Lemon Tree Hotels spurts after JV with Magnolia Grove Investment

Lemon Tree Hotels surged 7.99% to Rs 74.30 at 10:15 IST on BSE after the company agreed to enter into a joint venture with Magnolia Grove Investment, an affiliate of Warburg Pincus group.

The announcement was made after market hours yesterday, 27 December 2018.

Meanwhile, the S&P BSE Sensex was up 326.86 points or 0.91% at 36,134.14

On the BSE, 1.13 lakh shares were traded in the counter so far compared with average daily volumes of 19,000 shares in the past two weeks. The stock had hit a high of Rs 77.15 and a low of Rs 73.50 so far during the day. The stock hit a record high of Rs 91 on 23 April 2018. The stock hit a record low of Rs 57.30 on 9 April 2018.

Lemon Tree Hotels has formed a joint venture (JV) with an affiliate of Warburg Pincus, a leading global private equity firm focused on growth investing, to create a co-living platform. The JV marks Lemon Tree Hotel's entry into an adjacent but new business segment focusing on the development of institutional-grade rental housing accommodation serving both students and young working professionals across major educational clusters and key office markets in India.

An affiliate of Warburg Pincus and Lemon Tree Hotels will hold 68% and 30% stake, respectively in the JV, with the balance 2% to be held by Patanjali Keswani. The JV partners will initially invest Rs 1500 crore in equity over a period of time followed by an additional infusion of Rs 1500 crore in equity at the option of the partners, to develop rental housing projects through a combination of greenfield purpose-built properties, refurbishment of existing under managed/stressed commercial and residential assets taken on lease/acquisition basis as well as management of existing for rent accommodation projects. The JV's projects will also include shared spaces like living room, gym and wellequipped cafeterias in order to provide its residents with a high-quality and full service co-living accommodation.

On a consolidated basis, Lemon Tree Hotels reported net profit of Rs 6.54 crore in Q2 September 2018 as compared with net loss of Rs 4.43 crore in Q2 September 2017. Net sales rose 15.35% of Rs 128.69 crore in Q2 September 2018 over Q2 September 2017.

Lemon Tree Hotels is India's largest chain in the mid-priced hotels sector and third largest overall, on the basis of controlling interest in owned and leased rooms.

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