Grand Continent Hotels shares hit 5% lower circuit after muted debut on NSE SME; check details

Marking another disappointing trading debut, shares of small and medium enterprise (SME) Grand Continent Hotels Ltd were listed nearly flat on Thursday, March 27.

The Grand Continent Hotels stock opened the trading session at ₹112.9 apiece on the NSE SME platform, Emerge, on Thursday, down 0.08% compared to its initial public offering (IPO) price of ₹113 per share. Within minutes of the opening of the session, the share price further dropped as much as 5% to hit the lower circuit limit of ₹107.25.

Soon after listing, as many as 3.05 lakh shares changed hands on the NSE Emerge platform, with a total trading value of ₹3.41 crore. The company’s market valuation stood at ₹269.38 crore.

As the minimum bid quantity to apply for the Grand Continent Hotels IPO was 1,200 units, successful bidders who were allotted shares in the primary issue would have suffered potential losses of ₹120 per lot (₹0.1 x 1,200) as soon as the stock started trading in the secondary market.

The Grand Continent Hotels IPO, which was open for bidding from March 20 to March 24, was overall subscribed by 1.79 times during the three-day bidding window. Bids were received for 78.67 lakh shares compared with 43.86 lakh shares on offer.

The Qualified Institutional Buyers (QIBs) quota was the most subscribed at 2.93 times. This was followed by the non-institutional investors’ (NII) category that was overbid 1.39 times, while the retail investors’ portion was booked 1.32 times.

Grand Continent Hotels aimed to raise ₹74.46 crore through its 100% book-built issue. The IPO was a combination of a fresh issuance of 62.6 lakh shares, aggregating to ₹70.74 crore, and an offer-for-sale (OFS) of 3.29 lakh shares, amounting to ₹3.72 crore. The company had fixed the price band of the issue at ₹107 to ₹113 per share, while the lot size was 1,200 shares.

Ahead of the launch of the IPO, Grand Continent Hotels also raised ₹21.17 crore through an anchor investor round. The board of directors of the company at its meeting held on March 19 finalised allocation of 18.73 lakh equity shares to a total of 7 anchor investors at an allocation price of ₹113 per share.

Grand Continent Hotels plans to utilise the net proceeds from the IPO mainly for repayment of loans and capital expansion plans.

In its red herring prospectus (RHP) submitted to the Securities and Exchange Board of India (Sebi), Grand Continent Hotels said that it proposed to use nearly ₹34.1 crore of the IPO proceeds for repayment and/or prepayment, in full or in part, of certain outstanding borrowings availed by the company. It also planned to use ₹16.8 crore for expansion of hotel properties in India. The remaining amount was to be used for general corporate purposes.

Founded in 2011, Grand Continent Hotels Ltd is a hospitality company that caters to the mid-market hotel segment. The hotel group has a portfolio of over 19 properties in nine major cities in India. Located in prime urban areas, each hotel is designed to meet the needs of both business and leisure travellers.

As of September 30, 2024, the company and its joint venture partner entities operated hotels across Karnataka (Bengaluru/Mysuru), Tamil Nadu (Hosur), Goa (Anjuna/Morjim), Andhra Pradesh (Tirupati) and Telangana (Secunderabad).

For the first six months of the current financial year 2024-25 ended September 2024, Grand Continent Hotels reported consolidated revenue of ₹31.86 crore and a profit after tax (PAT) of ₹6.81 crore.

For the previous financial year 2023-24, the company reported a revenue of ₹31.53 crore compared to ₹17.05 crore in FY 2022-23. The hotel chain’s net profit increased multi-fold to ₹4.12 crore for FY24 compared to ₹1.05 crore in FY23.