Shares of Lemon Tree Hotels rallied over 4% on Monday as investor sentiment was buoyed after private equity firm Warburg Pincus proposed to acquire APG’s entire 41.09% stake in Fleur Hotels. Lemon Tree currently holds a 58.91% stake in Fleur, with APG owning the remaining 41.09%.

Fleur Hotels Limited, a subsidiary of Lemon Tree, operates as a large-scale, growth-oriented hotel ownership platform, with strong development capabilities and an attractive expansion pipeline.

Snapping a two-session losing streak, Lemon Tree Hotels shares surged as much as 4.14% to ₹155.90 on the BSE, lifting its market capitalisation to ₹12,240 crore. At the current level, the stock is 41% higher than its 52-week low of ₹110.55 touched on April 7, 2025, but remains nearly 14% below its 52-week high of ₹180.60 reached on September 8, 2025.

Fleur shares to be listed on exchanges

In an exchange filing, Lemon Tree Hotels said that its board of directors, along with the board of Fleur Hotels, has approved a composite scheme of arrangement aimed at simplifying the group structure, sharpening strategic focus, and unlocking long-term value for shareholders. The scheme is subject to customary regulatory and shareholder approvals.

As per the release, the board of directors have also approved the execution of a share purchase agreement, under which Coastal Cedar Investment B.V., an affiliate of Warburg Pincus, will acquire APG Strategic Real Estate Pool N.V.’s entire 41.09% equity stake in Fleur Hotels. The scheme will also result in the listing of Fleur’s shares on the NSE and BSE.

“Following receipt of all relevant approvals, the Scheme will become effective, and Fleur will be listed as a separate entity on Indian stock exchanges. The entire process to listing of Fleur is expected to be completed within 12 to 15 months,” the release noted.

In addition, the board cleared the execution of a shareholders’ agreement that provides for a primary investment of up to ₹960 crore by Warburg Pincus, to be infused in tranches to fund Fleur’s future growth.

The investment marks a renewed partnership between Warburg Pincus and Lemon Tree Hotels, following Warburg Pincus’ earlier investment in 2006, which supported Lemon Tree’s formative growth into a leading hotel brand and platform in India.

The proposed Scheme of Arrangement, to be implemented through an NCLT-approved process, will reorganise the group’s asset ownership and operating structure.

Under the scheme, hotel assets currently owned by Lemon Tree will be transferred to Fleur, which will become the group’s exclusive asset ownership and development company. Fleur will spearhead all future hotel acquisitions and development, while Lemon Tree will transition to a fully asset-light model, focusing on expanding its hotel management, franchising and digital businesses.

As part of the reorganisation, Patanjali Govind Keswani, Founder of Lemon Tree Hotels, will serve as Executive Chairman of Fleur Hotels and will eventually transition to a Non-Executive role at Lemon Tree.

Business restructuring to unlock value, says analyst

Motilal Oswal said the transaction represents a strategic realignment that sharpens business focus and accelerates growth. Warburg Pincus’ entry will strengthens Fleur’s ownership and leasing platform, while Lemon Tree transitions into a pure-play, asset-light hotel management and franchise business with clear operational separation and accountability.

The brokerage has reiterated its ‘BUY’ rating with a target price of ₹200, expecting Lemon Tree to deliver a CAGR of 11%/13%/26% in revenue/EBITDA/PAT over FY25–28.

Lemon Tree Hotels currently operates a hybrid model, combining an asset-light hotel management business with hotel ownership and development. The company owns 17 hotels with 1,765 keys, has two hotels under development, manages and franchises 89 hotels with 6,011 keys, and has a strong pipeline of 127 hotels (9,414 keys). In addition, Lemon Tree holds a 58.91% stake in Fleur Hotels, which owns, operates and leases 24 hotels with 3,993 keys.

At present, Lemon Tree’s shareholding consists of public shareholders (62.73%), promoters (22.28%), and APG (14.99%).

Ahead of the proposed corporate reorganisation, Warburg Pincus will acquire APG’s entire 41.09% stake in Fleur Hotels and will also make a primary equity infusion of up to ₹960 crore, to be deployed in tranches to fund Fleur’s growth. This move will pave the way for the creation of two focused platforms—Lemon Tree as a pure-play, asset-light hotel management and franchising company, and Fleur Hotels as a hotel ownership and leasing platform, Motilal Oswal said in its report.

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