JM Financial initiates 'Buy' on Schloss Bangalore; sees 43% upside

JM Financial has initiated coverage on Schloss Bangalore with a ‘Buy’ rating and a target price of ₹605, which implies 42.5 per cent upside from Friday’s close at ₹424.3 per share. Schloss Bangalore owns and operates luxury hotels under the ‘The Leela’ brand, which is widely recognised for superior architecture and luxury experience.

 

At 9:25 AM, Schloss Bangalore's share price wsa trading 0.69 per cent lower at ₹416.65 per share. In comparison, BSE Sensex was down 0.24 per cent at 82,425.5.

 

Leela Hotels or Schloss Bangalore shares made a weak debut on June 2, 2025. Leela Hotels' share price listed at ₹406 per share on the National Stock Exchange (NSE), reflecting a discount of ₹29 or 6.67 per cent over the issue price of ₹435 per share. On the BSE, Leela Hotels shares listed at a discount of ₹28.5 or 6.5 per cent at ₹406.5 per share.

Why is JM Financial upbeat on Schloss Bangalore?

Luxury segment tailwinds 

India’s luxury hotel segment is witnessing robust growth, driven by rising disposable incomes, a shift towards premium experiences, and a limited supply of luxury inventory. These factors have supported both Average Daily Rate (ADR) and occupancy growth in recent years, according to the brokerage.

 

Looking ahead, supply in the luxury segment is expected to remain tight due to high entry barriers, while demand for luxury rooms is projected to grow at a compound annual growth rate (CAGR) of 10.6 per cent over FY24–FY28E, compared with supply growth of just 5.9 per cent in the same period.

 

On the back of these tailwinds, analysts expect the segment’s Revenue Per Available Room (RevPAR) to rise to nearly 1.5 times its FY24 levels by FY28E, underscoring sustained pricing power and demand resilience in the premium category.

Brand with a rich heritage

With nearly 40 years of legacy, Leela Hotels is widely recognised for the superior quality of its architecture and luxury experiences, earning repeated top rankings among the world’s best hotels.

 

According to the HVS Report, Leela’s RevPAR across its owned portfolio was 1.4x the Indian luxury hotel segment average, underscoring the brand’s strength and pricing power in premium hospitality. This is another reason why the brokerage is bullish on the company. 

Aggressive expansion 

Leela has laid out an aggressive expansion plan that will see its room inventory increase from 1,224 owned keys to 1,978 owned keys by FY30E. It currently has a development pipeline of six hotels, including the recently announced mixed-use project (which includes a hotel with 250 keys) in BKC, Mumbai. It will continue to focus its expansion plans in key markets in India and internationally, where the demand-supply dynamics are favourable for luxury hotels, JM Financial believes. 

Proven asset management track record

Backed by Brookfield, Leela’s management has consistently delivered performance improvements through operational efficiency, cost optimisation, and brand-enhancing initiatives. This turnaround momentum is expected to sustain, according to analysts, with same-store RevPAR growth estimated at 11 per cent CAGR over the next three years.

Outlook

Leela’s revenue and Earnings before interest, tax, depreciation, and amortisation (Ebitda) are forecast to grow at a 17 per cent/ 18 per cent CAGR during FY25–28E, aided by 10 per cent CAGR in ARR and a steady pickup in occupancy.

 

The company is expected to generate a cumulative free cash flow to equity (FCFE) of ₹1,800 crore during FY26–30E (excluding BKC capex), comfortably funding its expansion plan.