Juniper Hotels Limited (Subscribe)

Highlights

Juniper Hotels Limited (JHL) is a flagship entity of Saraf Group incorporated in 2003 it is a joint venture between Saraf Hotels and Two Seas Holdings. JHL is a luxury hotel development and ownership company. They are the largest owner by number of keys of ‘Hyatt’ affiliated hotels in India. As of H1FY24 they have portfolio of 7 hotels and serviced apartments and operate total of 1,836 keys.  

JHL is the only hotel development company in India with which Hyatt has a strategic investment. JHL own 19.6 pct of Hyatt group affiliated hotel rooms and apartments in India as on H1FY24 and have extensive experience in identifying opportunities in hospitality destinations, developing high-end hotels in these locations and nurturing them through active asset management.

Their hotels and serviced apartments are present across the luxury, upper upscale and upscale category of hotels and are established landmarks in Mumbai, Delhi, Ahmedabad, Lucknow, Raipur and Hampi. Besides Grand Hyatt Mumbai Hotel and Residences being the largest luxury hotel in India, the Hyatt Regency Lucknow and Hyatt Regency Ahmedabad are the largest upper upscale hotels in their respective market.

JHL identify and acquire sites to develop its hotels and serviced apartments, accounting for factors such as location, economic potential of the location, target customers and branding. Once they identify and acquire sites, their expertise in development allows them to move swiftly from a capital deployment phase to a revenue generation phase by making their assets operational.

Out of the total proceeds of Rs. 18,000 mn, Rs. 15,000 mn would go towards repayment/ prepayment/ redemption, in full or in part, of certain outstanding borrowings availed by the company and its recent acquisitions, namely CHPL and CHHPL and Remaining amount would go towards pursuing inorganic growth initiatives through acquisitions and general corporate purpose.

Key Highlights

• The overall demand for hotels in India is estimated to clock 11.6 pct CAGR between FY23 and FY27. The luxury and upper upscale segments had a revenue and supply share, contributing to 35 pct of the supply share and 55 pct of the revenue share in 2022. Approximately, 60,000 rooms are expected to be added between 1 October 2023 and 31 March 2027, with approximately 25 pct of the new supply being in the luxury upper upscale segment.
• The company has developed its hotels at locations with high barriers to entry. For eg. As per Horwath Report, the land parcels for hotels of the scale of Grand Hyatt Mumbai Hotel and Residences and Andaz Delhi, are difficult to obtain and carry a high cost and associated development risks. In turn, this limitation provides an added value benefit to established well-located hotels.
• JHL has introduced complementary revenue-generating streams at their 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 intended to add 293 rooms and 24 serviced apartments by building additional floors at the hotel. Further, this addition of rooms will complement their new ballroom (49,655 sq. ft. expected to open Q2FY25) to cater to large events. The company intends to start the design of these additional floors in FY25 and expects to commence operations by mid-FY27.
• JHL intends to construct a dedicated commercial development, which we will rent to third parties, on a long-term basis. This commercial space is also expected to complement the hospitality business and generate synergies within the hotel-led mixed-use projects.
• After repaying 15,000 mn of debt, the company’s Debt to EBITDA will come down to below 1x in the coming year. As of now, the company is not profitable yet due to high finance costs. After repayment, the company is expected to save ~Rs. 140-170 mn finance cost.
• Out of the total sales of the company, 45 pct of revenue comes from the rooms, 12 pct from the serviced apartments, 30 pct of revenue from Food & Beverages and MICE, 5 pct of revenue from lease rentals and 7 pct from the other hospitality services. These diversified revenue schemes helped JHL to improve ARR during covid pandemic.
• Sales of the company have grown by 100 pct CAGR during the period FY21-23 while EBITDA grew 281 pct CAGR over the same period respectively. During FY23, the company reported sales of Rs. 6,668 mn which increased by 116 pct YoY while EBITDA increased by 217 pct YoY to Rs. 3,223 mn as the EBITDA margin improved from 29.52 pct in FY22 to 44.94 pct in FY23. As of FY23 and H1FY24, the company has not posted a profit. During H1FY24 the Sales/EBITDA came at Rs. 3,361 mn/Rs. 1245 mn.

Key Risk

• JHL business is capital intensive and may require additional financing to meet those requirements, for an extensive expansion company can take debt, which could have an adverse effect on their cash flows.
• The business of the company is subject to seasonal and cyclical variations that could result in fluctuations in its results of operations and cash flows.

Financial Performance

Peer comparison FY23

Valuation

The issue is quoting at a negative PE as the Company has seen negative trends at PAT levels. That said, it is the highest gross profit earning hospitality company among its peers with the well-known global brand “Hyatt” as well as an investor global partner. According to the management, it will turn positive PAT entity post-IPO since it will clear around 67 pct of its total debt. Considering the bright prospects ahead, one May Subscribe from a longer-term perspective.

Also read: What Is Asset Allocation And Why Is It Important?

Disclaimer: The views shared in blogs are based on personal opinions and do not endorse the company’s views. Investment is a subject matter of solicitation and one should consult a Financial Adviser before making any investment using the app. Investing using the app is the sole decision of the investor and the company or any of its communication cannot be held responsible for it.