Lemon Tree Hotels rises 4% as Warburg Pincus to invest in arm Fleur Hotels

Warburg Pincus will acquire APG Strategic Real Estate Pool N.V's 41.09 per cent stake in Fleur Hotels. The global private equity investment firm will also infuse ₹960 crore of capital.

Lemon Tree Hotel share price today: Lemon Tree Hotels share price rose on Monday as the company unveiled a business restructuring plan and announced an investment from Warburg Pincus in its arm, Fleur Hotels.

 

Lemon Tree Hotels share price rose 4.11 per cent to ₹155.99, the highest level since January 7. 

 

The counter pared gains to trade 1.43 per cent to ₹152 as of 10:13 AM, as compared to a 0.46 per cent decline in the Nifty 50 index.   CATCH STOCK MARKET UPDATES LIVE

Why did Lemon Tree Hotels share price rise today?

 

Lemon Tree Hotels announced a corporate restructuring plan, through which it will unlock value by creating two differentiated entities. Under the arrangement, Lemon Tree Hotels will act as a pure-play asset-light company focused on hotel management, brand and loyalty, and distribution services, the company said in an exchange filing on Saturday. 

 

 

Separately, Warburg Pincus will acquire APG's stake in Fleur Hotels ahead of the reorganisation, along with a primary equity infusion of up to ₹960 crore to fund growth. With this, Fleur Hotels will act as a hotel ownership and leasing entity.  This will be achieved through the transfer of hotel assets and development capabilities in exchange for equity. 

 

That apart, Lemon Tree Hotels will merge two of its wholly-owned subsidiaries -- Carnation Hotels and Hamstede Living into itself, as per the exchange filing. Other four wholly-owned subsidiaries of Lemon Tree Hotels will be merged into Fleur Hotels through the issuance of shares to Lemon Tree Hotels. 

 

Post the corporate restructuring, Lemon Tree Hotels’ shareholding structure will remain unchanged. Meanwhile, Fleur Hotels will see a significant change in ownership. 

 

After the corporate restructuring, Lemon Tree Hotels will own 41.03 per cent stake in Fleur Hotels, while Warburg Pincus will own 26.01 per cent stake, according to the exchange filing. 

 

Before the merger, Warburg Pincus will acquire APG Strategic Real Estate Pool N.V’s 41.09 per cent stake in Fleur Hotels. 

 

This is the second such strategic partnership between the hotel management company and the Warburg Pincus since 2006, according to the exchange filing.   Post the restructuring, Fleur Hotels will also list as a separate entity on the exchanges. The scheme of arrangement is subjected to regulatory and shareholders' approval, Lemon Tree Hotels said in the exchange filing.   ALSO READ | Ashiana Housing slips 3% on posting Q3 business update; check details

Analyst View: 

Overall, Lemon Tree Hotels is doing a strategic realignment to sharpen business focus and accelerate growth, Motilal Oswal Financial Services said. 

 

Warburg Pincus’ entry and the equity infusion will strengthen Fleur Hotels' ownership and leasing platform, while Lemon Tree Hotels transitions into a pure-play, asset-light hotel management and franchise business with clear operational separation and strategic accountability, the brokerage said. 

 

The hotel management company's asset-light business has grown rapidly with high margins and low capital intensity. Their hospitality assets also supported the rapid growth. Both businesses deliver balanced and resilient earnings, the brokerage said. 

 

Motilal Financial Services expects Lemon Tree Hotels to report a compound annual growth rate (CAGR) of 11 per cent, 13 per cent, and 26 per cent in revenue, Earnings before interest, taxes, depreciation, and amortization (Ebitda), and profit before tax (PAT) over the financial years 2025 and 2028. 

 

The brokerage has a 'Buy' rating on the stock with a target price of ₹200, which implies 33 per cent upside from Friday's close price.