Lemon Tree Hotels shares rose over 5% on January 7 as CNBC-TV18 reported that PE firm Warburg Pincus may acquire "meaningful stake" in the mid-range hotel chain.
The Warburg Pincus deal in Lemon Tree might trigger an open offer, the channel reported.
On January 7, Lemon Tree shares closed 3.2% higher at Rs 153.2 apiece.
Warburg Pincus was a significant investor in Lemon Tree and had exited its stake by 2019.
The PE firm is likely to acquire APG Strategic RE Pool's stake in Lemon Tree in first tranche, reported CNBC-TV18. APG Strategic RE Pool owns 14.99% stake in Lemon Tree.
Promoters own 22% stake in Lemon Tree.
Lemon Tree is likely to make a preferential allotment towards Warburg Pincus in second tranche of the deal, the channel further reported.
Lemon Tree Hotels operates more than 110 properties in over 75 cities, with international presence in places like Dubai, Bhutan, and Nepal.
In September quarter, the company's total revenue increased by 8% to Rs 308 crore, while net profit after tax grew significantly by 20% to Rs 41.9 crore.
PL Capital had said in post-Q2 results note that Lemon Tree's operational performance was disappointing with EBITDA margin of 42.7% due to increased investments in renovation, technology, and onetime ex-gratia payment to employees.
"Near term growth will hinge on improvement in same-store RevPAR as 91/165 keys at Shimla/Shillong are expected to be operationalised in FY27E/FY28E while inauguration of Aurika, NCR is at-least 3-4 years away (exact timeline is not disclosed). We maintain HOLD on the stock with a target price of Rs 174 (24x Sep-27E EBITDA)," the brokerage said.
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