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Platinum Industries Ltd IPO : SUBSCRIBE

Platinum Industries Ltd IPO : SUBSCRIBE
  • Date

    27th Feb 2024 - 29th Feb 2024

  • Price Range

    Rs. 162 to Rs. 171

  • Minimum Order Quantity

    87

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Company Overview

Platinum Industries Ltd. is engaged in manufacturing stabilizers across various segments such as PVC stabilizers, CPVC additives, and lubricants. Operating in the specialty chemicals industry, the company is the third largest player in PVC stabilizers in terms of sales, with a 13% market share in the domestic market for FY23. The company’s product portfolio has various applications in PVC pipes, PVC profiles, PVC fittings, electrical wires and cables, SPC floor tiles, rigid PVC foam boards, packaging materials, etc. The company has one manufacturing facility in Palghar, Maharashtra which is strategically situated near JNPT (Nhava Sheva) Port, Maharashtra (JNPT) from where the company receives its supply of imported raw materials as well as exports its finished goods to the international market.  Traditionally, lead-based PVC stabilizers were commonly utilized for their stabilizing properties. However, during recent times, there has been a noticeable shift in the trends and preferences within the PVC stabilizer industry, particularly in sectors such as potable water distribution, agriculture, construction, medical consumables, wires, and cables. Recognizing the significance of this trend shift, the company has responded by gradually transitioning from lead-based PVC stabilizers to calcium zinc-based and calcium organic-based stabilizers which has allowed the company to align with current market demands and adhere to evolving safety and environmental norms. By offering calcium zinc-based stabilizers and calcium organic-based stabilizers, the company provides customers with products that meet their performance requirements while prioritizing health and sustainability. The company also undertakes trading activities of associated commodity chemicals such as titanium dioxide and PVC/CPVC resin. The company’s business model is aimed at consistently expanding its product portfolio by introducing new products to cater to multiple end-use applications. With a strict focus on product quality and a good track record in the distributor network, the company has established a brand image that helps the company penetrate new product categories. The company also intends to establish multiple projects in and outside India, where it shall venture into manufacturing PVC stabilizers (both lead-based and non-lead-based).

Objects of the issue:

The net proceeds from the fresh issue will be used towards the following purposes:

  • Investment in the subsidiary, Platinum Stabilizers Egypt LLC (“PSEL”), for financing its capital expenditure requirements for setting up of a manufacturing facility for PVC stabilizers at SC Zone ‘Governorate of Suez Egypt’;
  • Funding of capital expenditure requirements of the company towards setting up of a manufacturing facility for PVC stabilizers at Palghar, Maharashtra, India;
  • Funding working capital requirements of the company; and
  • General corporate purposes.

Investment Rationale:

High entry barriers in the specialty chemical industry

Barriers to entry in the specialty chemical industry are typically high and the specialized nature of products leads to significant differentiation. Various other factors such as R&D requirements, technical know-how, capital intensive service capabilities, customer relationships, and engineered or regulated specifications also create important barriers to entry. Due to the nature of the application of the company’s products and the processes involved, the company’s products are subject to, and measured against, high-quality standards and rigorous product approval systems with stringent technical specifications. Further, with end products manufactured by the company typically subject to regulatory and industry standards, any change in the vendor of the products may require significant time and expense for customers, thereby acting as an entry barrier. Thus, customer acquisition is difficult and limits the number of competitors involved in the manufacturing of the company’s products. According to CRISIL, the specialty chemicals industry presents significant entry barriers, including customer validation and approvals, expectations from customers for process innovation and cost reduction, high-quality standards and stringent specifications, as well as various client and regulatory approvals that are required to be obtained. 

Varied product portfolio catering to diversified industries

The company has varied products for the PVC industry and multiple product categories such as low lead-based stabilizers, calcium zinc-based stabilizers, and organic-based stabilizers. Within each product category, there are multiple grades depending on application and customer requirements.The company’s efforts are focused on continuously identifying market demands and introducing relevant products with high quality. In PVC applications, the company has developed more than 400 grades, which has helped the company to cover a majority of its customers as well as different applications. The company diversifies its product portfolio in such a way that its products are customized for the customers and scale for each of the geographies the company serves. The company’s diversified product portfolio helps it to retain customers and strengthen its cross-selling efforts across product portfolios.

Valuation and Outlook:

The company has varied products for the PVC industry and multiple product categories such as low lead-based stabilizers, calcium zinc-based stabilizers, and organic-based stabilizers. Within each product category, there are multiple grades depending on application and customer requirements.The company’s efforts are focused on continuously identifying market demands and introducing relevant products with high quality. In PVC applications, the company has developed more than 400 grades, which has helped the company to cover a majority of its customers as well as different applications. The company diversifies its product portfolio in such a way that its products are customized for the customers and scale for each of the geographies the company serves. The company’s diversified product portfolio helps it to retain customers and strengthen its cross-selling efforts across product portfolios.

Exicom Tele-Systems Ltd IPO : SUBSCRIBE

Exicom Tele-Systems Ltd IPO : SUBSCRIBE
  • Date

    27th Feb 2024 - 29th Feb 2024

  • Price Range

    Rs. 135 to Rs. 142

  • Minimum Order Quantity

    100

  • (D) RHP

    -

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Company Overview

Incorporated in 1994, Exicom Tele-Systems Limited (ETL) specializes in power systems, electric vehicle (EV) charging, and Li-ion based energy storage solutions. The company operates under two verticals in its core business. The first vertical of power systems specializes in providing uninterrupted power solutions (UPS) for digital communication networks, which are extremely power-intensive, yet mission-critical for most organizations. The second core business vertical of ETL is the EV Charging Solutions vertical. As of date, ETL has deployed more than 6,000 AC (alternate current) and DC (direct current) chargers in India and Southeast Asia. Their EV charging solutions are designed to be tough and resilient and have the capacity to withstand harsh environmental and electrical conditions. ETL is among the early entrants to enter India’s EV charger manufacturing segment. This is a business that has high visibility in terms of growth in the coming years as India moves towards green mobility. ETL offers slow charging solutions (primarily AC chargers for residential use) and fast charging solutions (DC chargers for business and public charging networks in cities and highways). Further, ETL provides its customers with a wide range of services covering installation and commissioning, maintenance and operations, supplying individual spare parts, and repair and return. It has a robust customer base, which includes established automotive OEMs (for passenger cars and EV buses), charge point operators (CPOs), and fleet aggregators, who are running green vehicles as part of their fleet service. It has already installed 61,000 EV chargers across 400 locations in India and has deployed a total of 470,810 Li-ion (lithium ion) batteries for application in the telecom sector, equivalent to storage capacity of over 2.10 GWH. It has over 70 core customers and employs 1,190 personnel on full-time and contract basis. As of FY23, ETL has an in-house manufacturing capacity of 1.3+ lakh rectifiers, 12k DC Power Systems, 44.4k EV chargers and 56.4k Li-ion battery across its three plants.

