The government-owned hospitality major, with a market capitalisation of ₹4,567 crores, operates hotels, restaurants, and tourism facilities across India. Trading at ₹546.70 on February 09, 2026, the stock has gained 3.62% in the latest session but remains 23.44% below its 52-week high of ₹714.05, reflecting persistent valuation concerns despite robust operational performance.
The quarter's standout performance was driven by a 55.95% sequential jump in net sales to ₹184.78 crores, propelled by strong domestic tourism demand during the festive season. Year-on-year revenue growth of 28.74% underscores the company's ability to capitalise on India's recovering travel and hospitality sector, though the sustainability of this pace remains a critical monitoring point.
Financial Performance: Margin Expansion Drives Profitability Surge
| Quarter | Revenue (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | QoQ Change | Op. Margin (%) |
|---|---|---|---|---|---|
| Dec'25 | 184.78 | +55.95% | 28.06 | +70.37% | 17.77% |
| Sep'25 | 118.49 | +35.03% | 16.47 | +66.70% | 16.12% |
| Jun'25 | 87.75 | -56.11% | 9.88 | -60.65% | 10.23% |
| Mar'25 | 199.94 | +39.30% | 25.11 | +20.90% | 16.10% |
| Dec'24 | 143.53 | -1.44% | 20.77 | -12.77% | 17.70% |
| Sep'24 | 145.63 | +71.51% | 23.81 | +101.44% | 13.74% |
| Jun'24 | 84.91 | — | 11.82 | — | 9.21% |
ITDC's Q3 FY26 results showcase impressive operational leverage, with operating profit (excluding other income) climbing to ₹32.83 crores from ₹19.10 crores in the previous quarter. The operating margin expanded by 165 basis points quarter-on-quarter to 17.77%, reaching its highest level in the trailing eight quarters and demonstrating effective cost management despite inflationary pressures in the hospitality sector.
The company's profit before tax (excluding other income) surged to ₹30.76 crores, whilst other income contributed ₹7.82 crores during the quarter, up from ₹6.61 crores sequentially. The PAT margin improved to 15.24% in Q3 FY26 from 13.93% in Q2 FY26, reflecting both operational efficiency gains and a normalised tax rate of 26.72% compared to the elevated 30.11% in the previous quarter.
Employee costs remained well-controlled at ₹25.73 crores, representing just 13.92% of revenue, whilst interest expenses stayed minimal at ₹0.43 crores, benefiting from the company's debt-free balance sheet. Depreciation charges of ₹1.79 crores were marginally higher than the prior quarter, reflecting ongoing capital maintenance across the hotel portfolio.
Operational Excellence: Tourism Recovery Drives Momentum
ITDC's operational performance reflects the broader recovery in India's domestic tourism sector, with the company capitalising on increased travel activity during the October-December quarter. The sequential revenue surge of 55.95% significantly outpaced typical seasonal patterns, suggesting market share gains or pricing power improvements across the portfolio.
The company's return on equity (ROE) stands at 21.45% on a latest-year basis, demonstrating strong capital efficiency and placing ITDC amongst the better performers in the hospitality sector. This represents a substantial improvement from the five-year average ROE of 12.92%, indicating accelerating profitability trends. The company's balance sheet remains exceptionally clean, with zero long-term debt and a net cash position, providing financial flexibility for expansion or refurbishment initiatives.
Working capital management showed mixed signals during FY2025, with cash flow from operations generating ₹52 crores despite a ₹38 crore increase in working capital requirements. The company's cash and cash equivalents stood at ₹82 crores at the end of FY2025, up from ₹55 crores in the previous year, though nine-month FY2026 data shows a decline to ₹208.39 crores on a half-yearly basis, warranting close monitoring.
Key Operational Strengths
Debt-Free Balance Sheet: ITDC operates with zero long-term debt and maintains a net cash position with negative net debt to equity of -0.61, providing exceptional financial flexibility and eliminating refinancing risks in a rising interest rate environment.
Improving Capital Efficiency: Latest ROE of 21.45% significantly exceeds the five-year average of 12.92%, demonstrating management's ability to generate superior returns on shareholder capital as tourism demand normalises post-pandemic.
