Ventive Hospitality(VHL) is a hospitality asset owner with a primary focus on luxury offerings across business and leisure segments. All of its hospitality assets are operated by or franchised from global operators, including Marriott, Hilton, Minor and Atmosphere.

VHL is a joint venture between Panchshil Realty and Blackstone.

VHL portfolio comprises 11 operational hospitality assets in India and Maldives, totaling 2,036 keys across the luxury, upper upscale and upscale segments. The Ritz-Carlton, Pune is one of only two “The Ritz-Carlton” hotels in India which is a luxury brand within the Marriott portfolio. JW Marriott, Pune is the largest luxury hotel based on the number of keys in Pune and is one of only eight luxury hotels in India with inventory of between 400 to 500 keys. The company owns three luxury hospitality assets in the Maldives, which has been ranked consistently as one of the best tourist island destinations globally (including World’s Leading Destination (2023) and Indian Ocean’s leading destination (2024) at the World Travel Awards) with its unique “one island, one resort” concept). Conrad, Maldives houses the Muraka, a flagship experience that offers private accommodation comprised as an integrated undersea residence. It is reportedly the first such resort product globally along with an underwater restaurant known as Ithaa. Muraka Suite was named one of the greatest luxury hotel suites in the world in Robb Report’s The 50 Greatest Luxury Hotel Suites in the World.

VHL’s upcoming projects include a 167-key hotel under the Marriott brand in Varanasi, an 80-key luxury resort, The Ritz-Carlton Reserve in Sri Lanka, and the addition of 120 keys to the Marriott Aloft in Bengaluru’s Whitefield.

VHL luxury and upper upscale hotels in Pune achieved an ARR index of 1.44 compared with other luxury and upper upscale hotels in Pune from January 2024 to September 2024.

VHL hospitality assets are enhanced by its leading, award-winning food and beverages (F&B) offerings. In Pune, eight of its restaurants feature in the top 10 fine dining restaurants according to TripAdvisor rankings as at November 8, 2024, including Alto Vino, an Italian restaurant, and Tao Fu, a Chinese restaurant at JW Marriott, Pune and Ukiyo, a Japanese restaurant at The Ritz-Carlton, Pune. Its F&B offerings are also a key strength of its Maldives hospitality assets. Conrad, Maldives features Ithaa, a unique underwater restaurant. Anantara, Maldives has nine F&B outlets with differentiated cuisines spread across three integrated islands, with distinct offerings tailored for servicing customers across price points. Revenue from the sale of food and beverages contributed to 34.92%, 35.04%, 34.76% and 35.89% of its revenue from hotel operations.

VHL platform includes four stabilized ‘Grade A’ annuity assets which are part of its hospitality-led integrated developments in Pune, having a total leasable Area of 3.40 msf and committed occupancy of 95.55% as at September 30, 2024. VHL annuity portfolio includes three Grade A office assets and a Grade A retail space, which form part of three hospitality-led integrated developments. Its office assets have a committed occupancy of 96.07% as at September 30, 2024 and over 80% of its leasable area was leased to multinational corporations as at September 30, 2024. Its office assets command a premium of over 33% above the average rental for Pune as of September 2024 due to these assets being generally of a superior quality compared to the average in the market. Its annuity assets are occupied by marquee tenants such as HSBC, Deutsche Bank, Nokia, Vodafone, PwC, Sephora, Starbucks and Vero Moda.

Object of the offer

The IPO consists of fresh issue of Rs 1600 crore.

Out of the proceeds from the fresh issue, Rs 1400 crore will be used for repayment or prepayment of certain borrowings and the balance towards general corporate purposes.

Strengths

VHL hospitality portfolio includes marquee luxury assets that are operated by global hospitality brands. Further, the company’s hospitality-led integrated developments have three Grade A office assets and a retail space which provide regular annuity stream for the company.

VHL hospitality assets are located in established business destinations such as Pune and Bengaluru, premium tourist destinations such as the Maldives and spiritual and cultural hubs such as Varanasi. The company focuses on sub-markets and locations based on their proximity to airports and transport hubs, central business and commercial districts and areas with high tourism potential.

