Rakesh Jhunjhunwala portfolio: Nirmal Bang sees over 40% upside on this stock

Market


Brokerage house Nirmal Bang recently hosted Indian Hotels Company on an investor call in which the company’s management stated that the strong rental growth in hotels seen in 2QFY22 gathered further momentum in 3QFY22 with staycations, vacations, weddings etc. 

The brokerage and research firm remains positive on IHCL’s business recovery prospects due to strong growth environment with a V-shaped recovery in demand, cost optimization, which will help in improving EBITDA margin, strong brand recall and footprint across segments, asset light approach for growth and diversified revenue strategy to include other verticals like Ginger, Qmin, Ama Trails, Chambers etc.

It has maintained Buy rating on Indian Hotels shares with a target price (TP) of 294 apiece, implying a potential upside of over 40% from current level.

The management strategy is focused on driving growth and not on debt reduction, the note stated. The key elements of the strategy include asset light room expansion by increasing management contracts, diversifying revenue streams, improving balance sheet strength with acquisition of subsidiaries like Roots and focused property asset management to ensure returns on property are higher than the hurdle rate for the property.

The IHCL management is increasingly linking the utilization of space in a property to generate higher returns than the hurdle rate for the property. For instance, the management stated that they had closed the Japanese restaurant in Taj Mansingh as the return ratios from the restaurant were lower than the hurdle rate for the property. Further, they have increased the room size in Taj Mansingh as it has helped to increase ARR, thereby improving the return on the property, the note highlighted.

As per BSE shareholding pattern, Rakesh Jhunjhunwala and his wife Rekha Jhunjhunwala hold 1.05% stake each in Indian Hotels as of September 2021.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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