Indian Hotels shares decline 3% after Morgan Stanley downgrade, price target cut
Indian Hotels Company shares fell nearly 3% on Wednesday, January 7, after Morgan Stanley downgraded the stock from 'overweight' to 'equal weight' and reduced the price target to ₹780 from ₹811 per share. Despite acknowledging the company's strong hospitality ecosystem built around the Taj brand and industry-leading return ratios, the brokerage cited limited upside surprises in the revenue per available room cycle. The stock hit an intraday low of ₹703.30 and has declined 16.9% over the past year, though it maintains strong analyst support with 18 out of 26 analysts maintaining 'buy' ratings.
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Indian Hotels Company shares experienced a notable decline on Wednesday, January 7, dropping nearly 3% following a rating downgrade and price target revision by global brokerage firm Morgan Stanley. The stock hit an intraday low of ₹703.30 and was trading at ₹708.80 around 10:45 AM, representing a 2.4% decline for the day.
Morgan Stanley's Rating Revision
Morgan Stanley has made significant changes to its outlook on Indian Hotels Company, implementing both a rating downgrade and price target adjustment:
| Parameter | Previous | Revised | Impact |
|---|---|---|---|
| Rating | Overweight | Equal Weight | Downgrade |
| Price Target | ₹811 | ₹780 | -₹31 (-3.8%) |
| Upside Potential | - | 7% | From Tuesday's close |
Company's Strong Fundamentals Acknowledged
Despite the downgrade, Morgan Stanley recognized the company's robust business model and market position. The brokerage highlighted that by leveraging the Taj brand, Indian Hotels has successfully created a comprehensive hospitality ecosystem that delivers industry-leading return ratios and free cash flow generation.
The firm noted that while the industry revenue per available room cycle remains strong, it anticipates limited upside surprises going forward. Morgan Stanley's analysis suggests that the enterprise value to earnings before interest, tax, depreciation, and amortisation (EV/EBITDA) ratio of 27.5x for financial year 2027 adequately captures the current risk-reward scenario.
Management's Growth Outlook
In November 2025, Indian Hotels' Managing Director and CEO Puneet Chhatwal reaffirmed the company's optimistic growth trajectory. During a conversation with CNBC-TV18, he projected several key growth drivers:
- Double-digit revenue growth guidance maintained for FY26
- Approximately 10% top-line growth expected for the second half of the current fiscal
- Strong food and beverage business performance
- Higher number of weddings compared to the previous year
Analyst Coverage and Stock Performance
The stock continues to maintain broad analyst support despite the recent downgrade:
| Rating Category | Number of Analysts |
|---|---|
| Buy | 18 |
| Hold | 6 |
| Sell | 2 |
| Total Coverage | 26 |
However, the stock's performance over the past year has been challenging, with shares declining 16.9% during this period. The current market reaction reflects investor concerns about valuation levels and future growth prospects in the hospitality sector.
Market Context
The downgrade comes at a time when the hospitality industry is navigating various market dynamics. While the sector has shown resilience and recovery, investors are increasingly focused on valuation metrics and sustainable growth prospects. Morgan Stanley's revised stance appears to reflect a more cautious approach toward the stock's near-term performance potential, even while acknowledging the company's strong operational fundamentals and market positioning.
Historical Stock Returns for Indian Hotels Company
| 1 Day | 5 Days | 1 Month | 6 Months | 1 Year | 5 Years |
|---|---|---|---|---|---|
| +0.44% | +5.02% | -7.95% | -7.97% | -16.79% | +492.51% |
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