Ayodhya magic lifts this small-cap stock 70% in a month; Vibrant Gujarat, Lakshadweep campaign help

With the upcoming inauguration of the Ram Mandir in Ayodhya, tourism firm Praveg is anticipating significant benefits from the increased number of devotees visiting the religious site. Praveg, which describes itself as a pioneer in the experiential tourism sector, provides exhibition, event management, and hospitality services within the country.

“The current resort in Ayodhya is seeing strong bookings ahead of the opening of Ram Mandir,” said Anirudh Garg, Managing Partner, Invasset. The stock has already climbed 70 percent in the last one month, with gains cemented from the upcoming Ayodhya temple inauguration, the ongoing Vibrant Gujarat summit, and the recent ‘Chalo Lakshadweep’ campaign.

The firm established its newest facility in Ayodhya, which has been operational since November 2023, with an average room rate of around Rs 8,000, according to Nuvama Institutional Equities’ estimates. Praveg is expected to build another tent city in Ayodhya to meet expected demand.

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“With a revenue contribution of 43 percent in the hospitality segment, Praveg operates around 700 luxury tents and cottages across ten properties in Gujarat, Daman, Diu, and Uttar Pradesh,” said Nuvama Institutional Equities. The company usually builds accommodation in areas of cultural importance, where it will not be feasible to construct properties in a traditional manner and began operations in 2005.

Also, as #BoycottMaldives trended on the social media platform X (Twitter) last week, netizens promoted tourism in Lakshadweep. Praveg drew attention, surging over 40 percent over two days after the trend, as it has recently bagged an order to develop, operate and manage a minimum of 50 tents at Agatti Island in Lakshadweep, according to a filing with the bourses on December 20.

Earlier, on December 21, Nuvama said that at Rs 656, Praveg stock trades at a trailing 12-month EV/EBITDA and P/E ratio of 40.1x and 74.5x, respectively. The stock has surged since then to Rs 1,202 apiece as on January 11. Over the past year, the share price has over 240 percent, more than tripling investors’ wealth.

The company has rapid expansion plans. By the end of FY24, Praveg will add 52 rooms across three properties. By FY25, the tally is expected to rise by 250 rooms spanning eight properties. This will take the total inventory to around 1,000 rooms/tents.

The firm’s luxury tents require around Rs 15-20 lakh to set up, versus around Rs 1 crore per hotel room. Since the tents can be set up rapidly, the time to market is also extremely short. “Owing to limited capex, its luxury tents/cottages can break even in the first year itself, at an occupancy level as low as 20 percent/40 percent,” said the brokerage.

The share of hospitality revenue will inch up, driving revenue and EBITDA growth in coming years, as the properties mature and newer properties are developed. “Company sees a steady growth in the exhibition segment, and a sharp improvement in the hospitality segment, led by a consistent increase in room inventory and a steady increase in ARR and occupancy,” said Nuvama Institutional Equities.

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