Ventive Hospitality Ltd. (Avoid)

Highlights

Ventive Hospitality Limited (VHL) incorporated on 2002, is a hospitality asset owner with a primary focus on luxury offerings across business and leisure segments. All of their hospitality assets are operated by or franchised from global operators, including Marriott, Hilton, Minor and Atmosphere.

Their pre-acquisition luxury hospitality asset comprises JW Marriott, Pune, and post-acquisition luxury hospitality assets comprise JW Marriott, Pune, The Ritz-Carlton, Pune, Conrad, Maldives, Anantara, Maldives and Raaya by Atmosphere, Maldives.

VHL Portfolio comprises of 11 operational hospitality assets in India and Maldives, totalling 2,036 keys across the luxury, upper upscale and upscale segments. Their The Ritz-Carlton, Pune is one of only two The Ritz-Carlton hotels in India which is a luxury brand within the Marriott portfolio.

The company own 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.

Out of the total proceeds of Rs. 16,000 mn, Rs. 14,000 mn would go towards repayment/prepayment, in part or full, of certain of borrowings availed by the company including payment of interest accrued thereon and the subsidiaries and Rs. 2,000 mn would go towards general corporate purpose.

Key Highlights

• The India travel and tourism sector contributed Rs. 19.1 trillion of GDP in 2023 and is expected to contribute over Rs. 43 trillion by 2034. Domestic travel visits grew at a 13.5 pct CAGR between 2001-2019. HAI estimates that foreign tourists in India will cross 30 mn by 2037 (from 9.3 mn in 2023).
• VHL hospitality assets command an ARR premium vis-à-vis their peers in India and Maldives, which they believe is a testament to their superior asset quality, contemporary offerings and customer experience. Their luxury and upper upscale hotels in Pune achieved an ARR index of 1.44 compared with other luxury and upper upscale hotels in Pune in 9MCY24. Similarly, the ARR index for Conrad, Maldives and Anantara, Maldives is 1.04 compared to the luxury and upper upscale segment in the Maldives in 9MCY24.
• They have a proven track record of developing and acquiring marquee hotel assets across various geographies and different hospitality segments. Through their development and acquisition-led expansion, they have scaled up the Portfolio and forayed into new geographies such as Bengaluru, Varanasi and the Maldives within the past few years.
• VHL platform includes 4 stabilized Grade A annuity assets which are part of their hospitality-led integrated developments in Pune, having a total Leasable Area of 3.40 msf and Committed Occupancy of 95.55 pct. VHL office assets have a committed occupancy of 96.07 pct and over 80 pct of their Leasable Area was leased to multinational corporations.
• VHL office assets command a premium of over 33 pct above the average rental for Pune as of H1FY25 due to these assets being generally of a superior quality compared to the average in the market. Their annuity assets are occupied by marquee tenants such as HSBC, Deutsche Bank, Nokia, Vodafone, PwC, Sephora, Starbucks and Vero Moda.
• VHL plan to continue focusing on their core strength of developing luxury and upscale hospitality assets and to increase the number of keys across hospitality assets by an estimated 367 keys or 18.02 pct, from 2,036 keys as at H1FY25 to approximately 2,403 keys in FY2028 through planned development and expansion initiatives in Varanasi, Uttar Pradesh and Bengaluru, Karnataka in India and Pottuvil, near Yala East National Park and Arugam Bay Beach in Sri Lanka.
• VHL key growth strategies includes (i) Developing and expanding asset base (ii) Drive organic growth from ramp-up of existing assets (iii) Leverage on award-winning F&B and amenities (iv) Optimize event spaces (v) Selective acquisitions supported by cash flows and significant debt headroom (vi) Proactive asset management to drive shareholder value.
• Sales of the company has grown by 44.41 pct CAGR over FY22-24. In FY24 the company reported sales of Rs. 4,780 mn which grew 11 pct YoY. EBITDA stood at Rs. 3,006 mn, grew 20.19 pct. During FY24 profit of the company rose by 26.26 pct YoY to Rs. 1663 mn. In Q1FY25 the company reported Sales/EBITDA/loss of Rs. 3728 mn/ Rs. 1804 mn/ Rs. 208 mn.

Key Risk

• They do not have a consolidated operating history through which their overall performance may be evaluated and have incurred losses in the recent past.
• Their hospitality business is subject to seasonal and cyclical variations that could result in fluctuations in their business.
• VHL do not own the trademark PANCHSHIL and only have a license to use the same pursuant to a trademark licensing agreement with Premsagar Infra Realty Private Limited, one of their Promoters. Further, VHL do not have any trademark protection for their corporate logo.

Financial Performance

Valuation

Ventive Hospitality offers a broad and distinctive portfolio of business, luxury hotels and resorts that spans vibrant cityscapes and serene seashores. From India’s bustling business hubs to idyllic Maldives atolls, and soon in sublime sunny Sri Lanka, Ventive Hospitality creates experiences tailored to both business and luxury travellers. At the upper end of the price of Rs. 643, the issue quotes at PE of ~90.31x based on FY24 post issue capital. The issue looks fully priced. One may avoid this issue.

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