Industry

The increasing demand for mobile data and voice services, the growing adoption of 4G and 5G networks, and the need for reliable and uninterrupted power supply for telecommunication towers are the key factors driving the growth of the global telecommunication power market. The market size for telecommunication DC power systems (including hybrid systems) in India is estimated at Rs. ~15 bn for FY23, with upgradation and replacement demand expected to drive the industry with 75% demand while balance 25% demand is expected on account of new tower additions. The energy storage solutions market for telecommunications is valued at Rs. 19.5 bn in FY23, while the market size for Li-ion battery energy storage systems in data centers is valued at Rs. 3.2 bn in FY23.
The domestic EV PV market has grown substantially at a CAGR of 127% from FY19 to FY23 reaching a total of 47,512 electric cars. It is estimated to grow at a CAGR of 50-60% between FY24-28E, with 9-12% EV penetration expected in FY28. The current EV charging market in India is estimated at Rs ~8.5 bn as of FY23. The public charging station market which is estimated to contribute ~50% of the overall Electric Vehicle Supply Equipment (EVSE) market size in FY24 is expected to grow at a CAGR of 45-50% between FY24-28. The E-buses charging stations market is expected to grow at a faster CAGR of 80-85% owing to higher scope of penetration. The residential charging segment is expected to grow at a CAGR of 60-65%.

Objects of the issue:

The net proceeds from the fresh issue will be used towards the following purposes:

  1. Part-financing the cost towards setting up of production/assembly lines at the planned manufacturing facility in Telangana – Rs. 146 crores;
  2. Repayment/pre-payment, in part or full, of certain borrowings of the company – Rs. 50.3 crores;
  3. Part-funding incremental working capital requirements – Rs. 69 crores;
  4. Investment in R&D and product development – Rs. 40 crores;
  5. General corporate purposes.

Investment Rationale:

Early-mover advantage and industry tailwinds to propel growth

ETL stands out as an established player with a significant early-mover-and-learner advantage in the rapidly growing Indian EV charger market. As one of the first entrants in the segment in 2019, the company has capitalized on its early presence to secure a substantial market share, particularly in the residential (60% market share) and public charging (25% market share) segments. The market also has significant entry barriers that include evolving technology standards, stringent performance requirements, grid infrastructure compatibility, the necessity for strategic partnerships, and demanding service setups. The rise of electric vehicle (EV) penetration in passenger vehicles, commercial vehicles, and electric buses presents a compelling growth opportunity for ETL. With PV EVs projected to grow at a remarkable CAGR of 50-60% between FY2023-28 to reach 5.5 lakh cars by FY28, the demand for EV chargers is set to soar. The company is well-positioned to capitalize on this trend, given its early entry into the market and comprehensive portfolio of EV charging solutions. Moreover, ETL has planned the set-up of two production/assembly lines – a) Critical Power and EV Charger production/assembly line and; b) Prismatic production/assembly line for Li-ion Batteries at its planned manufacturing facility in Hyderabad. Upon commencing operations, the facility would provide ETL increased capacity for the production of EV chargers and will enable it to capitalize on growth in demand for EV chargers. Additionally, the EV charging infrastructure market in India is at a nascent stage, with significant growth potential driven by favourable government policies, lower cost of ownership, and investments in charging infrastructure. ETL’s early-mover advantage, vertically integrated operations, robust R&D capabilities, and diversified product portfolio positions it to capitalize on the burgeoning EV industry in India and globally. With a projected total addressable market of Rs. 9.0-9.5 bn by FY28, ETL is poised for sustained growth and market leadership in the EV charger segment.

Customer-centric approach and vertically integrated operations to drive success

ETL’s track record of long-standing relationships with an established customer base underscores its commitment to delivering customer-centric solutions and value-added products and services. With a diverse customer base spanning telecommunications companies like Jio Infocom Limited and Maxis Telecom (an operator in South East Asia), tower companies like American Tower Corp., Eastcastle Infrastructure DRC S.R.L.U. and Indus Tower, automotive OEMs and charging infrastructure providers, the company has built a reputation for reliability and excellence in the industry. Through collaborative partnerships and ongoing engagement with key customers, ETL continuously upgrades its products to meet evolving market demands and customer specifications. The company’s stringent quality standards, durability, and reliability of products are essential factors in maintaining customer relationships, particularly in critical applications where it has garnered a market share of 16%. With end-to-end product development capabilities and in-house R&D centers, the company intends to accelerate product innovation, shorten development cycles, and ensure consistent quality across its product portfolio. By providing a range of services, including installation, maintenance, spare parts support, and technical assistance, ETL strengthens its customer relationships and reinforces its commitment to delivering superior customer experiences.

Valuation and Outlook:

ETL’s track record of long-standing relationships with an established customer base underscores its commitment to delivering customer-centric solutions and value-added products and services. With a diverse customer base spanning telecommunications companies like Jio Infocom Limited and Maxis Telecom (an operator in South East Asia), tower companies like American Tower Corp., Eastcastle Infrastructure DRC S.R.L.U. and Indus Tower, automotive OEMs and charging infrastructure providers, the company has built a reputation for reliability and excellence in the industry. Through collaborative partnerships and ongoing engagement with key customers, ETL continuously upgrades its products to meet evolving market demands and customer specifications. The company’s stringent quality standards, durability, and reliability of products are essential factors in maintaining customer relationships, particularly in critical applications where it has garnered a market share of 16%. With end-to-end product development capabilities and in-house R&D centers, the company intends to accelerate product innovation, shorten development cycles, and ensure consistent quality across its product portfolio. By providing a range of services, including installation, maintenance, spare parts support, and technical assistance, ETL strengthens its customer relationships and reinforces its commitment to delivering superior customer experiences.

