India’s hotel industry has witnessed tremendous growth in recent years, fueled by rising disposable incomes and a burgeoning middle class. As more people have the financial means to travel, the demand for accommodation has surged. This momentum is further amplified by a growing interest in domestic and international tourism, with travelers seeking diverse experiences in India’s cities, beaches, and heritage sites.
Tourism Surge and Government Support
The influx of domestic and international tourists has driven the need for more hotels, ranging from budget options to luxury resorts. The government’s active promotion of tourism through initiatives like “Incredible India” and simplifying visa processes has made the country more accessible to travelers. Additionally, the rising travel enthusiasm among younger generations, coupled with modern infrastructure developments, ensures a thriving hotel industry in the years to come.
Share Price
The shares of ITC Hotel Limited are listed at Rs. 180 and are currently trading at Rs. 173.5, down by 3.6% from the listing price. The stock is down by 33.46% from its last recorded price of Rs. 260 which was calculated on 6th January the Ex-demerger date (Considering the valuation of the hotel business).
Recent Updates
ITC Hotels Demerger and Spin-Off
On January 29, 2025, ITC Hotels Ltd. was officially listed on the stock exchanges following the demerger from its parent company, ITC Ltd. Shareholders of ITC Ltd. received one share of ITC Hotels for every 10 shares of the parent company. This spin-off is a significant event for both companies, allowing ITC Hotels to operate as an independent entity and potentially unlock value for shareholders.
Financial Outlook and Projections
ITC Hotels is expected to continue its growth trajectory, with projected revenue of ₹3,680 crore and EBITDA of ₹1,180 crore for FY25, resulting in an EBITDA margin of 32%. This is a slight increase from previous years, showing the resilience and strong recovery of the hotel business post-pandemic.
For FY26, the company is projected to achieve even higher figures, with revenue reaching ₹4,400 crore and EBITDA growing to ₹1,450 crore. These projections suggest a steady improvement in both revenue and operational efficiency, signaling a positive outlook for ITC Hotels in the coming years.
Historical Financial Performance
Looking at ITC Hotels’ financial performance over the past few years, the company has seen consistent growth. For FY23, it reported revenue of ₹2,629 crore and EBITDA of ₹808 crore, with a margin of 31%. This improved in FY24, with revenue increasing to ₹3,034 crore and EBITDA rising to ₹1,004 crore, resulting in a margin of 33%.
In H1 FY25, the company generated ₹1,471 crore in revenue and ₹413 crore in EBITDA, reflecting a margin of 28%. While the H1 margin saw a slight dip, the overall growth trajectory remains strong.
Valuation of ITC Hotels
Based on current market trends and industry valuations, ITC Hotels is likely to be valued at ₹22,000-23,500 crore. Given the 40% stake that ITC Ltd. holds in the hotel business, the listing of ITC Hotels could imply a per-share price range for the hotel business between ₹175 and ₹190 per ITC share.
This valuation aligns with the multiples at which other listed hotel stocks trade. ITC Hotels is expected to trade at a discount compared to market leader Indian Hotels but at a premium over companies like Chalet Hotels.
Reference Price and Passive Flow Impact
The share price of ITC Ltd. fell by ₹26 per share when the hotel business was demerged on January 6, 2025, setting the last discovered price of ITC Hotels at ₹260 per share.
Additionally, ITC Hotels is expected to meet the criteria for inclusion in the MSCI Global Small Cap Indices, which will trigger passive outflows of around $100 million due to its temporary inclusion in the Nifty50 and Sensex. These passive flows could affect the stock price in the short term, particularly during the exclusion period from the indices.
Hotel Sector Valuations
In terms of industry valuations, Indian Hotels currently trades at a multiple of 37X FY26E EV/EBITDA, while Chalet Hotels trades at 25X, and ITC Hotels is expected to trade somewhere in between, with estimates ranging from 25X to 30X. This implies a valuation range for ITC Hotels in FY26 of ₹34,750 crore to ₹42,000 crore, depending on the multiple the market ascribes to the company.
Future Growth and Strategic Plans
Looking ahead, ITC Hotels has ambitious growth plans. The company currently operates 140 hotels with 13,000 keys and intends to expand to over 200 hotels with 18,000 keys by 2030. With 65% of its portfolio expected to be managed assets by then, the company is positioning itself for sustained growth.
Additionally, ITC Hotels is debt-free, with ₹1,500 crore in cash reserves, and plans to focus on value-accretive mergers and acquisitions to enhance its portfolio further. This financial stability, coupled with a low capex requirement (8-10% of revenue), positions ITC Hotels for long-term success in India’s thriving hospitality industry.
Written By: Dipangshu Kundu
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