Chalet Hotels IPO opens next week, issue size lowered due to volatility

Company has retained fresh issue component, while promoter has decided to sell fewer shares than earlier intended

K Raheja Corp-promoted Chalet Hotels' Rs 1,690-crore initial public offering (IPO) will hit the market next week. Sources say the hotel property owner has lowered the share sale size due to volatile market conditions.

Chalet Hotels plans to raise about Rs 950 crore by fresh equity issuance and the promoter group plans to offload shares worth another Rs 700 crore in the IPO. Earlier, the IPO size was intended to be around Rs 1,900 crore.

Sources say the company has retained the fresh issue component, while the promoter has decided to sell fewer shares than earlier intended.  

Chalet Hotels had filed its offer document with market regulator Securities and Exchange Board of India (Sebi) in June. Since then, the market has been on a topsy turvy ride amid several global and domestic headwinds.

"The decision to lower the issue size has been taken post market feedback. The fresh capital raising remains the same. The promoters have agreed to sell less. The decision has been taken post market feedback. The promoters want to leave gains on the table," said an investment banker. 

A query sent to the group's spokesperson didn't elicit an immediate response.  

JM Financial, Axis Capital and Morgan Stanley are the bankers to the issue. Chalet Hotels' IPO will remain open for subscription between January 29 and January 31. The company will allot shares under the anchor category on Monday.

Investment bankers are hopeful that Chalet Hotels will break the lull in the primary market. Since October, not even a single company has launched an IPO. On Wednesday, Xelpmoc Design launched its Rs 23-crore IPO.

Market players say there are about half a dozen IPOs waiting to hit the market in February.

"If the response to Chalet Hotels' IPO is good and there are no negative surprises in the Union Budget, we could see a flurry of issues next month," said another banker.

Chalet Hotels owns several hotel properties and serviced apartments in key metros. Mumbai's Renaissance and Courtyard by Marriott are owned by the company. The company has upcoming projects in Hyderabad and Bengaluru.

The last IPO by a hotel company was by Lemon Tree in March 2018. The IPO size was about Rs 1,040 crore. Currently, shares of Lemon Tree are trading at Rs 68, about 20 per cent higher than the issue price of Rs 56 per share.