Pure-play luxury hospitality with strong growth visibility
We initiate coverage on Leela Palaces Hotels & Resorts (LEELA) with a BUY rating and a target price of INR 600, based on a 22x Dec’27E EV/EBITDA for its hotels business and a 1x P/B for the BKC/Dubai investments. LEELA is a luxury hospitality company with 4,090 operational keys across 14 hotels, including 1,761 owned keys, along with a pipeline of 763 owned and 283 managed keys over FY25–30E. We expect the company to deliver 16%/17% revenue/EBITDA CAGRs over FY25–28E backed by same-store RevPAR CAGR of 12% and pipeline keys. A strong heritage brand, coupled with limited luxury supply in India’s tier-1 cities, augurs well for the company’s medium-term growth outlook. Key risks: Slowdown in hotel occupancies/ARRs; and delay in execution of upcoming hotel assets.
Brand and asset owner with strong luxury positioning
LEELA is one of the largest pure-play luxury hospitality companies in India, consisting of 14 operational properties across 4,090 operational keys (including one Dubai hotel with 546 keys). The India portfolio includes five owned hotels with 1,215 keys and eight managed hotels with 2,329 keys. In FY25, the ARR and RevPAR across LEELA’s owned portfolio outperformed that of the luxury hospitality sector in India by 1.4x. Going forward, HVS Anarock estimates luxury segment demand CAGR (FY25-28E) of 13.7% vs. 8.8% supply CAGR which bodes well for RevPAR growth of luxury hotels in India and for the company’s medium-term growth outlook.
Robust asset pipeline/enhancements to boost growth
Going forward, the company has a visible pipeline to expand its footprint from ~4,090 operational keys, as of Nov’25, to over 5,000 operational keys by FY30. Of this, a robust pipeline of six owned hotels with 763 keys along with three managed hotels with 283 keys would be a key growth enabler. Further, the company’s revenue enhancement focus, through upgrading and repurposing its assets to add revenue streams and opening new verticals such as ARQ invite-only members club and Leela luxury residences, is expected to act as an additional growth lever.
Expect 16% revenue and 17% EBITDA CAGR over FY25–28E
We build in same-store ARR growth of ~10% for operational hotels over FY25–28E, in line with our view on the hotel industry, with same-store owned hotels occupancy set to stabilise at 72% by FY28E. Consequently, we model for 12% same-store RevPAR CAGR over FY25–28E. Further, with the company set to open 508 new keys in FY28E and management fees estimated to grow at a 13% CAGR over FY25–28E, we estimate a 16% revenue CAGR on a consol. basis over FY25–28.
While we build in a 16% revenue CAGR over FY25–28E, we estimate a 17% EBITDA CAGR over the same period on account of higher operating margins from management fees and economies of scale on employee costs and corporate overheads. We estimate consol. EBITDA margins to rise by 180bps over FY25–28 to 48% in FY28.
Strong balance sheet to enable organic/inorganic growth
As of Mar’25, the company had net debt of INR 25bn. Post its IPO in Jun’25, where the company raised INR25bn, the company has repaid INR 23bn of debt and incurred capex of INR 3.7bn in H1FY26. With fresh investments in its BKC, Mumbai and Dubai investments, we expect the company to have ~INR 8bn of net debt as of Mar’26 with a net debt/equity of 0.1x. We estimate the company to generate INR 7–8bn of pre- capex operating cash flow over FY26–28 with estimated annual capex of INR 6-7bn, which may result in company’s net debt/equity hovering ~0.1x. This leaves room for both organic and inorganic expansion in the medium term.
Dubai investment to bear fruit in medium term
The company has received its Board’s approval to acquire the luxury beachfront asset at Palm Jumeriah, Dubai in partnership with the Sponsor in a 25:75 ownership structure. The asset comprises of 546 keys including 361 hotel keys, 182 branded residences and 3 villas; and the transaction is priced at INR 43bn (USD 503mn or USD 920k/key). The company would invest INR 4.4bn (in addition to renovation capex) for 25% equity stake and will also likely earn HMA fees to the extent of INR 0.5-0.6bn annually from FY28E, post the re-branding of asset.
Management has indicated that the residences would be monetized with net proceeds shared between partners. This should allow the company to re-coup its initial investment within three years while retaining the 25% stake, making the transaction highly accretive.
Valuation: Initiate with BUY; TP INR 600
We initiate coverage with a BUY rating on LEELA and a target price of INR 600. We value the company’s hotel business at 22x Dec’27E EV/EBITDA valuing the hotel business at an EV of INR203.5bn. Our target multiple of 22x is in line with our target multiple of 22x for Lemon Tree Hotels and Chalet Hotels. Adjusting for net debt of INR 9.2bn, as of Dec’27E and adding BKC, Mumbai and Dubai investments at 1x P/B of INR6.2bn, we derive an equity value of INR 200.5bn or INR 600/share.