Margin Dynamics: Sustainable or Seasonal Peak?
The 165-basis-point quarter-on-quarter expansion in operating margins to 17.77% raises important questions about sustainability. Whilst the improvement reflects operational leverage from higher occupancy rates and potentially better pricing, historical data reveals significant quarterly volatility. The company's operating margin ranged from 9.21% in Jun'24 to 17.77% in Dec'25 over the past eight quarters, highlighting the seasonal nature of the hospitality business.
On an annual basis, FY2025 operating margins (excluding other income) stood at 14.90%, down from 18.30% in FY2024, suggesting that whilst Q3 FY26 showed strong performance, full-year margins face headwinds. The company's five-year sales growth of 16.88% and EBIT growth of 40.24% demonstrate strong long-term momentum, though investors should temper expectations given the low base effects from pandemic-impacted years.
| Metric | Q3 FY26 | Q2 FY26 | Q1 FY26 | Q4 FY25 | Trend |
|---|---|---|---|---|---|
| Operating Margin (Excl OI) | 17.77% | 16.12% | 10.23% | 16.10% | Improving |
| Gross Profit Margin | 21.77% | 21.39% | 16.22% | 18.20% | Expanding |
| PAT Margin | 15.24% | 13.93% | 11.24% | 12.50% | Rising |
| Employee Cost % of Sales | 13.92% | 21.15% | 24.64% | 13.00% | Well-Controlled |
Peer Comparison: Premium Valuation Versus Sector
ITDC's valuation metrics reveal a significant premium compared to hospitality sector peers, raising concerns about downside risk if operational momentum falters. The company trades at a P/E ratio of 64.58 times trailing earnings, substantially higher than Lemon Tree Hotels at 41.79x and Juniper Hotels at 44.31x, though below the loss-making Leela Palaces Hotels.
| Company | P/E (TTM) | P/BV | ROE (%) | Div Yield (%) | Market Cap (₹ Cr) |
|---|---|---|---|---|---|
| ITDC | 64.58 | 13.85 | 12.92 | 0.53 | 4,567 |
| Lemon Tree Hotels | 41.79 | 8.32 | 9.65 | — | — |
| Mahindra Holidays | 60.78 | 8.50 | 19.31 | — | — |
| Ventive Hospitality | 55.86 | 3.66 | 4.67 | — | — |
| Juniper Hotels | 44.31 | 2.01 | 2.91 | — | — |
| Leela Palaces Hotels | NA (Loss Making) | 2.41 | 1.34 | — | — |
More concerning is ITDC's price-to-book value ratio of 13.85 times, which dwarfs the sector average of approximately 5.0 times. Whilst the company's ROE of 12.92% justifies some premium over lower-return peers like Juniper Hotels (2.91% ROE) and Ventive Hospitality (4.67% ROE), it falls short of Mahindra Holidays' superior 19.31% ROE, yet trades at comparable P/E multiples.
The company's PEG ratio of 4.94 suggests the stock is pricing in growth expectations that may prove challenging to deliver. With minimal institutional holdings at just 1.78% and negligible mutual fund or FII participation, the stock lacks the anchor investor base that typically supports premium valuations during market volatility.
Valuation Analysis: Expensive by Most Metrics
ITDC's valuation grade stands at "Very Expensive" as of February 09, 2026, reflecting stretched multiples across key parameters. The stock's EV/EBITDA of 52.30 times and EV/Sales of 8.15 times place it at the upper end of hospitality sector valuations, leaving limited margin of safety for investors at current levels.
The company's dividend yield of 0.53%, based on the latest dividend of ₹2.90 per share (ex-date September 09, 2025), provides minimal income support to investors. With a dividend payout ratio of 30.50%, there is room for increased distributions, though management appears focused on retaining capital for potential expansion or refurbishment projects.
Historical valuation trends show the stock has oscillated between "Expensive" and "Very Expensive" grades since September 2025, with no sustained period of attractive valuations. The current price of ₹546.70 sits 23.44% below the 52-week high of ₹714.05 but remains 16.24% above the 52-week low of ₹470.30, suggesting limited downside protection at prevailing levels.
