High Occupancy Rates

• Apeejay Surrendra Park Hotels operates multiple 5-star hotels across India, boasting a strong presence in the hospitality sector. Over the past three fiscal years, the company has demonstrated remarkable growth in both its top-line and bottom-line figures, with revenue expanding at a CAGR of 66%. Notably, the company achieved profitability in FY23 after experiencing losses in previous fiscal years, reflecting its strategic management and operational efficiency. The company enjoys positive cash flow from operations, amounting to Rs 175 crore in the last fiscal year and Rs 88 crore in H1FY24, indicating robust cash flow generation and effective financial management.
• A key indicator of a hotel's efficiency is its occupancy rate, and Park Hotels boast an industry-leading rate of 91%. This exceptional occupancy rate is attributed to the high quality of service provided to customers. Despite maintaining a competitive average revenue per room of Rs 6000, which is lower than its counterparts owning Five Star Hotels, the company sustains its high occupancy rates, highlighting its ability to balance pricing and customer satisfaction effectively.
• However, a significant concern for the company is its debt, amounting to Rs 597 crore. To address this issue, the company plans to utilize the proceeds to reduce its debt burden. With its strong occupancy rates and strategic debt reduction plans, Park Hotels aims to improve its margins and strengthen its financial position in the future.

Valuations

• As per FY23, the company is asking for a PE of 68x and a market cap-to-sales of 6x. These valuations might seem expensive but considering that the competitors command higher valuations, we believe that this could provide investors with capital appreciation. Hence, we recommend subscribing to this IPO.​