The deal involved a Rs 960 crore commitment from Warburg Pincus via Coastal Cedar Investments B.V. into Lemon Tree’s subsidiary, Fleur Hotels.
Post the update, Nuvama Institutional Equities reaffirmed its ‘Buy’ recommendation on Lemon Tree, setting a target price of Rs 178 and signalling a 19% upside from the current market price.
Meanwhile, it views the transaction as value-neutral for now; the potential upside lies in a re-rating of the asset-light parent entity.
Under a composite scheme approved by the Board of Directors, Lemon Tree will reorganise its operations into two distinct platforms: Lemon Tree Hotels Ltd, which will operate as a pure-play asset-light hotel management and branding company, and Fleur Hotels Ltd, the asset-heavy development and ownership arm.
Warburg Pincus will acquire APG’s entire 41.09% stake in Fleur under the scheme, and infuse capital up to Rs 960 crore in tranches to support future growth.
Also read: TCS, Kotak Bank among 8 stocks nearing ex-dates for bonus, dividend, and stock split. Do you own any?The restructuring is aimed at unlocking long-term shareholder value by enhancing strategic focus and simplifying the corporate structure. A major component of this reorganization includes the demerger of 12 hotels (11 operational + 1 under construction in Shimla) and the transfer of ownership and development undertakings from Lemon Tree to Fleur.
Lemon Tree will merge some of its subsidiaries with itself, while others will be merged into Fleur in exchange for share allotments.
Once the scheme becomes effective (appointed date: April 1, 2026), Lemon Tree shareholders will own 32.96% of Fleur, while Lemon Tree itself will directly own 41.03%, with Warburg Pincus holding 26.01%, excluding further dilution from the upcoming capital infusion. Fleur will subsequently be listed as a separate entity on Indian stock exchanges, with the listing process expected to be completed over the next 12 to 15 months.
The deal also marks a renewed partnership between Lemon Tree and Warburg Pincus, which had earlier invested in the company back in 2006. Founder Patanjali G. Keswani will be taking charge as Executive Chairman of Fleur Hotels, transitioning to a non-executive role at Lemon Tree post-implementation.
According to Nuvama, the 41.09% indirect stake of Lemon Tree in Fleur warrants a holding company discount. While the restructuring is currently seen as value-neutral, the brokerage sees potential upside if the market assigns a higher multiple to Lemon Tree’s newly transitioned asset-light model.
The stock is currently trading at 27x FY26E / 23x FY27E EV/EBITDA.
The brokerage firm believes the re-entry of Warburg Pincus provides visibility for future capex at Fleur and supports its path to listing, though the re-rating remains contingent on improved investor sentiment and valuation for both the asset-heavy and asset-light segments.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)