Indian Hotels investors have a good view, but stock valuation is pricey
₹1,466 crore. However, elevated costs hampered an expansion at the Ebitda (earnings before interest, tax, depreciation, and amortization) level, despite the growth in revenue. The hospitality major flagged increased marketing expenses during its earnings call, leading to a 187 basis-point reduction in its Ebitda margin year-on-year, falling to 28% in Q1.
Key performance indicators such as average room rate (ARR) and revenue per available room (RevPar) showed year-on-year growth, though they fell sequentially due to seasonal factors. For context, standalone RevPar was at ₹9,428 in Q1, down from ₹12,634 in Q4FY23. Despite these challenges, Indian Hotels has retained its forecast of securing double-digit growth in RevPar for FY24.
Indian Hotels anticipates rising occupancy and potential boosts from events like the ICC Cricket Men’s World Cup and Miss World pageant. The revival of foreign tourism, which is yet to regain momentum, could also serve as a potential catalyst for growth. “While Q1 Ebitda was a miss and stock may remain range bound in near term, we believe Indian Hotels is an attractive proxy to domestic macro tailwinds over medium to long term," said analysts at Jefferies India in a report on 27 July.
Adding to the optimism, demand in Q1 outpaced supply, with hotel demand rising 8% compared to FY20 and room supply growth at 6.7%. As of Q1, Indian Hotels operates 270 establishments. On a separate note, the company’s board approved either Indian Hotels or one of its subsidiaries to acquire 100% equity of Pamodzi Hotels Plc from Tata International Singapore PTE Ltd.
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