The Securities Board of Nepal (SEBON) has officially approved the Initial Public Offering (IPO) proposal of Hotel Forest Inn Limited (HFIN), marking a significant step in the company’s expansion and capital-raising plans. Under the approved proposal, the company will issue 40 lakh unit shares to the general public at a par value of Rs. 100 per share. NIC Asia Capital Limited has been appointed as the issue manager for the public offering, which is expected to attract investors keen on the growing hospitality and tourism sector in Nepal.
Credit Ratings Reflect Moderate Risk
CARE Ratings Nepal Limited (CRNL) has assigned a ‘CARE-NP BB-’ rating to the long-term bank facilities of Hotel Forest Inn Private Limited and reaffirmed the issuer rating of ‘CARE-NP BB- (Is)’ for HFIN. According to CRNL, issuers with this rating carry a moderate risk of default concerning the timely servicing of financial obligations in Nepal, indicating that the IPO is suitable for investors with moderate risk appetite.
Greenfield Five-Star Hotel Project in Budhanilkantha
Hotel Forest Inn Limited, incorporated on November 22, 2010, is developing a 5-star hotel in Budhanilkantha, Kathmandu, spread across 142,783 sq. ft. of land with 105 modern rooms. The hotel has entered into a License Agreement with Intercontinental Hotels Group (IHG) to operate under the Holiday Inn brand, an American mid-scale hotel chain. The property is designed to include world-class amenities such as swimming pools, conference and banquet halls, spa, F&B services, and modern facilities, targeting international and domestic travelers alike.
The greenfield project’s total cost is Rs. 3,572 million, of which Rs. 2,120 million has been funded through debt and Rs. 1,020 million by promoter equity. The remaining Rs. 980 million will be raised through the IPO, pending regulatory approval. While operations have commenced since mid-2024, the company expects its capital structure to remain leveraged in the initial stages due to the debt-funded nature of the project.
Opportunities and Strategic Advantages
HFIN benefits from its association with the globally recognized Holiday Inn brand, which will assist in hotel completion, international standards supervision, training, marketing, and customer reservations. This collaboration is expected to boost guest bookings and brand visibility, giving the hotel a competitive advantage in Kathmandu’s crowded hospitality market.
Strategically located in Budhanilkantha, the hotel is only 11 km from Tribhuvan International Airport and near Kathmandu’s UNESCO World Heritage Sites, including the three famous Durbar Squares. Its location makes it a prime choice for tourists, business travelers, and MICE (Meetings, Incentives, Conferences, Exhibitions) activities.
Industry Outlook and Sector Growth
Nepal’s tourism sector remains a priority for government development, with Rs. 11.91 billion allocated in the FY25 budget for the Ministry of Culture, Tourism, and Civil Aviation. The government has also declared 2023-2033 as the Tourism Decade, aiming to promote Nepal as a top global destination. The recovery of the hospitality sector is driven by increasing foreign tourists, domestic leisure demand, and rising MICE events. Despite challenges like inflation, volatile interest rates, and competitive market conditions, key indicators such as average room rate, occupancy, and revenue per available room show encouraging trends, highlighting the sector’s resilience.
Risk Factors: Competition, Cyclicality, and Geographic Concentration
Hotel operations in Nepal are highly fragmented with many organized and unorganized competitors, especially in Kathmandu. Competition may result in subdued room rates, while revenue and occupancy remain vulnerable to macroeconomic trends. Additionally, HFIN’s single-location setup exposes it to geographic concentration risk, and the debt structure is subject to interest rate volatility, which could impact profit margins.
Experienced Management Team and Governance
HFIN is led by an experienced board of directors, chaired by Ms. Binita Thapa, who brings over 20 years of industry expertise. The management team is supported by skilled professionals across hotel operations, finance, marketing, and administration, ensuring effective governance and operational efficiency.
Promising Investment Opportunity
With SEBON’s IPO approval, Hotel Forest Inn Limited provides investors an opportunity to participate in a strategically located, globally branded five-star hotel in the heart of Kathmandu. While initial phases involve leveraged financing, the hotel’s brand affiliation, prime location, and modern facilities position it well for long-term growth, reflecting the promising potential of Nepal’s hospitality sector in the coming years.
