In Ayodhya, it’s homecoming for pilgrims as well Just 800 metres from Ram Janmabhoomi, where the Ram Temple is set to be inaugurated on January 22, is Paarijat, one amongst the about 600 homestays that have come up in Ayodhya as the temple town warms up to welcome lakhs of pilgrims. “I read in the newspaper that the local administration is inviting those with extra rooms in their houses to convert them into homestays. I liked the idea, and started Paarijat in July last year. So far I have hosted several guests, from Indians from different parts of the country to foreigners and even celebrities,” said 47-year-old owner Vandana Tripathi. “The hotels that are upcoming will take time to be ready. That is when we thought why not focus on homestays. The work began six months ago, and about 600 homestays have already been onboarded,” said Satyendra Singh, secretary, Ayodhya Development Authority (ADA). Homestays not only offer addition rooms, but are economically feasible too.“Most pilgrims coming to Ayodhya belong to middle and lower middle-class strata,” said Singh, highlighting that homestays are affordable for them. “Pilgrims get a home-like atmosphere, besides a people-to-people connect, and for locals it is an economic opportunity,” he said, explaining why the administration gave special focus to this model. Earlier this month, the ADA also launched the Holy Ayodhya app to help tourists book affordable homestays, which are largely priced between Rs 1,500 and Rs 2,500 per night. “Homestays are booming here. I converted the upper portion of my house into a homestay, and I earn about `1 lakh a month after paying commission to online booking sites and taxes,” Tripathi shared. While locals have the first-mover advantage, an increasing number of hospitality players are also looking at Ayodhya as it is poised to become a spiritual tourism spot. “IHCL has signed management contracts for two new properties in Ayodhya — a 100-room hotel under the Vivanta brand and a 120-room Ginger hotel — which are expected to be operational in 36 months,” said Deepika Rao, executive vice-president, Indian Hotels Company Limited (IHCL), which also runs amã Stays & Trails, a premium branded homestay offering. Other hospitality chains that have signed hotels include Sarovar Hotels & Resorts and Wyndham Hotels & Resort. Park Inn by Radisson has recently opened in the city. While hospitality players remain bullish, the local administration is also eyeing other avenues. “We have built a Tent City here, and are also exploring newer options such as rural/village stays. But that would begin only after January 22,” said Singh, according to whom, while hotels work well in metros and bigger cities, “here people are keener to explore something new.” He added that the administration is also working on the idea of an eco-resort near Samda Lake in the city. With the Ram Temple set to be inaugurated later this month, the city has undergone a facelift with much push from the state and the Centre to turn the city into a hub for religious and spiritual tourism, a category that is growing well. “Spiritual tourism as a category has grown by 35% in just over a year,” said Rajesh Magow, co-founder & group CEO of MakeMyTrip. “Coming to Ayodhya, given the comparatively small visitor base, we see a 5X upside in searches (y-o-y) and are already recording 4X more bookings as compared to last year,” he said, adding, “Expectedly, the duration of January 10-22 is seeing a sharp increase in bookings.” As for Tripathi, her homestay is overbooked. “I even had to rent out the lower portion of our house to pilgrims,” she said.
Services miss estimates; Software better than expected: Services business grew 0.6% q-o-q cc and missed HCLT’s Q3FY23 guidance, mainly due to a 3.8% q-o-q cc decline in the ER&D segment. Growth in the IT&BS segment moderated slightly to 1.6% q-o-qcc but was in line with estimates. BFSI and Life Sciences were the key growth drivers, while communications were the drag among verticals. Growth was led by the Americas region, while Europe and ROW posted declines.
Decline in bookings reflects delays in decision-making: HCLT won 10 large deals in services and three large deals in Software with net-new deal TCV of $2.1bn, down 8% y-o-y. Deal wins were driven by the services portfolio, were centered on cost optimisation and vendor consolidation and came mainly from BFSI, manufacturing and Life Sciences verticals. Management highlighted a ramp-down in discretionary spending in Hitech and communications verticals but pointed to a strong deal pipeline.
FY24 guidance in line with expectations: HCLT has guided for 6-8% y-o-y growth for overall business and 6.5-8.5% y-o-y cc growth in services segment and 18-19% margins in FY24—all in line with our assumptions. We maintain our FY24-25 cc revenue growth and margin estimates and expect HCLT to deliver 6.5% cc revenue growth and 18.4% margins in FY24. However, we lower our earnings forecasts by 2% to factor the higher tax rate indicated by the management.
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Raise PT: HCLT has fared better in Q4, particularly in North America and BFSI, unlike its peers. However, rising demand uncertainty as a US recession nears remains a concern. HCLT’s stock at CMP trades at 17x PE and offers a 5% yield, which in our view should limit downsides and derating. Hence, we raise our target PE to 17x (16x earlier) and raise our PT to Rs 1,125, offering 8% potential upside.