The Indian Hotels Company Ltd. Quarterly Results Q3 FY 25 stock analysis

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Sector Outlook: Positive

Strong quarter, driven by robust demand

In Q3FY25, IHCL delivered strong performance with revenue reaching Rs. 25,331 million, up 29% YoY. This was driven by a higher occupancy rate of 78%, supported by industrial tailwinds like supply shortages, the wedding season, and increased domestic tourism, particularly in cities like Mumbai, Bengaluru, Delhi, and Hyderabad. The company’s Average Room Rate (ARR) grew by 11% YoY to Rs. 20,440, boosting Revenue Per Available Room (RevPAR) by 13% YoY to Rs. 15,996. Its new business ventures, including Ginger, Ama, and Qmin, saw revenue growth of 40% YoY to Rs. 1,640 million, while management fee income grew by 32% YoY to Rs. 1,770 million. Consolidated EBITDA improved to Rs. 9,617 million, with margins expanding by 67 basis points YoY to 38%.

IHCL also saw strong international business performance, particularly from its New York hotels. During the quarter, the company signed 20 new hotels across brands, including Taj, The Claridges, SeleQtions, Vivanta, Tree of Life, Gateway, and Ginger, and opened eight new properties, bringing its total portfolio to 237 hotels with 25,935 rooms. For its Sea Rock property, IHCL is awaiting approvals for commencement and height clearance.

Looking ahead, IHCL expects further growth in Q4FY25 due to additional wedding dates, large events and concerts, and rising domestic tourism, especially at religious sites like Prayagraj during Maha Kumbh. The management is optimistic about future growth driven by price hikes, higher ARR, and increased foreign tourist arrivals.

Key Concall Highlights

IHCL’s hotel brands reported strong double-digit RevPAR growth, with the Taj brand achieving 13% growth. This was driven by increased demand for domestic luxury travel and higher average room rates.
The new business segment, including Ginger, Qmin, and Ama Stays & Trails, recorded a 40% revenue growth in Q3FY25. Ginger generated ~Rs. 1,860 million in revenue, with a portfolio of 102 hotels, 72 of which are operational. Qmin expanded to 59 outlets, and Ama Stays & Trails now has 250 bungalows, with 119 operational.
The company received Intimation of Disapproval (IOD) for the Sea Rock property and is waiting for a commencement certificate (CC) and height clearance approval. Construction is expected to start in H2CY25.
IHCL completed the acquisition of Tree of Life, which will be added to its new business portfolio.
A labor strike in San Francisco impacted the market, but IHCL’s Campton Place hotel was not directly affected.
The rupee’s movement is expected to benefit the company by attracting more foreign tourists and encouraging Indian tourists to travel domestically instead of abroad.
The management mentioned that the current pricing environment is not favorable for greenfield projects.
With peak occupancy rates, the company plans to drive growth through price hikes, improving ARR, and increasing foreign tourist arrivals.

Valuation and Outlook

IHCL delivered a strong performance in Q3FY25, and the management is confident of achieving double-digit growth for FY25 by focusing on improving cash flows and maintaining a strong balance sheet. The new business segment is expected to support overall growth, while the company plans to expand its management fee segment to boost EBITDA margins. Tata Neu’s loyalty program is expected to drive revenue by increasing repeat customers.

The management anticipates continued growth in the coming quarters, supported by increased foreign tourist arrivals, better weather, more wedding dates, higher tourism at religious sites like Prayagraj for Maha Kumbh, and rising demand for MICE (Meetings, Incentives, Conferences, and Exhibitions).

IHCL’s goal of expanding to 700 hotels by 2030 positions it to benefit from the current demand-supply gap in the industry, where demand is growing at 6% YoY, while supply grows at only 2% YoY. This expansion strategy strengthens IHCL’s market position and supports a positive outlook for the future.