INSTITUTIONAL EQUITY RESEARCH Chalet Hotels Ltd.backoffice.phillipcapital.in/Backoffice/Researchfiles/PC_-__Chalet... · operates these branded hotels in the 5-star deluxe and 4-5

INSTITUTIONAL EQUITY RESEARCH

Page | 1 | PHILLIPCAPITAL INDIA RESEARCH

Chalet Hotels Ltd.

Best-placed in the premium segment

INDIA | MID- CAP | IPO Note

30 January 2019

Chalet Hotels (CHL), part of the K. Raheja Corp, is a developer and asset manager of high-end hotels in high-entry-barrier cities including JW Marriott Mumbai Airport (585 rooms/keys), Bengaluru Mariott Hotel Whitefield (391), The Westin Hyderabad Mindspace (427), Four Points by Sheraton Navi Mumbai (152), Renaissance Mumbai Convention Centre Hotel (600) and Lakeside Chalet, Mumbai-Marriott Executive Apartments (173). The company operates only in luxury-upper-upscale (5-star deluxe luxury) and upscale (4-5 star) segments. In FY18, its revenue/EBITDA/OPM/PAT was Rs 8.7bn/2.9bn/33.7%/312mn.

About the company: CHL’s parent, K Raheja Corp., incorporated in 1956, has more than 60 years of experience in residential development. CHL follows an active asset-management model – 20 years ago, it was the first partner in India for Marriott. Its recent JW Marriott Sahar Hotel in Mumbai was built at a per-key land cost of Rs 14mn with 1,100 sq. ft. utilisation per room (industry is at Rs 20-25mn with utilisation of 1,500 sq. ft.), indicating better efficiency. CHL aims to achieve utilisation of 800-850 sq. ft. per room in its future acquisitions. It operates at 1.2 employees per key vs. the industry average of two in the 5-star deluxe segment.

IPO rationale – raising funds for capex and debt repayment: CHL is raising Rs 16.4bn through its IPO (offer for sale by promoters and fresh issue) for repayment of debt of Rs 7.2bn. At the IPO price band of Rs 275‐280, the stock trades at EV/EBITDA of 17.3x on our FY20 expectations.

Chalet’s core strategy

Promoter pedigree: Backed by K Raheja Corp, a leading real estate developer in India.

Assets at the right location: High entry barrier markets – Mumbai, Bengaluru, and Hyderabad. All these cities are currently operating at high occupancy (%). CHL is now looking for ARR improvement.

Higher asset sweating: Properties are a mix of hotels, commercial, and residential. Large hotels help create economies of scale.

Partnership :Assets are Operated by Marriott – a leading global hotel operator.

All the above factors result in lower than industry headcount metrics, efficient usage of power, premium EBITDA margins (for the hotels business) and high ROCE.

Key risks 1) Agreements with Marriott and other branded hotels – if terminated, CHL may be

adversely affected. 2) Deceleration in India’s economic growth.

Our view: The company has a strong business model with a robust brands and a presence in key markets. CHL is best-placed in the premium segment. Its FY14-18 revenue and EBITDA CAGR was 18%/33%. Currently all properties are operating at peak occupancy of 70%+ and are looking at increasing prices (ARR improvement). Its balance sheet should get better as it plans to reducing its debt through IPO proceeds – expect debt to fall to Rs 16.4bn from Rs 23.6bn in FY18. All incremental capex over FY20-21 will be through internal accruals. We expect revenue/PAT CAGR of 8.3%/13.4% over the next two years (FY18-20).

At the upper band of Rs 280, CHL would trade at an FY19/20 EV/EBITDA of 19x/17x (25% DISCOUNT TO INDUSTRY AVERAGE). We like the business model, brand association, and presence – which should lead to higher than industry margins and ROCE. We recommend SUBSCRIBE.

