Nomura cheers Indian Hotels buying stakes in Brij Hospitality; here's why

Nomura maintains 'Buy' rating for the Indian Hotel Company and a target price of ₹830, which implies an upside potential of 20.64 per cent from Wednesday's close price

Indian Hotels Company Limited's latest acquisition of Brij Hospitality looks attractive to global brokerage Nomura on the back of a relative inexpensive price, and primary funding for future growth. IHC's announcement to buy a 51-per cent stake in Brij Hospitality Private Limited highlights the hotel chain's ability to continue growing inorganically, according to Nomura.  

  The brokerage estimates the hotel operator could generate a cash surplus of ₹1,000 crore annually, post dividend and lease payments, which can be used for potential acquisitions. 

 

Nomura maintains a 'Buy' rating for Indian Hotel Company stock and a share price target of ₹830, which implies an upside potential of 20.64 per cent from Wednesday's close price.

 

"The target price is based on 26 times Indian Hotels Company’s estimated enterprise value (EV) and earnings before interest, taxes, depreciation, and amortisation (Ebitda) for the financial year 2028 (FY28), which is at the lower end of the company's trading multiple for the past two years," the brokerage said. 

Indian Hotels to acquire Brij Hospitality

The proposed acquisition is based on Brij Hospitality's ₹1,000–1,150 crore earnings before interest, taxes, depreciation, and amortisation (Ebitda) estimate for the financial year 2027 (FY27). The deal values Brij Hospitality's current portfolio at 10.5 times–11.5 times the financial year 2027 enterprise value (EV) -to-earnings before interest, taxes, depreciation, and amortisation (Ebitda) multiple. 

 

Indian Hotels Company is buying the stake in Brij Hospitality with an aim to develop the boutique leisure segment across India. The deal is also for a portfolio of capital-light boutique hotels in line with the Indian Hotels Company’s strategy, Nomura said. 

 

The acquisition will add Brij Hospitality's 22 hotels or 440 keys to the Indian Hotels Company’s portfolio. As of now, only 11 hotels or 145 rooms are operating. 

 

"Onboarding a partner with a portfolio of boutique hotels across markets implies possibilities of operational synergies, given that both companies’ hotels are in similar locations," Nomura said.   ALSO READ | Elara Capital revises Lemon Tree to Accumulate; sees limited value in rejig

Brij Hospitality Acquisition details:

Indian Hotel Company will directly or through ANK Hotels buy a 51 per cent stake in Brij Hospitality, subject to the fulfilment of certain conditions precedent.

 

The company will make a total investment not exceeding ₹225 crore, of which roughly ₹105-140 crore would be primary investment, and ₹85 crore would be secondary share purchases.

 

The transaction will conclude before March 2026.

 

In the past six months, the Indian Hotels Company has completed two deals, in addition to Brij Hospitality. 

 

Earlier, the hotel operator bought a 51 per cent stake in ANK Hotels and Pride Hospitality Pvt Ltd, for a total investment of ₹200 crore. It has also acquired a 51 per cent stake in Sparsh Infratech Private Limited for a total investment of ₹240 crore. 

 

============== 

Disclaimer: View and outlook shared belong to the respective brokerages/analysts and are not endorsed by Business Standard. Readers discretion is advised.