Indian Hotels' raised revenue guidance still allows for a slower second half

Indian Hotels has raised its revenue growth guidance for this fiscal year to 15-17%, from the 12-14% it gave in May. A higher number reads like a faster year. Measured against what is already booked, it describes a slower one: consolidated sales grew 18.2% in the first half, calculated from the filed quarterly results, and for the full year to land inside the new range, sales from October to March need to grow 12.7% to 16.2% on the same months a year earlier.

The sum is short. Take last fiscal year's sales, add the guided growth, subtract what has already been earned since April, and compare what is left with the second half of last year. Run the same way, the old range asked for as little as 7.5% second-half growth. The raise closes much of the gap between the guide and the business, but not all of it. When an analyst put the midpoint's implied second-half growth to the chief financial officer, Ankur Dalwani, he said the figure would probably have to be higher to reach the guided range.

That gap fits the way this company's revenue guidance has related to its results. In May last year it guided to double-digit growth for the last fiscal year; sales grew 16.3%. In July it said the top line in the September 2026 quarter should be similar to or better than the quarter before. Sales rose 21.7% last quarter, far faster than the quarter before. The guidance has followed the results up rather than leading them.

There are good reasons not to extrapolate the first half. The current guidance includes recent acquisitions, which management said in May would bring in over ₹250 crore of extra revenue this year, revenue that does not come from the hotels it ran a year earlier. Growth from the existing business is therefore lower than the headline. Management's own case for the range also leans on newly opened hotels: Chief Executive Puneet Chhatwal said that if growth at existing hotels slipped by a few hundred basis points, new hotels would make up the difference.

The second thing the results show is that pre-tax profit is not keeping pace with sales. Last quarter operating profit before depreciation, interest and other income rose 23.9%, a little faster than sales. Depreciation, though, rose almost as fast as sales as new and acquired hotels came onto the books, and pre-tax profit grew more slowly than sales, so pre-tax profit as a share of sales slipped slightly from a year earlier.

The company guided in May to more than 60 hotel openings this year. Chhatwal said the company was "on track to achieve our target of this year", which he put at 30 openings in the second half, "or even maybe 32 or 34". Added to the 20 opened in the first half, that comes to 50 to 54 by our arithmetic, short of the May guidance. Chhatwal said a separate development guidance would follow by the middle of November, because the portfolio was already close to the size the company had set itself as a goal. Those openings matter beyond the room count, because new hotels are the part of growth management is now counting on to hold the revenue range.