SUBSCRIBE COMPANY DATA ISSUE OPENS 29-Jan-18 ISSUE CLOSES 31-Jan-18 PRE- ISSUE EQUITY SHARES 171.1mn - LOWER BAND Rs 275 - UPPER BAND Rs 280 PRICE BAND Rs 275 - 280 - FRESH ISSUE 33.9mn - OFS 24.7mn NO OF SHARES TO BE ISSUED 58.6mn RETAIL DISCOUNT (RS) Rs 0 ISSUE SIZE Rs 16.12-16.4bn POST- ISSUE EQUITY SHARES 205.0mn MKT CAP Rs 56.4-57.4bn

Consolidated Financials Y/E Mar, Rs mn FY18 FY19E FY20E

Net Sales 8,738 9,571 10,257 OperatingProfit 2,944 3,337 3,789 OPM (%) 33.7% 34.9% 36.9% Adj. PAT 312 121 1,007 EV/EBITDA 25.2 19.3 17.3 P/E@Rs 280 184.2 476.4 57.0

Deepak Agarwal (+ 9122 6246 4112) [email protected] Akshay Mokashe (+ 9122 6246 4130) [email protected]

mailto:[email protected]

mailto:[email protected]


CHALET HOTELS LTD.

IPO NOTE

About the IPO Issue size: Rs 16.4bn.

58.6mn shares at Rs 275‐280 per share; 24.7mn shares offered for sale by promoters and management; fresh issue of 33.9mn shares.

Market capitalisation: Rs 56.4‐57.4bn.

Of the Rs 16.4bn proceeds from the fresh issue, Rs 7.2bn will be used for debt payment, offer expenses, and general corporate purposes.

Chalet Hotels: Issue details

ISSUE OPENS 29-January-18

ISSUE CLOSES 31-January-18

PRE- ISSUE EQUITY SHARES 171.1mn

- LOWER BAND Rs 275

1 - UPPER BAND Rs 280

PRICE BAND Rs 275 - 280

- FRESH ISSUE 33.9mn

- OFS 24.7mn

NO OF SHARES TO BE ISSUED 58.6mn

RETAIL AND EMPLOYEE SHARE (%) 0%

ISSUE SIZE Rs 16.12-16.4bn

POST- ISSUE EQUITY SHARES 205.0mn

MKT CAP Rs 56.4-57.4bn

Source: RHP, PhillipCapital India Research

Share holding pattern pre-issue

Name of shareholder

Pre-Offer No. of shares

offered Post-Offer

Shares

Pledged

% of total

pre-offer

No. of Equity

shares

% of Eq.

Share Capital

No. of Equity

shares

% of Eq. Share

Capital

Ravi C. Raheja 15,876,318

9.28% 5,550,000 10,326,318 7.05%

Neel C. Raheja 15,876,318

9.28% 5,550,000 10,326,318 7.05%

K. Raheja Corp Private Ltd. 14,570,000

8.52% 10,784,176 3,785,824 2.59%

K. Raheja Private Ltd 12,400,000

7.25%

12,400,000 8.47%

Ivory Properties and Hotels Private Ltd. 5,572,253

3.26% 2,000,824 3,571,429 2.44%

Ivory Properties and Properties Private Ltd* 7,780,404

4.55%

7,780,404 5.31%

Genext Hardware and Parks Private Ltd 8,000,000

4.68%

8,000,000 5.46%

Touchstone Properties Hotels Private Ltd. 14,500,000

8.47%

14,500,000 9.90% 14,400,000

8.42%

Cape Trading LLP 13,116,180

7.67%

13,116,180 8.96% 13,116,180

7.67%

Capstan Trading LLP 16,495,680

9.64%

16,495,680 11.27% 2,995,680

1.75%

Casa Maria Properties LLP 16,496,280

9.64%

16,496,280 11.27%

Anbee Constructions LLP 13,116,180

7.67%

13,116,180 8.96% 13,116,180

7.67%

Palm Shelter Estate Development LLP 800,000

0.47% 800,000 0 0.00%

Raghukool Estate Development LLP 16,495,680

9.64%

16,495,680 11.27% 3,395,680

1.98%

Other Public

58,613,571 28.59%

Total 171,095,293

100.00% 24,685,000 205,023,864 100.00% 47,023,720

27.48%

Source: DRHP, PhillipCapital India Research


CHALET HOTELS LTD.

IPO NOTE

About Chalet Hotels Ltd CHL is an owner-developer and asset manager of high-end hotels in metro cities in India and is a part of the K. Raheja Corp. The company operates five hotels in Mumbai, Hyderabad and Bengaluru, representing 2,328 room as of March 2018. It operates these branded hotels in the 5-star deluxe and 4-5 star hotel segments. Its hotels are currently branded with global brands such JW Marriott, Westin, Marriott Executive Apartments, Renaissance and Four Points by Sheraton which are held by Marriott Hotels India Private Limited and its affiliates. CHL follows an active-asset-management model for four hotels operated by third parties.

