Lemon Tree Hotels Limited has announced a major strategic reorganization through a Composite Scheme of Arrangement, approved by its Board of Directors on January 9, 2026. The comprehensive restructuring will create two distinct and complementary business platforms, positioning the company for enhanced growth and value creation.

Strategic Restructuring Overview

The proposed reorganization will establish two clearly differentiated platforms. Lemon Tree will emerge as a pure-play asset-light company focused on hotel management, brand and loyalty services, distribution, and digital solutions. Meanwhile, Fleur Hotels will operate as a large-scale growth-oriented hotel ownership and leasing platform with comprehensive in-house development capabilities.

Warburg Pincus Strategic Partnership

Warburg Pincus, the leading global private equity firm, will acquire APG Strategic Real Estate Pool N.V.'s entire 41.09% shareholding in Fleur Hotels. This marks the second strategic partnership between Warburg Pincus and Lemon Tree Hotels, following their earlier investment in 2006. The partnership includes primary investment rights of up to ₹960.00 crores in equity capital, providing substantial growth capital for Fleur Hotels' expansion plans.

Post-Restructuring Shareholding Structure

Upon scheme completion, Lemon Tree shareholders will own 73.99% of Fleur Hotels through combined direct and indirect holdings. The ownership structure will comprise 32.96% direct shareholding by Lemon Tree shareholders, 41.03% ownership by Lemon Tree, and 26.01% ownership by Warburg Pincus.

Business Platform Positioning

Lemon Tree will operate as an industry-leading fee business managing approximately 11,700 rooms across its portfolio. The company will maintain ownership of 2 hotels with 202 rooms while managing 39 hotels with 5,556 rooms for Fleur Hotels and 89 operational hotels with 6,011 rooms for third-party owners. The asset-light model targets 70%+ EBITDA margins with minimal capital requirements for growth.

Fleur Hotels will emerge as one of India's largest hospitality asset owners, operating 39 hotels with 5,556 rooms and 2 under-construction properties with 256 rooms. The platform combines stable operating assets with clearly defined development and acquisition pipelines, supported by end-to-end in-house development capabilities.

Growth Pipeline and Market Position

The restructured entities maintain significant growth trajectories. Lemon Tree's managed and franchised hotel pipeline includes 9,414 rooms from third-party owners, while Fleur Hotels has active discussions for acquiring over 2,500 additional rooms. The combined portfolio spans 130+ destinations across India's key markets, including major metropolitan areas and emerging urban centers.

Implementation Timeline and Approvals

The scheme requires necessary shareholder and regulatory approvals, with the complete process to listing expected within 12-15 months. Following approval, Fleur Hotels will be listed as a separate entity on Indian stock exchanges. All hotel assets in Fleur Hotels will enter new Hotel Operating Agreements effective April 1, 2026, ensuring seamless operational continuity during the transition.

Lemon Tree Hotels Limited's board of directors has approved a major corporate restructuring through a composite scheme of arrangement that will reshape the company's business structure and create distinct platforms for hotel ownership and management operations.

Board Meeting and Scheme Approval

The board meeting held on January 9, 2026, from 7:30 PM to 9:00 PM, approved the comprehensive scheme based on recommendations from the Reorganization Committee, Audit Committee, and Committee of Independent Directors. The scheme involves the company, its material subsidiary Fleur Hotels Limited, and six wholly-owned subsidiaries under Sections 230-232 of the Companies Act, 2013.

Key Components of the Restructuring

Amalgamation Structure

The scheme encompasses two distinct amalgamation processes:

Share Exchange Ratios for Amalgamation 2

Demerger of Hotel Assets

The scheme includes demerger of the company's identified hotels and hospitality asset platform to Fleur Hotels Limited. The demerged undertaking comprises 11 operating hotels, 1 under-construction hotel, investment in Arum Hotels Private Limited, and development capabilities.

Financial Impact of Demerger

Strategic Partnerships and Investment

The board approved execution of three critical agreements:

Shareholders' Agreement

A shareholders' agreement between the company, Fleur Hotels Limited, Coastal Cedar Investments B.V., and promoters establishes governance framework and investment rights. The investor gains rights to provide growth capital up to ₹960 crores through equity subscription.

Share Purchase Agreement

APG Strategic Real Estate Pool N.V. will sell its entire 41.09% stake in Fleur Hotels Limited to Coastal Cedar Investments B.V., subject to Competition Commission of India approval.

Implementation Agreement

Sets out the manner of effecting the scheme with customary representations, warranties, and obligations among all parties.

Financial Overview of Entities

Rationale and Strategic Objectives

The restructuring aims to achieve operational focus and clearer alignment of business objectives by separating asset-heavy hotel ownership from asset-light management operations. The company will retain its hotel management platform covering brand systems, distribution, sales, loyalty, technology, and operations, while Fleur Hotels becomes the principal entity for hotel ownership and development.

Post-restructuring, the company's shareholding in Fleur Hotels will reduce to approximately 41.03%, with Fleur Hotels positioned for separate stock exchange listing to enable transparent price discovery and market-driven valuation.

Regulatory Approvals Required

The scheme's effectiveness depends on multiple approvals including SEBI and stock exchange no-objection letters, shareholder and creditor approvals, Competition Commission of India clearance, and National Company Law Tribunal sanction.

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