ICICI Securities has initiated coverage on The Leela Palaces Hotels & Resorts (LEELA) with a ‘BUY’ rating and a target price of INR 600, implying a ~46% upside from the current market price of INR 411. The brokerage values Leela’s core hotels business at 22x Dec’27E EV/EBITDA, adding a 1x P/B multiple for its high-value investments in Mumbai BKC and Dubai.
ICICI’s initiation on Leela Hotel marks one of the most confident brokerage calls in India’s luxury hospitality segment this year, reflecting the brokerages’ conviction in Leela’s strong brand equity, visible earnings growth, and prudent balance sheet transformation post its June 2025 IPO.
Reinforcing Leadership in Luxury Hospitality
Leela Hotel is one of India’s largest and most established pure-play luxury hospitality operators, with 14 operational hotels comprising 4,090 keys, including five owned properties (1,215 keys) and eight managed hotels (2,329 keys). The company also owns a 546-key property in Dubai, expanding its international footprint.
The brokerage notes that Leela Hotel’s Average Room Rate (ARR) and Revenue per Available Room (RevPAR) outperformed India’s luxury segment average by 1.4x in FY25, underscoring its premium positioning. The brand’s strong pricing power, coupled with limited supply in tier-I markets, gives it a durable advantage in a sector entering a multi-year growth cycle.
Financial Strength: From Leverage to Cash Generation
One of the key pillars of ICICI Securities’ bullish thesis is Leela Hotel’s financial transformation. Post its INR 2,500 crore IPO in mid-2025, the company repaid INR 2,300 crore of debt, sharply reducing leverage to a net debt-to-equity ratio of 0.1x.
This deleveraging has converted Leela Hotel into a cash-generative platform capable of funding its growth internally—a rare trait in the capital-intensive hospitality industry. The brokerage expects Leela Hotel to generate INR 700 – 800 crore in pre-capex operating cash flow annually (FY26–28E) against annual capex needs of INR 600 – 700 crore.
The company’s consolidated EBITDA margin is projected to rise from 45.7% in FY25 to 48% by FY28, aided by operating efficiencies, scale benefits, and a rising contribution from high-margin management fees.
Adjusted for non-core capital and fair-value accounting under Ind-AS, Leela’s operational assets deliver mid-teen RoCE (~14–15%), comparable to global luxury peers. This strong internal return profile, coupled with a clean balance sheet, positions the company for sustained value creation.
Strategic Growth Levers: Domestic and International
ICICI Securities highlights two marquee investments that could redefine Leela’s growth trajectory:
- BKC, Mumbai: The company, along with Brookfield-led partners, has acquired a 2.1-acre plot in the Bandra-Kurla Complex to build a 250+ key luxury hotel integrated with a 0.7 mn sq. ft. Grade-A office tower. Leela will retain a 50% stake in the hotel segment, investing around INR 800 crore. The project is expected to deliver a 16% yield on cost and generate INR 130 crore steady-state EBITDA.
- Palm Jumeirah, Dubai: The Leela’s first international foray involves a 546-key beachfront asset valued at INR 4,300 crore (~USD 503 million). With a 25% equity stake (INR 440 crore), Leela will co-own the property with its sponsor and expects annual HMA fees of INR 0.5–0.6 crore post-rebranding in FY28. Proceeds from monetised branded residences are expected to help recover the initial investment within three years.
These ventures not only expand Leela Hotel’s geographic reach but also diversify its revenue into foreign currency income and asset-light management structures.
Industry Tailwinds: Demand Outpacing Supply
India’s hotel industry is entering a structural growth phase driven by robust domestic travel, rising foreign tourist arrivals, and limited new supply.
Domestic travel visits surged to 2.5 billion in CY23, exceeding pre-pandemic highs, while foreign tourist arrivals are expected to cross 10 million in CY25. Despite this, the country has only 1,95,000 chain-affiliated hotel rooms, and luxury hotels form a mere 17% of that base.
Luxury demand is projected to grow at 13.7% CAGR (FY25–28E), nearly 1.5x the supply growth rate of 8.8%, according to HVS Anarock. Consequently, RevPAR in the luxury segment (INR 10,100 in FY24) is forecast to rise by 50% through FY28.
