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As it looks to grow its market share and expand its portfolio, Brigade Hotel’s IPO plans highlight not only the company’s growth potential, but also the broader optimism surrounding the Indian hospitality sector.

Peden Doma Bhutie

Brigade Hotel Venturesowner and developer of hotels mainly in South India, has filed its Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI). The company said it plans to raise up to INR 9 billion ($107 million) through a new share issue.

Brigade Hotel said it may also seek to raise up to INR 1.8 billion ($21 million) through a pre-IPO placement.

In September, Schloss Bangalore, the luxury hotel group behind The Leela Palaces in India, filed for $599 million (50 billion INR) IPO, the largest ever in the Indian hospitality industry.

What does Brigade Hospitality do?

A 100% subsidiary of Brigade Enterprises, Brigade Hotel Ventures benefits from the real estate expertise of its parent company, which entered the hospitality sector in 2004. Brigade Enterprises’ evolution into hospitality began with the Grand Mercure Bangalore , which started operations in 2009, and has since expanded across South India, covering key states like Karnataka, Tamil Nadu and Kerala, as well as the city Gujarat GIFT.

With nine properties totaling 1,604 rooms, Brigade Hotel properties span major urban centers such as Bangalore, Chennai and Kochi. The company partners with global hotel operators Marriott, Accor and InterContinental Hotels Group in the upscale, upscale, upper midscale and midscale segments.

The Company owns or leases hotel assets and engages global hotel companies to operate, maintain and market its hotel assets under management contracts.

How will it use the IPO money?

Brigade Hotel said it plans to use a significant portion of its IPO proceeds – INR 4.8 billion (around $57 million) – to pay down a significant portion of its existing debt.

Specifically, the company intends to allocate INR 4.1 billion ($49 million) for its own debt reduction and INR 690 million ($8 million) to settle the outstanding borrowings of its major subsidiary, together covering more than 79% of its consolidated debt.

The company plans to restructure its finances in fiscal years 2025 and 2026 to reduce interest expense and increase cash flow flexibility.

The remainder of the funds will fuel Brigade’s ambitious expansion plans, including the development of five new hotels in high-growth regions in India. The company aims to expand its presence by focusing on key markets in South India and tapping emerging opportunities in tourist hotspots like Goa and popular pilgrimage destinations. In 2022, the number of domestic tourists who visited Indian pilgrimage sites was greater than India’s population, which was 1.43 billion.

The company will also reserve part of the funds for possible acquisitions.

Where are the upcoming hotels going?

The company plans to expand its presence with a series of high-profile properties across South India, catering to a range of hospitality segments. A luxury resort on the East Coast Road (ECR) in Chennai, Tamil Nadu, planned under the Grand Hyatt brand. The Chennai project highlights Brigade’s desire to tap the market for premium resorts along Tamil Nadu’s picturesque coastline.

In Bangalore, the company is eyeing the upper midscale segment with two new hotels under the Fairfield by Marriott brand. However, Brigade Hotel noted that these projects are still awaiting approval from Marriott’s board of directors and the signing of definitive agreements.

Brigade’s expansion strategy also includes a luxury InterContinental hotel in Hyderabad, strengthening its presence in India’s growing metropolitan markets. The company’s developer, Brigade Enterprises, has already signed a definitive agreement with InterContinental Hotels Group for this project.

Additionally, Brigade is venturing into wellness tourism with plans for a sprawling resort in Vaikom, Kerala, spanning nearly 15 acres. Construction timelines suggest that Brigade aims to complete the Chennai and Bengaluru projects by FY2028, while the resorts in Hyderabad and Vaikom are expected to open by FY2029.

What is the company’s current financial situation?

The company turned profitable in FY 2024, recording a profit of INR 311 million compared to a loss of INR 31 million in the previous financial year and a loss of INR 827 million in FY 2022.

The company’s operational revenue increased from INR 1.5 billion in FY 2022 to INR 3.5 billion in FY 2023 and over INR 4 billion in FY 2022. 2024.

For the first 3 months of FY2025, for the period ending June 30, 2024, the Company incurred a loss of INR 58 million, primarily due to the reversal of deferred tax assets following the adoption of a new tax regime, Brigade Hotel said in the draft prospectus.

The company said it earns a significant portion of its revenue from the food and beverages served at its hotels. About 32% of its revenue comes from the food and beverage business in fiscal 2024.