Motilal Oswal Financial Services has reaffirmed its BUY recommendation on Indian Hotels Company Ltd. (IHCL), projecting a promising upside in the coming quarters. The brokerage has set a revised target price of Rs 640 per share, suggesting a solid potential upside from current levels. The optimism stems from the company's expanding footprint, elevated Average Room Rates (ARRs), and industry-leading EBITDA margins. The report further notes that Indian Hotels is strongly positioned to capitalize on India’s growing travel and tourism sector, with increasing business and leisure travel underpinning forward visibility for the next 12–15 months.

Strong Financial Momentum Driven by Higher ARRs and Occupancy

Indian Hotels continues to benefit from the structural uptrend in domestic travel demand. In Q4FY24, the company witnessed a 9% year-on-year rise in ARRs, while maintaining occupancy rates in line with pre-COVID peaks.

Key performance metrics:

• ARR growth: +9% YoY
• Revenue from new businesses (Ama Stays, Qmin, Management Contracts): Rs 475 crore in FY24
• EBITDA margins: Maintained at 32%

This consistent performance is driven by demand across both metro and Tier-II cities, with robust booking pipelines well into FY25. Management expects these dynamics to sustain growth, even with an anticipated addition of 18 new hotels in FY25.

Pipeline Expansion Reinforces Long-Term Strategy

Indian Hotels is actively expanding its footprint through an asset-light model. In FY24, the company signed 36 new properties and opened 18 hotels, taking the operational count to 200. The management remains committed to opening more than 300 hotels by FY27, indicating accelerated capacity build-up.

• Total signed inventory: 32,000+ rooms
• Pipeline (FY25E): 45–50 hotels to be signed
• New launches planned for FY25: 18 hotels

The company is also expanding internationally, with a keen eye on the Middle East and Southeast Asian markets.

Robust Financial Discipline and Balance Sheet Strength

Indian Hotels’ financial strategy emphasizes cash generation and deleveraging. The company has maintained net cash status for the last six quarters, which underlines its conservative capital management approach.

• Net cash balance: Rs 1,400 crore
• Capex (FY25 guidance): Rs 500–550 crore
• Focus: Maintenance, digital transformation, and strategic hotel upgrades

The capital allocation framework ensures high return on equity and optimizes shareholder value creation.

Guidance and Valuation Support Further Upside

Motilal Oswal forecasts steady margin expansion and EBITDA growth for Indian Hotels, underpinned by its pricing power, network scale, and disciplined execution.

• FY25 EBITDA margin guidance: 33–34%
• FY26 margin target: 35%
• Fair Value: Rs 640/share, implying ~17% upside

Valuation is compelling at 21.5x FY26E EV/EBITDA, considering the asset-light growth model and cash-generating ability.

Technical Analysis: Bullish Setup With Strong Support Base

From a technical standpoint, Indian Hotels stock is currently consolidating after a robust uptrend and presents a constructive structure.

• Current price range: Rs 545–560
• Support levels: Rs 530 and Rs 505
• Resistance levels: Rs 580 and Rs 610

Candlestick patterns suggest a bullish engulfing on the weekly chart, pointing to renewed buying interest. A sustained breakout above Rs 580 could trigger a swift rally toward the Rs 640 target.

Fibonacci Levels and Trend Outlook

Based on the recent swing high of Rs 598 and swing low of Rs 502, the calculated Fibonacci retracement levels are:

Any price movement sustaining above Rs 575 could lead to a bullish continuation pattern, targeting Rs 640–650.

Peers and Sector Dynamics

Indian Hotels faces competition from other listed hospitality majors like Lemon Tree Hotels and Chalet Hotels. However, its differentiated portfolio, strong brand recall (Taj, Vivanta, SeleQtions), and aggressive growth pipeline provide a clear competitive edge.

• Lemon Tree: Focused on mid-market segment, expanding rapidly in Tier-II cities
• Chalet Hotels: Premium assets in urban hubs; limited pipeline in comparison

Indian Hotels remains the frontrunner in capturing high-value business and luxury travel demand, especially with increasing domestic air traffic and experiential travel preferences.

Bottomline for Investors: Solid Growth Story with Attractive Valuation

Indian Hotels Company Ltd. offers an attractive blend of robust fundamentals, expanding capacity, and high-margin growth, backed by strong demand visibility and a disciplined business model. With consistent earnings upgrades, efficient capital deployment, and a favorable macro backdrop, Motilal Oswal’s bullish stance appears well-founded. Investors looking for quality exposure in the Indian hospitality space would do well to consider Indian Hotels as a long-term compounder.