Company Overview
Juniper Hotels Ltd. is a luxury hotel development and ownership company. The company is the largest owner of hotels by number of keys of Hyatt-affiliated hotels in India. Benefiting from a unique and longstanding partnership of over 40 years between Saraf Hotels and Hyatt Hotels Corporation, the company has built a portfolio of over seven hotels and serviced apartments and operates over 1,800 room keys. The company has extensive experience in identifying opportunities in hospitality destinations, developing high-end hotels in these locations, and nurturing them through active asset management to provide quality guest experience while operating their assets efficiently. The company has hotels and serviced apartments across the luxury, upper upscale, and upscale categories of hotels around established landmarks in Mumbai, Delhi, Ahmedabad, Lucknow, Raipur, and Hampi. The business model of the company allows it to identify and acquire sites to develop its hotels and serviced apartments. Moreover, its expertise in development allows it to move swiftly from a capital deployment phase to a revenue generation phase by making its assets operational. The company is the flagship entity for the Saraf Group, through ownership of a unique portfolio of luxury, upper upscale, and upscale hospitality assets, located in highly desirable locations across key locations. The company’s continued strategy is to expand on its current ownership of marquee assets across India, bringing in more luxury and upscale hotels and serviced apartments into the portfolio by consolidating the interests of Saraf Hotels and its affiliates in entities incorporated in India or through new opportunities.
Objects of the issue:
The net proceeds from the fresh issue will be used towards the following purposes:
- Repayment and/ or pre-payment, in full or part, of certain borrowings availed by the company;
- Funding long-term working capital requirements of the company; and
- General corporate purposes.
Investment Rationale:
Expertise in site selection and identifying opportunities to develop hotels
The company identifies micro-markets and locations within cities based on their proximity to airports, central business districts, areas with concentrated industrial catchments, and areas with high tourism activities. The company aligns the appropriate Hyatt sub-brand with each development. The right sub-brand, along with the right size of development in the optimal location in the chosen city, allows the company to cater to the high-end traveler and maximize long-term returns. The company has demonstrated a strong track record in establishing its presence across key cities. Its hotels and serviced apartments are located in (a) established markets such as Delhi and Mumbai; (b) emerging business destinations such as Ahmedabad, Lucknow, and Raipur; and (c) growing tourist destinations such as Hampi. In Raipur and Hampi, its hotels were the first international chain-affiliated hotels. The company believes that its foresight in identifying key locations to establish its hotels and serviced apartments has been key to the company’s success.
Increasing returns by having multiple revenue streams & complementary offerings
The company has introduced complementary revenue-generating streams at its hotels and benefits from revenue contribution from areas such as serviced apartments, restaurants, MICE services and other services to ensure optimal utilization of available resources. The company’s complementary offerings also result in a mix of customers and guests staying at its properties which improves its ARR. Further, the company consistently monitors the usage of available space at its hotels and aims to enhance its customer offering by adapting the available real estate space in its hotels to meet the ever-changing demands of the market. Guests at its serviced apartments consist a mix of expatriates and Indians and primarily comprise corporate employees. The average occupancy of its serviced apartments was 74.3%, 74.6%, 75.3%, 55.6%, and 47.2% in the six months ended September 30, 2023, and September 30, 2022, and Fiscals 2023, 2022, and 2021, respectively. The company’s hotels feature an aggregate of 22 renowned restaurants and bars, including several award-winning establishments. The company’s F&B offerings provide a dining experience that caters to a broad upscale demographic and its restaurants have developed a strong brand image and customer loyalty which has become an independent and significant business stream. The company also offers meetings, conferences, and banqueting spaces which are used to target customers for events, exhibitions, and meetings as well as for weddings and marquee social events such as G20 conference.
Valuation and Outlook:
Considering the current domestic environment, the hotel sector has much to contribute to India’s economy by way of GDP, asset and credit growth, employment, FDI, foreign exchange earnings, and tax revenues. The multiplier effect of developing a new hotel is significant. As of 2022, the overall travel and tourism sector contributed Rs. 15.7 trillion to India’s economy, with an expected increase to Rs. 16.5 trillion for 2023 and Rs. 37 trillion over the next 10 years. The sector is expected to employ 39 million persons by the end of 2023. The GDP contribution of the hotel sector was estimated at USD 40 billion in 2022, with a projected increase to USD 68 billion by 2027 and USD 1 trillion by 2047. The need and demand for hotel rooms and hotel services will benefit from and, in turn, support growth-orientated macroeconomic policies, economic development initiatives, and investments across multiple sectors as India moves towards becoming the third largest global economy. Infrastructure and air/road access enhancements have also helped the growth of leisure and will continue to enable further growth. Various factors such as increased use of hotels for leisure, weddings, and social travel; increased urbanization and access to infrastructure creating new travel destinations and micro-markets for hotels; changing demographics, with millennials and younger travelers seeking experiences and willing to spend on entertainment and recreation; and evolving attitudes towards recreation, entertainment, wellness, and lifestyle has created an opportunistic environment for the industry. These factors have provided a room for growth for asset-heavy business model companies like Juniper Hotels Ltd. to prosper in the longer run. On the financial performance front, the company’s revenue grew at a CAGR of 100.2% during the FY2021-23 period. The company’s EBITDA stood at Rs. 2,719 million in FY23 compared to a negative EBITDA of Rs. 43 million in FY21. The company’s net loss decreased to Rs. 15 million in FY23 from net loss of Rs. 1,995 million posted in FY21. However, considering the asset-heavy business model of the company, rising debt levels and continued loss-making status, we would recommend an “Avoid” rating for the issue. We would reconsider the company for further evaluation following sustained financial performance over the next few quarters.
