Buy Indian Hotels Ltd for the Target Rs 870 by Motilal Oswal Financial Services Ltd
MICE, BRICS, and marquee hotel renovations drive growth
* Indian Hotels (IH) reported healthy consolidated revenue growth of 22% YoY in 2QFY27, led by 26% growth in the standalone business and 17% growth in subsidiaries. Growth in the standalone business was led by room revenue (RevPAR up 28% YoY, led by ARR/OR growth of 19%/700bp), followed by F&B revenue (up 20%), other services (up 49%), and management fees (up 16%).
* IH has upgraded its FY27 revenue guidance to 15-17% (from 12-14% growth), driven by sustained domestic travel demand, robust growth across its asset-light management business, and emerging brands such as Ginger, Qmin, amã Stays & Trails, and Tree of Life. Moreover, the company has a pipeline of 34,800 keys (with 81% of the signed pipeline being assetlight), almost equal to its current operational keys of 34,213, thereby supporting sustained growth momentum.
* We expect IH’s performance to continue its uptrend, with a CAGR of 14%/15%/19% in revenue/EBITDA/adj. PAT over FY26-28. We broadly maintain our FY27/FY28 EBITDA estimates and reiterate BUY with our SoTP-based TP of INR870.
Domestic operating performance offsets softness in the international business
* Revenue grew 22% YoY to INR24.8b (est. INR23.7b). Hotel segment grew 26%, while TajSATS declined 2% YoY to INR2.8b.
* EBITDA grew 24% YoY to INR7.1b (est. INR6.7b). EBITDA margin expanded 50bp YoY to 28.4%. Adj. PAT grew 24% YoY to INR3.5b (est. INR3.7b).
* Standalone revenue/EBITDA grew 26%/40% YoY to INR13.4b/INR5.2b, aided by an increase in RevPAR (up 28% YoY to INR13,860), led by ARR growth of 19% to INR16,902, with OR expanding 700bp to 82%. F&B/other services/management fee income grew 20%/49%/16% YoY.
* Subsidiary (consol less standalone) sales stood at INR11.5b, up 17% YoY. Subsidiary EBITDA came in at INR1.9b, down 7% YoY.
* UOH/St. James’ revenue grew 16%/14% YoY, with EBITDA for UOH declining 75% YoY, while St. James witnessed an EBITDA growth of 10%.
* For 1HFY27, Revenue/EBITDA/Adj. PAT grew 18%/20%/22% to INR48b/INR14b/INR7b.
* Gross debt stood at INR1.2b vs INR513m as of Mar’26. CFO stood at INR9.7b vs INR25b as of Mar’26. The company reported a gross cash of INR43.7b.
Highlights from the management commentary
* Domestic performance: Domestic hotel RevPAR growth of 28% was driven by resilient domestic demand, supported by large MICE events such as the BRICS Summit and renovations at marquee hotels, including Taj Palace New Delhi, President Mumbai, Taj West End Bengaluru, Taj Fort Aguada Goa, and Taj Lake Palace Udaipur.
* Ginger: The brand crossed 100 operational hotels, becoming India's first hotel brand to achieve this milestone, and is targeting 150 hotels by Mar’27. IH is integrating properties acquired through the ANK Pride transaction into Ginger, with nearly 75 signings completed and 30 properties already operating under the Ginger brand.
* Oriental Hotels merger: IH announced the merger of Oriental Hotels (OHL) with an appointed date of 1st Apr’27. The all-stock transaction has a share exchange ratio of 25 IH shares for every 117 OHL shares and is expected to increase IH's standalone operating revenue by 6–7% in FY28. The merger is expected to unlock operational synergies.
* International business: IH expects its international portfolio to improve in H2FY27, supported by the completion of renovation work at key properties and a gradual recovery in demand. London recorded double-digit revenue growth in October, following the completion of upgrades to meeting rooms, the lobby, and food and beverage facilities. However, margins were affected by higher fuel and power costs and the removal of a property tax waiver.
Valuation and view
* We remain optimistic on IH’s growth outlook despite near-term geopolitical and macroeconomic uncertainties, led by healthy traction in the core business as well as new and reimagined businesses.
* We expect the strong momentum to continue in the medium term, led by:
1) a strong room addition pipeline in owned/management hotels (6,650/28,150 rooms)
2) strategic acquisitions
3) continued favorable demand-supply dynamics
4) increasing MICE activities in India.
* We broadly maintain our FY27/FY28 EBITDA estimates and reiterate BUY with our SoTP-based TP of INR870.
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