GPT Healthcare Ltd IPO : AVOID

GPT Healthcare Ltd IPO : AVOID
  • Date

    22nd Feb, 2024 - 26th Feb, 2024

  • Price Range

    Rs. 177 to Rs. 186

  • Minimum Order Quantity

    80

  • (D) RHP

    -

Download Report

Company Overview

Company Overview

GPT Healthcare is one of the key regional corporate healthcare companies in Eastern India in terms of the number of beds and hospitals as of FY23. The company operates a chain of mid-sized full-service hospitals under the ILS hospital brand and provides integrated healthcare services, focusing on secondary and tertiary care. As of September 30, 2023, GPT operates four multispecialty hospitals in Dum Dum, Salt Lake and Howrah in West Bengal and Agartala in Tripura, with a total capacity of 561 beds. The company offers a comprehensive range of healthcare services across 35 specialties and super specialties, including internal medicine and diabetology, nephrology (including renal transplants), laparoscopic and general surgery, gynaecology and obstetrics, critical care, gastroenterology, orthopaedics and joint replacements, interventional cardiology, neurology, neurosurgery, paediatrics, and neonatology. Each hospital of the company provides integrated diagnostic services and pharmacies catering to patients. The company’s strategic focus on the relatively under-penetrated healthcare market in Eastern India, where they have presence in three cities, has provided an understanding of regional nuances, patient culture and the mindset of medical professionals. Its hospitals in West Bengal are strategically located in densely populated cities of Kolkata (West Bengal) and Howrah (West Bengal). India also benefits from medical value travel from neighbouring countries such as Bangladesh, Nepal and Bhutan, from patients who prefer to obtain quality healthcare services in India. Eastern India is geographically well positioned for medical value travel from Bangladesh, Nepal and Bhutan, owing to the lower average cost of treatment for healthcare services compared to the northern and western parts of India and due to Eastern India being more accessible from these neighbouring countries.

Objects of the issue

The net proceeds from the fresh issue will be used towards the following purposes:

  • Repayment and / or prepayment in part or in full, of certain outstanding loans of company; from banks and financial institutions; and
  • General corporate purposes. 

Investment Rationale

A healthcare provider with a strong foothold in under-penetrated and densely populated regions of Eastern India

GPT Healthcare is one of the key regional corporate healthcare companies in Eastern India in terms of the number of beds and hospitals in FY23. The company has over 20 years of expertise in providing healthcare services in Eastern India since opening its first hospital in Salt Lake, Kolkata (West Bengal). The company’s strategic focus on the healthcare market in Eastern India, where they have a presence in three cities, has provided them with an understanding of regional nuances, patient culture, requirements, preferences and the mindset of medical professionals. The company is leveraging the opportunity in Eastern India where there is a significant and growing need for quality and affordable healthcare services. Additionally, specific departments, such as the Department of Minimal Access Surgery, have built a reputation in the market for their skilled professionals and specialized experience. As a result, GPT Healthcare has evolved as a brand that is recognized among the region’s patients, doctors, healthcare professionals and vendors.

Well-diversified specialty and location mix enables to cater to the growing demand for quality service

GPT Healthcare has an established presence in Eastern India, with multiple healthcare delivery verticals to serve various economic segments. The company’s operations encompass different levels of healthcare services from primary to tertiary and position GPT Healthcare as a one-stop destination for patient needs in the respective micro markets. The company offers a comprehensive range of healthcare services across 35 specialties and super specialties, including internal medicine and diabetology, nephrology (including renal transplants), laparoscopic and general surgery, gynaecology and obstetrics, critical care, gastroenterology, orthopaedics and joint replacements, interventional cardiology, neurology, neurosurgery, paediatrics and neonatology. Additionally, the company is associated with various consultant doctors in specialty service areas to ensure a diversified pool of resources and holistic expertise. As the company’s healthcare network serves diverse patient needs, this ecosystem of specialized doctors has enabled them to expand reach and leverage market opportunities to gain access to a larger patient base and achieve synergies across verticals while avoiding dependence on a limited pool of doctors.

 

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.

Juniper Hotels Ltd IPO : AVOID

Juniper Hotels Ltd IPO : AVOID
  • Date

    21st Feb 2024 - 23rd Feb 2024

  • Price Range

    Rs. 342 to Rs. 360

  • Minimum Order Quantity

    40

  • (D) RHP

    -

Download Report

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.

Vibhor Steel Tubes Ltd IPO : SUBSCRIBE

Vibhor Steel Tubes Ltd IPO : SUBSCRIBE
  • Date

    13th Feb 2024 - 15th Feb 2024

  • Price Range

    Rs. 141 to Rs. 151

  • Minimum Order Quantity

    99

  • (D) RHP

    -

Download Report

Company Overview

Incorporated in 2003, Vibhor Steel Tubes Limited is a manufacturer and exporter of Mild Steel/Carbon Steel ERW Black and Galvanized Pipes, Hallow Steel Pipe, and Cold rolled Steel (CR) Strips/Coils to various heavy engineering industries in India. Its product portfolio comprises of ERW pipes which find application in water transport, oil, gas, and other non-toxic supplies, while hot-dipped galvanized pipes find extensive application in agriculture and infrastructure. In addition, the company makes hollow section pipes in square and rectangular forms, primer-painted pipes as well as crash barriers for application in railways, highways, and roads. The company has established a longstanding partnership with Jindal Pipes Limited since 2003. It has a contract to manufacture and supply 100,000 MT of pipes for Jindal Pipes annually till 2029 starting April 2023, under the renowned brand name ‘Jindal Star’. Currently, the company has two manufacturing facilities located at Raigad in the state of Maharashtra and Mahabubnagar district in the state of Telangana. The total capacity of the company combining the two plants is at 2.21 MTPA, which the company plans to expand by 1.2 MTPA to 3.41 MTPA in the next few years. For storing its products, VSTL also has a warehouse in Hisar in the state of Haryana. The Maharashtra unit’s stability is ensured by the company’s existing presence in the export market, while the Hyderabad unit is safeguarded by the company’s experience in producing highway guardrail products. The company has been granted an allotment letter for land to establish a new facility of Vibhor Steel Tubes Limited in Odisha. Given that Odisha is the largest iron market, this move is poised to reduce the company’s raw material costs and enhance profit margins in future. As on 30 September 2023, the company had a total of 636 employees on its rolls.

