Moreover, it has an ambitious plan to double its size in the next six years.
The company in question is Indian Hotels (IHCL), the hospitality powerhouse behind the iconic Taj Hotels, Vivanta, SeleQtions, and Ginger brands.
Once weighed down by an asset-heavy model and low margins, IHCL has executed a remarkable turnaround. It has driven revenue growth, cost efficiencies, and an asset-light expansion strategy that has positioned it for sustained long-term growth.
While IHCL may be a classic case of a forgotten stock in the hospitality sector, the industry itself suffered massive headwinds for almost a decade.
From 2008 to 2020, India’s premium hotel sector remained stagnant. Average room rates (ARRs) stagnated. Room supply slowed. Developers backed off. Capital dried up.
Then came covid. The pandemic obliterated occupancy and slashed room pricing further. For almost 13 years, between 2008 and 2021, average room rates (ARRs) for premium hotels in India barely moved.
Meanwhile, addition to room supplies was sluggish. Companies lacked incentive to add rooms given the low returns. National room inventory grew at a muted CAGR of 6% during this period.
Even as travel picked up in the late 2010s, hotels lacked pricing power. Occupancies stayed in the 60-65% range. Operating leverage was weak. Balance sheets were overextended.
The pandemic forced a reckoning.
In FY21, nationwide occupancy collapsed to 33% and ARRs fell below ₹4,000. It was the lowest revenue base in two decades.
But something changed in 2022. And that change has continued into 2025, driven by secular tailwinds in domestic demand, a disciplined supply-side response, and improved operating leverage.
India’s travel behaviour has changed. Leisure travel has normalized. Spiritual and wellness tourism is booming. Business travel is bouncing back. ARRs have grown by 60-70% in two years.
Rising middle-class incomes, improved air connectivity, and aspirational spending have structurally lifted demand.
Moreover, only 15,000 new rooms were added in 2024. Nationwide branded inventory remains under 190,000. The supply of additional rooms remains below demand growth. And therefore hotel stocks like IHCL command both pricing power and premium valuations.
The stock price of Indian Hotels has gone up 891% in the past five years after languishing for a decade.
The forgotten stock has become a multibagger. Check out the stark difference in returns for yourself!
M&M, a strong conglomerate, languished for a decade as the return on capital on various ventures failed to excite investors.
Even as the company added capacities, invested in subsidiaries, and launched products, the consolidated financials failed to reflect shareholder wealth creation.
But like in the case of IHCL, the pandemic forced a rethink for M&M too. Several changes in strategies helped the stock make up for the lost decade.
In the world of investing, attention is a powerful currency.
Stocks that capture the market’s imagination can command premium valuations, while those that fall out of favour are often left behind, regardless of their underlying financial health. These are the forgotten stocks.
A forgotten stock, at its core, could be a solid company that has simply been overlooked by the majority of investors, a phenomenon driven more by market psychology than by poor business performance.
Major brokerage houses and research firms tend to focus their resources on companies that generate more transaction fees and media buzz, leaving the less exciting stocks out of coverage.
There is very little information disseminated about them, further cementing their status as ‘forgotten’. Finally, their valuation is often disconnected from their intrinsic value.
Another defining characteristic of a forgotten stock is its low trading volume. Unlike popular stocks that see millions of shares change hands daily, these companies trade infrequently. This lack of liquidity is a direct result of minimal investor interest.
But the most critical element of a forgotten stock is the time correction in valuations.
Even if the earnings per share increase, from say ₹10 to ₹50 in a decade, if the stock price languishes at ₹1,000, the PE multiple falls from 100 to 20.
Also, the company may be a slow and steady performer in an unglamorous industry, like chemicals, which fails to make it to the headlines without policy changes.
Finally, collective amnesia toward a stock can be caused by a recent but temporary negative event, such as a disappointing earnings report or a market-wide downturn that causes a temporary dip in confidence.
Investors, in their impatience, may sell and move on, failing to see the company’s long-term resilience.
So, forgotten stocks are not necessarily bad investments. In most cases, they are entities that have failed to grab investor attention for a prolonged period.
While chasing the latest trend may feel exciting, value investors understand that true opportunity often lies in the stocks that everyone else has forgotten about.
Having the patience to hold these companies requires a disciplined approach. One must be willing to look past the noise and focus on fundamental value.
Similar is the story of several bluechip stocks today that have witnessed prolonged time correction.
- Private sector banks like HDFC Bank and Kotak Mahindra Bank.
- FMCG behemoths like HUL.
- Engineering majors like Larsen & Toubro.
- Consumer durable like Titan Company and Pidilite.
- Technology stocks like TCS, Infosys and HCL Technologies.
Happy Investing.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com
