Tourism in India is a multi-year theme, driven by increasing disposable incomes of the young middle class and improving infrastructure across sub-segments, according to BofA Securities India Ltd.
It also cited well-developed travel ecosystems with healthy competition ensuring a variety of options and improving use cases like workcation and staycation, and destination weddings.
Unlike in other countries, where pent-up travel demand post-Covid is behind, India is seeing a sustained travel uptake by consumers and corporates, the research firm said in a March 5 note. "Travel consultant Videc estimates the travel market size to increase from $48 billion in FY20 to $72.4 billion by FY26."
Some of the listed companies that give exposure to this theme are the Indian Hotels Co., Indian Railway Catering and Tourism Corp., VIP Industries Ltd. Hospitals like Apollo Hospitals Enterprise Ltd. and Fortis Healthcare Ltd., both rated a 'buy', benefit from medical tourism, according to BofA.
Tailwinds
The continued investments in infrastructure and government initiatives should likely provide tailwinds for tourism. Government schemes like Swadesh Darshan, Prashad, UDAN and Dekho Apna Desh are aiding travel, BofA said. It expects more initiatives due to the government's focus on tourism.
On air infra, the aircraft fleet in India is expected to double from 720 in the last fiscal to over 1,400 in fiscal 2030. The number of airports is expected to grow to 220 by 2029–30, it said.
On road network, a total of 1 lakh new routes have been added, connecting the tier-2 and tier-3 cities. A record 36.5 km per day of national highways were constructed in fiscal 2021, up from 10.4 km per day in fiscal 2012, according to BofA.
On the hotel space, organised players are increasing capacity by asset-light techniques like hotel-management contracts to enhance overall supply, the research firm said.
Religious, International Tourism
Apart from a $6-billion makeover of Ayodhya and the Kashi Vishwanath Corridor, the government continues to spend on developing multiple pilgrimage sites, it said.
"With rising aspirations and affordable options to travel abroad, we think the growth from international travel by Indian consumers is at (an) inflection point," BofA said.
Around 60 countries offer visa-on-arrival and visa-free facilities to Indian passport holders. This number continues to increase. Improving connectivity from low-cost carriers is helping international and religious travel, it said.
MakeMyTrip, IndiGo Well-Positioned
BofA finds MakeMyTrip and InterGlobe Aviation Ltd. as the companies that benefit the most from the travel theme. It maintains a 'buy' on both the firms on a favourable risk reward.
MakeMyTrip benefits on the back of lower competition in the online-travel-agency space, coupled with improving demand in the high-margin hotel and international space, it said.
It increased MakeMyTrip's earnings-per-share estimates for fiscal 2025–26 by 3–6% and modelled a stronger growth beyond fiscal 2026 to factor a sustained momentum.
IndiGo is well-placed to take advantage of the growth due to the size of its orderbook, low-cost structure and additions of long-range aircraft to its fleet, BofA said.
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