Schloss Bangalore stock up 5% as Morgan Stanley initiates with 'Overweight'

Schloss Bangalore share price today: Shares of Schloss Bangalore, the operator of Leela Hotels, rallied on Tuesday, July 8, 2025, with stock gaining as much as 5 per cent to hit an intraday high of ₹427.15 per share on the National Stock Exchange (NSE). In comparison, benchmark NSE Nifty50 was trading flat with a negative bias at ₹25,438. 

 

Around 12:30 PM, Schloss Bangalore shares were trading at ₹422, up 3.8 per cent from the previous day's close of ₹406.55. 

 

Schloss Bangalore debuted on the exchanges just over a month ago. On June 2, 2025, the stock listed at a discount of 6.67 per cent at ₹406 per share compared to the issue price of ₹435.  Track Stock Market LIVE Updates

Here's why Schloss Bangalore shares rallied today

Schloss Bangalore has received an 'overweight' rating from Morgan Stanley, with a target price of ₹549. The rating is driven by higher-for-longer upcycle, strong demand, iconic assets and attractive valuation. 

 

According to analysts at Morgan Stanley, Schloss Bangalore is one of the limited ways to play the India luxury story. The company is one of the few pure-play luxury hotel brands from India. 

 

"It is an asset-heavy business, with 93 per cent of operating revenue from five owned hotels, and its iconic properties blend historical architectural styles with modern luxury," the brokerage stated. 

 

In addition, international awards, along with industry-leading RevPAR (Revenue per available room) and Ebidta margins, also reflect the luxury positioning the company has built.  

 

In its report, Morgan Stanley highlighted that demand for luxury hotels in India remains robust, while new supply is growing at a relatively moderate pace due to the capital-intensive nature of the sector. This imbalance between strong demand and limited supply supports Morgan Stanley’s thesis of a prolonged upcycle in RevPAR.

 

The brokerage expects rising room rates and high occupancy to drive 12 per cent annual Ebitda growth through fiscal year 2026-27 (FY27), with net income increasing 9 times as interest costs come down. 

 

It also noted that the company’s balance sheet is nearly net-debt-free, allowing free cash flow (FCF) to support the upcoming capex cycle, which includes the addition of five new hotels with a total of 475 rooms, one of which will be developed through a joint venture, scheduled to open in FY28. While the reported Return on Capital Employed (ROCE) for FY25 is low at 7.3 per cent, Morgan Stanley pointed out that adjusting for asset revaluation of ₹13 billion and a higher cash balance due to recapitalisation of ₹12 billion by promoters, the adjusted ROCE rises to around 10 per cent.

 

"The stock is trading at 18.5x F27 EV/Ebitda, vs 29x one-year forward EV/Ebitda on average for branded hotel plays like IHCL (Overweight) and ITC Hotel (not covered) and asset owners like Chalet and Juniper at 20x (both not covered). In our base case, we benchmark the stock to the sector average EV/Ebitda of 25x on F27 Ebitda," the brokerage said. 

 

"Reflecting our confidence of a continued RevPAR upcycle and successful ramp-up of new hotels, we assign a target multiple of 30x (similar to IHCL) in our bull case. We see a re-rating of the stock closer to IHCL's multiple," it added.

 

However, despite the positive outlook, the brokerage raised concerns around high concentration risk as the top three properties account for 70 per cent of the revenue. "A sharp luxury downcycle is another risk to watch as the business has high fixed costs and capex plans," it said.