Segment-wise breakup

Chalet Hotels Ltd

CommercialBusines Centre & Office, Mumbai 374358

Whitefield Bengaluru 109228

RetailThe Orb 123082

Inorbit Mall, Bengaluru 260279

Hotel Name No. of keys

Four Points by Sheraton Navi Mumbai, Vashi 152

Hotel Name No. of keys

JW Marriot Mumbai Sahar 585

Bengaluru Marriott Hotel Whitefield 391

The Westin Hyderabad Mindspace 427

Renaissance Mumbai Convention Centre Hotel and Lakeside Chalet

773

Location Saleable area

Quiescent Heights, Madhpur, Hyderabad 204,125 square feet

Hotels Managed by Third Party

Hotel Operators

Hotel Operated by Chalet Hotels

Residential projects

Commercial and Retail


CHALET HOTELS LTD.

IPO NOTE

Hospitality segment CHL operates four hotels in the 5-star deluxe luxury segment. These are managed by third-party operators. This segment accounted for 88% of CHL’s total revenue in FY18. The 4-5 star segment, which CHL operates under license agreements, accounted for c.6% of its total revenue in FY18. It uses online travel agents (OTAs), websites of hotel operators (c.10% of hotel revenue), and strategic and tactical sales and marketing initiatives to acquire customers.

Commercial and retail segment CHL has developed two such projects (c.860,000 sq. ft.) adjacent to its hotel properties. These projects accounted for almost 3% of its total revenue in FY18. It has established longstanding relationships with several large corporate clients and domestic and global retail brands, including food and beverage chains, department stores, and consulting and management companies.

Residential projects CHL has already sold 170,965 sq. ft. as of May 2018, out of its 204,125 sq. ft. of total saleable area. CHL has a residential project in Madhapur (Hyderabad) called Quiescent Heights. It owns property at Koramangala Industrial Layout, Bengaluru, where it plans to construct a residential complex. This property is close to an aerodrome operated by Hindustan Aeronautics, and is under litigation. A writ petition is currently pending before the Karnataka High Court.

Chalet Hotel – Portfolio

CHL is well positioned to benefit from industry trends, as it is located in key markets

such as Mumbai, Bengaluru, and Hyderabad

Portfolio of high-end, globally recognized, branded hotels

2,176 keys in 5-star deluxe luxury

152 keys in 4-5 star hotels

Revenue: Segment mix FY18


96%

3%

1%

Hospitality

Commercial and retail

Residential Projects

Chalet Hotels has 15 years of experience in malls and 20 years in hotels


CHALET HOTELS LTD.

IPO NOTE

CHL occupancy vs. industry occupancy – FY18

Mumbai Bengaluru Hyderabad

CHL ADR vs. industry ADR – FY18

Mumbai Bengaluru Hyderabad

Current status: Date of expiry and approval

Hotel Name Brand Utilised Date of opening Date of Expiry

of Term

Renewal Extension Keys Comments

JW Marriott Mumbai Sahar JW Marriott February 2015 March 2035 585

Bengaluru Marriott Hotel Whitefield Marriott February 2013 March 2033 391

The Westin Hyderabad Mindspace The Westin December 2009 March 2021 March 2036 427

Renaissance Mumbai Convention

Centre Hotel and Lakeside Chalet,

Mumbai-Marriott Executive

Apartments

Renaissance

Marriott

July 2001 March 2020 March 2035 773 Renaissance to

Westin

Four Points by Sheraton Navi

Mumbai, Vashi

Four Points by

Sheraton

June 2009 March 2021 152 will get finalise in

next 2-3months


73% 69% 88%

75.2%

0%

20%

40%

60%

80%

100%

JW M

arri

ott

M

um

bai

Sah

ar

Ren

aiss

ance

M

um

bai

…

Fou

r P

oin

ts b

y Sh

erat

on

Nav

i …

Ind

ust

ry

75%

68%

0%

20%

40%

60%

80%

Ben

galu

ru

Mar

rio

tt H

ote

l W

hit

efie

ld

Ind

ust

ry

71% 66.1%

0%

20%

40%

60%

80%

The Westin Hyderabad Mindspace

Industry

8499

7215

6436

8102

5000

6000

7000

8000

9000

JW M

arri

ott

Mu

mb

ai

Sah

ar

Ren

aiss

ance

Mu

mb

ai

Co

nve

nti

on

Cen

tre

…

Fou

r P

oin

ts b

y Sh

erat

on

Nav

i …

Ind

ust

ry

7973

5071

3000

4000

5000

6000

7000

8000

9000

The Westin Hyderabad Mindspace

Industry

8620

5839

5000

6000

7000

8000

9000

Bengaluru Marriott Hotel Whitefield

Industry


CHALET HOTELS LTD.

