The ₹3,500 crore initial public offering (IPO) of Schloss Bangalore, owner of Indian luxury hotel chain ‘The Leela’, will kick off for subscription on Monday, May 26. The three-day issue closes on May 28.The company has set a price band of ₹413 to ₹435 per share for its IPO. Investors can bid for a minimum of 34 shares and in multiples thereof.
Schloss Bangalore IPO: Should you bid?
Bajaj Broking: Subscribe for long term
The brokerage has recommended subscribing to the IPO with a long-term investment horizon. It said that the offering is primarily a bet on a turnaround and brand-driven growth narrative, rather than a valuation play based on current fundamentals.While the company has shown strong top-line growth and a notable rise in EBITDA to ₹600 crore in FY24, it continues to post losses, reporting a net loss of ₹2.13 crore in FY24 and an additional ₹36.4 crore loss in just the first two months of FY25.Due to negative earnings per share and a negative net asset value, traditional valuation metrics such as P/E and RoNW are either inapplicable or present a distorted picture, the brokerage noted.This results in Schloss being valued at a significant premium, compared to listed peers like Indian Hotels and EIH Limited, both of which have stronger profitability and return profiles, it added.Although Schloss presents a promising growth story in India’s luxury hospitality segment, bolstered by its asset-light model and strong brand positioning, the current valuation appears to have already priced in much of the anticipated upside.SBI Securities: According to the brokerage, Schloss Bangalore is valued at a FY25 EV/EBITDA multiple of 26.3x, based on the post-issue capital at the upper price band. The company’s revenue and EBITDA have grown at a CAGR of 23% and 25%, respectively, over the past two years. On a net basis, the business turned profitable in FY25.SBI Securities wrote that the company’s presence in the luxury segment of the hospitality sector positions it well for strong growth, as this segment is expected to expand at a faster pace. Additionally, the company plans to use IPO proceeds to repay debt, which will reduce its debt-to-equity ratio from the current 1.1x and enhance profitability. The brokerage has not assigned a rating to the IPO.Anand Rathi: Subscribe for long termThe brokerage believes that the IPO is fairly priced and recommends a ‘Subscribe-Long term’ rating to the IPO.“At the upper price band, the company is valuing at P/E of 266.8x, P/S of 11.2x and market cap of ₹14,527 crore with EV/EBITDA of 30x post issue of equity shares,” it said.
Schloss Bangalore IPO: Anchor investors
The Brookfield-backed company has raised ₹1,575 crores from 47 marquee domestic and global anchor investors.Goldman Sachs, Fidelity and Societe Generale are among top global funds that have invested in the company.The anchor book saw participation from domestic institutional investors like HDFC MF, ICICI Prudential MF, Nippon India MF, Mirae MF and Invesco MF and insurance companies such as Max Life Insurance and Aditya Birla Sun Life Insurance.
Schloss Bangalore IPO: Other details
The highly anticipated IPO is worth ₹3,500 crore and includes a fresh issue of ₹2,500 crore and an offer for sale (OFS) worth ₹1,000 crore.At the higher end of the price band, Schloss Bangalore will have a market capitalisation of ₹14,527 crore.Schloss has trimmed the size of its offering by 30%, eight months after it filed draft papers for an IPO, joining a growing list of firms that have tempered their issues to go public amid market uncertainty.Brookfield-backed Schloss will sell fresh shares worth ₹2,500 crore, down from an initially planned ₹3,000 crore. Brookfield plans to sell shares worth ₹1,000 crore, half of its original plan.About 75% of the IPO size has been set aside for qualified institutional buyers, of which up to 60% portion (that comes to ₹1,575 crore) may be allocated to anchor investors . Further, 15% of the issue size is reserved for non-institutional investors, and the rest 10% for retail investors.Schloss Bangalore plans to use ₹2,300 crore out of net fresh issue proceeds for repayment of its debt, and the remainder for general corporate purposes.Established on March 20, 2019, Schloss Bangalore is a luxury hospitality company operating under “The Leela” brand in India. It owns, operates, manages, and develops luxury hotels and resorts, offering premier accommodations and personalised services inspired by Indian hospitality.As of May 2024, the company operates 12 properties with 3,382 keys under The Leela Palaces, Hotels, and Resorts.Five of these — located in Bengaluru, Chennai, New Delhi, Jaipur, and Udaipur — are wholly owned.Despite reporting losses of ₹36 crore for the period ended May 2024, the company has narrowed its losses from ₹319 crore in FY22 to ₹2.1 crore in FY24. Revenues surged to ₹1,226 crore in FY24 from ₹415 crore in FY22, showcasing a sharp turnaround in business performance post-Covid.JM Financial, Bofa Securities India, Morgan Stanley India, JP Morgan India, Kotak Mahindra Capital, Axis Capital, Citigroup Global Markets, Iifl Securities, Motilal Oswal Investment Advisors, SBI Capital Markets are the book running lead managers, while Kfin Technologies is the registrar for the Leela Hotels IPO.The allotment for the Leela Hotels IPO is expected to be finalised on May 29, 2025. Leela Hotels IPO will be list on BSE, NSE with a tentative listing date fixed as June 2, 2025.
