Nomura initiated coverage on Indian Hotels (IHCL) with a ‘Buy’ rating. The global brokerage house has a target price of Rs 830. This price target expects that the stock may give a return of 22.4% over the next 12 months.
IHCL’s high visibility on average daily rate of growth, coupled with better quality of earnings, positions it well to achieve its FY30 goals, said Nomura.
Strong visibility on ADR growth
Nomura expects India Hotels’ Average Daily Rate (ADR) growth to remain resilient because hotel room supply in key business cities is constrained, likely registering a CAGR of less than 5–7% through FY30.
Simultaneously, demand is bolstered by an all-time high in domestic tourism, a recovery in foreign arrivals, and recurring structural demand from weddings and MICE (meetings, incentives, conventions, and exhibitions) events. Furthermore, while current rates are high, Average Room Rates (ARRs) in dollar terms are still below 2008 levels, providing a significant tailwind for future pricing power.
However, as per IHCL, supply growth will remain constrained over the next five years (FY25-30) with just 0.1 million rooms in the pipeline, and only 25% in key business cities.
Transition to a capital-light model
IHCL has shifted its expansion strategy toward “asset-light” formats, such as management contracts and revenue-sharing leases. Approximately 80% of new keys in the pipeline are through management fee structures, which require minimal incremental capital and deliver high EBITDA conversion rates of 70–80%. This shift improves the quality of earnings and allows the company to scale rapidly without adding debt.
Likely to achieve ‘Accelerate 2030’ targets
IHCL appears well-positioned to meet its ambitious 2030 goals, which include doubling its portfolio to 700+ hotels and achieving a consolidated revenue of Rs 15,000 crore. The acquisition of the Clarks portfolio has already fast-tracked this growth, adding 135 hotels and strengthening IHCL’s mid-scale footprint under the Ginger brand. Nomura expects a revenue and EBITDA CAGR of 15% and 16%, respectively, between FY25 and FY28.
Significant improvement in cash generation
The company has successfully turned around its balance sheet from a high-debt position to a net cash business that generates surplus cash of Rs 800–1,200 crore annually. This robust cash flow covers necessary capex while allowing for inorganic growth. Consequently, the Return on Capital Employed (ROCE) is on track to improve from historical levels of 5–6% to approximately 20% by FY30.
Dominant brand equity and premium positioning
As South Asia’s largest hospitality company, IHCL’s multi-brand ecosystem (Taj, Vivanta, SeleQtions, and Ginger) provides a competitive edge in pricing control. The flagship Taj brand continues to command a RevPAR premium of 70–78% over the industry average. Strategic renovations of iconic assets and the “Lean Luxe” transformation of the Ginger brand have further enabled the company to sustain higher ARRs and attract high-yield customer segments.
IHCL stock performance
The share price of IHCL has fallen 1.22% in the last five trading sessions. The stock has declined almost 6% in the past one month and dropped 7.5% in the last six months. IHCL’s stock price has erased over 15% of investors’ wealth over the previous 12 months.