ICICI Sec starts coverage on Leela Palaces with 'Buy'; 45% upside seen

ICICI Securities has set a target price of ₹600 for Leela Palaces Hotels and Resorts, based on a 22x EV/Ebitda on December 2027 earnings estimates for its hotels business

Leela Palaces Hotels and Resorts share price: Domestic brokerage ICICI Securities has initiated coverage on Leela Palaces Hotels and Resorts, a luxury hospitality company, with a 'Buy' rating, citing its strong heritage brand, robust asset pipeline, and strong balance sheet. 

 

According to the brokerage, Leela Palaces is a luxury hospitality company with 4,090 operational keys across 14 hotels, including 1,761 owned keys, along with a pipeline of 763 owned and 283 managed keys over FY25–30E. It expects the company to deliver a revenue/Ebitda CAGR of 16 per cent/17 per cent over FY25–28E backed by same-store RevPAR (revenue per available room) CAGR of 12 per cent and pipeline keys.

 

"A strong heritage brand, coupled with limited luxury supply in India’s tier-1 cities, augurs well for the company’s medium-term growth outlook," the brokerage said in its note. 

 

ICICI Securities has set a target price of ₹600, based on a 22x EV/Ebitda on December 2027 earnings estimates for its hotels business and a 1x P/B (Price to book value) for the BKC/Dubai investments. The target price implies an upside potential of 45 per cent from the December 16, 2025, closing price of ₹414 on the NSE.

 

At 02:05 PM on Wednesday, December 18, the Leela Palaces stock was trading at ₹410.55, down nearly 1 per cent from the previous session's close. In comparison, the NSE Nifty50 was down 64.55 points or 0.25 per cent at 25,795 levels. The company's total market capitalisation stood at ₹13,729 crore.

Here’s why ICICI Securities recommends buying Leela Palaces Hotels and Resorts:

Asset owner with strong luxury positioning: Leela is one of the largest pure-play luxury hospitality companies in India, consisting of 14 operational properties across 4,090 operational keys. In FY25, Leela’s owned hotels recorded average room rate (ARR) and RevPAR 1.4 times higher than the Indian luxury hospitality sector average, the brokerage said in its note. Looking ahead, HVS Anarock projects the luxury segment demand to grow at a CAGR of 13.7 per cent between FY25 and FY28, outpacing supply growth of 8.8 per cent, which is expected to support RevPAR growth and bolster the company’s medium-term growth prospects.

 

Robust pipeline to boost growth: According to the brokerage, the company plans to expand its footprint from around 4,090 operational keys in November 2025 to over 5,000 keys by FY30. Key growth drivers include a strong pipeline of six owned hotels with 763 keys and three managed hotels with 283 keys. Additionally, the company is focusing on revenue enhancement by upgrading and repurposing existing assets, as well as launching new verticals such as the ARQ invite-only members club and Leela luxury residences, which are expected to provide further growth support.

 

Strong balance sheet: As of March 2025, the company’s net debt stood at ₹25 billion. Following its IPO in June 2025, which raised ₹25 billion, Leela has repaid ₹23 billion of debt and incurred capex of ₹3.7 billion in H1FY26. Analysts noted that with ongoing investments in BKC, Mumbai, and Dubai, net debt is expected to be around ₹8 billion by March 2026, with a net debt-to-equity ratio of 0.1x. The company is projected to generate ₹7–8 billion in pre-capex operating cash flow over FY26–28 against an annual capex of ₹6–7 billion, maintaining a net debt-to-equity of 0.1x, which provides significant room for both organic and inorganic expansion in the medium term.

 

Revenue/Ebitda to grow strongly over FY25–28E: According to ICICI Securities, Leela Palaces is expected to report a 16 per cent revenue and 17 per cent Ebitda CAGR over FY25–28E. Same-store ARR is projected to grow 10 per cent, with occupancy stabilising at 72 per cent by FY28E, driving a 12 per cent same-store RevPAR CAGR. Addition of 508 new keys and a 13 per cent CAGR in management fees further support growth, while Ebitda margins are expected to expand by 180 bps to 48 per cent by FY28 due to higher operating margins and scale efficiencies.  (Disclaimer: Target price and stock outlook has been suggested by ICICI Securities. Views expressed are their own.)