Indian Hotels gains 3% to hit record high on healthy business outlook

Shares of the Indian Hotels Company (IHCL) gained 3 per cent to hit a record high of Rs 387.70 in Thursday’s intra-day trade in an otherwise subdued market on expectation of strong business outlook. The stock surpassed its previous high of Rs 377.80, which it had touched on May 9, 2023.

IHCL is primarily engaged in the business of owning, operating & managing hotels, palaces and resorts. The company has a diversified position in the hotel industry through brands such as Taj, Vivanta, SeleQtions and Ginger brands.

In the past one year, IHCL has outperformed the market as shares zoomed past 75 per cent, as against a 15 per cent rise in the S&P BSE Sensex.
 

According to IHCL, the outlook for the Indian hospitality industry during 2023 remains positive.

"The upsides working in favour of the hospitality industry in India are good macroeconomic environment evidenced by 6 per cent plus GDP growth, superior performance by the services sector of the Indian economy, abating COVID-19 fears, continuing infrastructure development projects within the country, growth in air and railway passenger traffic and growth in demand for branded rooms outpacing a tepid growth in supply of those rooms to provide long-term sustainable demand," the management said.

Moreover, the management said that the industry learnt to work with volatility and adopt leaner cost structures, thus contributing to higher profitability. They expect growth in the industry to be largely driven by domestic demand, which is expected to remain strong through FY2023-24 as international travel saw green shoots of recovery and provided scope for further growth in demand.

"Additionally, the India’s G20 Presidency and an opportunity to host international events, including the ICC Men’s World Cup, is expected to increase demand for hotels in the cities hosting the events," IHCL added in their FY23 annual report.

Along with improved outlook, the company is also focusing on driving more efficiencies through cost optimisation.

Analysts believe that the revival in foreign tourists, wedding season, G20 summit 2023 are to provide further fillip to leisure and business hotel room demand, going forward.

"The company plans to have a 300+ hotel room portfolio with zero net debt status. IHCL also aims to achieve 33 per cent plus margins (35 per cent for new businesses) through cost efficiencies. We expect revenue compounded annual growth rate (CAGR) of 10.7 per cent in FY23E-25E, on a higher base. The domestic business has now recovered fully. Now, growth is expected to be driven by foreign tourists and rebound in international business," the brokerage firm added.