Schloss Bangalore IPO: Strong Brand, Steep Valuation, and Lukewarm Listing Outlook

Schloss Bangalore, the luxury hospitality brand operating under the globally recognized “The Leela” name, recently concluded its Initial Public Offering (IPO) process. The IPO, valued at ₹3,500 crore, opened for subscription on May 26, 2025, and closed on May 28, 2025. Despite investor concerns over its high valuation, the IPO was subscribed 4.50 times, signaling robust demand on the last day.

Company Overview

Schloss Bangalore is a leading luxury hotel and resort operator in India. The company operates under “The Leela” brand, which earned the title of the #1 hospitality brand globally in 2020 and 2021, and secured a spot among the top three brands in 2023 and 2024, as per Travel + Leisure World’s Best Awards.

Its current operations span across premium destinations including Udaipur, Bangalore, Chennai, and Delhi, and it has pipeline properties in Gandhinagar and Hyderabad. The brand's luxury image and growing footprint have played a pivotal role in creating investor interest in its IPO.

IPO Details

• IPO Size: ₹3,500 crore

  • Fresh Issue: ₹2,500 crore (574.71 lakh shares)

  • Offer for Sale (OFS): ₹1,000 crore (229.88 lakh shares)

• Price Band: ₹413 – ₹435 per share

• Market Capitalization at Upper Band: ₹14,527.16 crore

• Lot Size: 34 shares

• Retail Investment Minimum: ₹14,790

• HNI Minimum (14 lots): ₹2,07,060

• Registrar: KFin Technologies Limited

• Lead Managers: JM Financial, BofA Securities, Morgan Stanley, JP Morgan, Kotak, Axis Capital, Citigroup, IIFL, ICICI Securities, Motilal Oswal, SBI Capital Markets

Financial Performance

The company has demonstrated a strong post-pandemic financial recovery with significant growth in both revenue and profitability:

While losses plagued earlier years, the FY2025 turnaround into profit has encouraged investor optimism. However, analysts point out that net margins remain thin relative to top-line growth.

Valuation Metrics

Despite improved fundamentals, the valuation of the Schloss Bangalore IPO has raised concerns:

• Pre-Issue EPS (FY24): ₹1.97

• Post-Issue EPS (FY24): ₹1.43

• Pre-Issue P/E Ratio: 220.18x

• Post-Issue P/E Ratio: 304.82x

• Industry P/E Benchmark: 95x

• ROE (FY24): 1.32%

• RoNW (FY24): 1.32%

The extremely high price-to-earnings ratios indicate that the IPO is aggressively priced, especially when juxtaposed with the industry average and the company’s modest return on equity. Analysts caution that substantial earnings improvement will be required to justify these valuations in the medium term.

IPO Objectives

The net proceeds of the IPO are intended to:

1. Repay/prepay borrowings totaling ₹2,300 crore

   • ₹1,102.50 crore for Schloss Bangalore

   • ₹1,197.50 crore for subsidiaries including Schloss Chanakya, Chennai, Udaipur, and TPRPL

2. Fund general corporate purposes

The company’s debt-heavy balance sheet has been a concern. The IPO funds aimed at deleverage are viewed positively by some long-term investors.

Anchor Investor Participation

Prior to the public subscription, Schloss Bangalore raised ₹1,574.99 crore from Anchor Investors at the upper end of the price band (₹435 per share), allocating 2,62,06,896 equity shares.

This includes prominent institutional names, adding a layer of credibility to the issue despite market skepticism.

Grey Market Premium (GMP) and Listing Expectations

• GMP: ₹0

• Expected Listing Price: ₹435 (same as upper band)

• Listing Gain: 0.00%

The absence of any grey market premium (GMP) is unusual for an IPO of this scale and brand equity. This implies that listing gains are unlikely, and the issue may either list at par or at a discount.

Subscription Status (Final Day - May 28, 2025)

Despite high valuations, the IPO saw healthy participation, particularly from institutional and retail investors. However, this may be driven more by brand perception than valuation comfort.

Allotment and Listing

• Allotment Date: May 29, 2025

• Listing Date (Tentative): June 2, 2025

• Exchanges: BSE & NSE

To check allotment status, visit the registrar’s website (KFin Technologies), select “Schloss Bangalore Limited IPO” from the dropdown, and enter your application number, PAN, or DP ID.

Recommendation: Avoid for Listing Gains

While Schloss Bangalore has strong brand equity, an expanding portfolio, and a recovering bottom line, the IPO valuation appears excessively high. With zero GMP, minimal listing gain potential, and a low ROE, experts advise investors to avoid the IPO for short-term gains.

Long-term investors who believe in the luxury hospitality growth story in India may consider it after market stabilization post-listing, especially if it lists at or below issue price.

Disclaimer: This article is purely for educational and informational purposes. It is not financial advice. Consult a SEBI-registered financial advisor before investing.

About the Author:
CA Abhay Kumar (CA Abhay Varn) is a SEBI Registered Research Analyst (INH300008465) with 8+ years of market experience. He’s a qualified Chartered Accountant, having cleared CA at age 21. His insights are based on publicly available data and are meant to help retail investors make informed decisions.

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