IPO watch: Why Leela Hotels, Aegis Vopak Terminals fail to create euphoria despite large fresh offers

Mint

29-05-2025

After a prolonged lull, the Indian primary market regained momentum in May, with six mainboard companies launching their initial public offerings (IPOs). The earlier slowdown in IPO activity was largely attributed to weak global sentiment driven by concerns over the economic fallout from the US-China trade war, exacerbated by tariff policies introduced by US President Donald Trump.
As macroeconomic tensions began to ease, IPO activity saw a resurgence. On May 26, Schloss Bangalore Ltd — the operator of luxury hospitality brand 'The Leela' — and Aegis Vopak Terminals launched their respective IPOs.
The ₹ 3,500-crore Leela Hotels IPO comprised a fresh issue of 5.75 crore equity shares worth ₹ 2,500 crore and an offer-for-sale (OFS) of 2.30 crore shares amounting to ₹ 1,000 crore. Aegis Vopak Terminals IPO was a ₹ 2,800 crore offer, entirely consisting of a fresh issue of 11.91 crore shares.
Despite the sizable fresh capital offerings, both IPOs failed to replicate the enthusiasm seen in recent listings such as Borana Weaves IPO and Belrise Industries IPO.
Leela Hotels IPO was subscribed 4.50 times overall, receiving bids for 20.96 crore shares against the 4.66 crore shares on offer. The Qualified Institutional Buyers (QIB) segment led the demand, subscribing 7.46 times, while the Non-Institutional Investor (NII) and retail categories saw relatively muted interest at 1.02 times and 0.83 times, respectively.
Aegis Vopak Terminals IPO garnered even less interest, with an overall subscription of 2.09 times. While the QIB portion was subscribed 3.30 times, the retail and NII segments fell short, at 0.77 times and 0.56 times, respectively.
Market analysts attribute the subdued response primarily to steep valuations and uncertain market sentiment.
Schloss Bangalore reported a revenue of ₹ 1,300.6 crore in FY25, growing at a CAGR of 23% from FY23 to FY25. The company posted a net profit of ₹ 48 crore in FY25, largely supported by a higher average room rate (ARR) and reduced debt-related stress. However, at an IPO price of ₹ 435 per share, the company's valuation stood at an elevated price-to-earnings (P/E) ratio of 220.8x, significantly higher than industry peers.
Aegis Vopak Terminals, priced at ₹ 235 per share, posted a net profit of ₹ 86.54 crore in FY24 after a marginal loss in FY23. Yet, analysts noted the valuation was stretched, with the issue priced at 60x EV/EBITDA and 258x P/E (annualized FY25 earnings).
Arun Kejriwal, Founder of Kejriwal Research and Investment Services, flagged two key concerns: 'The pricing of both IPOs was high, and the market lacked clarity on the companies' forward-looking growth drivers.'
He added that the muted retail and HNI participation contrasted with more active institutional involvement, which largely sustained the subscription figures. 'In the case of Leela Hotels IPO, a P/E of over 200 implies the company is generating minimal profit per share. While expansion of hotel capacity is on the cards, the resultant growth will not materialize in the short term.'
For Aegis Vopak Terminals, Kejriwal noted that many investors remained unsure about the company's ability to generate commensurate profit given its current revenue and lofty market capitalization.
Adding context to the tepid response, he pointed to the listing performance of Belrise Industries.
'The final day for these two IPOs coincided with the Belrise Industries IPO listing. Initially, Belrise Industries shares were expected to debut with a 22-23% premium, but it ultimately listed at just an 11% premium. As expectations of profit from this company did not materialize, investors became more cautious regarding these two issues as well.'
Prashanth Tapse, Senior Vice President (Research) at Mehta Equities, echoed similar sentiments. 'Investor appetite from retail and HNI segments remained subdued, which is justified given the rich valuations and cautious market mood.'
The trends in the grey market premium (GMP) for both these IPOs also remain muted. While Leela Hotels IPO GMP today was ₹ 6 per share, or 1.4%, Aegis Vopak Terminals IPO GMP was Re 1 per share, or 0.5%, market experts said.
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