ITC Hotels Ltd. is expected to see its revenue grow at a compound annual growth rate of 15% over the next three to four years, according to Prashant Biyani, sector lead for agri-inputs, sugar and hotels at Elara Securities.
“Part of it will be driven by the hotel business and some of it will also be driven by the sale of luxury residential apartments that they will start off from this year in their latest property in ITC Ratnadipa, which is in Sri Lanka,” he said.
Biyani projected that by FY28, ITC Hotels will have a top line of Rs 5,300–5,400 crore and an Ebitda of Rs 2,000–2,100 crore. “That would imply a margin of around 38% for the company.”
ITC Hotels’ shift towards a higher proportion of managed contracts, expected to account for 65% of its portfolio by FY30, is set to drive margin expansion of 300–400 basis points over the next four years.
“Then we will also see Ebitda accretion from the sale of luxury residential apartments, which is also a high-margin business. So, both of them will contribute to the margin accretion for ITC hotels,” he said.
Biyani outlined the financial dynamics of ITC Hotels’ business model. Managed hotels offer high Ebitda margins of around 80% as they incur minimal costs. Owned hotels, by contrast, typically generate margin of 33% to 37%, but deliver significantly larger absolute Ebitda.
“It is not that one business model is better than the other. I think in India, the right model will be a mix of owned as well as managed,” he said. Biyani said that seven to 10 managed hotels could match the Ebitda of a single owned property.
The analyst is optimistic about ITC Hotels’ valuation. Elara Securities has a target price of Rs 230 apiece based on a sum-of-the-parts valuation, factoring in the hotel and residential real estate businesses.
Biyani highlighted ITC Hotels’ strong cash position. It has a net cash reserve of Rs 1,500–1,600 crore, bolstered by a recent Rs 1,500-crore infusion from ITC post-demerger. However, he expressed concern about the company’s cash deployment strategy, noting that excessive cash reserves could drag return ratios.
“If you look at their own hotel pipeline right now, they have a pipeline of around 400 to 500 keys in the owned portfolio, which they will start over the next two to three years. So, I think as an analyst I would like to see more properties on the owned side,” he said.
Occupancy rates at ITC Hotels have been driven by the full-scale opening of the 352-key ITC Ratnadipa, the ramp-up of newer properties opened since 2020, and the completion of renovations that had previously led to room closures. Biyani also noted positive tailwinds in the broader hotel industry as a key factor.
. Read more on Business by NDTV Profit.By FY28, ITC Hotels will have a top line of Rs 5,300–5,400 crore and an Ebitda of Rs 2,000–2,100 crore, says Biyani. Read MoreBusiness, Markets, Notifications
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