Warburg Pincus to invest Rs 960 crore in Lemon Tree Hotels arm Fleur, take 41% stake

Lemon Tree will continue to operate its existing leased hotels in Indore and Aurangabad, which are approaching the end of their respective lease terms.

Lemon Tree Hotels on Saturday said its board has approved Warburg Pincus' acquisition of 41.09 % stake of APG Strategic Real Estate Pool NV in its subsidiary Fleur Hotels and an investment of Rs 960 crore in tranches.

The stake purchase will be carried out by Coastal Cedar Investment BV, an affiliate of Warburg Pincus, which will acquire the holding from APG Strategic Real Estate Pool NV, Lemon Tree said in a regulatory filing.

The board has also cleared a strategic reorganisation under which Fleur Hotels will be listed separately, while Lemon Tree transitions into a pure-play, asset-light hotel management and brand platform. Fleur will become the group’s exclusive hotel asset ownership and development company.

“In a regulatory filing, Lemon Tree said the strategic reorganization and investment from Warburg in Fleur will unlock long-term shareholder value by creating two focused, high-growth, and large-scale platforms.”

The reorganisation will be implemented through a composite scheme of arrangement, subject to regulatory and shareholder approvals, and an NCLT-approved process. Under the plan, hotel assets currently owned by Lemon Tree will be transferred to Fleur, which will also lead all future hotel acquisitions and development for the group.

“This scheme is intended to create a simplified, transparent, and growth-oriented structure for both companies, which we believe will enhance long-term value for our shareholders,” founder Patanjali Govind Keswani said. Keswani will serve as Executive Chairman of Fleur Hotels and will eventually move to a non-executive role at Lemon Tree.

Anish Saraf, Managing Director at Warburg Pincus, said, “Lemon Tree has played a pioneering role in shaping India’s mid-market hospitality segment, building a large scale, high-quality portfolio with strong brands and operating capabilities. With favourable industry fundamentals and a clear strategic roadmap, we look forward to supporting the team as they continue to scale the business.”

As part of the restructuring, Lemon Tree will merge two wholly owned subsidiaries — Carnation Hotels and Hamstede Living — into itself, while four others will be merged into Fleur. In addition, 12 hotels, including one under construction in Shimla and an investment in a hotel project in Shillong, will be demerged into Fleur.

The listing of Fleur Hotels on the NSE and BSE is expected to be completed within 12 to 15 months. After the transaction, Fleur will become one of India’s largest owners of hospitality assets, with its portfolio expanding from 3,993 keys across 24 hotels to 5,813 keys across 41 hotels.

Lemon Tree will continue to operate leased hotels in Indore and Aurangabad and will manage an additional 1,820 keys and 17 hotels transferred to Fleur, alongside its existing managed portfolio.