Indian Hotels pipeline and RevPAR growth support medium-term earnings expansion

Investment View

In its August 27, 2026 company update, ICICI Securities retained its BUY recommendation on Indian Hotels Co. Ltd. (IHCL) and an unchanged target price of Rs 925.

The broker’s positive view is based on resilient demand, IHCL’s brand strength, a substantial hotel-key pipeline, expected high single-digit RevPAR growth, rising management fees and a strong net-cash balance that can support expansion.

Operating Performance and Demand Outlook

IHCL delivered a resilient Q1FY27 despite geopolitical disruption. Consolidated revenue rose 15 per cent year-on-year to Rs 2,340 crore and EBITDA increased 17 per cent year-on-year to Rs 670 crore. Standalone domestic like-to-like RevPAR increased 14 per cent.

For FY26, IHCL recorded revenue growth of 16.3 per cent and EBITDA growth of 15.4 per cent. Over FY23 to FY26, the company delivered revenue and EBITDA CAGRs of 18.6 per cent and 21 per cent, respectively, driven by industry tailwinds, brand strength and room expansion.

Management indicated that Q2FY27 business on the books is robust and remains confident of delivering double-digit revenue growth in FY27.

Expansion Pipeline and Medium-Term Growth

IHCL had net cash of Rs 4,400 crore as of June 2026, which management intends to deploy to continue driving growth. As of June 2026, IHCL had around 33,600 operational keys at the entity level and a further pipeline of around 32,600 keys expected to open over the next four to five years.

ICICI Securities expects the pipeline, industry high single-digit RevPAR growth, new businesses and management-fee income to support medium-term mid-teens revenue and EBITDA growth.

Broker Forecasts

The broker forecasts consolidated revenue and EBITDA CAGRs of 12 per cent and 15 per cent, respectively, over FY26 to FY29E. Its assumptions include 7 per cent like-to-like RevPAR growth and a 19 per cent CAGR in management fees to Rs 1,160 crore in FY29E.

Proposed Oriental Hotels Merger

IHCL has proposed an all-stock merger of associate Oriental Hotels Limited (OHL), with a share-exchange ratio of 25 IHCL shares for every 117 OHL shares. The appointed date is April 1, 2027, with completion targeted in the second half of FY28, subject to statutory approvals and clearances.

OHL owns seven hotels with 825 rooms and holds strategic investments in several IHCL group hotel companies. ICICI Securities believes the transaction can simplify the group holding structure, increase IHCL’s direct ownership across entities and result in two new operating subsidiaries.

Valuation Methodology

The target price is derived using a sum-of-the-parts valuation. ICICI Securities values IHCL excluding TajSATS at 30 times June 2028E EV/EBITDA, adds June 2028E net cash, deducts minority interest, and adds values for Oriental Hotels and IHCL’s 51 per cent TajSATS share, also valued at 30 times June 2028E EV/EBITDA.

Key Risks

• Geopolitical demand disruptions.
• A slowdown in domestic demand.