Jefferies initiates coverage on Leela Hotels with Buy rating, sees 22% upside

Jefferies has initiated coverage on Leela Hotels with a Buy rating and a price target of Rs 675, implying 22% upside from the reference price of Rs 554.10.

The brokerage views Leela as a play on India’s premiumisation trend, supported by growing demand for luxury and experiential travel, an expanding owned portfolio and greater exposure to leisure destinations.

Shares of Leela Hotels gained 2.72% to Rs 570.35 in early trade on August 31 following Jefferies’ coverage initiation, against the previous close of Rs 555.25.


Jefferies said constrained luxury-hotel supply and sustained premium-travel demand should support superior room-rate and RevPAR growth.

Strong growth outlook

Jefferies expects revenue to grow at a 20% CAGR between FY26 and FY29, from Rs 1,527 crore to Rs 2,651 crore.

EBITDA is forecast to rise at a 19% CAGR, from Rs 743 crore to Rs 1,253 crore, while adjusted profit is projected to grow at a 20% CAGR, from Rs 408 crore to Rs 703 crore.

Owned-property RevPAR is expected to grow at a 9-10% CAGR, including 13% growth in FY27 and about 8% annually in FY28 and FY29. Management-fee income could increase at a 30% CAGR as new hotels open and the Dubai property begins contributing.

Pre-tax return on capital employed is forecast to improve from 8.7% in FY26 to 10.9% in FY29 as new assets start generating revenue.

The Rs 675 target values Leela at 21 times September 2028 EBITDA, a roughly 25% discount to Indian Hotels Company. Jefferies attributed the discount to Leela’s lower return ratios, asset-heavy expansion and high revenue concentration.

Owned-led expansion

Leela’s pipeline comprises 10 hotels and 1,095 rooms, implying a 5% CAGR in total room inventory through FY31.

Owned rooms are expected to grow at an 8% CAGR, increasing their share of the portfolio from 44% in FY26 to around 50% by FY31.

Eight of the 10 planned hotels are focused on leisure destinations, including Agra, Ranthambore, Srinagar, Jaisalmer and Ayodhya. The share of rooms in leisure markets is projected to rise from 36% to 43% by FY31.

The pipeline also includes a 250-room Leela Palace in Mumbai’s BKC and the company’s first international hotel in Dubai.

Brookfield backing

Jefferies sees Brookfield’s ownership as a key advantage, giving Leela access to long-term capital, global hospitality expertise and institutional governance.

Brookfield manages more than $1 trillion in assets and has a hospitality portfolio of around 170 hotels with 43,000 rooms. Its support is visible in the Dubai venture, where it owns 75% of an approximately $500-million transaction, and the proposed mixed-use development in Mumbai’s BKC.

Comfortable balance sheet

Leela’s net debt fell to Rs 1,270 crore in FY26 from Rs 2,530 crore in FY25, reducing net debt-to-EBITDA to 1.7 times.

Jefferies expects net debt to rise to around Rs 1,720 crore by FY28 as expansion spending continues, before declining to Rs 1,460 crore in FY29. Dubai branded-residence sales could generate about Rs 650 crore between FY29 and FY31, supporting deleveraging.

Despite the expansion programme, net debt-to-EBITDA is expected to remain broadly stable at 1.6-1.7 times through FY28.

Key risks include delays in hotel openings, slower-than-expected ramp-up at new properties, travel disruptions and a material economic slowdown.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times.)