Nomura Cheers Indian Hotels Buyout, Boosts Target Price 20%

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AuthorIshaan Verma|Published at:
Nomura Cheers Indian Hotels Buyout, Boosts Target Price 20%
Overview

Nomura reiterates 'Buy' on Indian Hotels Company with an ₹830 price target, citing the attractive acquisition of Brij Hospitality. The brokerage highlights IHCL's potential ₹1,000 crore annual cash surplus for further growth, with the Brij deal adding 22 hotels and enhancing its boutique segment strategy. The ₹225 crore acquisition aims for operational synergies and is expected to close by March 2026.

Global brokerage Nomura has cheered Indian Hotels Company Limited's (IHCL) move to acquire a 51% stake in Brij Hospitality Private Limited, assigning a 'Buy' rating and a price target of ₹830. This target implies a significant 20.64% upside from Wednesday's closing price.

Nomura's Rationale

Nomura views the acquisition as attractive, primarily due to its relatively inexpensive price and the strategic funding for future expansion. The brokerage highlighted IHCL's demonstrated capability for inorganic growth.
The analyst firm projects that Indian Hotels Company could generate an annual cash surplus exceeding ₹1,000 crore, even after accounting for dividend and lease payments. This surplus is earmarked for potential future acquisitions.

Deal Valuation and Strategy

The proposed acquisition of Brij Hospitality is underpinned by its estimated earnings before interest, taxes, depreciation, and amortisation (Ebitda) of ₹1,000–1,150 crore for the financial year 2027. The deal values Brij Hospitality's current portfolio at a multiple of 10.5 to 11.5 times its projected FY27 enterprise value (EV) to Ebitda.
Indian Hotels Company aims to leverage this acquisition to expand its boutique leisure segment across India. The deal aligns with IHCL's strategy of acquiring capital-light boutique hotel portfolios.

Portfolio Expansion

The integration of Brij Hospitality will add 22 hotels, comprising 440 keys, to Indian Hotels Company's existing portfolio. Currently, 11 hotels and 145 rooms from Brij Hospitality are operational.
Nomura anticipates operational synergies, given that hotels from both companies are situated in similar geographic markets. This partnership could streamline operations and enhance customer offerings.

Investment and Timeline

Indian Hotels Company plans to invest up to ₹225 crore in Brij Hospitality, directly or through its subsidiary ANK Hotels. This investment comprises approximately ₹105–140 crore in primary capital and ₹85 crore for secondary share purchases.
The transaction, subject to fulfilling certain conditions, is expected to be concluded before March 2026. This acquisition follows two other recent deals by IHCL in the past six months, including stakes in ANK Hotels and Pride Hospitality for ₹200 crore, and Sparsh Infratech for ₹240 crore.

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