IHCL'S SEPTEMBER 2025 CONCALL ANALYSIS: BIG ACQUISITION ALERT?

Disclaimer: This blog is not intended to provide any form of investment advice and is strictly for personal and academic goals of reinforcing learning.

My intention is to summarize my readings for the day, and some of the facts I found most interesting. You can understand more about this concept in this video.

You can find the links to all articles cited hyperlinked within the article!

IHCL'S SEPTEMBER 2025 CONCALL ANALYSIS!

This article intends to answer 2 basic questions:

1) IHCL has invested 204 crores into Clarke Hotels and Resorts at a 12X EBIDTA valuation. Why?

2) How will this 204 CR be put to use?

WHY INVEST INTO CLARKE HOTELS?

One word: Ginger!

MID MARKET HOTELS

Ginger is IHCL's very own lean luxe segment. Lean luxe segment is the mid market hotels, which are classy and business chic. If you read our previous post, you'd know that several Tier 2 and Tier 3 cities in India are experiencing strong digital penetration, and a hybrid work culture, that is expanding the wants of this populations, when it comes to hotel rooms.

Statistically, out of every 100 branded rooms, 50 would belong to the mid market sector by 2030. But here's the catch - Ginger isn't IHCL's crown jewel.

IHCL is known for the Taj brand, and it's known for luxury. Hence why, the company decided to opt for inorganic growth to expand this segment. It decided to acquire a company like Clarke, which itself largely operates on a franchising business model, to spread the brand equity of Ginger.

This acquisiton would mean that IHCL acquires some of the hotels under this brand, renovates it to basically become a Ginger hotel, and now generates more room revenue. Also, since these Clarke brands now operate under the Ginger name, Clarke also pays IHCL management fees!

Alongside this, the number of properties under the Clarke acquisition is so vast, that the company actually stands to be a market leader in this segment when executed!

Not to mention, Ginger is still pretty fancy for the average Indian. This gives direct impetus to a business like QMIN (read this article to know more), hitting 2 birds with one stone!

MORE REVENUE, AND NOT JUST BY SELLING ROOMS!

Indeed this is a remarkable strategy. The Clarke acquisiton adds 135 more rooms to the Ginger portfolio. 125 of these are under management contracts (running a hotel owned by someone else for a management fee) and 10 of these are under operating leases.

Especially with Ginger in the last 18 months, the company has earned a significant amount of revenue by replacing these management contracts with revenue sharing agreements. This means that instead of receiving management fees, IHCL retains a portion of their room revenues for operating the hotel.

Indeed by ruling the hotel business for as long as they have, the company will always manage to achieve a baseline amount of revenue, and by being able to retain this revenue earned from someone else's property, the company amplifies the amount of income it makes.

The company intends to project this strategy onto their Clarke portfolio as well, which means they now stand a chance to multiply the existing amount of revenue earned by Clarke.

How they can achieve this will be covered in our next section!

NEW LOCATIONS AND SYNERGIES!

70% of all the new hotels from Clarke are based in locations where Ginger has not yet penetrated. This is important because this is growth, not just in numbers, but in brand equity!

For the remaining 30% of the hotels the company benefits from operational synergies. Take for example their SDA (sales and distribution agreements), that they have with travel agencies. By operating 2 hotels in the same region, they can connect both with just 1 travel agency, and create an impetus in demand for 2 hotels. Basically, doubling their revenue at a significantly lower cost.

Talk about operating leverage!

In summary, this acquisition if executed right paves the way for IHCL to gain complete market share in the mid market hotel segment!

HOW WILL THE 204 CRORES BE USED?

IHCL has invested almost 204 crores into Clarke. These 204 crores are channelized into 3 of Clarke's major brands: ANK, Pride and Brij. With this the company owns a 51% stake in Clarke.

PROPERTY IMPROVEMENT PLANS (PIP)

The first step would obviously be to take the existing hotels in Clarke's portfollio, and completely renovate them so they look like a Ginger hotel, and operates with its branding.

Why not continue with the Clarke name? Well, this was a concious decision from the management, because the number of Clarke hotels in the recent years has expanded so much in number that the brand equity in some sense has been diluted. Operating under the Ginger name was hence deemed more sensible.

This revamping would effectively mean that ANK, Pride and Brij, as brands, would no longer exist! All would be come Ginger.

Since IHCL owns 51% of Clarke, and these hotels are part of Clarke's portfolio, Clarke would have to pay IHCL a management fee to operate with Gonger's name. Thus more revenue, without even selling rooms!

CONVERSION FROM MANAGEMENT CONTRACTS TO REVENUE SHARING ARRANGEMENTS

As we discussed before, IHCL has historically profited from taking existing management contracts, and turning them into revenue sharing arrangements.

Let's say IHCL is operating a hotel on a developer's premises (let's call him P). To operate this hotel, P would pay IHCL some amount as management fees, which may be capped or fixed. The potential for IHCL in such an arrangement is hence limited.

By getting into a revenue sharing arrangement IHCL basically says "I need a portion of the revenue you are making through my expertise". In the management's own words, this process is not straightforward.

How they achieve such a deal involves some amount of capital infusion. Every developer/property owner has a pain point. Some of them probably want to expand their property but lack the capital to do so. By supporting them with these pain points, the company paves its path to discuss a potential revenue sharing arrangement for their hotel operations.

Thus the company also intends to use some amount of the capital invested in Clarke, to alter their exisiting management contracts and turn it into revenue sharing arrangements!

CONCLUSION

Overall, it appears that the company is aiming sharply at the business travel community of India, and is on the fast lane to become a market leader in this segment!