IPO NOTE

Capex plan: Development pipeline in highly attractive markets

Segment Location Proposed Brand Keys Area (sq. ft.) Est. Opening Ownership

Hotels Navi Mumbai Hyatt Regency 260

Sep-21 Leasehold

Hyderabad Westin 178

Apr-21 Leasehold

Hotel & Convention Centre Bangalore W 150

Sep-21 100%; Leasehold

Commercial Mumbai Renaissance complex

7,00,000 FY21 100%; Leasehold

Bengaluru Marriott complex

4,00,000 FY21 100%; Leasehold


Renovation cost of Rs 1.5mn per room at Renaissance; for other hotels it costs Rs 10mn per room

Overall performance – India and key markets

Investment thesis

Improving macroeconomic environment and favourable demand-supply equation.

Assets are strategically located – Occupancy is above 70%; now ready for ARR improvement.

Strong business model, higher asset sweating: Has a business mix of hotels, commercial, retail, and residential properties.

Low development cost of hotels at optimal pricing – e.g. JW Marriot Sahar, Mumbai, built at Rs 13.9mn per key vs. industry average of Rs 18mn . Active-asset-management model results in superior operating performance.

All this leads to higher EBITDA margin than the industry.

Key focus matrix

Superior operating performance delivered by a lean and efficient cost structure

1.2 staff per key giving 40% cost advantage in employee cost against its peers

Hotel EBITDA margins are at meaningful premium to the industry

Source: Horwath Report, Company Fillings

Note: 1. As of March 31, 2018; 2. FY18 for Chalet Hotels Horwath Report; 3. FY17 for Industry Average as per Howrath Report


CHALET HOTELS LTD.

IPO NOTE

Strong team

Experienced board with prominent independent directors

Hotel Name Designation

Years of

Experience Experience

Hetal Gandhi Chairman and Independent Director 31+ Co-Founder and MD – Tano India Advisors; Former head of financial

services at IL&FS; CEO of Orix Auto and Business Solutions Limited

Radhika Piramal Independent Director Associated with VIP Industries Limited since 2009, formerly with Bain and

Company and Carlton Travel Goods Limited

Arthur William De Haast Independent Director 34+ Former CEO and CFO of hotels and hospitality group; currently an

international director and chairman of global capital markets board

Conrad D'Souza Independent Director Associated with HDFC Limited since 1984 and current member of

executive management, and Chief Investor Relations Officer

Ravo C. Raheja Non-Executive Director 22 Group President of K Raheja Corp Group

Neel C. Raheja Non-Executive Director 20 Group President of K Raheja Corp Group

Sanjay Sethi MD & CEO Executive Director 30 Former COO of ITC limited, MD & CEO of Berggruen Hotels, The Indian

Hotels Company Limited as a general manager

Rajeev Nair CFO Executive Director 26 Formerly with The Indian Hotels Company Limited in various leadership

roles


Senior management team

Name Designation Experience Last employment

Sanjay Sethi MD & CEO

Rajeev Nair ED & CFO

Karuna Nasta Associate VP Asset Management & Assurances 19

Milind Wadekar VP Finance & Tax 22

Ravindra Kolhe VP Finance 23

Premal Zaveri GM MD & CEO's Office

Ex-CBRE South Asia, HVS International

Christabelle Baptista CS, Deputy GM - Legal 14

Sundeep Mujumdar GM Contracts & Principal Buyer 18

Pragnesh Doctoria GM (Engineering) 13

Amit Mehrotra Associate VP Project Management 17


CHL’s group companies

Name of the Group Companies CHL Promoter

holding (%)

Name of the Group Companies CHL Promoter

holding (%)

Aqualine Real Estate Private Limited (“Aqualine”) 100.00% Sundew Real Estate Private Limited (“Sundew”) 100.00%

Brookfields Agro & Development Private Limited (“Brookfields”) 100.00% Sustain Properties Private Limited (“Sustain”) 100.00%

Carin Properties Private Limited (“Carin Properties”) 100.00% Sycamore Properties Private Limited (“Sycamore”) 100.00%

