Lemon Tree Hotels Limited has announced a major strategic reorganization designed to create two focused hospitality platforms and unlock enhanced shareholder value. The Board of Directors approved a Composite Scheme of Arrangement on January 9, 2026, following recommendations from multiple committees, marking a significant transformation in the company's structure and growth strategy.

Strategic Reorganization Structure

The comprehensive restructuring will create two complementary platforms with distinct operational focuses:

The reorganization involves transferring hotel assets currently owned by Lemon Tree to Fleur, which will serve as the group's exclusive asset ownership and development company. Lemon Tree will transition to a fully asset-light model, concentrating on expanding its hotel management and franchising operations.

Warburg Pincus Investment and Partnership

A key component of the restructuring involves Warburg Pincus returning as a strategic partner through a substantial investment commitment. The investment structure includes multiple components designed to strengthen Fleur's growth capabilities:

This marks a renewed partnership between Warburg Pincus and Lemon Tree, building on their previous collaboration in 2006 that supported the company's initial growth phase. The investment comes at a strategic time when India's hospitality sector is experiencing sustained growth driven by rising disposable income, increased domestic travel, and government infrastructure investments.

Composite Scheme Implementation Details

The Board approved a comprehensive scheme with specific implementation parameters and structural changes:

The scheme involves merging two wholly-owned subsidiaries (Carnation Hotels and Hamstede Living) with Lemon Tree, while four other subsidiaries will merge with Fleur. Upon completion, the shareholding structure will see Lemon Tree shareholders owning 32.96% of Fleur, with Lemon Tree directly holding 41.03% and Warburg Pincus controlling 26.01%.

Post-Transaction Portfolio Expansion

The reorganization will significantly expand both platforms' operational capabilities and market presence:

Fleur Hotels Portfolio Growth:

• Current portfolio: 3,993 keys across 24 operating hotels
• Post-transaction: 5,813 keys across 41 hotels
• Strategic focus: Continued expansion through development and acquisitions

Lemon Tree Management Platform:

• Additional managed properties: 1,820 keys across 17 hotels from Fleur
• Existing third-party portfolio: 6,011 keys across 89 operational hotels
• Development pipeline: 9,414 keys across 127 hotels in various stages
• Geographic presence: India and international markets

The transaction positions Fleur as one of India's largest hospitality asset owners while enabling Lemon Tree to focus on scaling its management and franchise operations domestically and internationally.

Leadership and Strategic Vision

Mr. Patanjali Govind Keswani, Founder of Lemon Tree Hotels, will serve as Executive Chairman of Fleur Hotels while transitioning to a non-executive role at Lemon Tree. The leadership emphasized the scheme's potential to create simplified, transparent, and growth-oriented structures for both companies, leveraging favorable industry fundamentals and strategic positioning in India's expanding hospitality market.

The reorganization reflects the companies' commitment to capitalizing on India's emergence as a leading MICE destination, supported by infrastructure investments in aviation, high-speed railways, and highway development. Morgan Stanley served as the exclusive financial advisor for the proposed transaction, which remains subject to customary regulatory and shareholder approvals.

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Lemon Tree Hotels Limited's board of directors has approved a comprehensive composite scheme of arrangement designed to restructure the company's business operations and attract strategic investment. The scheme, approved on January 9, 2026, involves multiple subsidiaries and aims to create distinct platforms for hotel ownership and management operations.

Composite Scheme Structure

The approved scheme encompasses three main components: two amalgamations and one demerger. Under Amalgamation 1, two wholly-owned subsidiaries - Carnation Hotels Private Limited and Hamstede Living Private Limited - will merge with the parent company without any share issuance or cash consideration.

Amalgamation 2 involves four wholly-owned subsidiaries merging with Fleur Hotels Limited, the company's material subsidiary. The share exchange ratios for this amalgamation are structured as follows:

Demerger of Hotel Assets

The scheme includes demerger of identified hotel properties and hospitality asset platform to Fleur Hotels Limited. The demerged undertaking comprises 11 operating hotels, 1 under-construction hotel, and investment in Arum Hotels Private Limited. Shareholders will receive 20 fully paid-up equity shares of Fleur Hotels for every 311 equity shares of the company.

Strategic Investment and Agreements

The board has approved execution of multiple strategic agreements with Coastal Cedar Investments B.V., a Netherlands-based entity. Under the Shareholders' Agreement, the investor will acquire APG Strategic Real Estate Pool N.V.'s entire 41.09% stake in Fleur Hotels and gain rights to invest up to ₹9,60,00,00,000.00 in growth capital.

Key provisions of the strategic partnership include:

• Board composition of up to 10 directors for Fleur Hotels
• Up to 3 directors each from the company and investor
• Balance as independent directors
• Reserved matters requiring affirmative consent from both parties
• Exclusive rights for Fleur Hotels to own, lease and develop hospitality assets globally

Financial Performance of Entities

The entities involved in the scheme demonstrate varied financial performance as of March 31, 2025:

Regulatory Approvals and Timeline

The scheme's effectiveness is conditional upon several regulatory approvals, including no-objection letters from SEBI and stock exchanges, approval from requisite majority of shareholders and creditors, and sanction from the National Company Law Tribunal. The appointed date for the scheme is April 1, 2026.

The restructuring aims to achieve operational focus, greater flexibility for capital deployment, and clearer alignment of business objectives. Following implementation, Fleur Hotels will seek separate listing, enabling transparent price discovery and market-driven valuation of the asset-heavy business while the parent company focuses on asset-light hotel management and brand operations.

Source: Exclusive