In a strategic move to bolster its presence in the hospitality sector, Prestige Estates Projects Ltd. has approved an investment of up to ₹1,625.04 crore in its wholly-owned subsidiary, Prestige Hospitality Ventures Ltd. (PHVL), through a rights issue. This investment, slated to occur in one or more tranches, underscores the company's commitment to enhancing its hospitality portfolio by developing and operating new projects in this domain.​

Details of the Investment

Established in 2017, PHVL reported a turnover of ₹4,161 crore for the financial year ending March 31, 2024. Given that PHVL is a wholly-owned subsidiary, this transaction qualifies as a related-party deal. However, Prestige Estates Projects Ltd. has emphasized that the transaction will be conducted at arm's length, ensuring transparency and fairness. The company has also clarified that its promoters have no financial stake in this transaction, reinforcing its commitment to corporate governance standards.​

The rights issue is anticipated to be completed by March 31, 2025, with shares being purchased in cash. Importantly, this move will not alter PHVL's ownership structure; the subsidiary will remain fully owned by Prestige Estates Projects Ltd. This strategic infusion of capital is expected to provide PHVL with the necessary resources to expand its operations and solidify its position in the hospitality industry.​

Financial Performance and Strategic Outlook

This investment decision comes at a time when Prestige Estates Projects Ltd. is navigating financial challenges. The company reported an 85% decline in consolidated net profit, amounting to ₹17.7 crore for the third quarter of the financial year 2025, down from ₹116.3 crore in the corresponding period of the previous year. Additionally, total income decreased to ₹1,697.9 crore in Q3 FY2025 from ₹1,970.5 crore year-on-year.​

Despite these financial headwinds, the company's Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) saw a 7% increase, reaching ₹590.10 crore, with margins improving to 35.7% from 30.7%. This indicates a focus on operational efficiency and cost management amidst revenue challenges.​

On the stock market front, shares of Prestige Estates Projects Ltd. closed at ₹1,180, marking a 2.16% decline on the National Stock Exchange (NSE). Over the past six months, the company's shares have experienced a 36% decrease, and approximately a 28% decline since the beginning of the year.​

Strategic Implications

The substantial investment in PHVL reflects Prestige Estates Projects Ltd.'s strategic intent to strengthen its foothold in the hospitality sector. By channeling resources into its subsidiary, the company aims to capitalize on growth opportunities within the hospitality industry, potentially offsetting challenges faced in other segments.​

Furthermore, this move aligns with the company's broader financial strategy. In June 2024, the board approved a plan to raise up to ₹5,000 crore through Qualified Institutional Placement (QIP) or other methods. This plan also included monetizing assets within the hospitality segment via Prestige Hospitality Ventures Ltd., either through primary or secondary share issuances.​

Conclusion

In summary, Prestige Estates Projects Ltd.'s decision to invest ₹1,625 crore in Prestige Hospitality Ventures Ltd. through a rights issue underscores its commitment to expanding its hospitality business. Despite recent financial challenges, this strategic investment reflects the company's focus on long-term growth and resilience in the evolving real estate and hospitality markets.​

The Current active IPO are Aten Papers & Foam Limited, Infonative Solutions Limited,Spinaroo Commercial Limited,Retaggio Industries Limited,Identixweb Limited.

The Closed IPOs are  ATC Energies System Limited, Shri Ahimsa Naturals Limited, Desco Infratech Limited

Start your Stock Market Journey and Apply in IPO by Opening Free Demat Account in Choice Broking FinX.

Join our Trading with CA Abhay Telegram Channel for regular Stock Market Trading and Investment Calls by CA Abhay Varn - SEBI Registered Research Analyst.