Cavalcade Properties Private Limited (“Cavalcade”) 100.00% Nakshtra Logistics Private Limited (“Nakshtra”) 99.99%

Feat Properties Private Limited (“Feat”) 100.00% Pramaan Properties Private Limited (“Pramaan”) 99.99%

Flabbergast Properties Private Limited (“Flabbergast”) 100.00% Inorbit Malls (India) Private Limited (“Inorbit”) 99.86%

Grange Hotels & Properties Private Limited (“Grange”) 100.00% Convex Properties Private Limited (“Convex Properties”) 99.00%

Immense Properties Private Limited (“Immense”) 100.00% Newfound Properties and Leasing Private Limited (“Newfound”)

85.00%

Imperial Serviced Offices and Property Management Private

Limited (“Imperial”)

100.00% K. Raheja IT Park (Hyderabad) Limited (“K Raheja IT Park”) 68.00%

K. Raheja Corp Advisory Services (Cyprus) Private Limited (“K

Raheja Cyprus”)

100.00% Mindspace Business Parks Private Limited (“Mindspace”) 63.24%

K. Raheja Corporate Services Private Limited (“K Raheja

Corporate”)

100.00% Sundew Properties Limited (“Sundew Properties”) 60.34%

Nirankar Properties Private Limited (“Nirankar”) 100.00% Challenge Properties Private Limited (“Challenge”) 47.50%

Novel Properties Private Limited (“Novel”) 100.00% Intime Properties Limited (“Intime”) 46.16%

Pact Real Estate Private Limited (“Pact”) 100.00% Trion Properties Private Limited (“Trion”) 0.04%

Paradigm Logistics & Distribution Private Limited (“Paradigm”) 100.00% The Residency Hotels Private Limited (“The Residency”) Nil



CHALET HOTELS LTD.

IPO NOTE

Key financial


IPO proceeds to help reduce debt Net debt to equity

Source: Company Fillings Source: DRHP, PhillipCapital India Research

As of June 28, 2018, Rs mn 2,105.94 Promoter Receivable, Rs mn 759.18 Promoter Payable to get Net Promoter Receivable of Rs mn 1345.76

Key financials

Hotel Name Revenue EBITDA EBITDA Margin %

FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E

INDIAN HOTELS CO LTD 41,542 44,450 48,080 6,838 8,367 9,759 16.5% 18.8% 20.3%

EIH LTD 16,218 19,376 20,819 2,977 4,165 4,550 18.4% 21.5% 21.9%

LEMON TREE HOTELS LTD 4,971 6,017 7,859 1,400 1,973 2,961 28.2% 32.8% 37.7%

CHALET HOTELS 8,738 9,571 10,257 2,944 3,337 3,789 33.7% 34.9% 36.9%

Hotel Name EV EV/Room EBITDA/Room

FY18 FY19 FY20 FY18 FY19E FY20E FY18 FY19E FY20E

INDIAN HOTELS CO LTD 1,83,674 1,91,216 1,88,682 10.6 10.8 10.7 0.4 0.5 0.6

EIH LTD 68,628 na. na. 15 na. na. 0.7 0.9 0.9

LEMON TREE HOTELS LTD - 69,794 70,441 - 11.5 11.1 0.3 0.3 0.5

CHALET HOTELS 74,291 64,330 65,589 32 27.6 28.2 1.3 1.4 1.6

Hotel Name PAT P/E ROE%


INDIAN HOTELS CO LTD 1,150 2,572 3,512 126.0 63.2 46.3 3.2 6.0 7.8

EIH LTD 1,160 2,260 2,361 90.2 45.7 43.5 4.1 7.8 7.7

LEMON TREE HOTELS LTD 48 394 790 1,145.8 139.7 64.4 1.7 4.6 9.0

CHALET HOTELS 312 121 1,007 184.2 476.4 57.0 6.2 0.8 6.5

Hotel Name Net Debt EV/SALES EV/EBITDA


INDIAN HOTELS CO LTD 12,674 20,217 17,623 4.6 4.3 4.0 27.8 22.7 19.5

EIH LTD 2,804 na. na. 6.7 5.6 5.2 36.5 26.1 23.9

LEMON TREE HOTELS LTD 9,778 11,159 11,806 13.9 11.4 8.8 49.2 34.9 23.3

CHALET HOTELS 23,621 13,861 15,419 8.5 6.7 6.4 25.2 19.3 17.3


-

2,000

4,000

6,000

8,000

10,000

12,000

FY14 FY15 FY16 FY17 FY18 FY19E FY20E

Revenue

10%

15%

20%

25%

30%

35%

40%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000


EBITDA OPM (%)

0.1

1.1

2.1

3.1

4.1

5.1

6.1

10,000

12,000

14,000

16,000

18,000

20,000

22,000

24,000

26,000


Net Debt


CHALET HOTELS LTD.

