Grand Continent Hotels Limited operates in the mid-scale hotel sector, providing services in the upper-mid priced, mid-priced, and economy hotel segments. With a focus on middle-class Indian guests and business travelers, the company aims to offer value-for-money, comfortable, and differentiated services. As of September 30, 2024, the company operates 16 hotel properties and 753 hotel keys across states like Karnataka (Bengaluru/Mysuru), Tamil Nadu (Hosur), Goa (Anjuna/Morjim), Andhra Pradesh (Tirupati), and Telangana (Secunderabad).

The IPO of Grand Continent Hotels is a Book Built Issue amounting to ₹ 74.45 Crores, with a fresh issue of 62.60 lakh shares worth ₹ 70.74 crores and an offer for sale of 3.28 lakh shares totaling ₹ 3.71 crores. The subscription period for this IPO will open on March 20, 2025, and close on March 24, 2025, with allotment expected on March 25, 2025, and shares set to list on the NSE SME on March 27, 2025.

The price range for the shares is ₹ 107 to ₹ 113 per share. The market capitalization of the company at the upper price band of ₹ 113 per share will be ₹ 281.58 Crores. The lot size is 1,200 shares, with a minimum investment of ₹ 1,35,600 for retail investors. For High-Net-Worth Individuals (HNIs), the minimum investment is ₹ 2,71,200 for 2 lots (2,400 shares).

Grey Market Premium (GMP) & Subscription Status

As of March 17, 2025, the Grey Market Premium (GMP) for Grand Continent Hotels IPO is reported at ₹ 0, suggesting no expected listing gains. This indicates that the IPO is unlikely to provide significant short-term gains post-listing.

Financial Performance & Key Metrics

Grand Continent Hotels has shown a consistent financial performance, with revenues for the fiscal year ending September 30, 2024, at ₹ 3,186.32 lakh, and an EBITDA of ₹ 1,126.94 lakh. The Profit After Tax (PAT) for the same period stood at ₹ 622.37 lakh, which reflects a steady growth in profitability.

The pre-issue EPS for FY24 is ₹ 2.54, with the post-issue EPS dropping to ₹ 1.64. The P/E ratio is relatively high at 44.49x pre-issue and 69.06x post-issue, compared to the industry P/E ratio of 45x, suggesting that the IPO is fully priced. The Return on Capital Employed (ROCE) for FY24 is 18.35%, and the Return on Equity (ROE) is 25.00%, both indicating strong financial health.

IPO Objectives

The net proceeds from the IPO will be utilized as follows:

1. ₹ 3,408.08 Lakhs will be used for the repayment or prepayment of outstanding borrowings.
2. ₹ 1,679.24 Lakhs will be allocated to the expansion of the company’s hotel properties in India.
3. The remainder will be used for general corporate purposes.

Anchor Investors and Subscription Update

Grand Continent Hotels has already raised ₹ 21.16 crores from Anchor Investors at the upper price band of ₹ 113 per share, allocating 18,73,200 shares. This shows confidence from institutional investors in the company’s future prospects.

Recommendation

Given that the GMP is flat at ₹ 0, indicating no expected listing gains, and considering the fully priced IPO with high P/E ratios, this offering does not present a significant opportunity for quick gains. However, the company’s steady financial performance, strong management, and growth prospects in the expanding Indian hotel sector could make it an appealing investment for those with a long-term perspective.

While the IPO is priced fairly, potential investors should be cautious if looking for immediate listing profits. For those interested in long-term growth and hotel sector expansion, this IPO may offer a solid entry point.

The Upcoming IPOs in this week and coming weeks are Arisinfra Solutions Limited, Grand Continental Hotels, Rapid Fleet Management Services.

The Current active IPO are Paradeep Parivahan, Divine Hira Jewellers.

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