Company Update : Indian Hotels by Motilal Oswal Financial Services Ltd
Driving growth through scale and diversification
* Indian Hotels (IHCL), India's largest hospitality company and an industry pioneer with over 120 years of operating history, is uniquely positioned to benefit from India's structural consumption-led growth, underpinned by rising private consumption, increasing domestic tourism, expanding affluence, and accelerating demand for premium travel experiences.
* India's resilient hospitality market, supported by strong structural tailwinds and a widening demand-supply gap, provides a favorable backdrop for IHCL. Its diversified brand portfolio and asset-light expansion strategy helped IHCL achieve a new milestone in FY26 with the acquisition of three new brands and signed 250 hotels, taking its total portfolio to 645 hotels under its Accelerate 2030 vision.
* IHCL continues to evolve into a house-of-brands, expanding across customer segments through strategic acquisitions and brand additions. IHCL's growth was supported by a record performance at TajSATS, continued investments in catering infrastructure, and an aggressive expansion pipeline for Ginger (~96 hotels) , strengthening its long-term growth visibility.
* IHCL's asset-light strategy continues to gain traction, with management contracts and distribution arrangements accounting for ~55% of operational inventory in FY26 (compared to 31% in FY20) and ~80% of the pipeline, supporting rapid network expansion, margin accretion, and management fee revenue growth.
* Strong domestic performance offset mixed international operations in FY26. This trend is expected to continue as industry demand growth (~8-10%) is expected to outpace supply (~5-6%) in India's hospitality market (12.4% CAGR over CY25-30).
* IHCL's outlook remains healthy, supported by continued traction in its core and new businesses. The company is well positioned to benefit from a favorable demandsupply environment, along with sustained growth in leisure and luxury travel, increasing MICE (Meetings, Incentives, Conferences and Exhibitions) activity in India, room additions in new geographies and robust pipeline with a balanced mix of asset-heavy and asset-light hotels.
* Going ahead we expect IHCL to post a CAGR of 15%/17%/21% in revenue/EBITDA/ adj. PAT over FY26-28, with ROIC improving to 22.5% by FY28 from 17.5% in FY26. We reiterate BUY with our FY28 SoTP-based TP of INR870.
Valuation and view
* IHCL’s outlook remains healthy, supported by continued traction in both the core business and new & reimagined businesses amid a favorable macro-economic environment where demand growth (~8-10%) continues to outpace supply growth (~5-6%).
* IHCL continues to evolve into a house of brands, expanding into high-growth niche segments such as wellness, premium experiential leisure, and heritage hospitality to capitalize on emerging market opportunities.
* We expect the strong momentum to continue in the medium to long term, led by:
1) a strong room addition pipeline
2) strategic acquisitions
3) continued favorable demand-supply dynamics
4) increasing MICE activities
5) rising private consumption, increasing domestic tourism
6) accelerating demand for premium travel experiences.
* We expect IHCL to deliver a CAGR of 15%/17%/21% in revenue/EBITDA/Adj. PAT over FY26-28. We reiterate our BUY rating with an SoTP-based TP of INR870.
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