Hotels set to join IPO frenzy: Schloss Bangalore, Ventive Hospitality, Brigade Hotels look to raise ₹8,000 cr

Hospitality industry has sustained healthy performance in the recent past, similar to pre-Covid levels, thanks to recovery in leisure demand, pent-up demand from MICE (meetings, incentives, conferences, and exhibitions) and gradual pick-up in business travel and foreign tourist arrivals (FTAs). In a bid to capitalise on strong trends in hospitality sector and robust demand outlook, four companies are gearing up to raise capital by public listing of their shares on the domestic bourses - BSE and NSE.

Schloss Bangalore, known for its luxurious hotels and resorts under "The Leela" brand, Ventive Hospitality and Brigade Hotels are looking to raise around ₹8,000 crore via IPOs, while ITC Hotels is listing via demerger, as per the latest report by foreign brokerage house Jefferies.

All these three companies filled their IPO prospectus with the capital market regulator SEBI in the past 3-4 months. The IPOs of these three companies include a total fresh equity component of ₹6,000 crore, which will go into their businesses. ITC Ltd, having diversified presence in branded packaged foods, hotels, personal care, education and stationery, and cigarettes, is going to demerge its hotel business in Q4 FY25, though there will be no fundraise.

In September, Schloss Bangalore filed DRHP with the SEBI to raise ₹5,000 crore via IPO, while Ventive Hospitality looks to garner ₹5,000 crore. A month later, in October, Brigade Hotel Ventures filed a draft paper to raise ₹900 crore via IPO route.

Schloss operates an owner-operator business model with the focus solely on luxury hotels (under the brand name Leela), while Ventive and Brigade are hotel asset developers (capital heavy business model). While Schloss operates a mix of owned and managed portfolio, Ventive has expanded in recent years through its development and acquisition model.

Schloss has a relatively well diversified regional presence including all most metros, Ventive has selective presence in cities of Pune, Bangalore and international market of Maldives, while Brigade's presence is mostly restricted to cities in South India.

All 3 players have relatively small room inventory size (1,600-3,400 keys) versus the inventory of large listed peer like Tata group-owned Indian Hotels Company Limited (IHCL) (at 25k+). Brigade has the largest growth pipeline of 996 keys (over 1,604 existing keys), Leela has planned addition of 833 keys (over 3,382 existing), Ventive plans to add a 367 keys (over 2,036 existing).

Schloss and Ventive are backed by private equity and asset management firms, while Brigade Hotel is an offshoot of the South India based real estate developer. Ventive Hospitality was also established as the hospitality division of Pune-based Panchshil Realty firm.

Earlier this year, Chalet Hotels raised ₹1,000 crore via qualified institutional placement (QIP) route, while three companies Samhi Hotels, Apeejay Surendra Park Hotels, and Juniper Hotels made debut on the stock exchanges after raising a total of ₹4,000 crore via IPO. As per report, real estate players (DB Realty, Prestige Estates) are also eyeing listing of the hotels businesses.

As per the report, the hotel IPO stocks in past year are above their issue price in the range of 0-52% to date, with performances largely sideways/lower after the initial upmove.

Travel demand in India has remained healthy even post the growth normalisation seen in many consumer segments post Covid. Industry pricing across segments remains elevated without hurting growth, materially, suggesting that Indian consumers are priortising travel over many other spending categories, also aided by macro trends. The demand and supply growth imbalance continues to support growth in average room rates (ARRs) for the hotel industry, says Jefferies.