Silver Pearl Hospitality & Luxury Spaces coming with an IPO to raise upto Rs 9 crore

Silver Pearl Hospitality & Luxury Spaces

• Silver Pearl Hospitality & Luxury Spaces is coming out with an initial public offering (IPO) of 5000000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 18 per equity share.
  
• The issue will open on June 6, 2022 and will close on June 9, 2022.
  
• The shares will be listed on SME Platform of BSE.
  
• The share is priced 1.80 times higher to its face value of Rs 10.
  
• Book running lead manager to the issue is Inventure Merchant Banker Services.
  
• Compliance Officer for the issue is Nandani Bhardwaj.
  

Profile of the company

The company is a hospitality company and operate in the mid-priced hotel sector, consisting of the upper-midscale, midscale and economy hotel segment. Its current properties are located in Rakchham, Kinnaur, Himachal Pradesh. Rakchham village is located in Sangla Tehsil of Kinnaur district in Himachal Pradesh, India. Rakchham village is around 10 km from Chitkul and around 12 km from Sangla and is located between the two. Its first hotel property started operations in FY 19-20. It also operate a cafe at Rakchham. All its hotels, cafes and restaurants are operated under the brand name “Osiya”. It provide authentic hospitality and give its guests a localized and memorable experience. It also seek to cater to family as well as adventure loving guests and deliver differentiated yet superior service offerings, with a value-for-money proposition. Currently, it is operating with 36 rooms in 4 properties.

The company owns, manage, operate and market the hotels. It also operate restaurants and a cafe. The cafe has seating capacity for 100 people. It undertake its business through: (i) direct ownership of hotel properties, (ii) long-term lease or license arrangements for the land on which it construct its own hotels, (iii) long-term leases for existing hotels or home stays which are owned by third parties, and (iv) marketing agreements. Its business development, project management and execution process teams are involved in gathering relevant market data and assessing the potential of different locations. Its hotel operations team seeks to ensure standardized pre-opening and seamless day-to-day operations, at desired levels of service and cost efficiencies. It follow a dynamic pricing policy based on various factors including anticipated demand, market conditions, inflation, competition, the state of micro-markets in which it operate and the economy in general. It is registered with all major travel portals for online booking as these days most of the guests book through online portals.

Proceed is being used for:

• Purchase of hotel property in Goa.
  
• General corporate purposes.
  

Industry overview

The Indian tourism and hospitality industry have emerged as one of the key drivers of growth among the services sector in India. Tourism in India has significant potential considering the rich cultural and historical heritage, variety in ecology, terrains and places of natural beauty spread across the country. Tourism is an important source of foreign exchange in India similar to many other countries. The foreign exchange earnings from 2016 to 2019 grew at a CAGR of 7% but dipped in 2020 due to the COVID-19 pandemic. In FY20, tourism sector in India accounted for 39 million jobs, which was 8% of the total employment in the country. By 2029, it is expected to account for about 53 million jobs. According to WTTC, India ranked 10th among 185 countries in terms of travel & tourism’s total contribution to GDP in 2019. During 2019, contribution of travel & tourism to GDP was 6.8% of the total economy, Rs 13,68,100 crore ($194.30 billion).

India is the most digitally advanced traveler nation in terms of digital tools being used for planning, booking, and experiencing a journey. India’s rising middle class and increasing disposable income has supported the growth of domestic and outbound tourism. By 2028, Indian tourism and hospitality is expected to earn $50.9 billion as visitor exports compared with $28.9 billion in 2018. The travel market in India is projected to reach $125 billion by FY27 from an estimated $75 billion in FY20. The Indian airline travel market was estimated at $20 billion and is projected to double in size by FY27 due to improving airport infrastructure and growing access to passports. The Indian hotel market including domestic, inbound and outbound was estimated at $32 billion in FY20 and is expected to reach $52 billion by FY27, driven by the surging demand from travelers and sustained efforts of travel agents to boost the market.

Pros and strengths

Operational efficiency: The company strive to align its staffing levels and expenses with demand without compromising its commitment to authentic hospitality and levels of guest satisfaction. It has made significant changes in operations in response to recent declines in demand for hospitality products and services due to ongoing Covid 19 pandemic. The company will continue to incentivize and assist its hotel general managers as they proactively manage both the customer experience and the operating costs at each of their properties.

