Indian Hotels falls on strong Q1 as brokerages see sustainable growth
Indian Hotels reported an 18.7% rise in Q1 net profit, but shares fell as the market digested a sector-wide shift from hypergrowth to sustainable expansion.
The Indian Hotels Company (IHCL) shares fell more than 1% on the National Stock Exchange on Wednesday, even after the Tata Group hospitality firm posted an 18.67% year-on-year increase in consolidated net profit for the quarter ending June 30, 2026. Net profit reached ₹390.81 crore, up from ₹329.32 crore in the same period last year, while revenue climbed to ₹2,339.19 crore from ₹2,041.08 crore.
The top-line gains were partially offset by rising costs, with total expenses increasing to ₹1,886.04 crore compared to ₹1,662.35 crore a year earlier. Despite the margin pressure, underlying operational metrics pointed to robust demand. Revenue per available room in domestic like-for-like hotels grew 14%, while management fee income surged 26%.
Managing Director and CEO Puneet Chhatwal attributed the resilience to a diversified portfolio capable of weathering prolonged geopolitical and climate disruptions. "Since 14-15 months we are in a very volatile state, starting with Pahalgam last year to ongoing West Asia crisis, or Operation Sindoor, or landslides and flooding, etc... Everything to do with travel has been disrupted," Chhatwal said. He noted that demand continues to outstrip supply, driven by a structural shift in travel aspiration.
The broader market reaction suggests investors are recalibrating their expectations for the sector. Brokerage Anand Rathi highlighted that the hotel industry is transitioning from a hypergrowth phase to a stable, sustainable growth trajectory. The firm maintained its 'buy' rating but revised its target price to ₹845 from ₹765, valuing the stock at approximately 26 times its FY28 estimated EBITDA.
Anand Rathi projects domestic like-for-like RevPAR growth of 8% to 10% annually, supported by renovation-driven average room rate expansion. IHCL has spent roughly ₹20 billion over the past two years upgrading major properties in Delhi, Mumbai, and Goa. The brokerage raised its EBITDA estimates by 3.7% for FY27 and 9% for FY28, citing the company's strong cash position of around ₹44.4 billion and recent acquisitions.
Motilal Oswal also reiterated its 'buy' rating with a higher target price of ₹870, using a sum-of-the-parts valuation. The firm expects IHCL to deliver a compound annual growth rate of 14% in revenue, 17% in EBITDA, and 20% in adjusted profit after tax over the FY26-28 period. For investors, the stock's decline on strong fundamentals presents a test of whether the market is correctly pricing the end of hypergrowth or overreacting to a normalization trend.
