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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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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