Objects of the issue:

The net proceeds from the fresh issue will be used towards the following purposes:

  • Funding of long-term working capital requirements of the Company;
  • General corporate purposes.

Investment Rationale:

Strategic alliances and efficient operations driving growth

The association between VSTL and Jindal Pipes Limited (JPL) underscores a strategic partnership that has propelled the company’s growth trajectory. Leveraging a long-standing relationship between the promoters of both entities, VSTL benefits from a seamless business relationship with JPL, marked by transparency in pricing and effective procurement processes. Through the production of pipes under the renowned brand “Jindal Star,” VSTL not only secures a steady stream of orders but also taps into JPL’s extensive network of customers. This symbiotic alliance not only ensures consistent demand but also fosters trust and reliability in the market. Additionally, VSTL’s strategic manufacturing locations in Raigad, Maharashtra, and Mahabubnagar district, Telangana, further optimize operational efficiency. The proximity to key industrial areas facilitates streamlined logistics, access to essential resources, and a skilled workforce, thereby enabling the company to meet customer demand effectively. The combined expertise of the promoters, Mr. Vijay Kaushik and Mr. Vibhor Kaushik, with decades of experience in the steel pipes and tubes industry, underscores VSTL’s commitment to excellence and innovation. Through strategic alliances, efficient operations, and experienced leadership, VSTL is poised for sustained growth and market leadership in the steel tubes segment.

Global expansion strategy and diversified operations enhance resilience

VSTL’s commitment to diversification and global expansion positions the company for long-term success and resilience in the competitive marketplace. By leveraging its partnership with Jindal Pipes Limited and capitalizing on established networking channels, VSTL has successfully exported its products to ten countries worldwide under the prestigious brand “Jindal Star.” This strategic approach not only enhances the company’s brand visibility but also mitigates risks associated with operating in limited geographical areas. By diversifying its operational footprint, the company guards against the impact of localized economic fluctuations and ensures sustained revenue streams. Furthermore, VSTL’s distribution and marketing network, coupled with a focus on customer service excellence, facilitate efficient supply chain management and short turnaround times for product delivery.

Valuation and Outlook:

VSTL emerges as a pivotal player within the Indian steel industry, set against the backdrop of a burgeoning demand landscape and ambitious national targets for per capita steel consumption. Despite India’s per capita finished steel consumption standing at 81 kg, significantly below the global average of 222 kg, the National Steel Policy 2017 envisions a substantial increase to 158-160 kg per capita by FY31, highlighting the sector’s significant domestic potential in driving economic growth. The qualitative advantages of VSTL underscore its competitive positioning and operational strengths. With an integrated in-house design, engineering, and execution team, the company maintains meticulous control over quality and costs, enhancing its ability to meet client requirements efficiently. Moreover, its longstanding client relationships, built on a foundation of strong execution and quality, further reinforce its market standing. Notably, the company’s specialization in certain products has established it as a preferred supplier, fostering an advantage within a limited competitive landscape. Delving into the financials of VSTL reveals a pattern of robust and stable revenue growth, with sales nearly doubling over the past three years. Despite relatively lower net profit margins compared to industry peers, attributed to a lack of pricing power, extra discounts to their largest customer, and front-loading of costs, the company maintains attractive returns on equity of 25.5% and return on capital employed of 16.5%, supported by lean equity and asset base. Of particular note is the company’s commendable asset turnover rate, averaging around 3.8X in the latest fiscal year, signifying efficient asset utilization and operational excellence. However, the rising debt cost in the last two years need to be monitored going forward. While the value-added steel products business entails front-loaded costs, the trajectory suggests higher risks in the initial phases, gradually transitioning to lower risks as operations mature. In terms of valuation, the upper band pricing translates to a P/E of 10.2x based on FY23 EPS. This valuation appears attractive, especially considering the company’s outperformance compared to its listed peers by a considerable margin in terms of both valuation and returns. We, therefore, give a “SUBSCRIBE” rating to the IPO

Entero Healthcare Solutions Ltd. IPO : SUBSCRIBE

Entero Healthcare Solutions Ltd. IPO : SUBSCRIBE
  • Date

    09th Feb 2024 - 13th Feb 2024

  • Price Range

    Rs. 1,195 to Rs. 1,258

  • Minimum Order Quantity

    11

  • (D) RHP

    -

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Company Overview

Incorporated in 2018, Entero Healthcare Solutions Ltd was established to create an organized and technology-driven healthcare product distribution platform that serves the entire healthcare ecosystem pan-India. The company facilitates healthcare product manufacturers by providing access to pharmacies, hospitals, and clinics through its integrated and technology-driven distribution platform. Similarly, clients (pharmacies, hospitals, and clinics) gain access to a broad range of healthcare products through the distribution infrastructure and established relationships with healthcare product manufacturers. Over the years, the company has acquired 34 entities in the Indian healthcare products distribution industry. The company’s pan-India approach to acquiring and integrating smaller distributors has increased its geographic reach and has grown its customer base. The company operates 77 distribution warehouses spread across 38 cities in 19 states and union territories, with an aggregate size of 4,64,112 sq. ft. As of September 2023, it serves a customer base of over 73,700 pharmacies and 2,800 hospitals across 501 districts, providing vast access to healthcare product manufacturers. Additionally, the company has established supply relationships with over 1,900 healthcare product manufacturers and access to over 63,900 product SKUs as of 1HFY24.

Objects of the issue:

The net proceeds from the fresh issue will be used towards the following purposes:

  • Repayment/prepayment, in full or part, of certain borrowings availed of by our Company;
  • Funding of long-term working capital requirements of the Company and its Subsidiaries during FY25 and FY26;
  • Pursuing inorganic growth initiatives through acquisitions: and
  • General corporate purposes.

Investment Rationale:

Operates in a fragmented Indian healthcare products distribution market and expects to benefit from market consolidation.

