Viceroy Hotels RI review - (Avoid)

•    The company is region centric hospitality service provider.
•    While it posted growth in top lines, its bottom lines marked highly volatile trends.
•    Thanks to deferred tax credit that boosted its bottom lines for H1 of FY25, which has helped it to price its RI with fancy valuations.
•    This can be a "High Risk/ Low Return" bet. Investors may skip it.

PREFACE:
For this RI, while the offer documents were available since last week on NSE, no final documents were found on BSE Exchange till this eve. (i.e. December 10, 2024). The offer document has filing date of November 29, 2024. As per latest info, BSE uploaded the offer document late eve of 10.12.24.

ABOUT COMPANY:
Viceroy Hotels Ltd. (VHL) the company that was originally incorporated as Krishna Cold Drinks Pvt. Ltd. and kept changing its name to finally arrived at the current name. It had a vision to establish itself as the prominent hospitality player in the region of its operations. 

The company's strategic location in Hyderabad, a major commercial hub, has facilitated its expansion and operational success. VHL's portfolio includes a range of hotels that cater to both business and leisure travelers, showcasing its versatility and commitment to meeting diverse market needs.

Throughout its history, VHL has consistently pursued growth through the development and acquisition of properties, reinforcing its position in the industry. The company has focused on creating environments that combine comfort, luxury, and modern amenities, attracting a loyal customer base. 

The company is into hospitality business that owns two hotels in Hyderabad under the Marriott and Courtyard by Marriott brands. Situated in Hyderabad's Central Business District, these hotels serve both business and luxury travelers. Its goal is to meet guest expectations with impeccable hospitality and modern amenities, and its vision is to be the top option for travelers looking for luxury and comfort at a reasonable price. As of the date of this Letter of Offer, it had 403 employees in addition to its management.

ISSUE DETAILS:
The company is coming out with a Rights Issue (RI) of 4421053 equity shares of Rs. 10 each at a fixed price of Rs.  112 per share to mobilize Rs. 49.52 cr. The RI opens for subscription on December 12, 2024, and will close on December 24, 2024. The full amount is to be paid on application for number of shares applied. The company is offering RI in the ratio of 7 for 10 to its eligible stakeholders as of the record date of November 29, 2024. Post allotment, shares will be listed on BSE and NSE. The company is spending Rs. 0.40 cr. for this RI process, and from the net proceeds, it will utilize Rs. 37.50 cr. for capex on renovation of existing properties, and Rs. 11.62 cr. for general corporate purposes. 

Navigant Corporate Advisors Ltd. is the advisor to the issue and Venture Capital and Corporate Investments Pvt. Ltd. is the registrar to the issue. 

Post-RI, company's current paid-up capital of Rs. 63.16 cr. will stand enhanced to Rs. 67.58 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 756.88 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last xxx fiscals, the company has (On a consolidated basis) posted total income/net profit/ - (loss) of Rs. 120.00 cr. / Rs. - (0.06) cr. (FY23), Rs. 139.22 cr. / Rs. 2.39 cr. (FY24). For H1 of FY25 ended on September 30, 2024, it earned a net profit of Rs. 60.74 cr. on a total income of Rs. 66.07 cr. Thanks to deferred tax provisions of Rs. 54.27 cr. that boosted its bottom line for H1 o FY25. Inconsistency in its bottom lines with accounting adjustment for deferred tax boosting its bottom line for last six months' financial performance raises eyebrows and concerns. 

DIVIDEND POLICY:
The offer document is silent on its dividend policy. It will adopt a prudent dividend policy post listings of RI shares based on its financial performance and future prospects. 

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 523796 (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 141.60 on November 28, 2024, and opened on an ex-right basis at Rs. 134.95 on November 29, 2024. Since then, it has marked a high/low of Rs. 135.25 / Rs. 121.55. The scrip last closed at Rs. 127.95 as of December 10, 2024. For the last 52 weeks' it has posted a high/low of Rs. 135.25 / Rs. 37.99. The counter is witnessing thin volume with vested interest trades. The counter is currently under IRP: Stage 0.

The promoters' holding has been constant at 90.00% for the last two quarters ended with Sept. 30, 2024. The counter is well managed above the RI by vested interests (due to low floating stock) to lure investors. Promoter's high holding it the only attraction and is also a bit surprising as to stay listed, minimum 25% dilution is mandatory.