Lemon Tree Hotels approves major reorganisation; partners with Warburg Pincus for Fleur Hotels
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Lemon Tree will first merge two of its wholly owned subsidiaries—Carnation Hotels and Hamstede Living—with itself | Credits: Lemon Tree Hotels
Lemon Tree Hotels approves major reorganisation; partners with Warburg Pincus for Fleur Hotels
Lemon Tree Hotels has announced a major reorganisation, partnering with Warburg Pincus to transform its operations. The plan involves separating its business into two distinct platforms: an asset-light management company and an asset-heavy hotel ownership entity. This strategic move aims to enhance growth and streamline operations, with a significant investment from Warburg Pincus to boost expansion.
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Beyond the stake acquisition, Fleur Hotels is set to receive a primary equity investment of up to ₹960 crores in tranches from Warburg Pincus to accelerate its expansion
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Lemon Tree will first merge two of its wholly owned subsidiaries—Carnation Hotels and Hamstede Living—with itself | Credits: Lemon Tree Hotels
Hospitality major Lemon Tree Hotels Limited (LTHL) informed the stock exchanges on Saturday that its Board of Directors has approved a transformative Composite Scheme of Arrangement. The board has also cleared the execution of a share purchase agreement (SPA) for the sale of APG’s entire 41.09% stake in Fleur Hotels Limited to Coastal Cedar Investments B.V., an affiliate of global private equity firm Warburg Pincus.
The proposed reorganisation is designed to segregate the group’s operations into two clearly differentiated and complementary platforms with distinct risk and return profiles:
Lemon Tree Hotels (asset-light): Will operate as a pure-play management company focused on hotel management, brand and loyalty programs, distribution, and digital services. It aims to be a zero-debt entity with high return on capital employed (RoCE).
Fleur Hotels (asset-heavy): Will function as a large-scale, growth-oriented hotel ownership and leasing platform. It will possess end-to-end in-house development capabilities and a significant pool of capital to fast-track its pipeline.
Multi-step structural overhaul
The scheme involves several strategic steps to streamline the group’s corporate structure:
Internal mergers: Lemon Tree will first merge two of its wholly owned subsidiaries—Carnation Hotels and Hamstede Living—with itself.
Consolidation of assets: Four other wholly owned subsidiaries of Lemon Tree will be merged into Fleur Hotels in exchange for Fleur Hotels issuing shares to Lemon Tree.
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Demerger of core assets: A "Demerged Undertaking"—consisting of 12 hotels (11 operational and one under construction in Shimla), the development team, and an investment in a Shillong-based hotel—will be moved into Fleur Hotels. This transfer includes exclusivity for all future hotel development and ownership.
Partnership and future listing
The partnership marks the second collaboration between Lemon Tree and Warburg Pincus, following their initial engagement in 2006. Beyond the stake acquisition, Fleur Hotels is set to receive a primary equity investment of up to ₹960 crores in tranches from Warburg Pincus to accelerate its expansion.
Upon completion of the scheme, the direct and indirect ownership of Fleur Hotels will be distributed among Lemon Tree (41.03%), Lemon Tree shareholders (32.96%), and Warburg Pincus (26.01%).
The entire process, including the listing of Fleur Hotels as a separate entity on Indian stock exchanges, is expected to be completed within 12 to 15 months, subject to regulatory and shareholder approvals. Post-approval, Lemon Tree also intends to define a new dividend distribution policy to reward its shareholders annually, the company statement said.
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The shares of Lemon Tree Hotels ended 0.30% lower at ₹150.4 apiece on the NSE on Friday.
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