SAMHI Hotels IPO GMP (Grey Market Premium)

The ₹1,370.10 crore IPO of SAMHI Hotels Ltd comprises of an offer for sale and also of a fresh issue of shares. The offer for sale (OFS) component is by the promoters and early shareholders of the company. Here it must be noted that while the fresh issue component infuses fresh funds into the company, it also is EPS dilutive and equity dilutive. On the other hand, the OFS is just a transfer of shares so there is no fresh infusion of funds, but it also does not dilute the equity. The issue has been priced in the band of ₹119 to ₹126 per share and the IPO allotment price will be discovered post the book building of shares being completed during the IPO process. For our analysis, the upper end of the band is assumed.

Details of the SAMHI Hotels IPO

Let us now look at the details of the issue of SAMHI Hotels IPO.  SAMHI Hotels IPO will be a combination of a fresh issue and an offer for sale (OFS). The fresh issue portion comprises the issue of 9,52,38,095 shares (9.52 crore shares approximately), which at the upper price band of ₹126 per share will translate into fresh issue size of ₹1,200 crore. The offer for sale (OFS) portion of the IPO comprises the issue of 1,35,00,00 shares (1.35 crore shares), which at the upper price band of ₹126 per share will translate into an offer for sale (OFS) size of ₹170.10 crore. Therefore, the overall IPO of SAMHI Hotels Ltd will comprise of the issue of 10,87,38,095 shares (10.87 crore shares approximately), which at the upper price band of ₹126 per share will translate into a total IPO issue size of ₹1,370.10 crore.

The issue opens for subscription on 14th September 2023 and closes for subscription on 18th September 2023 (both days inclusive). The basis of allotment will be finalized on 22nd September 2023 and the refunds will be initiated on 25th September 2023. In addition, the demat credits are expected to happen on 26th September 2023 and the stock is scheduled to list on 22th September 2023 on the NSE and the BSE.

Understanding the SAMHI Hotels IPO GMP

The grey market price (GMP) trading normally starts about 4-5 days prior to IPO opening and continues till the listing date. In the case of SAMHI Hotels Ltd, we already have GMP data for the last 3 days, which should give a reasonable picture of the likely listing performance.

There are 2 factors that impact the GMP. Firstly, the market conditions have a deep impact on the GMP, which includes the levels of the Nifty and Sensex as well as the general IPO market and macro conditions. Secondly, the extent of subscription for the IPO across the retail and the QIB segments also has a deep impact on the GMP as it is indicative of investor interest in the stock. Generally, strong QIB subscription is a trigger for a spike in GMP.

There is one small point to remember here. The GMP is not an official price point, just a popular informal price point. However, in most cases, it has been observed to be a good informal gauge of demand and supply for the IPO. Hence it does give a broad idea of how the listing is likely to be and how the post-listing performance of the stock would be.

GMP tends to be a good mirror of the real stock story. More than the actual price, it is the GMP trend over time that gives insights about which direction the wind is blowing.

SAMHI Hotels IPO GMP

Here is a quick GMP summary for SAMHI Hotels IPO for which the data is available.

In the above case, the GMP trend shows that the grey market premium has opened at around ₹10, and is up by ₹8. However, it must be remembered that initially the stock was trading in the grey market without the price band for the IPO being announced. The price band was just announced a day ago and hence this fall in GMP may not be too reflective. However, the GMP level is still indicative of moderate to strong traction for the IPO grey market price. Of course, we have to await for the actual subscription numbers to flow in when the issue opens for subscription on 14th September 2023, as that would have a very significant impact on the GMP. In the past, stocks which got oversubscribed in the IPO also saw a very robust positive shift in the grey market pricing. For a start, SAMHI Hotels Ltd has shown moderate to strong traction in the grey market.

If you consider the upper end of the price band of SAMHI Hotels Ltd at ₹126 as the indicative price, then the likely listing price is being signalled at around ₹136 per share as of the GMP indicator on 12th September 2023. One data point to track will be the subscription update on the stock as that would chart the GMP course from here. As mentioned, the institutional QIB subscription is a key trigger for the GMP pricing.

The GMP of ₹10 on a likely upper band pricing of ₹126 indicates a listing premium of a moderate to healthy 7.94% for SAMHI Hotels Ltd over the listing price. That pre-supposes a listing price of approximately ₹136 per share, when SAMHI Hotels Ltd lists on 27th September 2023. Of course, these are approximations, so you must keep a margin of safety. However, from here on, a lot will depend on the GMP sustaining over the next few days after the issue opens, as well as the subscription flow into the company IPO.

GMP (grey market price) is an important indicator, albeit informal, of likely listing price. One cannot take this price at face value However, the GMP tends to be quite dynamic and changes direction with the flow of news and events. Investors must note here that this is just an informal indication and has no official acceptance. The best thing one can do with the GMP is to observe the trend closely as that gives the best hints on listing status. Focus on the time series trend than on numbers.

Brief on SAMHI Hotels Ltd business model

SAMHI Hotels Ltd, is a branded hotel ownership and hotel property management platform having total portfolio comprising of 4,801 keys across 31 operating properties. Most of them are located in the key urban consumption centres of India like Bengaluru, Hyderabad, Delhi-NCR, Pune, Chennai, and Ahmedabad. It is also currently developing 2 hotels with a combined capacity of 461 keys in Navi Mumbai and in Kolkata. The recent acquisition of Asiya Capital and ACIC SPV has given SAMHI Hotels Ltd access to an additional 962 keys across 6 operating hotels. It has its keys under well recognized hotels operators like Courtyard Marriott, Sheraton, Hyatt, and Holiday Inn, among others. This provides SAMHI Hotels Ltd additional access to the loyalty programs of these hotel chains and their online reservation systems. SAMHI Hotels Ltd counts Equity International (led by Sam Zell), GTI Capital and International Finance Corporation (IFC) among its key shareholders.

The 4,801 keys held by SAMHI Hotels Ltd are spread across several premium properties across major destinations. These include 170 keys at the Courtyard by Marriott in Bengaluru, 270 keys at Fairfield by Marriott, Bengaluru across Whitefield and ORR properties, 153 keys in Fairfield by Marriott, Chennai, 148 keys at Fairfield by Marriott in Rajajinagar Bengaluru, 123 keys at Four Points by Sheraton, Vizag, 130 keys at Fairfield by Marriott, Goa, 109 keys at Fairfield by Marriott, Pune, 126 keys at Fairfield by Marriott, Coimbatore, 130 keys at Holiday Inn Express, Ahmedabad, 170 keys at Holiday Inn Express, Hyderabad and 161 keys by Holiday Inn Express, Bengaluru. In addition, SAMHI Hotels Ltd also has keys across Holiday Inn properties in Chennai, Gurugram, Nashik and Pune.

The company will use the proceeds from the IPO to repay loans taken by SAMHI Hotels Ltd and its subsidiaries, including accrued interest. The IPO will be lead managed by JM Financial and Kotak Mahindra Capital. KFIN Technologies (formerly Karvy Computershare is appointed the registrar to the IPO.