Will IHCL's merger with Oriental Hotels unlock value for shareholders? Here's what Goldman Sachs, Nomura, and others say

The mega-merger between Chennai-headquartered Oriental Hotels and Tata Group's Indian Hotels Company (IHCL) is likely to be EPS accretive and enhance operational efficiency, according to brokerages that remain bullish on IHCL’s share price.

The share swap ratio for one of the biggest mergers in India’s hospitality industry announced this year has been fixed at 25:117. This means that Oriental Hotels shareholders will receive 25 shares of IHCL for every 117 shares held in Oriental Hotels as of the record date, subject to statutory approvals and clearances.

The record date to determine the eligibility of Oriental Hotels shareholders who will receive IHCL shares after the merger will be announced later.


Calling it a ‘win-win merger’, IHCL said the restructuring will result in an enhanced financial profile, with an increase in revenue and profitability. It will also be an EPS accretive transaction from the first year, strengthening IHCL’s presence across Southern India. After the merger, IHCL’s total operating keys will rise above 2,100 in South India.

Oriental Hotels is an associate company of IHCL, with a portfolio of seven hotels comprising 825 rooms. IHCL and its subsidiary currently hold a little over 37% stake in the company. Once the merger is completed, which is expected in the second half of FY28, all seven hotels will become part of IHCL’s standalone portfolio, including three freehold properties.

Nomura on IHCL share price

Nomura maintained its ‘Buy’ call on the shares of IHCL, with a target price of Rs 830 apiece, implying around 14% upside potential from the stock’s previous closing price of Rs 728.90 apiece on NSE.

The international brokerage overall expects the acquisition of Oriental Hotels to be EPS accretive as the transaction valuation at 19x FY26 EBITDA is lower than IHCL’s own 26x FY27 EBITDA. It also believes that further cost synergies and asset optimisation or upgrades could drive EBITDA higher. Further, the merger will simplify the group’s holding structure by increasing IHCL’s direct ownership across several entities, resulting in two new operating subsidiaries, according to Nomura.

Also read | Explained: What Oriental Hotels’ merger with IHCL means for shareholders

Goldman Sachs on IHCL share price

Goldman Sachs maintained its ‘Buy’ rating on the shares of IHCL, with a target price of Rs 850 apiece, implying around 17% upside potential. Along with the merger, IHCL’s Rs 43,000 crore net cash further supports inorganic growth, ET Now reported Goldman Sachs as saying.

It sees the merger to be EPS accretive after 1.6% dilution, and strong balance sheet support further M&A. The international brokerage added that the strategic fit is seen as compelling with IHCL gaining direct ownership of key assets.

JM Financial on IHCL share price

JM Financial maintained its ‘Buy’ rating on the shares of IHCL, with a target price of Rs 850, same as Goldman Sachs. The transaction strengthens IHCL’s presence in South India and provides an opportunity to unlock value through asset upgrades, capacity expansion and active asset management, the domestic brokerage said.

Also, since Orient Hotels is currently an associate entity in which IHCL and its subsidiaries hold 37.1% stake, the merger will enable line-by-line consolidation, the domestic brokerage further said.

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