Valuation Concern: Limited Margin of Safety
Trading at 65 times trailing earnings and 13.85 times book value, ITDC offers minimal downside protection for investors. The PEG ratio of 4.94 indicates the market is pricing in aggressive growth that may prove difficult to sustain, particularly given the seasonal volatility inherent in the hospitality business and limited visibility on asset monetisation plans.
Shareholding Pattern: Stable Government Ownership
ITDC's shareholding structure remains remarkably stable, with The President of India maintaining an unchanged 87.03% promoter stake across the past five quarters. This government ownership provides strategic stability but limits free float and institutional participation, contributing to lower trading liquidity.
| Shareholder Category | Dec'25 | Sep'25 | Jun'25 | Mar'25 | QoQ Change |
|---|---|---|---|---|---|
| Promoter | 87.03% | 87.03% | 87.03% | 87.03% | 0.00% |
| FII | 0.00% | 0.01% | 0.00% | 0.00% | -0.01% |
| Mutual Funds | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Insurance | 1.78% | 1.78% | 1.78% | 1.78% | 0.00% |
| Other DII | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Non-Institutional | 11.19% | 11.18% | 11.19% | 11.19% | +0.01% |
The negligible institutional presence—just 1.78% total institutional holdings with zero mutual fund participation and minimal FII exposure—raises concerns about the stock's ability to attract quality long-term investors. The marginal 0.01% decline in FII holdings from Sep'25 to Dec'25, though small in absolute terms, signals lack of foreign investor interest despite improving fundamentals.
Insurance companies hold a steady 1.78% stake, providing some institutional anchor, whilst retail and non-institutional investors comprise 11.19% of the shareholder base. The absence of promoter pledging is a positive, eliminating concerns about forced selling during market downturns.
Stock Performance: Underperformance Despite Operational Gains
ITDC's stock price performance presents a stark contrast to its improving operational metrics, with shares declining 9.95% over the past year compared to the Sensex's 7.97% gain, resulting in negative alpha of -17.92%. The underperformance extends across most timeframes, with the stock down 7.29% over three months versus the Sensex's 1.02% gain.
| Period | ITDC Return | Sensex Return | Alpha | Assessment |
|---|---|---|---|---|
| 1 Week | 1.98% | 2.94% | -0.96% | Underperformed |
| 1 Month | -3.02% | 0.59% | -3.61% | Underperformed |
| 3 Months | -7.29% | 1.02% | -8.31% | Underperformed |
| 6 Months | -1.42% | 5.27% | -6.69% | Underperformed |
| YTD | -6.57% | -1.36% | -5.21% | Underperformed |
| 1 Year | -9.95% | 7.97% | -17.92% | Underperformed |
| 3 Years | 60.09% | 38.25% | +21.84% | Outperformed |
| 5 Years | 78.84% | 63.78% | +15.06% | Outperformed |
The stock's two-year return of -29.75% versus the Sensex's 17.42% gain highlights the significant wealth destruction over the medium term, with negative alpha of -47.17%. This poor performance coincides with the stock's valuation re-rating from more reasonable levels to current elevated multiples, suggesting investors have grown increasingly cautious about paying premium prices for cyclical hospitality exposure.
Technical indicators paint a concerning picture, with the stock in a "Bearish" trend since January 08, 2026, trading below all key moving averages including the 5-day (₹535.54), 20-day (₹537.35), 50-day (₹557.13), 100-day (₹583.00), and 200-day (₹584.96) levels. The stock's beta of 1.28 indicates higher volatility than the broader market, with volatility of 48.12% categorising it as "High Risk Low Return" based on one-year risk-adjusted metrics.
Investment Thesis: Quality Business, Expensive Price
ITDC presents a paradox for investors: improving operational fundamentals clashing with stretched valuations and weak price momentum. The company's Mojo Score of 36 out of 100 with a "SELL" rating reflects this disconnect, acknowledging the business quality whilst cautioning against entry at current prices.
The company's "Average" quality grade reflects solid long-term fundamentals including 16.88% five-year sales growth, zero debt, and improving returns on equity. However, the negative average ROCE of -53.38% over the historical period raises questions about capital allocation efficiency, though the latest ROCE of 60.27% shows significant improvement.
