Lemon Tree Hotels shares rise 4% as Warburg Pincus buys into Fleur; here's what shareholders get

Shares of Lemon Tree Hotels Ltd. opened with gains of as much as 4% on Monday, January 12, after the company announced a major restructuring plan aimed at value unlocking and fund raising, including the creation of two separate entities and the induction of Warburg Pincus as a strategic investor.

Under the proposed reorganisation, Lemon Tree Hotels will be repositioned as a pure-play, asset-light hotel management and brand platform, while a new entity, Fleur Hotels, will house the group's hotel ownership assets along with development capabilities.

Currently, Lemon Tree holds a 58.91% stake in Fleur, while APG owns the remaining 41.09%.

As part of the transaction, private equity firm Warburg Pincus will acquire APG's entire 41.09% stake in Fleur Hotels. In addition, Warburg has committed to invest ₹960 crore in Fleur Hotels in tranches, as and when required, to support future growth and expansion.

The restructuring will be executed through a scheme of arrangement.

Lemon Tree Hotels will merge two of its wholly-owned subsidiaries into itself, while four other subsidiaries will be merged with Fleur Hotels in exchange for shares issued to Lemon Tree.

The company will also transfer 12 hotels to Fleur Hotels, with shares of Fleur being issued directly to Lemon Tree shareholders. As per the announced ratio, shareholders will receive 20 shares of Fleur Hotels for every 311 shares held in Lemon Tree Hotels.

Following the completion of the scheme, Lemon Tree shareholders will directly own 32.96% of Fleur Hotels, while Lemon Tree itself will hold a 41.03% stake. Warburg Pincus will own the remaining 26.01% in Fleur Hotels.

Post restructuring, Fleur Hotels will own 41 hotels with a total of 5,813 keys, compared with the current 24 hotels and 3,993 keys. Lemon Tree Hotels, on the other hand, will manage 89 hotels with 6,011 keys, all of which will be owned either by Fleur Hotels or by third party owners.

In terms of financials based on FY25 numbers, Lemon Tree Hotels is expected to generate revenue of ₹171 crore with margins of over 70%. Fleur Hotels is expected to post revenue of ₹1,189 crore with margins of around 43%.

The company said that Fleur Hotels will be listed as a separate entity within the next 12 to 15 months. Post the arrangement, Lemon Tree Hotels will emerge as a high growth, high return on capital employed and zero debt company.

The management also plans to define a dividend distribution policy after the scheme to reward shareholders on an annual basis.

What brokerages say

Nuvama Institutional Equities has maintained a 'Buy' rating on Lemon Tree Hotels with a price target of ₹178 per share.

The brokerage said the composite reorganisation, which brings Warburg Pincus back into the group through Fleur Hotels, splits the business into an asset light fee platform and an asset heavy ownership platform.

Nuvama views the transaction positively, citing that Warburg's presence de-risks future large-scale capital expenditure.

Investec, which also has a 'Buy' rating with a price target of ₹187, said the long-awaited Fleur demerger should finally unlock the value of Lemon Tree's high-growth, high-RoCE, high-margin asset-light business.

The brokerage added that Warburg's buyout of APG's stake and its committed ₹960 crore primary infusion will support Fleur's future growth, while management's reaffirmation of growth goals provides comfort to investors.

Shares of Lemon Tree Hotels closed 0.30% lower on Friday at ₹150.40. The stock is down about 7% so far in 2026.