The proposed merger of Oriental Hotels with Indian Hotels Company Limited (IHCL) is another step in simplifying the group structure and likely to be EPS accretive for the Tata Group hospitality company, analysts said.
On Monday, The Indian Hotels Company Limited (IHCL) had announced that Oriental Hotels Limited (OHL) will be merged with IHCL through a Scheme of Arrangement.
As per the Scheme, Indian Hotels Company will issue 25 equity shares of face value Re 1 each for every 117 equity shares of face value Re 1 each held in Oriental Hotels. The all-stock transaction results in a modest dilution of ~1.6% to IHCL's existing equity base.
IHCL already holds 37.05% of OHL's equity share capital, directly and indirectly through subsidiaries, as of June 30, 2026. The transaction is targeted to be completed in the second half of FY2028.
Analysts view the deal as value accretive for Indian Hotels Company as it continues its simplification journey. Post-merger, 7 Oriental Hotels, including 3 freehold properties, will be integrated into IHCL's standalone portfolio.
According to Jefferies, the all-stock deal values Oriental Hotels at estimated ~14x FY28E EV/EBITDA, a ~50% discount to IHCL's 1-year forward multiple. The brokerage firm believes that the deal is EPS accretive from the first year.
“The merger is financially attractive, with management guiding for EPS accretion from year one. OHL's FY26 EBITDA of Rs 1.32 billion was affected by renovations, with earnings likely to normalize in FY27. We estimate the transaction is valued at ~ 14x FY28E EV/EBITDA on the first full year of consolidation (FY28),” said Jefferies.
Oriental Hotels adds non-LL growth (~4% of FY26 EBITDA) with scope for margin and Revenue improvement under IHCL. Operationally, EQ trends remain strong, and FY27 RevPAR growth could stay in double digits, implying upside risk to estimates, Jefferies added.
The brokerage firm said the deal could add ~3% to price target of IHCL. It maintained a ‘Buy' call on IHCL with a target price of Rs 875.
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Morgan Stanley also noted that IHCL is consolidating its assets at attractive valuations, and the transaction adds 5% to FY26 topline and 4% to EBITDA. Post-merger, the company could see revenue and margin synergies.
According to the brokerage firm, the deal is EPS accretive from year one and implies 15x FY27 EV/EBITDA versus IHCL at 29x.
Morgan Stanley maintains an ‘Equal-weight' rating on IHCL shares with a target price of Rs 793.
Nomura said the merger will further simplify the group's holding structure, while cost synergies and asset optimization and upgrades could drive IHCL's EBITDA higher.
It maintained a ‘Buy' call on IHCL shares with a target price of Rs 830, as it believes the acquisition likely to be EPS accretive.
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