Customer experience: The company’s operational practices are aligned with consumer needs and preferences and are targeted at boosting overall customer experience across all its establishments. It continuously look for ways to improve the experience of customers that visit its establishments. It continually invest in refurbishing its hotels and cafes and improving the ambience for better customer experience.

Experienced promoter and management team: The company’s promoter, Rajesh Kumar Negi, has approximately over a decade of experience in the hotel and hospitality industry. Its management team also has substantial experience in the hospitality industry. The strength of its management team and its understanding of the hospitality market enables it to continue to capitalize on current and future market opportunities.

Risks and concerns

Operate in highly competitive industry: The segments of the hospitality industry in which the company operate are subject to intense competition. Its principal competitors are other operators of full service and select service properties, including other major hospitality chains with well-established and recognized brands. It also compete against smaller hotel chains and independent and local hotel owners and operators. If it is unable to compete successfully, its revenues or profits may decline or its ability to maintain or increase its market share may be diminished.

Business is subject to seasonal and cyclical variations: The hotel and hospitality industry in India is subject to seasonal variations. Its current properties are located in colder and hilly terrain, hence guest arrival is also slow during November to February. The periods during which its hotel properties experience higher revenues vary from property to property, depending principally upon location and the guests served. Foreign leisure travel occurs primarily between October and March and to a lesser extent during the summer and monsoon seasons. This seasonality can be expected to cause quarterly fluctuations in revenue, profit margins and net earnings. Further, the timing of opening of newly constructed or franchised hotels and the timing of any hotel acquisitions or dispositions may cause a variation of revenue and earnings from quarter to quarter. Further, the hospitality industry is cyclical and demand generally follows, on a lagged basis, key macroeconomic indicators. There is a history of increases and decreases in demand for hotel rooms, in occupancy levels and in room rates realized by owners of hotels through economic cycles.

High competition to attract guests in hospitality industry: The company competes for guests based primarily on brand name recognition and reputation, location, customer satisfaction, room rates, quality of service, amenities and quality of accommodations. Some of its competitors are larger than it is based on the number of properties they manage, franchise or own or based on the number of rooms or geographic locations where they operate. Some of its competitors also have significantly more members participating in their guest loyalty programs which may enable them to attract more customers and more effectively retain such guests. Its competitors may also have greater financial and marketing resources than it does, which could allow them to improve their properties and expand and improve their marketing efforts in ways that could affect its ability to compete for guests effectively. In addition, industry consolidation may exacerbate these risks.

Outlook

Silver Pearl Hospitality & Luxury Spaces is a hospitality company. The company is involved in the mid-priced hotel category, which includes upper-midscale, midscale, and economy hotels. Silver Pearl Hospitality's current properties are located in Rakchham, Kinnaur, and Himachal Pradesh. Silver Pearl Hospitality & Luxury Spaces Limited hotels, cafes and restaurants are operated under the brand name ‘Osiya’. The company also engages in the business of Online Marketing and Branding of Tashi Dolma Home stay situated at Bhabha Nagar, Tehsil Nichar, District Kinnaur, Himachal Pradesh on a commission basis. The guest house will be known as ‘Osiya Tashi Dolma Home Stay’. On the concern side, certain operational risks are inherent in its businesses due to the nature of the industry in which it operate. Its hotels are subject to various operating and business risks common to the hotel and hospitality industry, including the impact of security issues on the quantity of travelers and destinations of business travel; the financial condition of third-party property owners of its hotels; and the financial situation of the aviation industry and its impact on the hotels and hospitality industry.

The company is coming out with a maiden IPO of 5000000 equity shares of Rs 10 each at a fixed price of Rs 18 per share to mobilize around Rs 9 crore. On performance front, the revenue from operations for the FY 2022 is Rs 45.12 lakh as compared to Rs 18.41 lakhs during the FY 2021 showing increase of 145.16%. Profit after Tax (PAT) increased from Rs 0.47 lakh for the FY 2020 to Rs 3.30 lakh in FY 2021. Meanwhile, the company seeks to diversify its geographical footprint to reduce its exposure to local, seasonal and cyclical fluctuations as well as in order to access a more diversified guest base across geographies. With this strategy in focus it intend to purchase a hotel property in Goa. This property will increase its geographical reach and also provide it business during winter season from November to February which is comparatively a lean season for its properties situated in Rakkcham, Himachal Pradesh.