Lemon Tree Hotels IPO: Things to Consider

By Olga Robert
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    The Delhi-based Lemon Tree Hotels Ltd launches its initial public offering (IPO) today for Rs 1,040 crore.

    Lemon Tree Hotels IPO: Things to Consider

    Lemon Tree Hotels IPO Details

    The promoters, private equity firm Warburg Pincus, and Dutch pension fund APG are offering 23.59% of the stake or 18.5 crore shares in a three-day trial period offer. The price band is Rs 54-Rs 56 apiece. This means that its upper-end price will value the company at Rs 4,403 crore, which is 45 times its financial earnings in 2017.

    The book-running lead managers for this issue are Kotak Mahindra Capital, CLSA India, JPMorgan India and YES Securities.

    Warburg Pincus will sell 94.5 million shares, reducing its stake to 12.51% from 24.53% as per the prospectus.

    Business

    Lemon tree hotels ltd was founded by Patanjali Govind Keswani in 2002. Its three hotel categories are:

    1. Upper-mid-scale: Lemon Tree Premier
    2. Mid-scale: Lemon Tree Hotels
    3. Economy: Red Fox

    It is the largest hotel chain in the mid-scale segment in India and ninth largest in terms of owned, leased and managed rooms.

    Brand No of rooms    % of total rooms     Revenue from each room
    Lemon Tree Premier 1,301 28% 3,570
    Lemon Tree Hotels 2,325 49% 2,752
    Red Fox 1,071 23% 2,099
    Total 4,697    

    Source: BloombergQuint

    It operates a total of 4,697 rooms in 45 hotels across 28 cities in India. This includes managed hotels. Lemon tree owns 3,200 and manages 1,500 of these rooms. These results are as of 31st January.

    Out of the 45, 10 are upper mid-scale, 27 mid-scale, and 8 economies.

    Lemon tree owns 19 these hotels and operates 18 through leases from third-party owners. Among others, it has 3 owned hotels on leased property and 5 on management contract.

    Financials

    • Its revenue stood at Rs 412 crore as of 31st March 2017. It is grown at an annual rate of 17.7% over the last five years.
    • Earnings before tax stood at Rs 116.4 crores as of 31st March 2017 at an annual rate of 33% over the last 5 years.
    Lemon tree hotels have raised Rs 311 crores from 16 anchor investors by selling shares before the IPO. The company said in a statement that Aberdeen, VantageTrust Funds, Zaaba and New York State Common Retirement Fund were its foreign anchor investors and the domestics investors were SBI Mutual Fund, Mirae, HDFC Mutual Fund and BNP Paribas Mutual Fund.

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