Leela Hotels IPO Allotment: Brokerages Weigh In On Schloss Bangalore's Listing

Schloss Bangalore Ltd., the owner and operator of the luxury Leela Palaces, Hotels and Resorts chain, will debut on the stock exchanges on June 2. The company's Rs 3,500-crore initial public offering garnered robust investor interest, being subscribed 4.50 times on the final day of bidding, with demand driven largely by institutional investors.

As per NSE data, the IPO received bids for 20.96 crore shares against 4.66 crore shares on offer. The Qualified Institutional Buyers or QIBs portion was subscribed 7.46 times, while the Non-Institutional Investors or NIIs category was subscribed 1.02 times. The Retail Individual Investors or RIIs segment was subscribed 83%.

Brokerages have weighed in with their recommendations on whether investors should subscribe or not. Check details here-

The Indian hospitality industry is expected to remain under focus owing to a demand-supply mismatch for branded rooms, strong growth in MICE activities, resumption of FTA and a healthy marriage season. At the upper-price band, Leela is available at a comfortable valuation of 26 times FY25 EV/ EBITDA. "We have a Subscribe for long term recommendation to this issue," noted Aditya Birla Money.

"At the upper price band company is valuing at P/E of 266.8x, P/S of 11.2 times and market cap of Rs 1,45,271 million with EV/Ebitda of 30 times post issue of equity shares," it said.

Anand Rathi Wealth shared that, "We believe that the IPO is fairly priced and recommend a Subscribe-Long term rating to the IPO."

The company is valued at a PE ratio of 220.8x on the upper price band based on FY25 earnings, which is comparatively higher than its peers. Considering the company’s expanding portfolio, favourable industry dynamics, entry into new market segments, and intention to repay debt.

We recommend a 'Subscribe' rating for this issue for a medium to long-term perspective.

At Rs 435, the IPO is priced at a steep P/E of 220.8 times (FY25 EPS Rs 1.97) vs peer average approximately 98.9 times, though P/B of 2.92 times is reasonable. Furthermore, post-debt repayment, the P/E ratio may become more aligned with market expectations.

Given its early-stage profitability, high-growth potential, and premium valuation, we recommend 'Subscribe with caution' for long-term investors with a high-risk appetite.

The company faces direct competition from three listed peers, namely, Indian Hotels Company Ltd., EIH Ltd. and ITC Hotels Ltd. Debt repayment will be EPS accretive by about Rs. 5.75. Taking the same into account, the company is available at a PER of 57 times post issue.

We have a 'Neutral' rating for Schloss Bangalore's IPO.

Five of these properties will be owned and managed by the company and are in different stages of construction with operations expected to commence in FY28. Although Schloss’ financial performance stood better than most of its peers (revenue and earnings CAGR of 23.0% and 25.0% respectively between FY23-25), its return matrix remained poor due to very high finance cost.

The company’s initial issue is priced at 31.0 times FY25 EV/Ebitda, which is almost ~15% lower than the industry average.

We believe the Schloss is expected to deliver improved earnings growth, better profitability led by reduced debt burden, healthy pipeline of upcoming hotels and industry leading sustainable margins driven by luxury segment focus. We assign a‘Subscribe’ rating to the issue.