VHL asset management practices are designed to provide a superior experience for guests, tenants and consumers and are driven by comprehensive procedures aimed at improving the operational performance of its assets through increased occupancy rates and revenue generation, as well as enhanced cost efficiencies. The company works closely with its hotel operators to continuously assess initiatives for improving revenue generation and operational efficiencies across its various hospitality assets.

VHL is promoted by Panchshil group and the BRE Promoters. The Panchshil group is affiliated with Panchshil Realty, one of India’s leading luxury real estate developers. The BRE group is affiliated with Blackstone, the largest investor in hotels globally based on the number of keys, with over 161,000 keys as at September 30, 2024. Its promoters combine their deep knowledge of local markets along with global best practices in development, investment and asset management.

The company has a professional and experienced management team led by its distinguished board of directors. It’s chief executive officer, Ranjit Bharat Batra holds a diploma from Oberoi Center of Learning & Development, New Delhi, India and Hotelconsult SHCC, Switzerland. He was associated with A2Z Online Services Private Limited, the group company as the executive vice president for over a decade. He joined VHL in 2018.

Weaknesses

The company relies on third parties for the quality of services at its hospitality assets and its hospitality assets are operated by or franchised from third-party brands. Any adverse impact on the reputation of its hospitality assets, or the brands under which they operate, or a failure of quality control systems at its hospitality assets could adversely affect the company’s business.

Termination or non renewal of franchise agreements from Marriott and Hiltonwill have an adverse impact on the operations of the company as8 out of 11 operational hospitality assets of the company, contributing to 78.05% of the keys in its hospitality portfolio as at September 30, 2024 and 49.19% of its total income for the six months ended September 30, 2024 is derived from franchise agreements.

Significant portion of the company’s total income is derived from four of its largest hospitality assets (which contributed to 52.83% and 58.26% of its total income for the six months ended September 30, 2024 and FY24, respectively). Any adverse developments affecting such assets could have an adverse impact.

If there is a decline in demand for office and retail properties than the company’s annuity income will be impacted which contributed 28.02% and 24.44% of the company’s total income for the six months ended September 30, 2024 and FY24, respectively.

A substantial portion of the net proceeds will be utilized for the repayment, prepayment and/or redemption of indebtedness availed of by the company and its subsidiaries.

The company has incurred losses in 2 of the last 3 financial years. The company incurred losses of Rs 146.2 crore in FY2022 and Rs 66.75 crore in FY2024. It has also incurred losses of Rs 137.83 crore in 6M FY2025.

The company’s business is subject to seasonal and cyclical variations that could result in fluctuations in the company’s results of operations.

The COVID-19 pandemic, or any future pandemic or widespread public health emergency, could affect the company’s business and financial condition.

The hospitality industry is intensely competitive and the company’s inability to compete effectively may adversely affect its business.

Valuation

For the six months ended September 2024, the company incurred loss of Rs 137.83 crore on consolidated revenues of Rs 846.44 crore.

For FY 2024, consolidated revenues were up by 8.4% to Rs 1842.07 crore. OPM rose 199 bps to 43.67%, which led to a 13.58% increase in operating profit to Rs 804.46 crore. Other income increased 3.98% to 65.31 crore, while interest cost increased 27.1% to Rs 428.49 crore and depreciation inclined 2.38% to Rs 354.07 crore. PBT stood at Rs 16.89 crore as against Rs 85 crore in FY2023. Tax expenses stood at Rs 83.64 crore in FY2024as against Rs 69.32 crore in FY2023. Net loss stood at Rs 66.75 crore as against net profit of Rs 15.68 crore for the corresponding period of previous year.

As the company is making losses, the P/E ratio cannot be calculated. At the higher price band of Rs 643, the offer is made at around 22.89 times post-IPO EV/FY2024 EBITDA.Listed industry peers of the company are Chalet Hotels, Lemon Tree Hotels, Indian Hotels and Juniper Hotels. In comparison Chalet Hotels trades at 42.33 times its EV/FY2024 EBITDA, Lemon Tree Hotels trades at 27.49 times its EV/FY2024 EBITDA, Indian Hotels trades at 57.41 times its EV/FY2024 EBITDA and Juniper Hotels trades at 22.89 times its EV/FY2024 EBITDA.