The company is into environment friendly luxury hotels and exhibition management. They also run a tv channel, a real estate marketing division and have recently started wedding management.
The company builds and operates luxury tent hotels with average room rates of Rs. 7000 – Rs. 10,000 per night. Tents are cheap to build, require little maintenance and attract visitors thereby generating a high return on capital for the company.
The company builds in areas where otherwise no hotel would usually come up. They either purchase outright or take it on lease.
They have been in business for over 20 years and run 1000+ events, and 2000+ exhibitions.
Till the last quarter, they had only 3 tent hotels in Rann of Kutch, Statue of Unity and Varanasi. In the current quarter, they have operationalized 3 more – Daman (2), Diu (2), Dholavira, Velavadar and Ayodhya. Management has plans to scale this to 21 resorts by end of FY 25.
Due to such rapid scale up, the Sales and PAT is expected to grow multi fold. The optically expensive 70 PE will appear cheap very soon.
With the inauguration of Ram Mandir, their Ayodhya hotel is expected to get a huge boost as it is currently the only one adjoining the Parikrama road. They are also in the process of building a 2nd Ayodhya hotel.
The company has a very enviable ROCE of > 50%.
They are also establishing regular 5-star hotels. Management is consciously trying to find ways to reduce seasonality of the business.
Sage One, a renowned small cap PMS, holds a 2% stake in the company.
Risks:
Huge growth is implied in the current price. If management fails to deliver (they should not), then there is scope for huge downside. Management is aiming for 50% occupancy – this needs to be tracked.
Currently, their resorts are concentrated in Gujarat. Management has stated goal of regional diversification – need to track this.
Sooner or later, other companies will also start building tents as this is a high return low investment model.
A lot of Praveg’s success is due to success in securing Government tenders. Need to track if they are able to secure tenders from Opposition backed states too.
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