Samhi Hotels Limited

Samhi Hotels Limited has filed  its DRHP with market regulator SEBI on April 5, 2023 to raise capital through IPO. The IPO of the Company consists of Fresh Issue and Offer for Sale both.  The size of IPO is Up to [●] Equity Shares aggregating up to ₹ 1000 crore and the size of Offer for Sale is Up to 9,000,000 Equity Shares aggregating up to ₹[●] crore. As part of OFS, the major selling shareholders are Blue Chandra Pte. Ltd. and Goldman Sachs Investments Holdings (Asia) Limited. 

Business Model of the Company

The Company is a prominent branded hotel ownership and asset management platform in India, with the third largest inventory of operational keys (owned and leased) in India as of February 28, 2023 (Source: JLL Report). Within 12 years of starting the business operations, the Company has built a portfolio of 3,839 keys across 25 operating hotels in 12 of India’s key urban consumption centers, including Bengaluru, Hyderabad, National Capital Region (“NCR”), Pune, Chennai and Ahmedabad, as of February 28, 2023.

The Company has adopted an acquisition-led strategy, which is underpinned by its track record of acquiring and successfully turning around hotels to grow its business. The Company acquires or build primarily business hotels, and it takes steps to further upgrade properties and engage with established branded hotel operators to allow the hotels to be appropriately positioned within the market. Subsequent to this one-time upgrade of the property, it deploys its in-house and proprietary asset management tools and capabilities to further enhance the ongoing financial and operational performance of the property.

Management of the Company

(i) Ashish Jakhanwala is the Chairman, Managing Director and Chief Executive Officer of the Company. He has been a member of the Board since December 28, 2010. He holds a bachelor’s degree in commerce from the University of Delhi, a diploma in hotel management and catering technology from the National Council for Hotel Management and Catering Technology, New Delhi and a post graduate diploma in management from International Management Institute, New Delhi. He was previously associated with InterGlobe Hotels Private Limited as a regional director-development and with Pannell Kerr Forster Consultants Pvt. Ltd. as a consultant. Ashish Jakhanwala was also awarded the Gold Bernache by Accor in 2009.

(ii) Manav Thadani is a Non-Executive Director of the Company. He holds a bachelor’s degree in science and a master’s degree in arts each from New York University. Manav Thadani is an experienced consultant in the field of hospitality and is the founder and chairman of Hotelivate Private Limited. He was previously associated with HVS Licensing LLC.

Object of the Issue

Offer for Sale

The Company will not receive any proceeds from the Offer for Sale by the Promoter Selling Shareholder and the proceeds received from the Offer for Sale will not form part of the Net Proceeds. The Promoter Selling Shareholder will be entitled to the proceeds of the Offer for Sale after deducting his proportion of Issue expenses and relevant taxes thereon.

Fresh Issue

The net proceeds are proposed to be utilized in the following manner:

1. repayment/ prepayment/ redemption, in full or in part, of certain borrowings availed of by the Company and its Subsidiaries including payment of the interest accrued thereon; and

2. general corporate purposes.

Further, the Company expects to receive the benefits of listing the Equity Shares on the Stock Exchanges, which will result in enhancement of  visibility and  brand image among its existing and potential customers.

Risks in the IPO

Termination of Agreements

The Company has entered into hotel operator services agreements and other related agreements with Marriott, Hyatt and IHG (and their affiliates) to receive operating and marketing services for the hotels of the Company. The ACIC SPVs have entered into franchise agreements and brand license agreements with Marriott for the license of Marriott’s brand name. If these agreements are terminated or not renewed, the business, results of operations and financial condition may be adversely affected.

Not in compliance with certain covenants

The Company was not in compliance with certain covenants under certain of its financing agreements in the past, and in case of any breach of covenants in the future, such non-compliance, if not waived, could adversely affect the business, results of operations and financial condition.

Major portion revenue is dependent on from few hotels

A significant portion of the revenues is derived from a few hotels and from hotels concentrated in a few geographical regions and any adverse developments affecting such hotels or regions could have an adverse effect on the business, results of operation and financial condition.

Certain of hotels are in building leased to Company 

Certain of the Company’s hotels are located in buildings which have been leased to the Company by third parties. If the Company is unable to comply with the terms of the lease agreements, renew the agreements or enter into new agreements, the business, results of operations and financial condition may be adversely affected.

Involved in legal proceedings

The Company, the Directors, the Subsidiaries and the ACIC SPVs are involved in certain legal proceedings. An adverse outcome in any of these proceedings may adversely affect the profitability, reputation, business, results of operations and financial condition of the Company, the Subsidiaries and the ACIC SPVs.

Financial Performance

As per the financial statements of the Company:

Samhi Hotels Limited achieved impressive revenue growth in FY22, with total income surging to 333.104 crore, marking a remarkable increase of 85.2% compared to the previous fiscal year.

Despite the significant increase in total income, the company managed its expenses effectively, with total expenses reaching 311.311 crore in FY22, representing a growth rate of 30.4% compared to FY21.

Samhi Hotels Limited successfully curtailed its losses before tax, demonstrating a decrease of 8.0% in FY22, amounting to (443.225) crore.

The company also witnessed a decrease in loss after tax, with the figure reducing by 7.3% to (443.253) crore in FY22.

The decline in earnings per share (EPS) to Rs. (58.12) in FY22 showcases the challenges faced by Samhi Hotels Limited. However, the decrease of 7.3% compared to the previous fiscal year’s EPS of Rs. (62.64) indicates the company’s commitment to stabilizing its financial performance.

Although the company experienced a slight decline in total assets, which amounted to 2386.576 crore in FY22, this decrease of 3.8% highlights the need for diligent asset management and allocation strategies.

Samhi Hotels Limited maintained a balanced equity and liabilities structure, mirroring the decrease in total assets. With total equity and liabilities also decreasing by 3.8% to 2386.576 crore in FY22, the company remains committed to maintaining a stable financial position.

The company achieved positive growth in cash generated from operating activities, reaching 26.31 crore in FY22. This signifies an increase of 21.5% compared to the cash flow generated from operating activities in FY21.

The cash used from investing activities was to (2.536) crore in FY22 against Rs. 42.28 crore cash generated in FY21.

Samhi Hotels Limited encountered challenges in managing its cash flows from financial activities, with Rs. (17.44) crore in FY22 as against Rs.  6.465 crore in FY21. However, the company continues to explore avenues for improving its financial activities and optimizing capital management.