Juniper Hotels IPO - Investment Rationale, Financials, Key Strengths, Risks And More: Anand Rathi

Anand Rathi's Report

Juniper Hotels Ltd. launched its initial public offering today and offer will be concluded on Feb 23. The hospitality firm has set a price band of Rs 342–360 apiece.

The Rs 1,800 crore comprises entirely of fresh issue. The minimum application lot size is 40 shares.

Objects of the Issue

• Repayment/ prepayment/ redemption, in full or in part, of certain outstanding borrowings availed by the company and its recent acquisitions, namely CHPL and CHHPL.

• General corporate purposes.

• Robust asset management capabilities with a focus on enhancing operating efficiency and profitability.

• Increasing returns by having multiple revenue streams and complementary offerings.

Strengths:

• Expertise in site selection and identifying opportunities to develop their hotels.

• Unique partnership between asset owner and operator brand backed by strong parentage.

Valuation

Juniper Hotels is jointly held by Saraf Hotels and its affiliate, Juniper Investments and Two Seas Holdings (an indirect subsidiary of HHC).

Juniper Hotels has a expertise in site selection and identifying opportunities to develop their hotels with unique partnership between asset owner and operator brand backed by strong parentage and robust asset management capabilities with a focus on enhancing operating efficiency and profitability with increasing returns by having multiple revenue streams and complementary offerings and well positioned to benefit from industry trends.

Key risk:

• Company has substantial indebtedness which requires significant cash flows to service, and limits their ability to operate freely.

• Company is subject to several conditions and restrictions under their financing agreements. Any breach of the terms under their financing arrangements or their inability to meet their obligations, including financial and other covenants under financing arrangements could adversely affect business and financial condition.

• Company recently acquired entity, CHPL, which is now their wholly owned subsidiary, has witnessed delays in repayment of loans in the past and has accordingly undertaken strategic debt restructuring. Any inability of CHPL to meet the terms of restructuring could adversely affect their business, financial condition, cash flows and results of operations.

• 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 (Maharashtra) and New Delhi out of the portfolio of four hotels/serviced apartments of their Company, and any adverse developments affecting these hotels/serviced apartments or the regions in which they operate, could have an adverse effect on their business, results of operation, cash flows and financial condition.

• Company have witnessed negative operating cash flows in the past, and it is possible that they may experience negative cash flows in the future.

• Several expenses incurred in their operations are relatively fixed in nature, and their inability to effectively manage such expenses may have an adverse effect on their business, results of operations, cash flows and financial condition.

• All their hotels and serviced apartments are currently operating under the Hyatt brands, on a non-exclusive basis. They have entered into long term agreements with certain Hyatt entities for the operations and management of their hotels and usage of brands owned by Hyatt International Corporation. If these agreements are terminated or not renewed, their business, results of operations, cash flows and financial condition may be adversely affected.

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