Issue Date:?26th Mar ? 28th Mar 2018
Price Band(Rs):?54-56 |??Lot Size (No. of Share):?265
Company Background
Incorporated in 1992, Delhi based Lemon Tree Hotel is India’s largest hotel chain in the mid-priced hotel sector, and the third largest overall, on the basis of controlling interest in owned and leased rooms, as of 30 June 2017. The company operates in the mid-priced hotel sector and its hotels are located across India, in metro regions, including the NCR, Bengaluru, Hyderabad and Chennai, as well as tier I and tier II cities such as Pune, Ahmedabad, Chandigarh, Jaipur, Indore and Aurangabad.
Issue Details
| Issue Opens | 26-Mar-18 |
| Issue Closes | 28-Mar-18 |
| Issue Size(Rs in Crore) | 1,038.68 |
| Face value(per equity share) | 10 |
| Price Band(Rs.) | 54-56 |
| Lot Size(No of Share) | 265 |
| No of Shares on Offer(Crore) | 18.54 |
| QIB(%) | 50% |
| Non-Institutional(%) | 15% |
| Retail(%) | 35% |
| Commencement of Trading | 09-April-18 |
Strengths
- Indian hotel industry highly under penetrated compared to global scenario.
- Hotel industry on verge of turnaround.
- Lemon Tree one of the leading mid-priced hotel one arm hammer row chains in India.
- Robust expansion plans to ensure Lemon Tree?s leadership position in mid-prices hotel segment in India.
Concerns
- Heavy capex has negatively impacted FCFF generation.
- Potential dilution of shareholding in subsidiaries (Carnation).
- Limited room of average room revenue (ARR) growth.
- Intensifying competition, higher bargaining power of B2B players may restrict ARR growth.
Our View
The price band of INR 54-56 per share and 9 months ended Dec-2017 consolidated EPS of Rs.0.04, P/E works out to be 1400x. Even on standalone EPS of 9 months ended Dec-17, the P/E works out to be 350x. There is only one listed peer, EIH Hotels which is trading at P/E of 90. Company is overpriced considering its past earning history.
It has been incurring losses in the last few years. Company has high capex oriented nature of expansion, low RoCE, higher competition in the mid-scale segment. One should not conclude based on last 1 year performance. We would recommend to stay away from such loss making companies.
Lemon Tree Hotel IPO Allotment Status Online
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