Samhi Hotels - Turnaround with Tailwinds

Stock Opportunities
346

Not necessarily. We shouldn’t forget that there were some IPO lock-ins expired in March.

I feel this is a decent mix given the current supply in terms of expired lock-ins. There are also chances that they’re waiting for higher levels to make an exit.

Disc- Invested

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347

Positive step towards Debt reduction.

Disc - invested.

https://www.moneycontrol.com/news/business/markets/samhi-hotels-shares-surge-7-as-gic-set-to-acquire-rs-752-crore-stake-in-firm-s-three-subsidiaries-13002868.html

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348

As stated earlier, Golden period started for this stock today, GIC invested 2200 cr. Debt reduced from 2070 cr to 1460 cr, Debt/ EBIDTA level now at 3.5, interest saving 60 cr, minority interest 43 cr. Increase in profit 16-20 cr.

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Sami Hotels x GIC: Business update call Summary

  • Samhi Hotels has partnered with GIC to form an upscale hotel investment platform in India for upscale and higher-category hotels in India
  • GIC will invest ₹752 crore for a 35% stake in three upscale hotel subsidiaries (Courtyard & Fairfield by Marriott Bangalore, Hyatt regency Pune, Trinity Hotel Bangalore Whitefield)
  • the total investment implies a valuation of approximately ₹2,200 crores for the three subsidiaries
  • ₹603 crore upfront will be used to reduce debt and a small amount towards deal expenses and ₹149 crore will be invested over 2 years to partly fund capex for the Westin and tribute Portfolio hotel

debt & balance sheet impact:

  • debt reduction of 580 crores
  • net debt to EBITDA at closing falls below 3.5x, better than earlier guidance.
  • they wants to reduce this below 3.0x within 12 months and target 2.5x long term without slowing growth.
  • the non-JV assets will initially have a higher leverage (around 4.4 times), but the plan is to normalize this across the portfolio over time

finanical upside

  • they see 15–20% upside in PAT driven because of lower interest costs and the creation of minority interest. this estimate currently only factors in debt reduction and not potential savings from lower interest rates
  • they see reduction in interest rates (currently around 9.4%) due to the stronger balance sheet and partnership with GIC

platform structure:

  • this JV structure will allow samhi to:
    • retain 65% control
    • earn 4% of EBITDA generated by the hotels as an asset management fee
      • this fee flows directly to the parent entity’s EBITDA
    • tap into GIC’s ₹1000+ crore future capital runway.

strategy and growth outlook

  • samhi will continue to see opportunities in the midscale segment
  • samhi prefers inorganic growth (acquisition + turnaround of assets) in the upscale space over greenfield development.
  • the partnership with GIC provides capital and credibility to grow the upscale platform beyond the initial three assets.

Q&A highlights

  • GIC is a long-only investor with a patient capital profile.
  • no immediate exit pressure; focus is on building a premium, cash-generating platform
  • no put options for GIC on Sami Hotels, except in an event of default
  • the transaction will improve credit rating

feel free to add if i missed anything

links to dive deeper:
deck
audio recording

disc: invested

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GIC Deal – Impact on Samhi

  • Subsidiary Acquisition: GIC has acquired 35% stake in 3 subsidiaries generating a combined ₹133 crore TTM EBITDA.
    • Samhi’s Share: 65% of EBITDA + 4% management fees = 69% of ₹133 crore, totaling approx. ₹91.77 crore.
    • GIC’s Share: Remaining 31% = ₹41.23 crore of EBITDA.
  • Debt Reduction:
    • Samhi will reduce debt by ₹580 crore.
    • At the current interest rate of 9.4%, this results in annual interest savings of ₹54.42 crore.
    • Note: This does not include savings from minority interest, which will further enhance overall impact.
  • Refinancing Potential:
    • There’s potential to refinance the remaining debt at lower interest rates, leading to additional interest cost savings over time.
  • Growth Outlook:
    • Management has guided for 15–20% EBITDA growth over the next 3–4 years.
    • They consider this a conservative estimate.

Disclosure: Invested.

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351

Good news that debt reduction is happening.

Though stock price ran significantly starting 15th Apr .I am assuming it was due to this partnership. Did the information was public or we missed something? If no , isn’t it insider info leakage?

Disclosure : Invested.

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352

What do you mean by savings in minority interest?

353

if the content is AI generated, please mark it as such.

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AI was used to improve the readability of the content, but the original content itself was not AI-generated.

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356

One of the subsidiary, Ascent Hotels, has a debt of about 200 crores. The interest on this debt will also be shared in the JV ratio.
Out of the two remaining subsidiaries, one is already debt free and the other will become debt free after this transaction.

357

What would be the percentage of total revenue from these subsidiaries?

I get that they will consolidate as they have 65%.

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358

Ok Got it.

They are giving up 40 crores of EBIT for a 750-crore investment and 2200 crores valuation. GIC paid 55x EBIT, which is high…That’s how one should see it. That’s actually pretty good.

need to change my mind here and look at it with fresh eyes.

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359

I don’t think they’ve paid 55x. Below is some calculation based on the business update call recording.

The SPV is valued at 2200 crores based on this transaction and GIC is only investing 752 crores in this for 35% stake.

image
image763×564 62.3 KB

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But you’re understanding is right.. We’re giving up some EBIDTA for upfront cash to reduce debt levels without equity dilution. And we’re getting a fantastic partner who will be active in operations as well as for future capital. This is definitely a win from SAMHI’s perspective.. Also, it’s heartening to listen to Ashish saying that they’ve heard investors voices loud and clear about the Debt and so this…

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Apologies.. You were probably right.. you were talking about EBIT multiple :+1:

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Just one change in the numbers here as per my understanding. The EBITDA at the consolidated level in the reported numbers will not change since GIC has acquired a minority stake.

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363

If you value Samhi Hotels at 17x EBIDTA the valuation is approx 4750 cr which is approx 17% premium to current mcap.

Seema like almost fairly valued…unless the EBIDTA is expected to grow ata brisk pace with increased capacities coming in operation in the near term.

Disc- Invested

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364

How do you get 17x ebitda= 4750cr

Q3 ebitda was close to 117cr.,
So I am assuming Fy25 complete would be close to 400 cr right?

I am missing something?

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365

Sorry bad…EBITA on TTM basis is 370 crore. Applying similar EBITA multiple we get a valuation of approx 6300 cr which is significantly higher than current MCap

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