Fleur Hotels Limited, a material subsidiary of Lemon Tree Hotels Limited , received an order from the Customs, Excise and Service Tax Appellate Tribunal, Hyderabad, on June 03, 2026, confirming a service tax demand of ₹33,54,487 along with a penalty. The order pertains to the period from July 2012 to March 2013 and was issued under Section 76 and 77(2) of the Finance Act, 1994. There is no material impact on the financial operations of the listed entity beyond the specified monetary amount.

The tribunal upheld the demand regarding the alleged wrongful availment of CENVAT credit on Maintenance and Repair Service, Internet Service, and Courier Service. The disclosure was submitted under Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Details of the Order

The following table outlines the key details of the regulatory order:

Legal Response

Fleur Hotels Limited is currently evaluating the available legal remedies concerning the order. The subsidiary stated that it will take appropriate legal action in due course to address the demand and penalty imposed by the tribunal.

Lemon Tree Hotels reported a consolidated net profit of ₹288.3 crore for the financial year ended March 31, 2026, an increase of 19% from the previous year. Total revenue for FY26 stood at ₹1,452.7 crore, up 13% year on year, driven by record occupancy and average room rates. For the quarter ended March 31, 2026, the company posted revenue of ₹419.5 crore compared to ₹379.4 crore in the same period last year. The Board of Directors approved the audited standalone and consolidated financial results at its meeting held on May 28, 2026, with statutory auditors Deloitte Haskins & Sells LLP issuing an unmodified opinion on both sets of results.

Operational Performance

The company achieved its highest ever full-year occupancy of 73.5% and a Gross Average Room Rate (ARR) of ₹6,875 in FY26. Net EBITDA for the year rose 10% to ₹699.3 crore, while cash profit grew 16% to ₹443.1 crore. In Q4 FY26, revenue increased 11% year on year to ₹419.5 crore, with net EBITDA growing 7% to ₹218.3 crore. Occupancy for the quarter reached 78.5%, the highest for any fourth quarter in the company's history.

The following table summarises key consolidated financial metrics for FY26 against FY25:

Q4 Performance Highlights

Lemon Tree Hotels delivered a strong quarterly performance, with Q4 consolidated net profit rising to ₹116.5 crore from ₹108.1 crore in the same period last year. Revenue for the quarter grew to ₹419.5 crore compared to ₹379.4 crore year on year. EBITDA for Q4 stood at ₹218.3 crore, with the EBITDA margin at 52%, down 198 basis points from 54% in the year-ago period.

The following table presents the key Q4 year-on-year metrics:

Margins and Expenses

Net EBITDA margin for FY26 was 48.1%, a contraction of 126 basis points compared to 49.4% in FY25. The company attributed this margin pressure to a 580 basis point impact from significant step-up in renovation expenditure, investments in technology, and GST-related changes. Management expects these expense heads to reduce to approximately 3.7% of revenue by FY28, leading to margin expansion.

Exceptional Items

During FY26, the company recorded total exceptional items of ₹3,326.59 lakhs at the consolidated level, comprising charges related to the implementation of new Labour Codes and a one-time ex-gratia provision, a one-time property tax settlement with the Municipal Corporation of Delhi, and expenses related to the proposed Composite Scheme of Arrangement. The breakdown is presented below:

At the standalone level, total exceptional items for FY26 amounted to ₹2,026.98 lakhs, including ₹1,661.94 lakhs on account of Labour Code and ex-gratia, ₹166.93 lakhs for property tax settlement, and ₹198.11 lakhs for restructuring expenses.

Debt and Expansion

Lemon Tree Hotels reduced its total borrowings to ₹1,500 crore from ₹1,699 crore a year ago, with the cost of debt falling to 7.42%, down 115 basis points. The combined operational and signed pipeline inventory stands at 22,581 rooms across 268 hotels. In FY26, the company opened 20 managed and franchised hotels with 1,523 rooms and signed 55 new hotels with 4,912 rooms. Fees from management and franchised contracts for third-party-owned hotels increased 23% year on year to ₹73.9 crore.

Corporate Developments

The Board of Directors, at its meeting held on January 09, 2026, approved a proposed Composite Scheme of Arrangement involving merger and demerger of certain group entities, resulting in the segregation of the hotel ownership and development business from the hotel management and brand business into separate focused platforms. The Scheme, with an appointed date of April 01, 2026, is subject to statutory, regulatory, and shareholder approvals. On April 7, 2026, the company received approval from the Competition Commission of India on the Scheme. Subsequently, on May 22, 2026, Coastal Cedar Investments B.V. acquired a 41.09% equity stake in Fleur Hotels Limited, a material subsidiary, from APG Strategic Real Estate Pool N.V.

The Board also approved the appointment of M/s R. Khattar & Associates, Chartered Accountants, and the re-appointment of M/s Felix Advisory Private Limited as Internal Auditors of the company for the financial year 2026-27. Additionally, the company granted Stock Appreciation Rights (SARs) under its "LTHL Stock Appreciation Rights Scheme-2024", recognising an expense of ₹150.24 lakhs during the quarter and year ended March 31, 2026.

Management Commentary

In a conference call held on May 29, 2026, management highlighted that FY26 was the best year in the company's history across key metrics. The company stated that margin pressure was driven by a 580 basis point impact from renovation, technology investments, and GST changes. It expects these three expense heads to reduce to approximately 3.7% of revenue by FY28, leading to margin expansion. Regarding the proposed demerger, management indicated that the process is currently awaiting shareholder and SEBI approval before filing with the NCLT, with an estimated timeline of 12 to 15 months for completion. Post-demerger, Lemon Tree Hotels is expected to emerge as a debt-free, asset-light entity with a target PAT margin of 60% in steady state, while Fleur Hotels will focus on ownership and development with potential capital deployment of up to ₹3,000 crore.