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Asset-led growth to start from FY28

Leela Palaces, Hotels and Resorts (THELEELA IN) reported good, though in-line results, driven by a 160bp improvement in occupancy to 71% and 18% average room rate (ARR) growth to INR 30,337. Occupancy and ARR grew across businesses, up 400bp & 28%, respectively, and the leisure portfolio was up 100bp and 17%, respectively. THELEELA has made provision of INR 64mn on account of recent changes in the Labour Law. The Leela Palace Jaipur has been undergoing a comprehensive upgrade to be repositioned as a sought-after leisure travel destination for foreign as well as domestic travellers. THELEELA plans to start renovation of the Dubai hotel in FY28 and open the hotel after rebranding in FY29. The benefits accruing would be back-ended but significant. Work on building the remaining 762 keys is continuing as per plan. THELEELA is a play on increasing number of high net worth individuals (HNI) seeking luxury experiential travel. HNI count in India is growing in the double digits pa but huge entry barrier is constraining supply of ultra luxury hotels, which is poised to benefit incumbent luxury hoteliers. We retain Buy with a higher TP of INR 620 based on 22x 9MFY28E EV/EBITDA as we roll forward our valuation to 9MFY28E financials.

Materials revenue contribution from Dubai from FY29: THELEELA closed the Dubai hotel acquisition on 26 November 2025, buying a 25% equity stake along with securing hotel management agreement. The total equity commitment, including future capex, is INR 6.4bn, of which ~INR 4.0bn has been deployed to date. Sofitel will continue to manage the hotel during the transition period. Renovation and upgrade activities are scheduled to commence in FY28, followed by rebranding to Leela Palace in FY29 before reopening. Consequently, significant management fee income and earnings contribution from the hotel are from FY29. Given the renovation timeline, principal value accretion from the hotel asset is back-ended, positioning Dubai as a long-term, capital-efficient growth lever rather than a near-term earnings driver. Equity invested in the Dubai hotel is likely to be recovered by FY30 through the sale of branded residences, materially reducing net capital employed for the hotel by THELEELA. This is set to render the hotel business effectively asset-light in the medium term despite having a 25% stake in the profit pool.

Retain Buy with a higher TP of INR 620: THELEELA’s structural growth would be driven by asset-led expansion from FY28 while the Dubai hotel acquisition would start to materially reflect in financials from FY29. We increase our EBITDA and PAT estimates by 8% and 17% for FY26 and by 4% and 15% for FY27, respectively. We retain Buy with a higher TP of INR 620 from INR 569 based on 22x Q3FY28E EV/EBITDA as we roll forward our valuation to 9MFY28E financials.

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