Lemon Tree Hotels LimitedThe Hospitality chain Lemon Tree Hotels IPO is set to raise Rs 1,040 crore through sale of up to 185,479,400 equity shares by the existing  shareholders. Promoters, private equity firm Warburg Pincus, and Dutch pension fund APG, will offload 18.5 crore shares i.e. about 23.59 % stake.

Lemon Tree Hotels Limited IPO Details
Issue PeriodMar 26, 2018-Mar 28,2018
Issue DetailsOffer for Sale of 185,479,400 Equity Shares
Issue Size (Rs. Cr) 1,038.68 Cr
Price BandRs.54 – 56
Bid Lot265 Equity Shares 
Issue Structure : 
QIB50% of the offer 
NIB15% of the offer 
Retail35% of the offer-6,49,17,790 Equity Shares – 363.54 Cr
Appls. required for 1x Retail Subscription 2,44,973
BRLMsKotak Mahindra Capital, CLSA India, J P Morgan, Yes Securities
RegistrarKarvy Computershare Pvt. Ltd.
About Lemon Tree Hotels Limited
  • Lemon Tree Hotels Limited  is India’s largest hotel chain in the mid-priced hotel sector, and the 3rd largest overall, on the basis of controlling interest in owned and leased rooms, as of June 30, 2017.
  • The company operates in the mid-priced hotel sector, consisting of the upper-mid scale, mid scale and economy hotel segments.
  • Lemon Tree has 4,697 rooms in 45 hotels (including managed hotels) across 28 cities in India as of January 31, 2018.
  • As of January 31, 2018, Lemon Tree has a portfolio of 19 owned hotels, 3 owned hotels located on leased or licensed land, 5 leased hotels and 18 managed hotels.
  • Issue consists of offer for sale by Maplewood Investment, RJ Corp, Ravi Kant Jaipuria and Sons (HUF), Whispering Resorts, Swift Builders, Five Star Hospitality Investment Limited, Palms International Investments Limited, Satish Chander Kohli and Raj Pal Gandhi.
Lemon Tree Hotels Limited: Financials: 
(Rs. In Cr)
Particulars9mFY18Fy17Fy16Fy15
Revenue from Operations 352.25411.93367.95290.36
Revenue Growth (%)11.95%26.72%
EBITDA98.58122.57103.2951.92
EBITDA %27.99%29.76%28.07%17.88%
Profit Before Tax5.28-2.48-17.28-60.08
Profit as stated2.85-7.17-29.8-63.24
EPS (Rs.)0.04-0.11-0.4-0.69
RONW(%)0.23%-0.66%-2.52%-4.33%
Share Capital786.37781.21778.04776.43
Reserves16.9427.3631.8633.76
Net worth as restated1,231.551,236.931,237.631,232.46
Long Term Borrowings899.98690.7523.73486.6
Short Term Borrowings31.4967.4669.4966.94
Net Asset Value (Rs.)15.6615.8315.9115.87
Face Value10
IPO Price332
Rationale for Investment:
  • Company’s hotels are wide spread geographically. Company’s hotels are located across India, in metro regions, including the NCR, Bengaluru, Hyderabad and Chennai, as well as tier I and tier II cities such as Pune, Ahmedabad, Chandigarh, Jaipur, Indore and Aurangabad.
  • As of January 31, 2018, Lemon Tree has a portfolio of 19 owned hotels, 3 owned hotels located on leased or licensed land, 5 leased hotels and 18 managed hotels.
  • Corporate customers contributed 55.62% of the total revenues in the nine months ended Dec 2017.
  • Lemon Tree Hotels Limited has Emerged as a leading mid-price hotel chain in a relatively short time.
  • The outlook for  hotel industry is positive  with mid price room demand expected to grow at a reasonable rate.
  • Company’s shareholders include marquee investors like with Warburg Pincus and APG, a Netherlands based asset manager of pension funds
Risks & Concerns:
  • Hotel industry is highly competitive and capital-intensive.
  • Lemon Tree Hotels operates in mid-sized segment which is highly competitive.
  • Lemon Tree Hotels has no presence in the luxury or upscale segment
  • Demand is both cyclical and seasonal.
Lemon Tree Hotels IPO: Assessment
  • The aggregate number of hotel properties that were owned, operated or managed increased from 18 in year 2013 to 36 hotels by the year 2017 and 45 by  January 2018. Thus Lemon Tree Hotels Limited has shown good growth. 
  • Revenues between FY 2013 to FY 2017 recorded CAGR of 17.8%
  • Lemon Tree Hotels Limited has meagre profitability with losses till FY 2017.
  • Lemon Tree Hotels return ratios are poor and its  EV/EBITDA mis around 44 based on Fy17 results44.5x  whoch is higher compared to other listed hotels.  
  • I  do not intend to apply in Lemon Tree Hotels IPO.

Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. I may have vested interest in every stock I discuss and my views may be biased. Please do your own due diligence as stock market investments have high degree of inherent risk.