The distribution network of pharmaceutical products in India is highly fragmented, with around 65,000 distributors as of FY23, serving limited local areas only, unlike developed markets where large nationwide distributors occupy a dominant market position. The Indian pharmaceutical distribution market remains fragmented, with traditional local distributors having a market share of around 92% and large/national distributors having a market share of around 8%. Market consolidation in India’s pharmaceutical distribution market is expected to be supported by factors such as the introduction of the GST regime and benefits presented by the consolidation of the segment, such as access to additional capital, better resource management, advantages of scale, establishment of a technology-driven country-wide distribution network, better infrastructure, quick turnaround times and high fill rates. The company will be able to benefit from the market consolidation in India and continue to expand business through future strategic acquisitions of local distributors. The company also believes that a technology-driven, nationwide distribution network, relationships with over 1,900 healthcare product manufacturers that give us access to over 63,900 product SKUs as of H1FY24, and an experienced and professional management team position us well to continue to grow the scale of business in India and take advantage of the shift towards the organized Indian healthcare products distribution market. According to the CRISIL Report, distributors can increase their market reach in a comparatively shorter period by growing inorganically, compared to pharmacy retailers that usually require relatively more time to scale as they need to increase store count.

India’s largest and fastest growing healthcare products distribution platforms to cater to demand

The company has developed a technology-driven, scalable business model focusing on network  expansion, execution, and cost efficiency to enable demand fulfilment in the healthcare industry. The company has established a large footprint in the distribution of healthcare products, with relationships with key stakeholders such as manufacturers, pharmacies, hospitals, and clinics. Further, the company’s B2B ordering application is integrated with other third-party customer ordering applications,  allowing them to seamlessly add customers to the network by providing customers with visibility of product range and pricing, allowing them to place orders through the Entero Direct application     conveniently.

Valuation and Outlook:

Entero Healthcare Solutions’ main focus is to create an organized and technology-driven healthcare product distribution platform that serves the entire healthcare ecosystem pan-India. The company’s pan-India approach to acquiring and integrating smaller distributors has increased its geographic reach and has grown its customer base. The company uses growth strategies such as product portfolio expansion, increased customer reach, improved service levels, and technology-based solutions to boost its market share. The company replicates this approach while expanding into new geographies and continuously attracting collaborations from the distributors. The company also has a record of sustained consolidated revenue from operation, growing at a CAGR of 36.2% during FY21-23. Looking at the industry growth, Entero, which is one of the largest and fastest-growing healthcare product distributors, is expected to grow from 8%-10% in FY23 to 20% -30 % by FY28. Going ahead, the improvement in operational performance is anticipated to be driven by a wide range of products offered, operations aimed at providing high fill rates to customers, technology-driven inventory management and order placing mechanisms for customers, economies of scale advantage, and competitive and transparent pricing. The issue is valued at a P/E of 111.2x on the upper price band based on FY24E earnings, which we feel is fairly valued in comparison to its peer. We, therefore, recommend an SUBSCRIBE rating for the issue.

Jana Small Finance Bank Ltd. IPO : SUBSCRIBE

Jana Small Finance Bank Ltd. IPO : SUBSCRIBE
  • Date

    07th Feb, 2024 - 09th Feb, 2024

  • Price Range

    Rs. 393 to Rs. 414

  • Minimum Order Quantity

    36

  • (D) RHP

    -

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Company Overview

Headquartered in Bengaluru, Jana Small Finance Bank Ltd. (Jana SFB) was incorporated in 2006. The financial services company was converted into SFB by the RBI in 2018. In terms of AUM and deposit size, Jana SFB is the fourth-largest SFB serving nearly 12 million customers as of September 30, 2023. The company has 771 banking outlets including 278 banking outlets in unbanked rural centres in 22 states and two union territories. The SFB has focussed on secured loan products that consist of 57.4% of the total loans and focuses on business loans, microloans against property, MSME loans, affordable housing loans, term loans to NBFC, loans against fixed deposits, two-wheeler loans, and gold loans. The balance 42.6% consists of an unsecured loan book that offers individual and micro business loans, agricultural and allied loans, and group loans (group loans are offered to a group of women as per the Joint Liability Group). In addition to providing banking operations, the SFB is a corporate agent for third-party life insurance products, general (non-life) insurance products, and health insurance products, including COVID-19 insurance products. It also offers Point of Sales (POS) terminals and payment gateway services through its merchant-acquiring partners.

Objects of the issue:

The offer comprises fresh issue and offer for sale. The net proceeds from the fresh issue will be used towards the following purposes:

  • Towards augmenting the bank’s Tier-I capital base to meet the bank’s future capital requirements; and
  • General corporate purposes.

Investment Rationale:

Fast growing retail deposit base and diversified deposit franchise

The SFB has been able to leverage the strength of the “Jana” brand to rapidly grow its deposit portfolio since the commencement of operations as an SFB in March 2018. Jana SFB’s deposit products comprise current accounts, savings accounts, recurring deposits, and term deposits where a variety of term deposits with multiple interest payment options, along with competitive interest rates is offered. Its deposits increased from Rs. 123,162.6 million as at March 31, 2021, to Rs. 163,340.2 million as at March 31, 2023, representing a CAGR of 15.2%. This has further increased to Rs. 189,367.2 million as of September 30, 2023 to be among the top four SFBs in India in terms of deposit size. To concentrate on growing its retail deposits, the SFB is implementing a daily sales rhythm where each member of its sales staff at its branches has set a daily target of meeting with 15 potential retail deposit customers, generating 10 leads and converting five customers. This will improve sales productivity, which coupled with customer activation with the help of a dedicated sales and monitoring process, will increase retail deposits, thereby leading to a reduction in the overall cost of acquisition of retail deposits and its cost of deposits.

Focus on accelerating the secured loan book and diversifying the lending book

Jana SFB plans to further accelerate its gross secured advances by (i) offering multiple products to its existing customers including evaluating new products such as used two-wheeler loans; (ii) focusing penetration into current states and expanding the oversight of hubs around 100 kilometres covering Tier 1 centres (having a population of 100,000 or more) and Tier 2 centres (having a population between 50,000 and 99,999); (iii) enhancing its location strategy by mapping industry performance and tightening policies; (iv) focusing on the right combination of customer segment and collateral type; and (v) enhancing its digital capabilities to source and serve customers. With a focus on affordable housing loans and loans against property, the SFB can secure better credit at lower costs and opportunities for cross-selling under the secured loan book. Additionally, it continues to cross-sell gold loans to microfinance institutions’ customers and maximize output through product and pricing strategies.