Within this context, ICICI Securities sees The Leela Hotel as one of the best-positioned plays, given its entrenched presence in high-entry-barrier markets like Delhi, Bengaluru, Chennai, Jaipur, and Udaipur. The brand’s consistent outperformance in ARR and occupancy underscores its pricing resilience.
Growth Outlook: 16% Revenue and 17% EBITDA CAGR
The brokerage estimates Leela Hotel’s consolidated revenue to grow at 16% CAGR and EBITDA at 17% CAGR over FY25–28, led by:
- 12% same-store RevPAR CAGR.
- Expansion of 508 new keys by FY28.
- 13% CAGR in management fee income.
- Operating leverage and efficiency gains from asset optimisation.
Financial projections (FY25–28E):
| Metric | FY25 | FY28E | CAGR |
|---|---|---|---|
| Net Revenue | 1,300.6 | 2,005.1 | 16 |
| EBITDA | 594.4 | 952.4 | 17 |
| EBITDA Margin | 45.7 | 47.5 | — |
| Net Profit | 47.7 | 509.2 | — |
Forward-Looking: Catalysts and Risks
Key Catalysts to Watch
- Timely commissioning of new hotels in Ayodhya, Srinagar, and Mumbai BKC.
- Monetisation of branded residences in Dubai, improving return on equity.
- Ramp-up of ARQ Members’ Clubs and Leela Luxury Residences, adding capital-light, recurring revenue.
- Rising international visibility and management contract scalability.
Principal Risks
- Revenue concentration: Nearly 93% of FY25 income came from five owned properties, making the business sensitive to local demand disruptions.
- Execution risk: Delays or cost escalations in BKC and Dubai projects could defer returns.
- Cyclicality: The sector remains exposed to economic downturns, travel restrictions, and seasonality in occupancies.
- Competitive pressure: Growing presence of global chains and boutique operators may challenge pricing power.
Despite these factors, the brokerage believes Leela Hotel’s brand strength, balance sheet discipline, and diversified expansion pipeline mitigate downside risks.
Valuation & Peer Context
ICICI Securities values Leela Hotel at an equity value of INR 20,050 crore, translating to a target price of INR 600/share, derived from a 22x Dec’27E EV/EBITDA multiple for its hotel business and 1x P/B for its BKC and Dubai assets.
This target multiple is in line with those assigned to Lemon Tree Hotels and Chalet Hotels, two of the company’s closest listed peers.
| Company | FY28E EV/EBITDA (x) | FY28E RoCE (%) | Rating |
|---|---|---|---|
| Indian Hotels | 22.2 | 17.2 | HOLD |
| Chalet Hotels | 15.2 | 14.9 | BUY |
| Lemon Tree Hotels | 20.1 | 17.8 | BUY |
| Leela Hotels | 15.0 | 7.7 (adj. ~14–15%) | BUY |
The Leela Palaces Hotels Post-IPO Performance
Schloss Bangalore (The Leela Palaces Hotel) launched its IPO in May 2025. The issue size was approximately INR 3,500 crore, comprising a mix of fresh issue and offer for sale (OFS). The IPO was subscribed about 4.5x and listed with a marginal gain of 0.13%.
After listing, the stock traded in the range of INR 465 to INR 390. Currently, Leela Hotel share price is around INR 411, which is approximately a 5.5% discount to its allotment price of INR 435.
Verdict
“Leela’s premium brand positioning, disciplined capital allocation, and visible earnings trajectory make it a unique play in India’s luxury hospitality space,” said Adhidev Chattopadhyay and Saishwar Ravekar, lead analysts at ICICI Securities. “The company’s balance sheet reset post-IPO and accretive investments in Mumbai and Dubai strengthen its long-term compounding story.”
With limited new luxury supply, growing domestic affluence, and rising international travel, ICICI Securities expects Leela to sustain double-digit earnings growth and potentially re-rate closer to global luxury peers such as Marriott and Hyatt over the next three years.
Bottom Line
As India’s hospitality sector enters a new growth cycle, The Leela Palaces Hotels & Resorts stands at the intersection of heritage, scale, and financial prudence. With a clean balance sheet, visible expansion pipeline, and robust demand backdrop, it offers investors a rare opportunity to participate in India’s luxury consumption boom.
At INR 411 per share, Leela Hotel target price of INR 600 implies a 46% upside, reaffirming its BUY stance on one of India’s most iconic and institutionally managed luxury hospitality brands.
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