IPO NOTE

Financials – Chalet Hotels Ltd Income Statement Y/E Mar, Rs mn FY18 FY19e FY20e

Net Sales 8,738 9,571 10,257

Growth (%) 23.8% 9.5% 7.2%

Expenditure 5,794 6,234 6,468

Real Estate development costs 195 213 229

Food beverages consumed 766 957 1,026

Operating suppliers consumed 256 306 318

Personnel Cost 1,296 814 896

Other Op. Costs 3,281 3,943 4,000

Operating Profit 2,944 3,337 3,789

OPM (%) 33.7% 34.9% 36.9%

(+) Other income 557 574 591

EBDIT 3,501 3,911 4,380

Growth (%) -18.7% 11.7% 12.0%

( - ) Depreciation 1,116 1,310 1,400

EBIT 2,385 2,601 2,980

Growth (%) -21.5% 237.7% 14.6%

( - ) Interest & Finance charges 2,119 2,440 1,638

Growth (%) -2.8% 15.2% -32.9%

PBT & exceptional items 266 161 1,342

Growth (%) -69.0% -125.6% 735.4%

( + ) Exceptional Items (54) PBT & exceptional items 212 161 1,342

( - ) Taxes (100) 40 336

Net Profit 312 121 1,007

Growth (%) -75.5 -61.3 735.4

Balance Sheet Y/E Mar, Rs mn FY18 FY19e FY20e

Shareholders Funds 1,711 2,050 2,050

Stock Option Outstanding

Reserves & Surplus 3,313 12,594 13,361

Networth 5,024 14,644 15,411

Total Debt: 23,937 16,737 16,687

Deferred Tax Liability (795) (795) (795)

Capital Employed 28,166 30,587 31,303

Gross Block 28,859 29,359 32,859

Less : Accumulated Depn 7,630 8,940 10,340

Net Block 21,229 20,419 22,519

Capital WIP 276 276 276

Fixed Assets 21,505 20,695 22,795

GoodWill on Consolidation 226 226 226

Current Assets 8,374 11,992 10,620

Cash & Bank Balances 317 2,877 1,268

Receivables 539 591 633

Inventories 4,189 5,195 5,390

Loans, Adv & Deposits: 2,605 2,605 2,605

Other Current Assets 724 724 724

Current Liabilities & provisions 8,719 9,306 9,618

Sundry Creditors & other liab 7,722 8,310 8,621

Provisions: 997 997 997

Net Current Assets (345) 2,686 1,002

Investments 6,780 6,980 7,280

Trade 6,737 6,937 7,237

Non-Trade 43 43 43

TOTAL ASSETS 28,166 30,587 31,303

Source: Company, PhillipCapital India Research Estimates

Cash Flow Y/E Mar, Rs mn FY18 FY19e FY20e

Pre-tax profit 212 161 1,342

Depreciation 1,116 1,310 1,400

Chg in working capital -340 -470 74

Total tax paid -123 -40 -336

Other operating activities 1,625 1,866 1,047

Cash flow from operating activities 2,490 2,827 3,528

Capital expenditure -609 -500 -3,500

Other investing activities -681 374 291

Cash flow from investing activities -1,290 -126 -3,209

Free cash flow 1,881 2,327 28

Debt raised/(repaid) 536 -7,200 -50

Dividend (incl. tax) 0 0 -240

Cash flow from financing activities -1,567 -140 -1,928

Net chg in cash 317 2,877 1,268

Valuation Ratios

FY18 FY19e FY20e

Per Share data

EPS (INR) 1.8 0.6 4.9

Growth, % -75.5% -61.3% 735.4%

Return ratios

Return on equity (%) 6.2 0.8 6.5

Return on capital employed (%) 8.5 8.5 9.5

Turnover ratios

Sales/Total assets (x) 0.3 0.3 0.3

Sales/Net FA (x) 0.4 0.5 0.4

Liquidity ratios

Current ratio (x) 1.0 1.3 1.1

Quick ratio (x) 0.5 0.7 0.5

Interest cover (x) 1.7 1.6 2.5

Total debt/Equity (x) 4.8 1.1 1.1

Net debt/Equity (x) 4.7 0.9 1.0

Valuation

PER (x) 184.2 476.4 57.0

PEG (x) - y-o-y growth -2.4 -7.8 0.1

Price/Book (x) 11.4 3.9 3.7

Yield (%)

EV/Net sales (x) 8.5 6.7 6.4

EV/EBITDA (x) 25.2 19.3 17.3

EV/EBIT (x) 31 25 22


CHALET HOTELS LTD.

