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SAMHI IN to buy 70% stake in RARE India, a luxury hospitality platform with a portfolio of 67 hotels comprising 990 rooms, for Rs474mn.

We increase our EBITDA estimates by ~4% over the next 2 years as investment in RARE India (RARE), a luxury hospitality platform, is likely to open a new revenue stream and result in B2C commission income of Rs425mn/Rs556mn for FY27E/FY28E. We believe RARE provides SAMHI IN an exposure to leisure segment through an asset light route diversifying the business model and lending scale advantage. Affiliation with Marriott will not only aid in boosting occupancy (~35-45%) and ARR (Rs25,000 odd) of existing properties but also help garner listings on the platform by onboarding new owners given strong parentage. After incorporating the acquisition of RARE, we expect revenue/EBITDA CAGR of 15%/23% over FY26E-FY28E. We maintain BUY on the stock with a TP of Rs264 (10.5x FY28E EBITDA; earlier 12x).   

SAMHI IN invests in RARE, an asset light leisure-based platform: Founded in 2003 by Shobha Rudra, RARE is a luxury hospitality platform with a portfolio of 67 hotels comprising 990 rooms across 15+ states in India along with international presence in Nepal and Bhutan. SAMHI IN is set to acquire a 70% stake in RARE for ~Rs474mn. The transaction will be executed in two tranches, including a primary investment of ~Rs234mn and a secondary acquisition of partnership interest from existing shareholders for ~Rs240mn.

Majority of the listings on RARE include forts, palaces, hill retreats, wildlife lodges and other boutique properties. While the marketplace for homestays and villa aggregators is extremely crowded, RARE stands apart by following a curated approach of selective onboarding of boutique properties (ARR of Rs25,000 odd). We believe investment in RARE provides SAMHI IN an exposure to experiential leisure segment via an asset light platform route.

Partnership with Marriott to provide scale advantage and aid KPIs: Post SAMHI IN’s investment, RARE will be appointed as Marriott’s exclusive platform for the “Outdoor Collection by Marriott Bonvoy” in India, Nepal, Sri Lanka & Bhutan. Affiliation with Marriott will not only open-up a new income stream by enabling direct bookings via the B2C route but also increase listings on the platform by onboarding new owners given strong brand parentage. 

RARE currently gets a B2B listing fee of Rs0.2-0.4mn per hotel per year. However, as the platform integrates with Marriott’s ecosystem and the B2C stack is ready, RARE will be able to attract direct bookings. We expect B2C revenue of Rs425mn/Rs556mn in FY27E/FY28E led by increase in occupancy and ARR of the existing hotels listed on the platform as well as addition of new listings arising from strong parentage of Marriott. 

Con-call highlights: 1) RARE currently earns an annual subscription fee of ~Rs0.2–0.4mn per hotel per year and is entitled to ~18-20% commission on bookings. Nonetheless, the commission income stream remains largely untapped due to absence of a fully operational B2C booking stack/platform. 2) The current portfolio generates enterprise revenue of ~Rs2,500mn (assuming ~35% occupancy and ~Rs20,000 ARR). 3) RARE’s portfolio is positioned at the premium end, with ~70% of rooms priced above Rs25,000 per night. 4) Currently, the portfolio occupancy remains low at ~35-45%, however it is expected to improve to ~50-55% levels after integrating within Marriott’s ecosystem. 5) Brand parentage of Marriott is expected to boost ARRs by ~15% over time. 6) RARE is currently in active discussion with owners of ~25-30 properties, supporting expansion from ~67 hotels to ~90-100 hotels in the near term, with a medium-term target of ~120-150 hotels over ~3 years. 7) RARE can deliver RoCE of ~60-70% as the business is asset light in nature.  8) The ~Rs474mn investment is expected to be recovered within ~18-24 months once the platform stabilizes. 9) As the platform scales to ~120-125 hotels over the medium term, the enterprise revenue of the portfolio is expected to reach ~Rs8,000mn. 10) A significant portion of RARE portfolio of hotels are currently not listed on online travel agencies (OTAs).

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