Brigade Hotel Ventures
IPO Size: Rs. 760 cr, Entirely Fresh Issue
- Rs. 468 cr debt repayment, of Rs. 617 cr gross debt
- Rs. 108 cr for buying a share in commercial land from promoter, to build a hotel on it
- Balance, for inorganic growth and general corporate purposes
Price band: Rs. 85-90 per share
- 5% dilution via Rs.126 cr pre-IPO placement on 3rd July 2025, at Rs. 90 per share
M cap: Rs. 3,419 cr, implying 22% dilution
- 75% for QIBs and only 10% for retail as company reported loss in FY23 and FY22
IPO Date: Thu 24th Jul to Mon 28th Jul 2025, Listing Thu 31st Jul 2025
Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.
South India Based Hotel Owner
Brigade Hotel Ventures, 95.26% subsidiary of Brigade Enterprises Limited, owns 9 hotel properties in Bangalore, Chennai, Kochi, Mysuru and Gift City, Gujarat, aggregating to 1,609 keys. These hotels, operated by Marriott, Accor, InterContinental Hotel, operate in the upper upscale and midscale segments. The 4 Bengaluru hotels account for 62% of company’s Rs. 468 cr revenue.
Plans 5 New Hotels
By FY28E, company plans to add 1 luxury beach resort in Chennai, to be operated by Hyatt, and 2 upper-midscale hotels in Bengaluru, under Fairfield by Marriott brand.
By FY29E, it plans another greenfield luxury hotel under InterContinental brand in Hyderabad and a wellness resort on 14.7 acres in Vaikom, Kerala under Ritz-Carlton brand. Thus, company plans to steadily grow over the next 4 years, in line with expected growth in hospitality sector, wherein demand is likely to outstrip room inventory / supply.
Growing Financials
With 77% occupancy, company’s average room rate (ARR) rose 5% YoY to Rs. 6,700 in FY25, translating into a revenue per available room (RevPAR) of Rs. 5,130, up 10% YoY. FY25 revenue grew 17% YoY to Rs. 468 cr, with EBITDA up 15% YoY to Rs. 167 cr. The 130-key Ibis Mysuru hotel commenced operations in Oct 2024, and clocked only Rs. 8 cr revenue in FY25, with 43% occupancy and Rs. 4,400 ARR. As the property matures, company’s overall margins of 36% in FY25 may expand going forward.
Bottomline to Spurt
Company will become nearly net debt free, after Rs. 126 cr pre-IPO and Rs. 468 cr debt repayment from IPO proceeds. This will lead to annual interest cost savings of Rs.73 cr, H2FY26 onwards. Being net debt free is a huge positive and differentiating factor, as most mid-sized listed hotel chains like Samhi, Juniper and even Lemon Tree have high debt levels.
FY25 net profit for owners stood at Rs.20 cr, implying 4% net margin. FY26E is estimated at over Rs. 70 cr or 14% net margin, thanks to the reduced interest outgo.
Attractive Pricing for the Micro-cap stock
Enterprise Value (EV) of Rs. 3,420 cr implies an EV/key of Rs. 2.1 cr and an EV/EBITDA multiple of 18x, based on FY26E EBITDA of close to Rs. 190 cr. On FY26E PAT of about Rs. 85 cr, PE multiple is seen at 40x. These are not expensive for 77% average occupancy, 36% EBITDA margin and 14% expected net margin.
Peer Juniper, with 2,115 keys, Rs. 1,000 cr topline, 37% EBITDA margin is trading an EV of Rs.4 cr per key, 21x EBITDA multiple, 85x PE. Samhi, with Rs. 1,000 cr topline, Rs. 5,000 RevPAR and a net debt to equity ratio of 2:1, is trading at an EV of Rs. 1.5 cr per key, EV/EBITDA of 19x and PE of 50x. Thus, similar size listed hotel peers are ruling at much higher multiples or at similar multiples for poorer financials, making Brigade’s IPO attractive.
Besides, Q1FY26 earnings of most hotel companies, declared so far, have been very encouraging, keeping outlook on Brigade Hotel Ventures also positive. Post IPO, Brigade Enterprises’ shareholding will decline to 74%, with 21% held by institutional investors and only 5% with retail.
24th Jul 2025 at 09:35 am