IHCL: Should you buy the Tata Group stock after Nomura trims its future earnings estimates?

Synopsis:- Brokerage maintained a ‘Buy’ with ₹800 target, implying ~32% upside from ₹604 despite minor estimate cuts. RevPAR growth of 9% and EBITDA growth of 11% support the outlook. Strong expansion to 361 hotels and rising management fees indicate steady medium-term growth despite near-term uncertainties.

India’s hotel sector is booming in FY2026, fueled by strong domestic leisure, MICE, weddings, and business travel. Revenues are set to grow 9-12% year-on-year, with premium occupancy steady at 72-74% and average room rates rising to  Rs 8,200-8,500. Demand outpaces supply growth of 5-6%, sustaining high RevPAR around  Rs 5,600-5,700. This demand-supply gap promises continued profitability. 

With a market capitalisation of Rs 85,989.54 crore, the shares of Indian Hotels Company Ltd were trading at Rs 604.10 per share, increasing around 3.71 percent as compared to the previous closing price of Rs 582.50 apiece

Brokerage Recommendation

Nomura has maintained a positive outlook on the hotel stock with a ‘Buy’ rating, even after trimming its target price from Rs 830 to  Rs 800. Despite the revision, the target still implies a strong ~32% upside from  Rs 604, suggesting confidence in growth prospects, though some near-term factors may have led to a more conservative valuation outlook.

Rational

Nomura has slightly lowered its FY27 and FY28 earnings estimates by 3% each, citing uncertainty due to geopolitical tensions, particularly in the Middle East. While this reflects a cautious stance, the brokerage expects limited near-term impact. For Q4FY26, EBITDA growth is projected at 11% YoY, down from 13% earlier and around 3% below consensus, indicating moderated expectations amid a volatile external environment.

However, growth is expected to recover in FY27, supported by a low base due to disruptions in FY26. Additional upside may come from acquisitions contributing 200–300 basis points to revenue, along with room expansions in key properties like Taj Frankfurt, Varanasi, and Ekta Nagar. Management fee income is also likely to grow in the mid-to-high teens, driven by new unit additions.

Nomura expects steady growth with FY28 RevPAR projected at 9%, driven by strong demand in the luxury segment and corporate travel. The brokerage believes improving operating leverage and a higher share of management fees will support margins, indicating a healthy medium-term outlook despite potential near-term fluctuations in demand trends.

Q3FY26 performance.

Looking forward to robust financial performance in Q3FY26, in which revenue increased by 12 percent on a year-on-year basis from Rs 2,533 crore in Q3FY25 to Rs 2,842 crore in Q3FY26. However, on a Quarter-on-Quarter basis, revenue increased by 39 percent from Rs 2,041 crore in Q2FY26 to Rs 2,842 crore in Q3FY26.

Moreover, net profit increased by 51 percent on a yearly basis from Rs 633 crore in Q3FY25

to Rs 954 crore in Q3FY26, meanwhile, on a quarter-on-quarter basis, net profit increased by

200 percent from Rs 318 crore in Q2FY26 to Rs 954 crore in Q3FY26.

The company delivered a steady Q3 performance with EBITDA rising 11% year-on-year to  Rs 1,134 crore, maintaining a healthy margin of 39.1%. For the nine-month period, EBITDA grew 16% to  Rs 2,425 crore with margins at 34%. Growth was supported by operational strength and included exceptional gains from a stake sale and consolidation impact.

IHCL continued its strong portfolio expansion, signing 239 hotels year-to-date across brands and strategic partnerships, including Clarks Group and Rajdarbar Group. It opened and onboarded 120 hotels, taking the operational count to 361 with an inventory exceeding 32,000 rooms, reinforcing its leadership and growth momentum across markets.

Furthermore, new and reimagined businesses delivered solid performance, with TajSATS reporting  Rs 323 crore revenue and healthy margins. Ginger recorded  Rs 232 crore enterprise revenue with strong profitability, while Qmin expanded to 110 outlets. amã Stays & Trails reached 351 bungalows, and Tree of Life grew to 27 resorts, reflecting diversified growth.

Indian Hotels Company Limited is India’s leading hospitality company and the parent of the iconic Taj brand. Part of the Tata Group, it operates a diverse portfolio of luxury, upscale, and budget hotels across India and international markets, blending heritage with modern hospitality.

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