Ayodhya may attract 5 crore visitors annually: Jefferies

With the consecration of the Ram temple on Monday, Ayodhya is set to emerge as a new tourist hotspot in India with around 5 crore people expected to visit this small ancient town annually, as per global brokerage firm Jefferies, thus raising expectations of a major economic boost to the region.

According to Jefferies, around Rs 85,000 crore (over $10 billion) investments by the government in infrastructure development like new airport, revamped railway station, improved road connectivity and township, will help in transforming the small sleepy town into a global religious and spiritual tourist hotspot.

Multiple sectors stand to benefit including hotels, airlines, hospitality, FMCG, travel ancillaries and cement. This is already evidenced in some small-cap companies, whose recent stock movement was analysed by DH.

Share price of Pakka Ltd, which has got the contract to supply compostable plates and bowls for temple prasad, has surged by over 76% since the beginning of January. Kamat Hotels, which plans to develop a new hotel in Ayodhya, has surged by around 70% this month.

Other stocks that have rallied include private security group SIS Ltd, EaseMyTrip, Allied Digital and IRCTC. SIS has won a contract to deploy security personnel in the temple complex. Allied Digital Services has been selected as a master system integrator for the integration of CCTV surveillance with existing ITMS control room for the Ayodhya smart city project.

“Without doubt, Ayodhya will become a major spiritual tourism destination. The potential for tourism-related business is enormous and has attracted investors into hotel, travel and other tourism-related stocks,” said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

Vijayakumar, however, cautioned retail investors and advised that they should not go overboard chasing the stocks that have elevated prices.

“Many stocks in this segment have run up too much too fast and have shot up by more than 100% in just a few weeks. This is a sentiment-driven rally triggered by retail exuberance. Broadly, the valuation of the mid and small cap segments are too high, unjustified, almost in frothy territory,” he added.

Meanwhile, industry body Confederation of All India Traders (CAIT) traders said that the temple inauguration had generated business of Rs 1 lakh crore across the country.

In most of the sectors, including hotels and restaurants, demand in Ayodhya outstrip supply. At present, Ayodhya has 17 hotels with 590 rooms. 73 new hotels are in the pipeline, of which 40 are already under construction.

According to Jefferies, potential beneficiaries in hotel sectors include Indian Hotels Company Limited (IHCL), ITC Hotels, EIH Limited and OYO Rooms. Tata Group’s IHCL, which runs the luxury hotel chain under Taj brand, has signed contracts for two new properties in Ayodhya that are likely to be operational by 2027. Marriott International and Wyndham have also signed deals for opening new properties in Ayodhya, while ITC Hotels has announced that it is exploring opportunities.

Among fast moving consumer goods (FMCG) and quick service restaurants, potential beneficiaries will be Jubilant Foodworks, Britannia Industries, Godrej Consumer, ITC, Westlife Foodworld, Hindustan Unilever, Devyani International, and Sapphire Foods. Food chains like Burger King, McDonald’s and Domino’s may open outlets in Ayodhya.

“Ayodhya tourism has excellent long-term prospects, investors have to be careful about the valuations,” said Vijayakumar.

Potential beneficiaries in the aviation and travel sector include InterGlobe Aviation (IndiGo), SpiceJet, Akasa Air, IRCTC, MakeMyTrip and EaseMyTrip.

“Surge in tourism and residents will lead to increased demand for both domestic and international connectivity and stands to benefit aviation, railways and ancillary service providers,” Jefferies said in a note.