Leela Hotels shares jump 5% as Morgan Stanley, BofA initiate coverage

Shares of Schloss Bangalore, the owner of luxury hotel chain The Leela, surged 5% on Tuesday after two major foreign brokerages initiated coverage following its recent listing on the Indian stock exchanges. While BofA Securities initiated coverage with a ‘Buy’ rating, Morgan Stanley assigned an ‘Overweight’ rating, citing favourable industry dynamics and the company’s growth prospects in the premium hospitality segment.

Boosted by the development, Leela Hotels shares jumped buy as much as 5% to 427.20 on the BSE, driven by strong volume. Over 50,000 shares changed hands over the counter compared to the two-week average of 9,658 shares.

At the time of reporting, shares of Leela Hotels were up 4% at ₹423.30, while its market capitalisation rose to ₹14,136 crore. At the current level, the stock is down nearly 3% from its initial public offering (IPO) price of ₹435 per share. The stock, which listed on the BSE and the NSE on June 2, 2025, hit a high of ₹440 on June 4, while it slipped to its lowest level of ₹382.50 on June 19.

Morgan Stanley assigns ‘Overweight’ rating

Global brokerage Morgan Stanley said that its ‘Overweight’ rating is driven by a higher-for-longer upcycle, strong demand for luxury experiences, iconic assets with a low net debt position, and attractive valuation.

“Demand for luxury hotels remains strong in India, while incremental supply growth is moderate given the high capex nature of the business. The demand-supply mismatch supports our higher-for-longer RevPAR cycle thesis,” it said in a report.

Schloss Bangalore is one of the few pure-play luxury hotel brands from India, generating 93% of its operating revenue from five owned hotels, and its iconic properties blend.

Morgan Stanley expects rising room rates and high occupancy to drive 12% annual Ebitda growth through FY27, 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),” it said.

BofA Securities assigns 'Buy' rating

U.S.-based brokerage BofA Securities has initiated coverage on Schloss Bangalore with a 'Buy' rating and a price target of ₹520 per share, citing lower debt and attractive valuations.

The brokerage said that industry tailwinds and key initiatives of the company, especially in growing its five owned iconic hotels and portfolio expansion, should help sustain revenue and earnings growth momentum.

The brokerage estimates a CAGR of 12% in revenue and 14% in Ebitda, with earnings expected to rise over 90% between FY25 and FY28, driven in part by a low base effect.

Retired debt using IPO proceeds

The Brookfield-backed hotel chain operator raised ₹3,500 crore via its IPO last month, which was a combination of fresh issue worth ₹2,500 crore and offer for sale of shares amounting to ₹1,000 crore. Out of ₹2,500 crore, Schloss intended to use ₹2,300 crore for repaying debts. A part of the capital will be used for general corporate purposes.

As of May 31, 2024, Schloss Bangalore was one of India's largest luxury hospitality companies by number of keys, comprising of 3,382 keys across 12 operational hotels. The portfolio includes The Leela Palaces, The Leela Hotels, and The Leela Resorts. Besides, it operates five owned hotels, six hotels under management agreements, and one hotel owned and operated by a third-party owner under a franchise arrangement.

Going ahead, Schloss plans to expand its portfolio with eight new hotels, aggregating 833 keys or 24.63% of existing keys through 2028, which will be either developed, owned, or managed by it. This includes modern palace hotels in Agra (Uttar Pradesh) and Srinagar (Union Territory of Jammu and Kashmir), resorts in Ranthambore (Rajasthan) and Bandhavgarh (Madhya Pradesh), a hotel in Hyderabad (Telangana) and serviced apartments in Mumbai’s (Maharashtra) international airport district.

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