Hotels join the fray as IPO frenzy continues

Brigade Hotel Ventures, the hospitality arm of Brigade Enterprises, has filed papers with the Securities and Exchange Board of India (Sebi) and is gearing up to raise ₹900 crore, according to Prime Database. Schloss Bangalore, the Brookfield-backed parent of Leela Hotels, has filed papers for a ₹5,000 crore issue.

“Bharat Hotels, which is currently delisted, plans to go public soon," said Krishna Patwari, founder and managing director of Wealth Wisdom India. “OYO is also expected to launch its IPO to reduce debt and expand operations across India, Indonesia and Europe, with a new equity offering of ₹7,000 crore."

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Blackstone-Panchshil’s Ventive Hospitality recently filed papers for a ₹2,000 crore IPO, said Prateek Jhawar, managing director and head, infrastructure and real assets investment banking, Avendus Capital. Real estate major Prestige Estates has also appointed bankers for the proposed IPO of its hospitality arm, and then there is the potential listing of ITC Hotels after the demerger from the parent, he said.

“We expect the capital market activity in this space to remain high even in the coming 12-24 months. We can expect 4-5 mainboard IPOs to hit the market in this time frame," said Jhawar.

The confidence to tap the market is backed by a strong comeback in company revenues. The hospitality industry is booming, thanks to a surge in travel after the pandemic—whether it’s for leisure, cultural exploration, or business. Indians are now spending more on hotel stays as income rise and appetite for indulgence grows. The government’s big push for religious tourism and major upgrades in infrastructure and connectivity are set to drive hotel demand even higher over the next five years, said analysts.

The hospitality industry is expected to reach $475 billion in 2029, expanding at a compound annual growth rate of about 14% in the medium term, said Vipin Singhal, associate director, Anand Rathi Investment Banking. “We witnessed near all-time highs in room occupancy rates as well of 67%-70% in FY24. Revenue per available room has also seen significant growth, increasing by 89-91% compared to the previous year."

Potential IPOs and a bull run after a long downcycle, fuelled by strong occupancies, have prompted wealthy or high-net-worth individuals (HNIs) to hunt for privately held shares of some of the hospitality companies expected to go public. Supportive capital markets have further amplified the sector’s momentum.

“In the unlisted sector at present, OYO has experienced significant demand from retail investors after reporting its first-ever profit after tax of ₹229 crore in FY2023-24. Similarly, the demand for shares of Bharat Hotels is rising," said Patwari of Wealth Wisdom India, a platform to buy and sell unlisted shares.

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Jhawar said Avendus is seeing frequent inbound requests from HNIs and family offices to evaluate IPO-bound companies in this space. “On the private side, large players are pursuing asset-specific deals to diversify their geographic presence and offerings."

Some of the recent deals include Ambuja Neotia’s acquisition of Tree of Life, and subsequent partnership with Indian Hotels Co. Ltd (IHCL); Blackstone’s acquisition of two hotels properties in Chenna; Samhi Hotels’ acquisition of Trinity Hotel; and Lulu Group’s acquisition of Juniper Hotels’ property near Bangalore Airport.

Bharat Hotels has yet to respond to Mint’s queries.

Schloss Bangalore, in its draft red herring prospectus, revealed plans to channel its fundraise toward debt repayment, prepayment or redemption. Brigade Hotel Ventures said the proceeds will go toward reducing borrowings, acquiring land from its promoter, exploring acquisitions for inorganic growth and fuelling strategic initiatives, alongside general corporate purposes.

Capacity boost

Hospitality companies are also expanding capacity, betting on booming travel.

Pan-India branded hotel room supply is set to grow 49% from FY25-29, building on the current supply of 180,403 rooms in FY24, according to data from a report by hospitality consulting firm Hotelivate. When it comes to leisure destinations, iconic spots like Goa, Jaipur and Udaipur are in for a major boost, with room supply expected to jump 40%, 53% and 65%, respectively, by FY29.

In prime business hubs, Noida and Navi Mumbai will see the highest growth at 88% and 72%, though from a smaller base, the report said. On the other hand, large business cities like Bengaluru, Mumbai, Delhi and Chennai will see more modest increases in supply, ranging from 8% to 34%, the report said.

The top 10 cities in India collectively account for 55% of existing supply of rooms, said Prashant Biyani, vice president of institutional equity research at Elara Capital, citing Hotelivate data. What’s particularly noteworthy, he said, is that “luxury hotels make up only 6% of the proposed supply, while upper-upscale and upscale hotels represent a substantial 31.5%."

This makes luxury hoteliers not only less prone to oversupply but also will give them the ability to charge a higher rate for premium offerings, he said.

Having surpassed its 2025 targets by a wide margin, IHCL aims to double its consolidated revenue to ₹150 billion, achieve industry-leading margins and a 20% return on capital employed, Biyani said. It also plans to expand its portfolio to over 700 hotels by launching new brands and exploring diverse markets.

The industry is expected to add close to 500 hotels and 58,000 keys in the next couple of years with companies like IHCL and Marriot leading the way, according to Singhal of Anand Rathi. Competition is heating up though. The launch of Waldorf Astoria in Jaipur in 2027 is a clear indication of the strong growth potential brands are seeing in the Indian luxury hotel market, Singhal said.

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While the hotel industry saw a dip in revenue in the April-June quarter, with demand picking up, a rebound is expected, according to Patwari of Wealth Wisdom. “Seventeen hotel stocks, each with a market capitalization of over ₹100 crore, reported a 6.9% year-on-year revenue growth for the June quarter, a slowdown from the 17.2% growth in the March quarter."

Elections, heatwaves and fewer weddings contributed to lower occupancy, affecting the sector’s performance, Patwari said. But he sees investment opportunities, especially as more businesses go public or host pre-IPO meetings.