The "Positive" financial trend grade acknowledges the strong Q3 FY26 performance, with net sales, operating profit, and PAT all reaching record levels. Yet this positive momentum has failed to translate into stock price appreciation, with the "Bearish" technical trend reflecting persistent selling pressure and lack of institutional buying support.
Key Strengths & Risk Factors
Key Strengths
- Debt-free balance sheet with net cash position provides financial flexibility and eliminates refinancing risks
- Strong Q3 FY26 performance with 70.37% QoQ profit growth demonstrates operational leverage and improving demand trends
- Improving ROE trajectory from 12.92% average to 21.45% latest indicates better capital efficiency and profitability
- Government ownership (87.03%) ensures strategic stability and access to prime tourism locations across India
- Operating margins at 17.77% in Q3 FY26 reflect pricing power and cost management capabilities
- Consistent dividend payer with 30.50% payout ratio demonstrates commitment to shareholder returns
- Zero promoter pledging eliminates concerns about forced selling during market stress
Key Concerns
- Expensive valuation at 65x P/E and 13.85x P/BV leaves minimal margin of safety for investors
- PEG ratio of 4.94 suggests market expectations may be difficult to sustain given seasonal business volatility
- Negligible institutional holdings (1.78%) and zero mutual fund participation limits demand support
- Stock in bearish technical trend, trading below all major moving averages with persistent selling pressure
- High beta of 1.28 and volatility of 48.12% categorises stock as high-risk with negative one-year alpha of -17.92%
- Seasonal revenue patterns create quarterly volatility, with margins ranging from 9.21% to 17.77% over past eight quarters
- Limited free float (12.97%) constrains liquidity and institutional participation opportunities
Outlook: What Lies Ahead
ITDC's forward outlook hinges on its ability to sustain the strong operational momentum demonstrated in Q3 FY26 whilst managing investor expectations around valuation. The domestic tourism sector's structural growth trajectory provides a favourable backdrop, though execution risks and seasonal volatility remain key monitoring points.
Positive Catalysts
- Sustained tourism demand recovery could drive continued revenue and margin expansion through FY2026
- Potential asset monetisation or divestment of non-core properties could unlock shareholder value
- Room rate pricing power improvements in premium locations may support margin sustainability
- Government infrastructure investments in tourism could benefit ITDC's strategically located properties
- Increased institutional participation if valuation corrects to more reasonable levels
Red Flags to Monitor
- Margin compression if Q3 FY26 performance proves unsustainable or seasonal peak rather than structural improvement
- Further institutional selling or lack of buying support given current premium valuation
- Technical breakdown below ₹470 (52-week low) could trigger accelerated selling pressure
- Disappointing Q4 FY26 results that fail to meet elevated market expectations built into current valuation
- Inability to attract institutional investors despite improving fundamentals signals valuation concerns
The Verdict: Quality Asset, Wrong Price
Score: 36/100
For Fresh Investors: Avoid initiating positions at current levels. Whilst ITDC demonstrates improving operational fundamentals and benefits from a debt-free balance sheet, the stock's valuation at 65 times trailing earnings and 13.85 times book value offers minimal margin of safety. Wait for a meaningful correction towards ₹400-420 levels (representing 30-35% downside from current price) to consider entry, which would bring valuations closer to 45-48x P/E—still premium but more justifiable given growth prospects.
For Existing Holders: Consider booking partial profits, particularly for positions acquired below ₹450. The strong Q3 FY26 performance provides an opportune exit window before seasonal weakness potentially emerges in Q1 FY27. Hold a core position only if conviction exists around sustained margin improvement and willingness to tolerate high volatility. Set a strict stop-loss at ₹470 (52-week low) to protect capital against technical breakdown.
Fair Value Estimate: ₹420-450 (23-28% downside from current price of ₹546.70), based on 48-52x P/E applied to FY2026 estimated EPS of ₹8.50-9.00, which factors in normalised margins and sustainable growth rates rather than peak quarterly performance.
Note- ROCE= (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions. Past performance does not guarantee future results. The views expressed are based on publicly available information and subject to change without notice.
