revenue from operations grew at a CAGR of 100% from Rs 166.35 crore in FY21 to Rs 666.85 crore in FY23 and was Rs 336.11 crore in the six months ended September 30, 2023. 
• Employee benefits expense as a percentage of revenue from operations reduced to 14.84% in FY23 from 24.50% in FY22 and 34.91% in FY21. 
• The revenue per available room and serviced apartments for the last three financial years was Rs 1936.22, Rs 3,344.84, and 7,479.43, respectively,
• Juniper Hotels has reported an EBITDA of Rs 22.20 crore, Rs 101.47 crore, and Rs 322.36 crore for FY21, FY22, and FY23, respectively. The EBITDA margins for the same period were 11.51%, 29.52%, and 44.94%, respectively. The margins have increased drastically in this period. 
• They have reported a net profit (PAT) of Rs (199.49), Rs (188.03) crore, and Rs (1.50) crore for FY21, FY22, and FY23. The company has reported losses but they have continuously reduced.
• For the last three financial years, Juniper has reported an average EPS of Rs (6.72), and an average RoNW of - (23.91)%.
• The issue is negatively priced as the company has posted losses for the reported periods. It is also at a negative P/E.
• The average occupancy rate has increased from 34.23% in FY21 to 75.74% in FY23.

Juniper Hotels IPO: Competitive Strengths

Risks associated with Juniper Hotels

Below are the risks associated with their Business:

• They have substantial indebtedness which requires significant cash flows to service and limits their ability to operate freely.
• The company is subject to several conditions and restrictions under its financing agreements. Any breach of the terms under their financing arrangements or their inability to meet obligations could adversely affect their business and financial condition.
• Juniper Hotels recently acquired entity, CHPL, which is now a wholly owned subsidiary, has witnessed delays in the repayment of loans in the past and has accordingly undertaken strategic debt restructuring.
• A significant portion of their revenue from operations (90.48% in the six months ended September 30, 2023) is derived from three hotels/serviced apartments in Mumbai and New Delhi out of the portfolio of four hotels/serviced apartments of the company.
• If they are unable to decrease their Illiquidity Ratio (32.75% in FY23), it could impact their business.