Lemon Tree to buy Keys Hotels for $68 mn, get more capital from Dutch pension fund

By Narinder Kapur

  • 01 Jul 2019
Lemon Tree to buy Keys Hotels for $68 mn, get more capital from Dutch pension fund
Credit: Pexels

Lemon Tree Hotels Ltd, which operates an eponymous mid-range hotel chain, is acquiring Keys Hotels for Rs 471 crore ($68.2 million at the current exchange rate) to expand its portfolio.

In a stock-exchange filing, Lemon Tree Hotels said that it would buy out Berggruen Hotels Pvt. Ltd, the parent of Keys Hotels, at an enterprise valuation of Rs 605 crore ($87.6 million).

New Delhi-based Lemon Tree counts private equity giant Warburg Pincus among its investors.


Lemon Tree is making the acquisition via Fleur Hotels Pvt. Ltd, which is a wholly-owned subsidiary. Berggruen Hotels Pvt. Ltd will become an indirect subsidiary of Lemon Tree, it added. The company expects to complete the transaction within two months.

Separately, Fleur Hotels Pvt. Ltd will raise capital from Dutch pension fund APG Asset Management NV, an existing investor, and parent Lemon Tree Hotels Ltd by issuing compulsorily convertible preference shares worth Rs 421 crore ($61 million).

APG’s strategic real estate pool will contribute Rs 360 crore with the remaining Rs 61 crore coming from Lemon Tree.


The developments come after Lemon Tree announced in March that it had signed a pact to acquire Keys Hotels.

At the time, Lemon Tree had said it would expand its operating portfolio to 75 hotels with 7,322 rooms in 44 cities in India after the acquisition. It had a pipeline of 33 hotels with 3,389 rooms in 26 cities that it aimed to open by 2020-21.

Lemon Tree Hotels are located in metro regions, including Delhi-NCR, Bengaluru, Hyderabad and Chennai, as well as Tier I and Tier II cities.


Lemon Tree directly owns some hotels and operates some others through long-term leases for hotels owned by third parties. The chain operates under three categories in the mid-priced segment—the upper-midscale category called ‘Lemon Tree Premier’, the midscale segment ‘Lemon Tree Hotels’ and economy hotels under ‘Red Fox’.

Founded in 2006, Keys Hotels operates 21 hotels across 19 locations in India, with 1,911 rooms. It runs hotels under the Keys Prima, Keys Select and Keys Lite brands. 

Shares of Lemon Tree were trading at Rs 69.25 apiece on the BSE, up 3.82% from the previous close at the time of publishing this report.


The hotel chain had made a spectacular trading debut last April with its shares jumping 28% on the first day of trading.

Warburg Pincus had said last December that it was setting up a joint venture with Lemon Tree Hotels that planned to invest as much as Rs 4,000 crore for developing full-service accommodation for students and young working professionals.



According to its website, APG provides services such as executive consultancy, asset management, pension administration and pension communication.

It manages pension funds and employers in sectors such as education, government, housing associations, energy and utility companies and construction. The group managed €505 billion (around $571.72 billion, or Rs 39.47 lakh crore) in assets as of April 2019.

In 2014, APG invested Rs 300 crore (around $50 million) in Lemon Tree, upping its stake in the company at the time to 13% from 5.6%. Before that, in 2012, it invested Rs 650 crore in the mid-range hotel operator.  

In 2017, the pension fund asset manager invested $175 million (around Rs 1,150 crore) in Virtuous Retail South Asia Pte. Ltd, a joint venture with Virtuous Retail, the retail development arm of The Xander Group.

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