This Tata Group stock quotes at an all-time high; market cap nears 1 trn

Shares of Indian Hotels Company hit a new high of Rs 693.35, gaining 4 per cent on the BSE in Tuesday's intra-day trade amid heavy volumes on expectations of strong revenue growth.

Shares of Indian Hotels Company (IHCL) hit a new high of Rs 693.35, gaining 4 per cent on the BSE in Tuesday’s intra-day trade backed by heavy volumes on expectations of strong revenue growth. 

Thus far in the calendar year 2024, IHCL has outperformed the market, by zooming nearly 60 per cent, as compared to 13 per cent rise in the BSE Sensex. A sharp rally in stock price of IHCL has seen the market capitalisation (market cap) of the Tata Group company inch towards Rs 1 trillion (Rs 1 lakh crore). 

At 11:56 am; with Rs 98,437 crore market cap, IHCL was trading 3.8 per cent higher at Rs 691.55. In comparison, the BSE Sensex was up 0.32 per cent at 81,817. The stock is 1.4 per cent or by Rs 9.65 away from achieving the Rs 1 trillion market cap. Meanwhile, the average trading volumes at the counter more-than-doubled with combined 3.5 million equity shares changing hands on the NSE and BSE.

With demand continuing to outpace supply and favourable structural tailwinds, the sector is set to clock strong revenue growth in the quarters ahead. IHCL expected double digit revenue growth for the financial year 2024-25 (FY25).  

IHCL and its subsidiaries bring together a group of brands and businesses that offer a fusion of warm Indian hospitality and world-class service. These include Taj - the iconic brand for the most discerning travelers; SeleQtions, a named collection of hotels; Vivanta, sophisticated upscale hotels; and Ginger, which is revolutionising the lean luxe segment. IHCL has a portfolio of 326 hotels including 102 under development globally across 4 continents, 13 countries and in over 130 locations.

Indian tourism is being driven by favourable demographics, increasing employment, higher disposable income of a young middle class, robust domestic demand, increased investments and improving infrastructure and connectivity. The Ministry of Tourism of the Government of India initiated several schemes such as ‘Swadesh Darshan’, PRASHAD, UDAN and ‘Dekho Apna Desh’ to promote travel. As many as 50 tourist destinations are in the pipeline for being developed to provide a wholesome tourism experience under the ‘Swadesh Darshan’ scheme.

The sector is well-positioned to capitalise on an upcycle, driven by the demand-supply gap, market penetration opportunities in Tier II and Tier III markets, strong demand drivers such as MICE (Meetings, Incentives, Conferences & Exhibitions), spiritual tourism, the rebound in foreign tourist arrivals and destination weddings.

IHCL in its financial year 2023-24 (FY24) annual report said that the Indian hotel industry is poised for a remarkable growth driven by long-term demand. Notable drivers of this growth are (i) improved connectivity with new airports and national highways across the country, (ii) increase in business travel led by buoyant economic conditions, new convention centres and global capability centres, (iii) recovery of foreign tourist arrivals, additional middle-income households and a clearly visible trend of premiumisation leading to higher demand for leisure destinations.

Analyst at JM Financial Institutional Securities expects room demand to improve from 2QFY25E, as the brokerage firm channel checks have indicated robust business growth in August 2024 as well. With various industry estimates estimating industry supply compound annual growth rate (CAGR) of 5-6 per cent over FY24-28E vs. demand CAGR of 9 per cent, analyst expect high single digit average room rate (ARR) growth and 200-250bps improvement in occupancies over FY25E-27E.