Valuation and Outlook:

The SFBs have been making strong inroads into the credit market and enabling financial inclusiveness across the country. These SFBs have good deposit mobilization and outreach among the under-banked masses, which would drive their market share multi-fold in the foreseeable future. The exponential growth in the SFB industry is illustrated by the growth in both loans and deposits. SFBs’ target audience is the low-income segment who can be wooed with a sachet-level product suite. Unlike NBFCs, which expand horizontally with a special focus product, SFBs have a chance to expand vertically and horizontally. Jana has transitioned its focus from microfinance loans to expanding its secured loan book, including affordable housing loans, secured business loans, gold loans, MSME loans, and two-wheeler loans. As a result, the proportion of Jana SFB’s gross secured advances has increased from 55.4% as at September 30, 2022, to 57.4% as at September 30, 2023. As of September 30, 2023, microfinance loans accounted for around 42.4% of its portfolio, with the balance being constituted by secured advances such as MSME loans (15%), loans to NBFCs (6.5%), gold loans (1.3%) and others (19.4%). The key trigger of Jana SFB’s strong fundamentals is that it intends to strengthen its liability franchise with a focus on growing its deposit base to attain a stable and low-cost source of funding. As the lender will utilize the net proceeds of the fresh equity issue to augment its Tier-I capital base, its capital adequacy will enhance and lead to a stable leverage position. At the current P/BV multiple of 1.2x based on book value as on September 2023, we believe the company is reasonably valued and advise investors to “Subscribe” to the issue from a medium to long-term perspective.

Rashi Peripherals Ltd IPO : SUBSCRIBE

Rashi Peripherals Ltd IPO : SUBSCRIBE
  • Date

    07th Feb 2024 - 09th Feb 2024

  • Price Range

    Rs. 295 to Rs. 311

  • Minimum Order Quantity

    48

  • (D) RHP

    -

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Company Overview

Established in 1989 and having over 34 years of experience, Rashi Peripherals Ltd. is a leading national distribution partner for global technology brands in India for information and communication technology (ICT) products. Initially, the company started as a manufacturer of peripherals but due to the liberalization of the economy in 1991, the company transitioned into distribution of ICT products of global technology brands in India. The company primarily operates in two business verticals, namely (i) Personal Computing, Enterprise, and Cloud Solutions (PES) and (ii) Lifestyle and IT Essentials (LIT). Under PES, the company is primarily engaged in the distribution of personal computing devices, enterprise solutions, embedded products, and cloud computing. The LIT business caters to the distribution of products such as graphic cards, central processing units (“CPUs”) and motherboards, storage and memory devices, lifestyle peripherals and accessories that include keyboards, mice, web cameras, monitors, wearables, casting devices, fitness trackers, gaming accessories, power equipment such as UPS and invertors, and networking and mobility devices. Over the years, the company has continuously expanded its operations and as of six months ended September 2023, the company distributed 311.89 million units of ICT products. The company also expanded its distribution network and currently has one of the largest ICT product distribution networks in India. The company differentiates itself by offering end-to-end services such as pre-sale activities, solutions design, technical support, marketing services, credit solutions, and warranty management services. Over the years, the company has consistently added new global technology brands to its portfolio and worked with them to distribute products across categories. The company has had business relationships for more than eight years with several global technology brands including Asus Global Pte Limited, Dell International Services India Private Limited, HP India Sales Private Limited, Lenovo India Private Limited, Logitech Asia Pacific Limited, NVIDIA Corporation and many more.

Objects of the issue:

The net proceeds from the fresh issue will be used towards the following purposes:

  • Prepayment or scheduled re-payment of all or a portion of certain outstanding borrowings availed by the company;
  • Funding working capital requirements of the company; and
  • General corporate purposes.

Investment Rationale:

Leading and fastest-growing Indian distribution partner for information and         communications technology products

The company distributes a range of ICT products manufactured by global technology brands such as personal computing, mobility, enterprise, embedded solutions, components, lifestyle, storage and memory devices, UPS, and accessories,. The company also distributes cloud computing solutions. The wide variety of products that the company distributes has helped them to achieve economies of scale and provide channel partners with a single sourcing point. The company is among the leading technology-integrated national distribution partners for global technology brands in India for ICT products in terms of revenues in fiscal 2023. The company is also one of the fastest-growing national distribution partners for global technology brands in India in terms of revenue growth between fiscal 2021 and fiscal 2023. The company is also a major player catering to Indian consumer demand for product categories like processors, graphic cards, and internal storage. As an important link in the technology value chain, the company creates sales and profitable opportunities for global technology brands and channel partners through its customized marketing programs, just-in-time logistics solutions, pre-sales and post-sales technical support, product planning, and distribution solutions.

Long-term relationships with marquee global technology brands supported by a committed engagement strategy with customers

Global technology brands undertake continuous research and development and introduce new products from time to time. These global technology brands also have extensive supply chain capabilities which ensures the availability of their products. These factors result in greater brand recall for such global technology brands which facilitates the sale of their products. The company maintains long-term relationships with such marquee global technology brands from whom it procures ICT products revenue of the company. The company also provides advertisements on behalf of global technology brands in technology and consumer media publications.

Valuation and Outlook:

With the increasing penetration of internet connectivity across geographies of rural and urban India, the number of smartphones, social media users, and online shoppers in India is on the rise. The IT penetration in non-metro cities in India has increased due to the penetration of smartphones and government-enabled village knowledge centres, leading to increased awareness which in turn is driving demand for ICT products. The non-metro cities and other rural geographies are becoming centers of consumption for ICT products like personal computers, smartphones, internet devices, and networking devices, and hence, there is a requirement for ICT distributors and resellers having a pan-India presence. The ICT sector significantly contributes to the country’s GDP. Due to such emerging demand, India’s ICT industry size is expected to reach Rs. 1,087 billion (approximately USD 136 billion) by 2025, growing at a CAGR of 10%. Various key factors for the growth of PC and components business include the booming gaming industry in India, increasing data volumes, efficient supply chain solutions, and the central government’s PLI schemes. Due to such factors, the demand for international hardware and software products is likely to rise. Therefore, Rashi Peripherals Ltd. emerges as one of the partners to bridge the gap for such emerging demand in India, given its diverse marquee suppliers and long-grown customer base. Hence, we expect the company to benefit from such a demand scenario in the long term. On the financial performance front, the company’s Revenue/EBITDA grew at a CAGR of 26.3%/10.1% during the FY2021-23 period. The company’s net profit dropped to Rs. 1,233 million in FY23 from Rs. 1,364 million in FY21. On the upper price band, the issue is valued at a P/E of 10.5x based on FY2023 earnings which we feel is fairly valued compared to its peers. Given a highly competitive environment and thin margins of the business, we recommend investors to  “Subscribe” to the issue for listing gains.