IPO NOTE

Rating Methodology We rate stock on absolute return basis. Our target price for the stocks has an investment horizon of one year.

Rating Criteria Definition

BUY >= +15% Target price is equal to or more than 15% of current market price

NEUTRAL -15% > to < +15% Target price is less than +15% but more than -15%

SELL <= -15% Target price is less than or equal to -15%.

Disclosures and Disclaimers PhillipCapital (India) Pvt. Ltd. has three independent equity research groups: Institutional Equities, Institutional Equity Derivatives, and Private Client Group. This report has been prepared by Institutional Equities Group. The views and opinions expressed in this document may, may not match, or may be contrary at times with the views, estimates, rating, and target price of the other equity research groups of PhillipCapital (India) Pvt. Ltd.

This report is issued by PhillipCapital (India) Pvt. Ltd., which is regulated by the SEBI. PhillipCapital (India) Pvt. Ltd. is a subsidiary of Phillip (Mauritius) Pvt. Ltd. References to "PCIPL" in this report shall mean PhillipCapital (India) Pvt. Ltd unless otherwise stated. This report is prepared and distributed by PCIPL for information purposes only, and neither the information contained herein, nor any opinion expressed should be construed or deemed to be construed as solicitation or as offering advice for the purposes of the purchase or sale of any security, investment, or derivatives. The information and opinions contained in the report were considered by PCIPL to be valid when published. The report also contains information provided to PCIPL by third parties. The source of such information will usually be disclosed in the report. Whilst PCIPL has taken all reasonable steps to ensure that this information is correct, PCIPL does not offer any warranty as to the accuracy or completeness of such information. Any person placing reliance on the report to undertake trading does so entirely at his or her own risk and PCIPL does not accept any liability as a result. Securities and Derivatives markets may be subject to rapid and unexpected price movements and past performance is not necessarily an indication of future performance.

This report does not regard the specific investment objectives, financial situation, and the particular needs of any specific person who may receive this report. Investors must undertake independent analysis with their own legal, tax, and financial advisors and reach their own conclusions regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realised. Under no circumstances can it be used or considered as an offer to sell or as a solicitation of any offer to buy or sell the securities mentioned within it. The information contained in the research reports may have been taken from trade and statistical services and other sources, which PCIL believe is reliable. PhillipCapital (India) Pvt. Ltd. or any of its group/associate/affiliate companies do not guarantee that such information is accurate or complete and it should not be relied upon as such. Any opinions expressed reflect judgments at this date and are subject to change without notice.

Important: These disclosures and disclaimers must be read in conjunction with the research report of which it forms part. Receipt and use of the research report is subject to all aspects of these disclosures and disclaimers. Additional information about the issuers and securities discussed in this research report is available on request.

Certifications: The research analyst(s) who prepared this research report hereby certifies that the views expressed in this research report accurately reflect the research analyst’s personal views about all of the subject issuers and/or securities, that the analyst(s) have no known conflict of interest and no part of the research analyst’s compensation was, is, or will be, directly or indirectly, related to the specific views or recommendations contained in this research report.

Additional Disclosures of Interest: Unless specifically mentioned in Point No. 9 below: 1. The Research Analyst(s), PCIL, or its associates or relatives of the Research Analyst does not have any financial interest in the company(ies) covered in

this report. 2. The Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively do not hold more than 1% of the securities of the

company (ies)covered in this report as of the end of the month immediately preceding the distribution of the research report. 3. The Research Analyst, his/her associate, his/her relative, and PCIL, do not have any other material conflict of interest at the time of publication of this

research report. 4. The Research Analyst, PCIL, and its associates have not received compensation for investment banking or merchant banking or brokerage services or for

any other products or services from the company(ies) covered in this report, in the past twelve months. 5. The Research Analyst, PCIL or its associates have not managed or co-managed in the previous twelve months, a private or public offering of securities for

the company (ies) covered in this report. 6. PCIL or its associates have not received compensation or other benefits from the company(ies) covered in this report or from any third party, in

connection with the research report. 7. The Research Analyst has not served as an Officer, Director, or employee of the company (ies) covered in the Research report. 8. The Research Analyst and PCIL has not been engaged in market making activity for the company(ies) covered in the Research report. 9. Details of PCIL, Research Analyst and its associates pertaining to the companies covered in the Research report:

