IPO Update: Royal Orchid Hotels

Capitalising on IT Cities, Strong business outlook

Royal orchid hotels has eneterd the capital market with a initial public offer of 68.2 lac shares on a book building basis in a price band of Rs150-165.

Investment Guru recommends investor to subscribe to the public issue. The issue not only offers handsome listing gains, but can also be hold for a medium term perspective. The hotel industry is in limelight and is expected to outperform in the near future. Royal orchid has an advantage of having hotels at prime locations in the happening city of bangalore and mysore and planning to expand in high demand cities of hyderabad and Pune.

Company & Issue highlights

The company belongs to Baljee group and operates 3 hotels in Bangalore & 1 in Mysore.

The company propose to use the issue procedds to expands its hotel chain to Hyderabad, Pune & Bangalore.

The company is focussing on the happening cities in India where the room occupancy and room rates are high. The business is less dependant on tourism and more on the business travels in these IT cities. The demand for hotels in these cities is expected to remain robust.

The company reported a profit of 12.98 Crore on a turnover of 58 crore for FY2005. However for the First half of current year, the profit zoomed to 8.56 croreson a turnover of 35 Crores.

Based on FY05 EPS of 7.10, the issue price works out to be at P/E multiples of 23. The peers are currently valued at a P/E range of 20-30.

Issue details
Opens: January 12th,2006
Closes : January 17th,2006
Registrar : MCS Ltd.
Retail Investors: Rs.1 Lac