Capital Small Finance Ltd IPO : SUBSCRIBE

Capital Small Finance Ltd IPO : SUBSCRIBE
  • Date

    07th Feb, 2024 - 09th Feb, 2024

  • Price Range

    Rs. 445 to Rs. 468

  • Minimum Order Quantity

    32

  • (D) RHP

    -

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Company Overview

Incorporated in 1999, Capital Small Finance Bank Ltd. (Capital SFB) received a license to operate as a small finance bank in 2016 before operating as a local area bank since its inception. The SFB offers a range of banking products on the asset and liability side. With an experience of over two decades in the banking industry, the SFB’s strategy is to strengthen the retail-focused banking franchise by enabling access to affordable credit to middle-income group segments with special emphasis on rural and semi-urban areas. Capital SFB’s business model primarily focuses on the middle-income customer segments i.e., customers with an average annual income of Rs. 0.4 million to Rs. 5 million in semi-urban and rural areas. The company has 41.6% of its branches in rural areas, 34.68% branches in semi-urban areas, and 23.70% of its branches in urban areas as on September 30, 2023. The SFB operates in states like Punjab, Haryana, Delhi, Rajasthan, Himachal Pradesh, and the Union Territory of Chandigarh where it offers products consisting of agriculture loans, MSME, and trading loans (working capital, machinery loans etc.) and mortgages (housing loans and loans against property). As on September 30, 2023, Capital SFB was present in five states and one Union Territory with 173 branches and 175 ATMs. Over the years, the bank has diversified its portfolio with a sizeable book in multiple asset classes with a proportion of secured lending at 99.85% as on September 30, 2023. Additionally, the lender generates fee income from products and services such as forex and money transfer, outward remittances, safe deposit lockers, distribution of life insurance and general insurance products, 3-in-1 demat and trading accounts, and other ancillary services. While most of the SFBs are pure MFI turned SFB and have huge concentration in MFI products, Capital SFB has about 19.7% of portfolio concentration towards MSME, agriculture accounts for 38.7% and mortgages accounts for 26.1% of the portfolio.

Objects of the issue:

The offer comprises fresh issue and offer for sale. The net proceeds from the fresh issue will be used towards the following purposes:

  • Towards augmenting the bank’s Tier-I capital base to meet the bank’s future capital requirements; and
  • General corporate purposes.

Investment Rationale:

Impressive business with retail focused liability alongside secured and diversified advances portfolio

With over 16 years of experience in operating as a local area bank, Capital SFB has deep understanding of growing its deposit base. This has helped the SFB to create a retail-centric deposit franchise with a high share of CASA deposits, with the CASA ratio increasing from 40.1% in FY21 to 41.9% in FY23. The lender offers a comprehensive suite of products of savings bank deposits, current deposits, term deposits, NRE and NRO deposits, and tax saver deposits to cater to the diverse needs of its customers. Due to high retail deposits, the bank has significant advantages including stability in deposits, greater customer retention, and enhanced cross-selling opportunities in addition to supporting the low cost of funds. Coming onto the Capital SFB’s advances portfolio, it has consciously focused on building a secured and granular loan book over the years with a focus on income generation. As on March 31, 2023, and September 30, 2023, 99.82% and 99.85% of its loan books were secured. It has a well-diversified portfolio across agriculture, MSME and trading, mortgage lending, and other products which helps to mitigate risk and optimize resources. As on September 30, 2023, the average ticket size of agriculture, MSME & trading, and mortgage lending products stood at Rs. 1.24 million, Rs. 1.81 million and Rs. 1.15 million, respectively. Further, a well-diversified loan portfolio with a focus on income generation, continued focus on secured lending, continuous customer engagement, and structured underwriting practices has contributed to the lender’s growth and superior asset quality as compared to other SFBs.

Streamlined credit assessment processes with customer centric approach

Capital SFB’s strategy of secured lending, primarily for productive purposes and conservative loan-to-value ratio, contributes towards lower delinquencies and credit losses. The lender’s positioning as the primary banker to most of its customers enables it to have a comprehensive view and control over cash flows, thereby contributing towards effective credit assessment. Further, its dedicated customer relationship team maintains healthy engagement with customers on an ongoing basis which has resulted in effective collection recoveries and consequently better asset quality. Through its understanding of the market and customer base, the SFB offers a range of credit and non-credit products and services to address a variety of financing requirements of customers through its branch network. Capital SFB is a one-stop financial hub for its customers with 7,25,037 customers as on September 30, 2023. The bank targets customers across sectors with special attention to rural and semi-urban centers as borrowers in these regions tend to have lower credit penetration which helps the lender with less competition, and a lower risk of customer migration (leading to longer, more loyal customer relationships), better credit behaviours and, in turn, lower delinquency rates.

Valuation and Outlook:

With small finance banks and payments bank increasing their reach and expanding into rural areas and increasing financial awareness, faster growth in rural areas can be expected in future due to the huge untapped potential. Given the stronghold and experience of these entities in dealing with customers across these regions, the share of SFBs will go up against the public and private sector banks. The sector’s loan portfolio is expected to see a strong growth of around 22-24% CAGR during FY2023-25 period as most of the SFBs have completed the transition phase and are likely to benefit from the operating leverage. Capital SFB already had its presence across the retail liability and asset side on account of operating as a local area bank before converting to a small finance bank. As a result, its retail franchise and reach has already been established across current and savings deposits as well as retail term deposits, thereby placing it in a good stead against other small finance banks. In comparison to other SFBs which are primarily focused on MFI lending and find it more difficult to penetrate into other products, Capital SFB has products, systems and processes in place to scale up operations across different products and geographies. Furthermore, Capital SFB has a CASA ratio which is similar to some of the leading private sector banks like HDFC Bank, Axis Bank, and ICICI Bank. Moreover, the lender’s gross NPA of 2.73% and net NPA of 1.36% as on September 30, 2023 acts as a testament to its streamlined underwriting processes, credit assessment, efficient collections, and risk management. It is important to note that the lender’s PPOP has grown from Rs. 714.86 million in FY21 to Rs. 1,487.04 million in FY23 and stood at Rs. 753.84 million as of six months ended September 30, 2023. As the lender will utilize net proceeds of the fresh equity issue to augment its Tier-I capital base, its capital adequacy will enhance and lead to a stable leverage position. At the current P/BV multiple of 2.3x based on book value as on September 2023, we believe the company is reasonably valued and advise investors to “Subscribe” to the issue from a medium to long-term perspective.