Sr. no. Particulars Yes/No

1 Whether compensation has been received from the company(ies) covered in the Research report in the past 12 months for investment banking transaction by PCIL

No

2 Whether Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively hold more than 1% of the company(ies) covered in the Research report

No

3 Whether compensation has been received by PCIL or its associates from the company(ies) covered in the Research report No

4 PCIL or its affiliates have managed or co-managed in the previous twelve months a private or public offering of securities for the company(ies) covered in the Research report

No

5 Research Analyst, his associate, PCIL or its associates have received compensation for investment banking or merchant banking or brokerage services or for any other products or services from the company(ies) covered in the Research report, in the last twelve months

No


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Independence: PhillipCapital (India) Pvt. Ltd. has not had an investment banking relationship with, and has not received any compensation for investment banking services from, the subject issuers in the past twelve (12) months, and PhillipCapital (India) Pvt. Ltd does not anticipate receiving or intend to seek compensation for investment banking services from the subject issuers in the next three (3) months. PhillipCapital (India) Pvt. Ltd is not a market maker in the securities mentioned in this research report, although it, or its affiliates/employees, may have positions in, purchase or sell, or be materially interested in any of the securities covered in the report.

Suitability and Risks: This research report is for informational purposes only and is not tailored to the specific investment objectives, financial situation or particular requirements of any individual recipient hereof. Certain securities may give rise to substantial risks and may not be suitable for certain investors. Each investor must make its own determination as to the appropriateness of any securities referred to in this research report based upon the legal, tax and accounting considerations applicable to such investor and its own investment objectives or strategy, its financial situation and its investing experience. The value of any security may be positively or adversely affected by changes in foreign exchange or interest rates, as well as by other financial, economic, or political factors. Past performance is not necessarily indicative of future performance or results.

Sources, Completeness and Accuracy: The material herein is based upon information obtained from sources that PCIPL and the research analyst believe to be reliable, but neither PCIPL nor the research analyst represents or guarantees that the information contained herein is accurate or complete and it should not be relied upon as such. Opinions expressed herein are current opinions as of the date appearing on this material, and are subject to change without notice. Furthermore, PCIPL is under no obligation to update or keep the information current. Without limiting any of the foregoing, in no event shall PCIL, any of its affiliates/employees or any third party involved in, or related to computing or compiling the information have any liability for any damages of any kind including but not limited to any direct or consequential loss or damage, however arising, from the use of this document.

Copyright: The copyright in this research report belongs exclusively to PCIPL. All rights are reserved. Any unauthorised use or disclosure is prohibited. No reprinting or reproduction, in whole or in part, is permitted without the PCIPL’s prior consent, except that a recipient may reprint it for internal circulation only and only if it is reprinted in its entirety.

Caution: Risk of loss in trading/investment can be substantial and even more than the amount / margin given by you. Investment in securities market are subject to market risks, you are requested to read all the related documents carefully before investing. You should carefully consider whether trading/investment is appropriate for you in light of your experience, objectives, financial resources and other relevant circumstances. PhillipCapital and any of its employees, directors, associates, group entities, or affiliates shall not be liable for losses, if any, incurred by you. You are further cautioned that trading/investments in financial markets are subject to market risks and are advised to seek independent third party trading/investment advice outside PhillipCapital/group/associates/affiliates/directors/employees before and during your trading/investment. There is no guarantee/assurance as to returns or profits or capital protection or appreciation. PhillipCapital and any of its employees, directors, associates, and/or employees, directors, associates of PhillipCapital’s group entities or affiliates is not inducing you for trading/investing in the financial market(s). Trading/Investment decision is your sole responsibility. You must also read the Risk Disclosure Document and Do’s and Don’ts before investing.

Kindly note that past performance is not necessarily a guide to future performance.

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For U.S. persons only: This research report is a product of PhillipCapital (India) Pvt Ltd., which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S.-regulated broker-dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker-dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances, and trading securities held by a research analyst account.

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