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India, with its enchanting landscapes and rich cultural tapestry, beckons investors with opportunities in its tourism sector. Positioned as one of the nation’s largest service industries, India’s tourism industry (including the hospitality sector) is one of the pivotal drivers of economic growth, contributing roughly 5% to the country’s GDP.
However, the onset of the Covid-19 pandemic in 2020 marked a downturn, reducing foreign tourist arrivals (FTAs) from 10.93 million in 2019 to 2.74 million in 2020 and 1.52 million in 2021. Since then, the sector has witnessed a resurgence, with 6.19 million FTAs recorded in 2022. Also, tourism ministry data for January to June 2023 indicates a 106% increase in FTAs compared to the same period in 2022, just 17% shy of pre-Covid levels.
Besides, domestic tourism showcased remarkable resilience, surging from 677 million in 2021 to 1,731 million in 2022. A rebound In India’s tourism comes at a time when the Asian tourism market is on the road to recovery as well.
“India is hosting over 200 G20 meetings at 55 locations across the country. It is happening with ‘janbhagidari’ (people’s cooperation). And, the tourism sector is benefitting the most from these meetings,” said Union Minister Union Tourism Minister G Kishan Reddy at a G20 Tourism Working Group meeting in June.
According to Statista, the projected revenue for India’s travel and tourism market in 2023 is $18.91 bn. Looking ahead, an annual growth rate of 13.47% between 2023 to 2027 is anticipated for the sector, culminating in a projected market volume of $31.35 bn by 2027.
Government measures to boost India’s tourism industry
The government is implementing diverse measures to enhance India’s tourism sector. This year, an announcement was made about the selection and development of a minimum of 50 destinations across the country, aimed at strengthening the nation’s tourism market.
India has also initiated a program titled “Visit India Year 2023.” This endeavour seeks to reveal the unexplored facets of Indian heritage and culture, presenting India as a year-round destination for tourists.
Furthermore, steps have been implemented to enhance the nation’s railway infrastructure, accompanied by government initiatives to streamline visa processes for tourists from various countries, facilitating smoother visits to India.
“There is a large potential to be tapped in tourism…Promotion of tourism will be taken up on mission mode, with active participation of states, convergence of government programmes, and public-private partnerships,” said India’s Finance Minister Nirmala Sitharaman.
How to invest in India’s tourism sector?
With India’s tourism sector making a strong comeback in 2023, we take a look at three stocks that stand to benefit from this trend.
Indian Hotels Company Limited (IHCL)
Indian Hotels Company Limited (IHCL) is an Indian hospitality company and the parent organisation of the Taj Group of Hotels. Established in 1903, IHCL operates luxury hotels and resorts globally.
The company registered an 85% year-on-year rise in revenue, amounting to Rs 5,949 crore ($714.16 mn) in the fiscal year ended March 2023. During the same period, its profit after tax amounted to Rs 1,003 crore ($120.40 mn), offsetting Covid-19 losses.
IHCL has a market cap of $6.90 bn and is traded on the Bombay Stock Exchange (BOM: 500850) and the National Stock Exchange of India (NSE: INDHOTEL). The company’s shares have risen by 17.82% since last year. It has a PE ratio of 54.48 and a price-to-book ratio of 6.78.
IRCTC
Indian Railway Catering and Tourism Corporation, or IRCTC, a government-owned entity in India, specialises in providing ticketing, catering, and tourism services exclusively for the Indian Railways.
In the fiscal year ended March 2023, the company collected revenues to the tune of ₹3,540 crore ($424.97 mn). This marked an 88% year-on-year increase. During this period, IRCTC also reported a profit after tax of ₹1,006 crore ($120.76 mn), demonstrating a 51% year-on-year spike.
Listed on the National Stock Exchange of India (NSE: IRCTC) and the Bombay Stock Exchange (BOM: 542830), IRCTC has a market capitalisation of $6.50 bn. The company’s stock has fallen by 11.27% in the past year. It has a PE ratio of 51.32 and a price-to-book ratio of 21.68.
MakeMyTrip
MakeMyTrip is India’s leading online travel company, offering a range of services such as flights, hotels, holidays, buses, and more. Users can book flight tickets, hotel stays, and holiday packages through their desktop site or mobile app.
MakеMyTrip’s revenue for the fiscal year ended March 2023 stood at around $593 mn, 95% higher than the preceding fiscal year. The company’s losses narrowed by 75% year-on-year to about $11.3 mn during this time frame.
The company’s stocks are listed on the Nasdaq stock exchange (NASDAQ: MMYT). MakеMyTrip has a market cap of $0.68 bn. Since last year, the company’s shares have gained 38.93%. Along with that, the shares have a PE ratio of 165.92 and a price-to-book ratio of 4.81.
Editor’s note: All stock movement figures as of November 09, 2023.
