Indian Hotels Company Ltd (IHCL) Q2FY26 Results Show Moderated Growth Amidst Headwinds, Outlook Remains Robust

Indian Hotels Company Ltd (IHCL) announced its Q2FY26 results, showing a consolidated revenue increase of 12 percent year-on-year. However, the growth in the core hotel segment moderated to 7 percent year-on-year, amounting to Rs 1,839 crore. This slowdown was attributed to external factors such as adverse weather conditions, including a stronger monsoon and landslides, alongside ongoing major property renovations and a high base effect from Q2FY25. The company's consolidated Revenue Per Available Room (RevPAR) for the hotel business grew in the mid-single digits. The air catering business under Taj SATS demonstrated stronger growth, increasing by 13 percent year-on-year to Rs 287 crore.

Despite the moderation in hotel segment revenue, IHCL managed to maintain its Earnings Before Interest, Tax, Depreciation, and Amortisation (EBITDA) margins on a year-on-year basis. The hotel business's EBITDA margin saw a marginal expansion of 50 basis points to 28.9 percent. Conversely, air catering margins experienced a slight decline of 30 basis points to 23.1 percent, primarily due to adjustments in airport levy methods.

Profit before exceptional items grew by 17 percent year-on-year. However, reported earnings declined year-on-year, largely influenced by significant exceptional gains recorded in the corresponding quarter of the previous year.

IHCL indicated that demand momentum remains strong, with a robust business pipeline for the remainder of the fiscal year, particularly in October 2025. The company anticipates a strong H2FY26, bolstered by several high-profile Meetings, Incentives, Conferences, and Exhibitions (MICE) events and an increased number of wedding dates. The company has also completed significant renovations, which are expected to drive future growth. IHCL has reaffirmed its commitment to achieving double-digit growth in the hotel business for FY26, even with the challenging Q2 performance and a high base from H2FY25.

The company boasts a healthy inventory addition pipeline, with plans to add approximately 22,000 keys over the next few years to its current operational inventory of 28,273 keys. This expansion will be a mix of owned properties and asset-light management contracts. This aggressive expansion strategy is considered industry-leading.

The broader hotel industry up-cycle, which began post-COVID-19, is projected to continue. Demand is expected to grow at a double-digit rate, outpacing supply growth of about 7.7 percent over FY25-30, especially in key business and leisure cities. This favourable demand-supply dynamic is expected to support sustained pricing growth for well-established players like IHCL.

IHCL's newer businesses, including its reimagined Ginger brand in the mid-market segment, are scaling up rapidly, contributing 8 percent of the company's revenues and showing a 22 percent year-on-year growth in H1FY26. Other ventures like Q-Min food, Ama bungalow, and Tree of Life resorts are also expanding.

Financially, IHCL holds strong reserves of Rs 2,850 crore, positioning it well for inorganic growth. Recent acquisitions include a 51 percent stake in ANK Hotels and Pride Hospitality for Rs 204 crore, adding 135 mid-scale hotels to be rebranded under the Ginger banner. Furthermore, IHCL has entered into multi-asset distribution and management tie-ups with brands like Brij, Ambuja Neotia, and Madison, which will further accelerate its growth trajectory.

At its current market price, IHCL is trading at an Enterprise Value to EBITDA (EV/EBITDA) multiple of 28 times its FY27 projections. Given the positive earnings outlook and strategic growth initiatives, the stock is recommended for investors.

## Impact This news provides investors with an update on IHCL's quarterly performance, highlights its strategic growth initiatives, and offers insights into the favourable dynamics of the Indian hospitality sector. The company's ability to maintain margins despite headwinds, its robust expansion plans, and the overall industry up-cycle suggest potential for sustained growth, making it a key stock to watch for investors interested in the Indian hospitality and tourism sector. The 'Add' recommendation indicates a positive outlook from analysts. 7/10

## Difficult Terms **YoY**: Year-on-Year, a comparison of financial data from one period to the same period in the previous year. **Rev Par**: Revenue Per Available Room, a hotel industry performance metric that measures average revenue earned per occupied room and is calculated by dividing total room revenue by the total number of rooms available. **EBITDA**: Earnings Before Interest, Tax, Depreciation, and Amortisation. It is a measure of a company's operating performance before accounting for financing and non-cash expenses. **Basis points**: A unit of measure equal to 1/100th of 1 percent (0.01%). Used here to describe small changes in percentages. **MICE**: An acronym for Meetings, Incentives, Conferences, and Exhibitions, representing a segment of business tourism. **Asset-light**: A business strategy that involves minimizing the ownership of physical assets, focusing instead on services, intellectual property, or management contracts to generate revenue. **EV/EBITDA**: Enterprise Value to Earnings Before Interest, Tax, Depreciation, and Amortisation. It is a valuation ratio used to compare a company's total value to its operating cash flow. **CMP**: Current Market Price, the current trading price of a stock on an exchange.