Branded hospitality

Graviss Hospitality is a part of the Graviss group focused on Hospitality and Food & Beverages (F&B) industry verticals. Previously known as GL Hotels, it was incorporated in 1959 and is headed by Ravi Ghai. It has nearly five decades of experience in the hotel business with its pioneering initiative in South Mumbai - the Nataraj Hotel. The 53 year old company started out with the iconic Natraj hotel on Marine Drive, Mumbai, which was demolished and rebuilt to the present day Intercontinental Marine Drive. The hotel was initially (from 2003) managed by the InterContinental Hotels Group, but in 2005 Graviss Hospitality took over the management and is now the franchisee for the hotel brand, housing 58 rooms spread over a total area measuring ~ 70,000 sq. feet. The company has a long term lease for this land from Collector of Greater Mumbai.

The specialties of the 58-room hotel are a series of luxury lifestyle outlets catering to the F&B industry with global specialties including cuisines from Asia, Russia and Italy:

• Dome – Located on the hotels 11^th floor, it is an open air international cuisine rooftop restaurant.
• Corleone – Corleone is a striking restaurant overlooking the Arabian Sea. The finest cheeses and meats are flown in regularly from Italy and Sicily which are combined with herbs from the hotels own garden to create pastas, risottos, gourmet entrées, hand-tossed pizzas and calzones.
• Kebab Korner - North Indian dishes made with traditional cooking methods, subtle spices and a dash of contemporary flair. Meats and kebabs are complemented by a delectable
• Czar the Vodka lounge bar
• Onyx the Meeting place, a banquet venue for formal and informal meetings

Temasek holds about 26% and Intercontinental Hotels 5% (owners of InterContinental, Crowne Plaza and Holiday Inn brands) in the listed company while the promoter group holds about 60%, thus the floating stock is pretty low. The same group also runs another Foods vertical comprising of well known brands such as Kwality (which not only sells ice-creams but also frozen foods and desserts such as Rasmalai & Paneer) and Baskin Robbins (exclusive ice-cream parlors selling BR-branded ice creams). 

The optimism about this stock (the listed entity) stems from 3 possibilities, none of which have been spoken about either by the promoters or major stakeholders:

1. Any of the above 2 big investors decide to cash out – in this case, there might be a good upside as the sale, if and when it happens, will surely happen at a premium.
2. Expansion of any of their existing outlets
3. Merger with the unlisted F&B company – looking at the success of Dominos and Starbucks and the increasing investor interest in branded retail food outlets, this might be the biggest trigger, if it happens.

This being a small cap stock, the usual risks regarding corporate governance and lack of liquidity (considering that 90% of the shareholding is in the hands of promoters and major investors) remain. Also, its valuations currently are not cheap @ttm P/E of 36. However considering the fancy for the F&B industry, coupled with increasing investor interest in companies in this sector, both listed as well as unlisted, this should be a good bet in times ahead.