 "Tata Group's hospitality arm and Taj Hotels' parent company Indian Hotels Company (IHCL) on Tuesday set a target to grow consolidated revenue 2x to Rs 15,000 crore and double the portfolio of hotels to over 700 by 2030.")
The largest listed hospitality chain, Indian Hotels Company or IHCL, had a soft September quarter and H1FY26 due to a higher base, ongoing renovation, higher rainfall and global uncertainties. Brokerages, however, believe that H2 will see strong growth given weddings, room additions and higher seasonal demand.
The stock, which is currently trading at ₹733 a share, has been an underperformer over the past year. It has generated a return of -2.73 per cent during this period as compared to 5–25 per cent returns of other major players.
IHCL’s standalone revenues were up 7 per cent Y-o-Y in H1FY26 as the hotel segment was impacted by global uncertainties, higher rainfall, an elevated base in the year-ago quarter due to events and lower inventory, as over 200 rooms were under renovation.
The company, however, indicated that there will be stronger performance in H2FY26 with revenue per available room or RevPar growth in double digits given high room demand and a strong wedding season. Further, with the 200 renovated rooms operational and 278 greenfield or new rooms, revenue growth in the second half of FY26 is expected to be in double digits.
The hotel chain’s Q2 revenues at the consolidated level were healthy at 12 per cent, though the same was led by subsidiaries, whereas the core standalone growth was restricted to just 2 per cent. Most of the operating metrics such as RevPar, average room rates or ARR and occupancy ratio were flat or lower Y-o-Y. While ARR declined by 1 per cent to ₹14,234, occupancies were flat at 78 per cent in the standalone entity.
Though food and beverages revenue growth was weak at 2 per cent, other services saw growth of 9 per cent. Management fees were up a healthy 24 per cent over the year-ago quarter.
Despite a weak topline, operating profit was up by 8 per cent Y-o-Y while margins expanded by 170 basis points Y-o-Y to 35 per cent. This was led by continued cost optimisation measures.
Among the growth drivers for the rest of the year are new hotels. The company is on track to open 3,000 rooms with new hotel openings in H2 pegged at 18 as compared to 12 in H1 through a combination of owned as well as managed portfolios. While the owned portfolio will include 504 rooms, the rest will be through management contracts.
ICICI Securities has a buy rating and expects a strong recovery in H2FY26. Kaustubh Pawaskar and Abhishek Shankar of the brokerage point out that room demand (10 per cent higher Y-o-Y) is likely to outpace room supply (8 per cent Y-o-Y). Further, the addition of greenfield rooms at key locations and consistent growth in management fee income is expected to drive consolidated revenues annually at 16 per cent over FY25–28. The brokerage has a buy rating with a target price of ₹915.
The other trigger is renovated properties, which include Taj Palace in Delhi, Taj Fort Aguada in Goa, President SeleQtions in Mumbai and Taj Lake Palace in Udaipur. In addition to this, what should add to the growth are higher meetings, incentives, conferences and exhibitions or MICE events as well as a higher number of wedding days.
The fully renovated portfolio is expected to deliver 12–15 per cent higher room rates and this will start reflecting from Q3FY26, with the full financial benefit expected in FY27. Higher demand in the current peak season is also expected to reflect on occupancies.
Elara Securities has upgraded the stock to a buy with a target price of ₹896. This upgrade is on the back of double-digit RevPar growth as well as room additions in the owned hotel portfolio, continued robust growth in management fee income through asset addition, portfolio enrichment and brand additions, aggressive scaling up of new businesses and healthy double-digit topline growth.
