Lemon Tree Hotels announced a corporate restructuring plan involving the separation of its asset-heavy and asset-light businesses. This includes a commitment of approximately ₹960 crores in primary capital from Warburg Pincus to Fleur Hotels. Post-reorganization, Lemon Tree shareholders will effectively own approximately 74% of Fleur Hotels. The aim is to unlock value and pursue accelerated growth in distinct business segments.
Corporate Restructuring Details
Lemon Tree Hotels is undertaking a corporate scheme of arrangement to reorganize its business into two distinct entities: Lemon Tree Hotels (asset-light) and Fleur Hotels (asset-heavy). The proposed reorganization aims to create focused, well-capitalized businesses capable of pursuing distinct growth strategies.
Fleur Hotels: Capital Infusion and Growth Plans
Fleur Hotels will operate as a hotel ownership/leasing platform. It will be supported by a primary capital commitment of about ₹960 crores from Warburg Pincus. It will consolidate ownership of existing hotels, including airport hotels in Mumbai and Delhi, and resorts like Aurika Udaipur. Growth will be driven by ongoing construction of 3 hotels with 750-plus rooms and potential acquisitions.
Lemon Tree Hotels: Asset-Light Strategy
Lemon Tree Hotels will emerge as a debt-free, high-margin company generating strong free cash flows from fees and brand-related income. The company will focus on offering hotel management, brand, loyalty distribution, and digital services. They currently manage nearly 12,000 rooms in 130 hotels and expect to reach approximately 22,000 rooms in 260 hotels in the next 3-4 years.
Ownership and Strategic Alignment
Post-reorganization, Lemon Tree shareholders will effectively own close to 74% of Fleur Hotels, with 33% direct ownership and approximately 41% indirect ownership through Lemon Tree. This structure aims to provide strategic alignment and ensure Lemon Tree maintains ‘skin in the game’.
Financial Outlook and Projections
Lemon Tree Hotels anticipates its EBITDA margin to be north of 80% by FY28. Fleur Hotels is expected to achieve a net EBITDA of over ₹1,000 crores by FY28. However, margins may be affected in the short term due to renovation and regulatory impacts. The company expects incremental impact of about 5% of revenue on EBITDA margins for FY26 and FY27.
Growth Strategy
Lemon Tree will continue to build its brand and aims to become the largest operator in its space with significant fee income, targeting 30,000 – 40,000 rooms. They are aiming to add 4,000 – 5,000 rooms per year and Fleur to add 1,000 – 2,000 rooms per year.
Source: BSE
