Name of Scrip: LEMONTREE

BSE Scrip Code: 541233

Subject: Disclosure under Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015

Key Financial Figures (FY26)

  • Total Revenue: ₹1,452.7 crore, up 13% Year-on-Year (YoY).
  • Net EBITDA: ₹699.3 crore, up 10% YoY.
  • Profit After Tax (PAT): ₹288.3 crore, up 19% YoY.
  • Cash Profit: ₹443.1 crore, up 16% YoY.
  • Gross Average Room Rate (ARR): ₹6,875 (highest ever reported).
  • Occupancy: 73.5% (highest ever reported).

Key Financial Figures (Q4 FY26)

  • Revenue: ₹419.5 crore, up 11% YoY.
  • Net EBITDA: ₹218.3 crore, up 7% YoY.
  • PAT: ₹116.5 crore, up 8% YoY.
  • Occupancy: 78.5%.
  • Net EBITDA Margin: 52.0%, down 198 basis points from Q4 FY25.

Margin Analysis & Cost Headwinds

Net EBITDA margins for FY26 contracted by 126 basis points to 48.1% (from 49.4% in FY25). This was primarily impacted by three factors, which together accounted for a 580 basis points headwind:

1. Renovation Expenditure: Significant step-up in upgrading the owned hotel portfolio.

2. Technology Investments: Increased spending on tech infrastructure.

3. GST Change: A change that came into effect during the year, having only a half-year impact in FY26. The full-year impact is expected in FY27.

Management expects these three expense heads to reduce to approximately 3.7% of revenue by FY28, leading to corresponding EBITDA margin expansion. One-off expenses of ₹25-30 crore related to ex-gratia payments, property tax in Delhi, and new Labour Code impacts are expected to disappear from the P&L from FY27.

Debt and Capital Structure

  • Total Borrowings: Reduced to ₹1,500 crore from ₹1,699 crore a year ago.
  • Cost of Debt: Fell to 7.42%, down 115 basis points YoY.

Operational and Pipeline Inventory

  • Combined Operational & Signed Pipeline: 22,581 rooms across 268 hotels.
  • Operational Hotels: 131 hotels with 11,811 rooms.
  • FY26 Asset-Light Activity: Opened 20 managed/franchised hotels (1,523 rooms) and signed 55 new managed/franchised hotels (4,912 rooms).

Management Fees

  • Fees from Third-Party Hotels: ₹73.9 crore in FY26, an increase of 23% YoY.
  • Fees from Fleur Hotels: ₹95.8 crore in FY26, an increase of 8% YoY (subdued due to GST impact and accelerated renovation).
  • Total Management Fees: ₹169.7 crore in FY26, an increase of 14% YoY.

Fleur Hotels Business Update

Post-demerger, Fleur will be India's largest hotel platform by inventory with 5,600 rooms across 39 operational hotels. Its economics are concentrated in the top 6 cities. The confirmed pipeline includes 4 hotels with 875 rooms.

  • Aurika, Nehru Place: 572 rooms are under final approval stage before construction commences. It is slated to be North India's largest hotel.
  • Aurika Naldehra, Shimla: Two out of three blocks planned to open by Q2 FY27 to capture summer demand.
  • Aurika, Varanasi: Signed a license deal for a 47-room heritage hotel located on the ghat adjoining the River Ganges in January 2026.

Fleur's strategy is focused on urban markets with deep demand, leisure markets, and international destinations. It is evaluating opportunities to add 2,500 rooms and has the potential to deploy up to ₹3,000 crore in the next 12-18 months, backed by Warburg Pincus's primary investment and internal accruals.

Composite Scheme of Demerger

The transaction involves:

1. Warburg Pincus completing the purchase of APG's stake in Fleur.

2. Lemon Tree transferring 17 hotels and development capabilities to Fleur in exchange for Fleur shares, leading to Fleur's listing as a separate entity.

Post-Reorganization Structure:

  • Lemon Tree Hotels: A pure-play, asset-light company focused on hotel management, brand, loyalty, distribution, and digital services. It is expected to be debt-free with high margins and high Return on Capital Employed (ROCE).
  • Fleur Hotels: A large-scale, growth-oriented hotel ownership/leasing platform with in-house development capabilities.

Ownership Post-Demerger:

  • Lemon Tree shareholders will effectively own close to 74% of Fleur Hotels (33% directly and ~41% indirectly through Lemon Tree), compared to the current 59% direct ownership.
  • Patanjali Keswani will continue as Executive Chairman of both companies but will transition to Non-Executive Chairman of Lemon Tree from March 2027 onwards.

Timeline: The demerger is awaiting shareholder and SEBI approvals before filing with the NCLT. The process is estimated to take another 12 to 15 months for all approvals, with the NCLT timeline being the key variable.

Synergies: Long-term management contracts will provide Lemon Tree with stable fee income from Fleur. Fleur will have Lemon Tree as a preferred management partner for new opportunities.

Near-Term Demand Environment & Strategy

Management acknowledged headwinds from geopolitical tensions in the Middle East and aviation disruptions (including IndiGo shutdown in December and airline capacity cuts), which impacted demand, particularly corporate travel, in March and April. In response, the company shifted strategy to focus on occupancy growth over price growth to maintain an occupancy premium to the market. This strategy was reported to be successful, with occupancy improving YoY in the affected period while ARR remained more or less flat.

Brand Performance & Renovation Status

  • Full-Year RevPAR Growth (FY25 to FY26): Aurika brand grew 19% and Keys brand grew 20%.
  • Renovation Status: Of the 4,000 rooms targeted for heavy renovation, approximately 85% is complete. Renovation spend is expected to normalize to 1.9% of revenue in FY27 and ~1.3% in FY28 from 5.8% in FY26.

Capital Allocation Post-Demerger

  • Lemon Tree: Expected to be a zero-debt, cash-accretive company. Capital allocation priority is likely to be distributing profits to shareholders via dividends/buybacks, with a high hurdle rate for any adjacent investments.
  • Fleur: Focused on capital growth and value creation through expansion rather than dividend distribution in the near term.

Technology and Loyalty Program

The company has 2.4 million loyalty members, who drive 48% of total room nights. Future technology investments will be directed toward legacy system transformation, including a new Property Management System (PMS), and enhancing the booking engine and loyalty program to drive more direct business.