Lemon Tree Hotels shares jump 4% after major restructuring news; Key details you should know

Synopsis: Lemon Tree Hotels Limited is announcing a value-unlocking restructuring, including the Fleur demerger and Warburg Pincus investment. Brokerages Nuvama and Investec turned bullish, citing improved growth visibility, reduced capex risk, and strong upside potential.

This Hospitality Stock, engaged in owning, leasing, operating, and franchising hotels across upscale to economy segments, offering branded hospitality services in India and select international markets, jumped 4.14 percent after the company announced a major restructuring plan.

With a market capitalization of Rs. 12,168.91 crores, the share of Lemon Tree Hotels Limited has reached an intraday high of Rs. 155.90 per equity share, rising nearly 4.14 percent from its previous day’s close price of Rs. 149.70. Since then, the stock has retreated and is currently trading at Rs. 153.60 per equity share. 

Reason Behind the Surge

Lemon Tree Hotels Limited has announced a major restructuring plan to unlock value and raise funds for future growth. As part of this plan, the company will split its business into two separate entities. Lemon Tree Hotels will focus on becoming an asset-light company that manages hotels and builds brands, while a new company, Fleur Hotels, will own hotel properties and handle development activities. This move is aimed at improving efficiency and returns.

At present, Lemon Tree Hotels owns 58.91 percent of Fleur Hotels, while APG holds the remaining 41.09 percent. Under the proposed deal, global private equity firm Warburg Pincus will buy APG’s entire stake in Fleur Hotels. 

Warburg Pincus has also committed to invest Rs. 960 crore in Fleur Hotels over time to support expansion and growth plans. The entire restructuring will be carried out through a formal scheme of arrangement.

As part of the reorganisation, Lemon Tree Hotels will merge two of its wholly owned subsidiaries into itself. Additionally, four other subsidiaries will be merged into Fleur Hotels, with shares issued to Lemon Tree in return. 

The company will also transfer 12 hotels to Fleur Hotels (11 operational hotels and one under-construction hotel at Shimla), and Fleur shares will be directly allotted to Lemon Tree shareholders. For every 311 Lemon Tree shares held, shareholders will receive 20 shares of Fleur Hotels.

After the restructuring, Lemon Tree shareholders will directly own 32.96 percent of Fleur Hotels, while Lemon Tree will retain a 41.03 percent stake and Warburg Pincus will hold 26.01 percent. Fleur Hotels will own 41 hotels with 5,812 rooms, while Lemon Tree will manage 89 hotels with 6,011 rooms. Fleur is expected to be listed within 12-15 months, and Lemon Tree aims to become a debt-free, high-growth company with a clear dividend policy.

Analyst Viewpoints

Nuvama Institutional Equities, a prominent brokerage firm, has recommended a “Buy” call on Lemon Tree Hotels Limited with a target price of Rs. 178 per share, indicating an upside potential of 18.90 percent from its previous day’s close price of Rs. 149.70.

Nuvama views Lemon Tree Hotels’ restructuring positively as it separates asset-light management and asset-heavy ownership businesses. The return of Warburg Pincus through Fleur Hotels is expected to de-risk future capital expenditure and provide strong financial backing, supporting growth visibility and improving the company’s long-term investment outlook.

Additionally, Investec, a prominent brokerage firm, has recommended a “Buy” call on Lemon Tree Hotels Limited with a target price of Rs. 187 per share, indicating an upside potential of 24.92  percent from its previous day’s close price of Rs. 149.70.

Investec believes the long-awaited Fleur demerger will unlock significant value for Lemon Tree Hotels by separating its high-growth, high-RoCE, asset-light business. The brokerage expects Fleur to emerge as a zero-debt entity, supported by Warburg Pincus’ buyout of APG’s stake and a Rs. 960 crore capital infusion. Management’s reaffirmed growth plans further strengthen confidence and support Investec’s positive target outlook.

Company Overview

Lemon Tree Hotels Limited is one of India’s largest hotel chains, operating across upscale, upper-midscale, midscale, and economy segments. The company offers seven well-known brands, including Aurika Hotels & Resorts, Lemon Tree Premier, Lemon Tree Hotels, Red Fox Hotels, and the Keys portfolio, catering to diverse guest needs with a strong value-driven service proposition.

The company operates 130 hotels across more than 80 cities in India and overseas, with another 130 properties in the pipeline. Its presence spans major metros, tier II and III cities, and international markets like Dubai, Bhutan, and Nepal.

Recent Quarter Results

Coming into financial highlights, Lemon Tree Hotels Limited’s revenue has increased from Rs. 284 crore in Q2 FY25 to Rs. 306 crore in Q2 FY26, which has grown by 7.75 percent. The net profit has also grown by 20 percent from Rs. 35 crore in Q2 FY25 to Rs. 42 crore in Q2 FY26. Lemon Tree Hotels Limited’s revenue and net profit have grown at a CAGR of 21.23 percent and 31.28 percent, respectively, over the last two years.

In terms of return ratios, the company’s ROCE and ROE stand at 13 percent and 18.4 percent, respectively. Lemon Tree Hotels Limited has an earnings per share (EPS) of Rs. 2.78, and its debt-to-equity ratio is 1.67x.

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