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Last Updated : Mar 25, 2018 12:17 AM IST | Source: Moneycontrol.com

Lemon Tree Hotels IPO to open on March 26: 10 things you should know before investing

The hotel chain company is aimed to raise Rs 1,001.6-1,038.7 crore through the issue at a price band of Rs 54-56 per share.

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Lemon Tree Hotels, the last initial public offering of the financial year 2017-18 will open for subscription on March 26, 2018.

Equity shares are proposed to be listed on BSE and NSE. The global coordinators & book running lead managers to the issue are Kotak Mahindra Capital Company, CLSA India and JP Morgan India. The book running lead manager is YES Securities (India) Limited.

Here are 10 key things that you should know before investing:

Company Profile

It is India’s largest hotel chain in the mid-priced hotel sector, and the third largest overall, on the basis of controlling interest in owned and leased rooms, as of June 30, 2017, according to the Horwath Report. It is ninth largest hotel chain in India in terms of owned, leased and managed rooms, as of June 2017, according to the Horwath Report.

It operates in the mid-priced hotel sector, consisting of the upper-midscale (with 'Lemon Tree Premier' brand), midscale (with 'Lemon Tree Hotels' brand) and economy hotel (Red Fox by Lemon Tree Hotels) segments.

It opened first hotel with 49 rooms in May 2004. It operated 4,697 rooms in 45 hotels (including managed hotels) across 28 cities in India as of January 2018.

As of January 2018, it has a portfolio of 19 owned hotels, three owned hotels located on leased or licensed land, five leased hotels and 18 managed hotels. It also has project design, management and development capabilities through subsidiary, Grey Fox Project Management Company Private Limited.

Its hotels are located in major metro regions in India, including the NCR, Bengaluru, Hyderabad and Chennai, as well as tier I and tier II cities in India such as Pune, Ahmedabad, Chandigarh, Jaipur, Indore and Aurangabad.

In the leisure hotel segment, it operates a resort and a hotel in Goa, one resort in the backwaters of Alleppey, Kerala and one wildlife resort in Bandhavgarh, Madhya Pradesh.

About the Issue

The public issue consists of an offer for sale of 18,54,79,400 equity shares by Maplewood Investment, RJ Corp, Ravi Kant Jaipuria and Sons (HUF), Whispering Resorts, Swift Builders, Five Star Hospitality Investment Limited, Palms International Investments Limited, Satish Chander Kohli and Raj Pal Gandhi.

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The offer will constitute up to 23.59 percent of the post-offer paid-up equity share capital of the company.

Bids can be made for a minimum lot of 265 equity shares and in multiples of 265 equity shares thereafter. The offer will close on March 28.

Fundraising

The hotel chain company is aimed to raise Rs 1,001.6-1,038.7 crore through the issue at a price band of Rs 54-56 per share.

Out of total fund raising, it has already garnered Rs 311.60 crore through anchor portion on Friday, one trading day before the issue opens, by allocating 55,643,820 equity shares to 16 anchor investors at a price of Rs 56 per share.

Objects of the Issue

It is entirely an offer for sale issue, so the company will not receive any proceeds from the offer and all the proceeds will go to the selling shareholders.

The objects of the offer are to achieve the benefits of listing the equity shares on the stock exchanges and for the sale of up to 18,54,79,400 equity shares by the selling shareholders. Further, the company expects that listing of the equity shares will enhance visibility and brand image.

Strengths

> Lemon Tree is a leading mid-priced hotel chain with a differentiated business model. It has strong operational performance.

> It has strategically positioned hotels in key geographical areas and developed hotels at locations with high barriers-to-entry within or close to major business centers, airports and other convenient locations.

> It is a hospitality platform with operations and competencies spread across the hotel value chain. Its operations range from acquiring land to owning, developing, managing and marketing hotels.

> Its focus is on brand excellence, providing a value-for money proposition and strengthening employee culture.

> It has experienced promoter and management team.

Financials

Lemon Tree has reported nearly 18 percent CAGR in total operating revenue due to improved occupancy, average daily rate and increased hotel room capacity.

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Peer Comparison

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Promoter and Promoter Group

Patanjali Govind Keswani is the Chairman and Managing Director of the company. He holds a bachelor’s degree in electrical engineering from the Indian Institute of Technology, New Delhi and a postgraduate diploma degree in management from the Indian Institute of Management, Calcutta. He has over 30 years of experience in the hospitality industry

Spank Management Services Private Limited is the corporate promoter of the company.

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Management

Rattan Keswani is an executive Director of the company. Prior to joining the company, he acted as the president of the Trident Hotels of the Oberoi Group, where he was engaged for a period 30 years. He has more than 30 years of experience in the hospitality industry.

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Organisation Structure

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Risks & Concerns

Here are some risks and concerns highlighted by brokerage houses:

> Lemon Tree relies heavily on its existing brands and quality of services at its hotels. Any dilution of company's brand reputation or failure of its quality control systems could adversely affect its business, results of operations and financial condition.

> Subdued economic growth

> Slow expansion in the occupancy level

> Poor ramp up of the new hotels

> Increased competition

> Rise in operating expenses
First Published on Mar 25, 2018 12:13 am
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