Lemon Tree Hotels has unveiled a comprehensive group reorganisation that will fundamentally reshape its business structure, with global private equity major Warburg Pincus set to acquire a significant stake in its hotel ownership arm, Fleur Hotels. The strategic move aims to unlock long-term shareholder value amid the current buoyant hospitality cycle.

Warburg Pincus Investment and Stake Acquisition

According to an exchange filing, Warburg Pincus will acquire APG Strategic Real Estate Pool's entire stake in Fleur Hotels and provide substantial growth capital for expansion:

Composite Scheme of Arrangement

The boards of Lemon Tree Hotels and Fleur Hotels have approved a composite scheme of arrangement that will create two distinct, focused platforms. Under this reorganisation, Lemon Tree will operate as a pure-play, asset-light hotel management and franchising business, while Fleur will emerge as the asset-heavy hotel ownership and development arm.

The scheme is scheduled to become effective from April 1, 2026. As part of the arrangement, Lemon Tree will transfer its owned hotel assets to Fleur but will continue to manage and franchise these properties, ensuring operational continuity.

Post-Reorganisation Ownership Structure

Following the completion of the reorganisation, the ownership structure of Fleur Hotels will be distributed as follows:

Note: Percentages exclude any dilution from the proposed primary capital infusion

Leadership Transition and Asset Distribution

Founder Patanjali Govind Keswani will serve as executive chairman of Fleur Hotels and will eventually transition to a non-executive role at Lemon Tree Hotels. This leadership structure ensures continuity while allowing for focused management of each platform.

Upon completion of the reorganisation, the asset distribution will be structured to optimise operational efficiency:

Strategic Focus and Future Operations

Fleur Hotels will house all owned hotel assets and lead acquisitions and greenfield developments, positioning it as the primary vehicle for asset accumulation and development. Meanwhile, Lemon Tree will maintain its leased hotels in Indore and Aurangabad, which are nearing the end of their lease tenures.

The separate listing of Fleur Hotels on the National Stock Exchange of India and BSE within the specified timeframe will provide investors with direct exposure to hotel real estate assets while maintaining access to the asset-light management business through Lemon Tree Hotels.

Lemon Tree Hotels has announced a major strategic reorganisation of its business operations, coupled with a significant investment from global private equity firm Warburg Pincus. The company's board approved a Composite Scheme of Arrangement on January 9, confirming earlier market speculation about the restructuring.

Investment Structure and Shareholding

The transaction involves Warburg Pincus, through its affiliate Coastal Cedar Investments BV, acquiring APG's entire 41.09% stake in Fleur Hotels. Additionally, the private equity firm will commit up to ₹960.00 crore of primary capital to support Fleur's future growth initiatives.

Business Restructuring Strategy

The reorganisation will fundamentally transform both companies' operational models. Lemon Tree Hotels will transition into a pure-play, asset-light hotel management and brand platform, while Fleur Hotels will become the group's hotel ownership and development company. All existing hotel assets owned by Lemon Tree will be transferred to Fleur, which will also lead future hotel acquisitions and development projects.

Post-transaction, Fleur Hotels will be listed as a separate entity on Indian stock exchanges, with the listing process expected to complete within 12 to 15 months following regulatory approvals.

Subsidiary Consolidation

The scheme includes comprehensive subsidiary restructuring:

• Merger with Lemon Tree: Carnation Hotels and Hamstede Living (wholly owned subsidiaries)
• Merger with Fleur Hotels: Oriole Dr Fresh, Sukhsagar Complexes, Manakin Resorts, and Canary Hotels

Asset Transfer and Portfolio Expansion

Twelve hotels will be demerged into Fleur, including 11 operational properties and one under-construction hotel in Shimla. The transfer also includes development capabilities and an investment in a hotel under construction in Shillong.

All hotels under Fleur will operate under a new hotel operating agreement with Lemon Tree, effective April 1, 2026. Lemon Tree will continue to operate and manage these hotels under its asset-light model while also managing and franchising its third-party owned portfolio in India and overseas.

Transaction Details

This marks the second strategic partnership between Lemon Tree Hotels and Warburg Pincus. Morgan Stanley served as the exclusive financial advisor for the transaction. The composite scheme remains subject to approvals from shareholders, regulators, and the National Company Law Tribunal.

Source: https://www.cnbctv18.com/market/stocks/newsbreak-confirmedlemon-tree-hotels-warburg-pincus-to-invest-rs-960-cr-fleur-hotels-ws-l-19818139.htm