SAMHI Hotels IPO proceeds to cut debt drastically

In an interaction with Fortune India, Ashish Jakhanwala, Chairman, Managing Director and Chief Executive Officer of SAMHI Hotels, talked about fundraising via IPO route, acquisition strategy, debt reduction, and expansion of hotel business portfolio.

The IPO of SAMHI Hotels, the owner of the largest number of Marriott and IHG -operated hotels in India, opened for subscription on September 14. The Gurugram-based hotel asset company, which specialises in the development, acquisition and ownership of branded hotels in the country, has set the price band for the issue at ₹119-126 per share, which would fetch ₹1,370 crore at the upper end of the IPO price.

Jakhanwala says that most of the IPO proceeds (around ₹1,100 crore) will be used to repay debt. As of March 31, 2023, the total debt of the company stood at ₹2,833 crore, which will come down to ₹1,730 crore, post listing of shares on the exchanges.

“Our net debt post IPO will be in the range of ₹1,730 crore against ₹2,830 crore as of now… We actually expect a significant reduction in the finance cost of the company because we have eliminated all non-recurring finance expenses that occurred in FY23.”

“The majority of the IPO proceeds have been used to reduce the debt of the company and with that, the finance cost will come down and once that happens the company will be on a path for profitability,” he adds.

On the business model, Jakhanwala says, “Samhi is India's third largest owner of hotel rooms with 3,000-4,800 rooms across 31 hotels and 13 cities. Our business model is that even though we are a very large hotel owner, we actually don't build many hotels. So, our fundamental strategies are to identify and acquire underperforming and under-managed hotels and do turnaround post-acquisition.”

“We have seen clear advantages of an acquisition-led strategy. One of them is that we can build a company faster. As you know, development takes anywhere between three to five years, whereas in an acquisition, you can really put inventory in the market at a much more rapid pace,” he says.