Leela Hotels IPO Day 2 Update: Issue booked 17%. Check GMP. Should you apply to Schloss Bangalore IPO?

Leela Hotels IPO: The public offering of Schloss Bangalore Ltd, which manages Leela Palaces Hotels and Resorts, began its public subscription today (Monday, May 26). Backed by Brookfield, the Schloss Bangalore IPO raised ₹1,575 crore from anchor investors just days prior to its opening for public subscription. 

Leela Hotels IPO price band has been fixed at ₹413-435 per share. Leela Hotels IPO lot size is 34 equity shares and in multiples of 34 equity shares thereafter. Leela Hotels IPO has reserved not less than 75% of the shares in the public issue for qualified institutional buyers (QIB), not more than 15% for non-institutional Institutional Investors (NII), and not more than 10% of the offer is reserved for retail investors.

As of May 31, 2024, Schloss Bangalore, which runs luxury hotels and resorts under "The Leela" brand, had a portfolio of 3,382 keys across 12 operational hotels. Their portfolio features The Leela Palaces, The Leela Hotels, and The Leela Resorts, situated in 10 major cities throughout India.

Financially, the company has experienced notable growth, with operating profit, or EBITDA, rising from ₹87.72 crore in FY22 to ₹600.03 crore in FY24.

Leela Hotels IPO subscription status

The initial public offer of Schloss Bangalore IPO has been subscribed 17% on the second day of subscription, as per BSE data.

The initial share sale received bids for 77,01,408 shares against 4,66,10,169 shares on offer, at 17:00 IST, according to BSE.

The portion for retail investors received 41% subscription while the quota for non-institutional investors subscribed 11% to the issue. The qualified institutional buyers (QIBs) portion has been booked 11%.

Leela Hotels IPO GMP today

Let's take a look at the grey market premium trends:

Leela Hotels IPO GMP today is +12.5. This indicates Leela Hotels share price was trading at a premium of ₹12.5 in the grey market, according to investorgain.com.

Considering the upper end of the IPO price band and the current premium in the grey market, the estimated listing price of Leela Hotels share price is indicated at ₹447.5 apiece, which is 2.87% higher than the IPO price of ₹435.

According to the recent activities in the grey market over the last 11 sessions, the IPO GMP is currently on an upward trend, indicating a potentially strong listing. The minimum GMP recorded is ₹0.00, whereas the maximum GMP noted is ₹20, as per the experts at investorgain.com.

'Grey market premium' indicates investors' readiness to pay more than the issue price.

Leela Hotels IPO Review

According to Canara Bank Securities, the profitability achieved in FY25 indicates enhanced leverage, although the margins are still modest compared to its peers. The IPO, priced at ₹435, carries a high P/E ratio of 220.8x (equivalent to ₹1.97), compared to the average of around 98.9x for peers, although the P/B ratio of 2.92x appears reasonable.

Additionally, after settling its debt, the P/E ratio could better align with market expectations. Considering its early profitability stage, significant growth potential, and premium valuation, the brokerage house advises “SUBSCRIBE WITH CAUTION” for long-term investors who have a high-risk tolerance.

As per BP Equities, the company has a valuation of 220.8x PE ratio at the upper price band based on FY25 earnings, which is relatively higher than that of its competitors. Given the company’s growing portfolio, positive industry trends, entry into new market areas, and plans to reduce debt, the brokerage advises a “SUBSCRIBE” rating for this issue for those looking at a medium to long-term outlook.

Rajan Shinde, Research Analyst at Mehta Equities Ltd, mentioned that based on the upper price band of ₹435/-, the issue is targeting a market capitalization of ₹14527 crore. According to the annualized FY 2026e earnings and the fully diluted post-IPO paid-up capital, the company is looking for an EV to EBITDA ratio of 21x, which we consider to be appropriately priced when compared to industry counterparts. 

Due to the company’s strategic asset base, strong brand positioning, and support from a global institutional investor, we regard Schloss Bangalore Ltd as an attractive long-term investment in India's growing luxury and tourism market. Therefore, we advise investors to “SUBSCRIBE” to the Schloss Bangalore Ltd IPO with a long-term view.

Leela Hotels IPO details

The company's IPO, valued at ₹3,500 crore, consists of a fresh issuance of equity shares amounting to ₹2,500 crore and an offer for sale (OFS) of shares totaling ₹1,000 crore from promoter Project Ballet Bangalore Holdings (DIFC) Pvt Ltd.

The firm intends to utilise the proceeds from the fresh issue to settle company and subsidiary loans as well as for various corporate needs.

JM Financial Limited, Bofa Securities India Limited, Morgan Stanley India Company Pvt Ltd, J.P. Morgan India Private Limited, Kotak Mahindra Capital Company Limited, Axis Capital Limited, Citigroup Global Markets India Private Limited, Iifl Securities Ltd, Motilal Oswal Investment Advisors Limited, and SBI Capital Markets Limited are the main book running lead managers for the Leela Hotels IPO, and Kfin Technologies Limited serves as the registrar for this issue.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.