Target: ₹549

CMP: ₹428.20

Schloss Bangalore, which owns and manages hotels under ‘The Leela’ brand, is one of the few pure-play luxury hotel brands from India. It is an asset-heavy business, with 93 per cent of operating revenue from five owned hotels, and its iconic properties blend historical architectural styles with modern luxury.

We expect rising room rates and high occupancy to drive 12 per cent annual EBITDA growth through F27, with net income increasing 9x as interest costs come down. The balance sheet is now nearly net-debt-free, leaving FCF to fund the upcoming capex cycle (five new hotels with 475 rooms, including one under a JV, all set to come in F28). F25 ROCE is low at 7.3 per cent, but if we adjust for the revaluation of assets (₹1,300 crore) and higher cash balance on account of recapitalisation by promoters (₹1,200 crore) then it rises to around 10 per cent.

The stock is trading at 18.5x F27 EV/EBITDA, vs 29x one-year forward EV/EBITDA on average for branded hotel plays like IHCL (OW) and ITC Hotel (not covered) and asset owners like Chalet and Juniper at 20x (both not covered). In our base case we benchmark the stock to the sector average EV/EBITDA of 25x on F27 EBITDA. We see a re-rating of the stock closer IHCL’s multiple.

Key risks: The top three properties form over 70 per cent of revenue; and a sharp luxury downcycle.

Published on July 8, 2025