Indian Hotels domestic leisure demand and renovated portfolio support double-digit FY27 growth

Investment View and Report Snapshot

ICICI Direct Research maintains a BUY recommendation on Indian Hotels Company Ltd. (IHCL), with a target price of Rs 865, compared with a CMP of Rs 722. The July 24, 2026 result update identifies resilient domestic leisure demand as the principal driver of Q1FY27 performance.

Q1FY27 Financial Performance

IHCL reported consolidated revenue growth of 14.6 per cent year-on-year to Rs 2,339.2 crore in Q1FY27. Standalone domestic revenue increased 18 per cent to Rs 1,232 crore, driven by domestic leisure demand despite geopolitical disruption.

The strong domestic performance was partly offset by muted 4 per cent growth at key international subsidiaries UOH, UK and PIEM, owing to lower international travel and operational issues at the New York hotel.

Domestic Demand and FY27 Outlook

Management said domestic demand continued to outpace supply, supported by premium leisure travel, staycations and corporate demand. Rajasthan and Goa recorded robust leisure demand, while Mumbai, Delhi and Bengaluru delivered healthy double-digit RevPAR growth. Management indicated that July demand was stronger than in Q1FY27 and expects Q2FY27 revenue growth to be similar to or better than Q1FY27.

• IHCL retained its guidance for double-digit FY27 revenue growth with sustained margins.
• Growth is expected to be supported by domestic demand, renovated assets, more than 60 hotel openings and incremental revenue from acquisitions.
• Wedding demand, government MICE and banqueting are expected to improve in H2FY27.
• A recovery in foreign tourist arrivals would provide an additional lever for ARR growth.
• Management expects high-teen CAGR in management-fee income, supported by hotel openings and contributions from recently added hotels.

TajSATS Performance and Near-Term Headwinds

TajSATS revenue grew 3 per cent to Rs 296 crore, but operating EBITDA declined 13.6 per cent to Rs 57 crore and the operating EBITDA margin fell 350 basis points to 19.5 per cent amid lower air traffic.

TajSATS continues to face headwinds from the West Asia crisis, airline capacity reductions and weaker long-haul international travel. Mid-20 per cent-plus growth in non-institutional catering partly offset weakness in airline catering, and management expects non-institutional catering to become a double-digit contributor over the medium term.

One-off launch costs for Frankfurt and a new Noida kitchen amounted to Rs 12 crore in Q1FY27 and are expected to moderate over the next two quarters.

Capital-Light Expansion and Portfolio Pipeline

ICICI Direct views IHCL’s capital-light strategy as a competitive advantage that enables disciplined expansion, higher returns and consistent cash-flow growth. IHCL had about Rs 4,400 crore of cash as of March 31, 2026, and invested about Rs 2,500 crore over the preceding three years in iconic assets and strategic capabilities.

The company plans FY27 capex of Rs 1,000 crore to Rs 1,200 crore for room renovations and new hotels. The report also states that the company has about 265 hotels under development, taking the portfolio to about 645 hotels. The balance-sheet pipeline includes more than 2,000 keys, including Taj Bandstand, Taj Lakshadweep and Taj Shiroda.

• More than 60 hotel openings are expected to support FY27 growth.
• Renovated assets and acquisitions are expected to provide incremental revenue.
• The development pipeline is intended to support continued management-fee income growth.

Valuation and Key Risks

ICICI Direct values IHCL at 29 times FY28E EV/EBITDA to arrive at its target price of Rs 865.

Key risks identified in the report include:

• Adverse events such as terrorist attacks or pandemics affecting room demand.
• Disruption at international properties, including operational issues.
• Delays in hotel launches.