Apeejay Surrendra Park Hotels Ltd IPO : SUBSCRIBE

Apeejay Surrendra Park Hotels Ltd IPO : SUBSCRIBE
  • Date

    5th February, 2024 - 7th February, 2024

  • Price Range

    Rs. 147 to Rs. 155

  • Minimum Order Quantity

    96

  • (D) RHP

    -

Download Report

Company Overview

Founded in 1987, Apeejay Surrendra Park Hotels Ltd. (ASPH) has emerged as a prominent player in the hospitality sector, boasting a diverse array of brands, including “THE PARK,” “THE PARK Collection,” “Zone by The Park,” “Zone Connect by The Park,” and the renowned retail brand ‘Flurys.’ With a robust presence in the retail food and beverage industry, the company manages an extensive network comprising 80 restaurants, nightclubs, and bars, and offer patrons an array of culinary experiences. The company has also made significant inroads in the hotel segment and operates 27 establishments across different categories comprising luxury boutiques to upscale and upper midscale which are strategically located in key Indian cities. As of August 2023, ASPH’s hotel portfolio consists a total 2,111 rooms and spans cities including Kolkata, New Delhi, Chennai, Hyderabad, Bangalore, Mumbai, Coimbatore, Indore, Goa, Jaipur, Jodhpur, Jammu, Navi Mumbai, Visakhapatnam, Port Blair, and Pathankot. Complementing its hotel business, the company owns and manages a distinguished array of restaurants, including Zen, Lotus, Aish, Saffron, Fire, Italia, 601, The Bridge, The Street, Verandah, Vista, Bamboo Bay, Monsoon, Mist, Love, and Bazaar. With a dedicated workforce of 1,923 employees as of June 2023, ASPH continues to shape the hospitality and F&B landscape in India.

Objects of the issue:

The net proceeds from the fresh issue will be used towards the following purposes:

  • Rs. 600 crores for repayment / prepayment, in full or in part of certain outstanding borrowings availed by the company; and
  • General corporate purposes.

Investment Rationale:

Enhanced brand recognition and diversified portfolio to fuel growth

ASPH has strategically built a diverse portfolio of hospitality brands, including “THE PARK,” “THE PARK Collection,” “Zone by The Park,” and “Zone Connect by The Park,” each catering to distinct price points and customer requirements. The company’s commitment to product innovation and service excellence has earned it recognition and accolades across various categories, reinforcing its position as a key player in the Indian hospitality industry. By partnering with leading Indian and international designers, ASPH has created iconic spaces that resonate with guests, fostering brand loyalty and driving expansion. The company’s focus on geographic expansion, wherein it has grown its hotel portfolio at a CAGR of 21.6% during FY21-H1FY24 period, reflects its ability to identify strategic locations and capitalize on growth opportunities. As India’s urban centers expand and discretionary spending increases, ASPH is well-positioned to benefit from rising demand for upscale and upper-mid-scale accommodations. With a proven track record of creating distinctive hospitality experiences, the company is poised for continued success and market leadership.

Synergies between hospitality and food & beverage businesses drive revenue      stability

ASPH’s integrated approach to hospitality encompasses not only accommodation but also food, beverage, and entertainment offerings (40% of revenue). The company’s iconic brands such as Zen, Lotus, and Someplace Else have become synonymous with quality and innovation, attracting both local and international patrons. Additionally, “Flurys” is an established retail food and beverage brand which has a distinctive track record and is widely recognized in India. Flurys operates under the ASPH umbrella and has 73 outlets with multiple formats such as kiosk, café, and restaurant format h. By leveraging its strong brand equity and operational expertise, ASPH has achieved high occupancy rates and competitive average room rates, bolstering its financial performance. The average occupancy levels for ASPH’s owned hotels for H1FY24 and H1FY23 and FY23 were 92.76%, 91.50%, and 91.55%, respectively, which is ahead of the majority of the market. The food, beverage, and entertainment segment, comprising 81 outlets and banquet spaces, adds a non-cyclical dimension to the company’s earnings and helps mitigate the seasonal fluctuations inherent in the hospitality industry. With India’s evolving demographic profile consisting of growing working-age population and increased discretionary spending, ASPH is well-positioned to capitalize on changing consumer preferences and lifestyle trends. By offering a diversified and holistic experience to its guests, the company ensures resilience and stability in its revenue streams, reinforcing its position as a leader in the hospitality sector.

Valuation and Outlook:

Apeejay Surrendra Park Hotels stands at the intersection of a resurgent hospitality industry and a post-pandemic economic rebound. The resurgence is evident in the remarkable performance of the hotel sector over the past year which reflects buoyant market sentiment and optimism toward the sector’s recovery. The timing of Park Hotels’ IPO strategically positions the company to capitalize on this positive momentum. The company has built a strong brand presence and credibility within the hospitality industry which is likely to ensure that its valuations are respected over time. With a diversified pan-India portfolio, the company effectively spreads its risk across various geographic regions and market segments, enabling it to capture opportunities in a granular fashion. Moreover, the company’s historically high occupancy rates bode well for improving net margins, thereby contributing to its financial stability and growth trajectory. A closer examination of the financials reveals significant milestones achieved by the company in recent years. The company has demonstrated robust revenue growth, with sales nearly tripling over the past three years. This turnaround is notable, considering the company’s transition from losses to profitability, reflected in the sharp uptick in net profit in FY23. While the return on equity turned positive in FY23, the return on assets remains relatively modest, owing to the capital-intensive nature of the hotel industry. The valuation, although reasonable compared to peers, reflects market optimism in the relatively high P/E ratio, which stands at 56.4 times based on FY23 EPS Looking ahead, ASPH’s strategic initiatives, including debt reduction and its unique blend of hotel and F&B services, position it favourably for sustainable growth and market leadership. Based on the above-mentioned positives, we give the issue a “SUBSCRIBE” rating.