EUR 88.49 For Business Accounts Only

Samhi Hotels Pre-IPO - Assets and borrowings are growing, but earnings haven’t kept pace

Samhi Hotels plans to raise up to US$300m in its Indian IPO. Samhi Hotels is India’s third-largest hotel asset owner, by number of keys, with a portfolio of 27 operating hotel assets comprising of 4,048 keys, as of Jun 2019. The company was founded in 2010 and has since rapidly grown its footprint via acquisitions. The company is backed by Goldman Sachs, which held a 28% stake prior to listing.

Samhi has a diversified set of assets across different cities and segments. Samhi focuses on the upper upscale, upscale and midscale hotel segments. 25 out of the 27 hotels are run under the Marriott, IHG and Hyatt brands.

Its revenue growth has been picking up pace over the past few years. However, its ramp-up assets, which are supposed to be leading its growth haven’t really been contributing as much. Samhi remains highly dependant on its upscale (four star) and upper upscale (five star) mature assets for earnings. However, it has only been acquiring mid-scale (three star) assets over the past few years. While these might drive revenue growth, their impact on profitability will be lower as their margins will likely trail those of the higher tier assets.

The company had some issues with servicing its debt covenants at the asset level. In addition, some of its shareholding at the asset level remains pledged with lenders and its overall borrowing has been rapidly rising.