Global investment firm Jefferies has initiated a 'Buy' recommendation for Indian Hotels Co Ltd (IHCL), a prominent Tata group entity, setting a target price of Rs 875. This target suggests a potential upside of 23% from current levels, following a recent fireside chat with IHCL's MD & CEO Puneet Chhatwal at the Jeff India Forum.
Investment Firm Sees Strong Growth Trajectory
Jefferies analysts expressed a highly constructive view on the long-term growth prospects within India's hospitality sector, anticipating a sustained upcycle. The firm noted that IHCL's strong momentum from Q1 has continued into Q2, bolstering confidence in exceeding its FY27 revenue growth guidance of 12-14%.
Strategic Acquisitions and Robust Pipeline Fuel Outlook
IHCL management conveyed its openness to strategic acquisitions, particularly within India, aimed at strengthening its portfolio and accelerating growth through capital-light models. Key considerations for potential acquisitions include strategic fit, brand compatibility, return on investment, acquisition cost, renovation needs, and operational impact. The company also emphasized its disciplined approach to capital allocation, evaluating numerous opportunities but only pursuing those that align with its strict criteria.
The management anticipates sustained growth, underpinned by a significant pipeline of 300 new hotels and an expected 50 annual openings from existing projects. Jefferies highlighted that IHCL targets a 10% like-for-like (LFL) growth and 5% non-LFL growth over the coming years. This growth is expected to be driven primarily by increases in room rates for established businesses, complemented by robust expansion in segments like Ginger, which is reportedly growing at 25%.
Diversified Portfolio and Disciplined Capital Allocation
Jefferies pointed to IHCL's diversification across 12 brands, various geographies, and diverse business models as a key factor supporting its growth, profitability, and cash generation. The firm noted that approximately 70% of IHCL's EBITDA is converting into free cash flow (FCF), a testament to strong operational efficiency and the increasing contribution from asset-light ventures.