Lemon Tree Hotels files for IPO; Warbug Pincus to partially exit
Photo Credit: Shah Junaid/VCCircle

New Delhi-headquartered Lemon Tree Hotels Ltd, which counts private equity giant Warburg Pincus among its backers, has filed a draft red herring prospectus with the Securities and Exchange Board of India (SEBI) for an initial public offering.

The public issue comprises an entirely secondary market sale by the promoter and promoter group, besides Warburg Pincus selling half its stake in the mid-sized hotel chain. The issue will see a sale of 195.79 million shares, resulting in a 24.9% stake dilution on a post-issue basis.

Warburg Pincus will sell 94.5 million shares of the 192.9 million it currently owns. Its stake will drop to roughly 12.51% from 24.53%, as per information in the draft prospectus.

The total issue size is estimated at Rs 1,000-1,200 crore ($155-185 million), said a person directly aware of the matter. This would value the Patanjali Keswani-led hotel chain at roughly Rs 4,820 crore (nearly $750 million), according to VCCircle estimates.

With the IPO, Lemon Tree will join a clutch of listed peers such as Indian Hotels Ltd, EIH Ltd, Mahindra Holidays, Hotel Leela Ventures, and Royal Orchid Hotels.

Here’s a snapshot of the proposed IPO.

Issue: The selling shareholders will offload 195.79 million shares through the offer. The company will not issue any fresh shares.

Warburg Pincus, through its investment arm Maplewood Investments, will sell 94.5 million shares, representing half of its ownership in the hotel chain. The remaining shares will be sold by the promoter, promoter group firms and other individual shareholders.

Proceeds: The company will not receive any proceeds from the offer, and the entire amount will go to the selling shareholders.

Bankers: Kotak Mahindra Capital Company, CLSA India, JPMorgan and Yes Securities will be the merchant bankers managing the IPO.

Lawyers: Shardul Amarchand Mangaldas & Co will be the legal counsel representing the company. Luthra & Luthra Law Offices will be the Indian counsel to the merchant bankers while Sidley Austin LLP is the international counsel to underwriters.

AZB & Partners will be the Indian legal counsel to Maplewood (Warburg Pincus).


As on 30 June, 2017, Lemon Tree Hotels was India’s largest hotel chain in the mid-priced segment and the third-largest overall by the number of owned and leased rooms.

It operates through direct ownership of hotel properties, and long-term lease and license arrangements.

It runs three brands in the mid-priced segment: upper-midscale category Lemon Tree Premier; midscale category Lemon Tree Hotels; and economy category Red Fox by Lemon Tree Hotels.

As of July, the chain operated 4,289 rooms in 40 hotels (including managed hotels) across 24 cities across the country. The company owns 19 hotels, and runs three on leased or licensed lands. It has five leased hotels and 13 managed hotels.

Keswani, a three-decade veteran in the hospitality sector, is the company's chairman and managing director.


The company clocked a consolidated revenue of Rs 411.93 crore for FY17, compared with Rs 367.95 crore in FY16 and Rs 290.36 crore in FY15. Since FY14, consolidated revenue has grown at a compounded annual rate of 17.68%.

Consolidated net loss narrowed to Rs 7.17 crore in FY17 compared with Rs 29.70 crore in FY16. The figure stood at Rs 63.23 crore in FY15.

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