Lemon Tree Hotels IPO: Important things you should know

Lemon Tree Hotels IPO is set to open for subscription on March 26, with a price band of Rs 54- Rs 56 per share.

Company Details: Lemon Tree Hotels 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 30 June 2017.

The company operates in the mid-priced hotel sector and its hotels are located across India, in metro regions, including the NCR, Bengaluru, Hyderabad and Chennai, as well as tier I and tier II cities such as Pune, Ahmedabad, Chandigarh, Jaipur, Indore and Aurangabad.

As of 31 January 2018, it operated 4,697 rooms in 45 hotels (including managed hotels) across 28 cities in India. The company has created three brands in order to address these three hotel segments:
1. ‘Lemon Tree Premier’ which is targeted primarily at the upper-midscale hotel segment catering to business and leisure
guests who seek to use hotels at strategic locations and are willing to pay for premium service and hotel properties;
2. ‘Lemon Tree Hotels’ which is targeted primarily at the midscale hotel segment catering to business and leisure guests
and offers a comfortable, cost-effective and convenient experience; and
3. ‘Red Fox by Lemon Tree Hotels’ which is targeted primarily at the economy hotel segment.

As of July 31, 2017, the company have a portfolio of 19 owned hotels, three owned hotels located on leased or licensed land, five leased hotels and 13 managed hotels. It also has project design, management and development capabilities through its Subsidiary, Grey Fox Project Management Company Private Limited (“Grey Fox”).

As of 31 January 2018,Lemon Tree hotels operates 4,697 rooms in 45 hotels (including managed hotels) across 28 cities in India.

Lemon Tree Hotels IPO Details:

Issue Open: Mar 26, 2018 – Mar 28, 2018
Issue Type: Book Built Issue IPO
Issue Size: 185,479,400 Equity Shares of Rs 10 aggregating up to Rs 1,038.68 Cr
Face Value: Rs 10 Per Equity Share
Issue Price: Rs 54 – Rs 56 Per Equity Share
Market Lot: 265 Shares
Minimum Order Quantity: 265 Shares
Listing At: BSE, NSE

Objects of the Lemon Tree Hotels IPO:

1. Achieve the benefits of listing the Equity Shares on the Stock Exchanges
2. Sale of up to 195,797,000 Equity Shares by the Selling Shareholders.

Lemon Tree Hotels Limited Company financials

The company’s margin improved by 70 basis points to 28.2 per cent as of March 31, 2017.Lemon tree hotels limited gross operating profit margin is 50 per cent as compared to 25 per cent for the industry due to cost efficiencies.

The Promoters of the Company are Mr. Patanjali Govind Keswani and SMSPL. The Promoters hold, in the aggregate, 184,784,311 Equity Shares which constitutes 23.49% of the Company’s pre-Offer paid-up Equity Share capital.

SMSPL was incorporated on November 5, 2004 and is primarily engaged in the business of designing, managing, supervising and executing hotel projects. Mr. Patanjali Govind Keswani is the natural person in control of SMSPL.

Strengths of Company / Reasons to invest in Lemon tree hotels IPO

• Better service standards
• Hotels located near prime location such as major business centre and airports.
• Rise in per capita income of individuals
• Rising urbanization
• Increase in domestic travel and higher discretionary spending to assist growth of hotel industry
• Demand for rooms per day is expected to grow to nearly 13%
• Occupancy rate is projected to increase from 68% in FY 18 to 76% by FY 21.

Risk Factors / Reasons not to invest in Lemon tree hotels IPO

• Major dependence on a few properties accounting for nearly 72% of revenue
• Capital costs are high for building new hotels at locations in Mumbai and Kolkata
• Demand is cyclical and seasonal
• Economic slowdown or surge in air fares will impact negatively
• Highly competitive and capital intensive industry

Lemon Tree Hotels IPO subscription on 26th March: 25%

Lemon Tree Hotels IPO subscription on 27th March: —-

Lemon Tree IPO GMP Grey Market Price Trend as on 26 March 2018 : GMP  N/A

Lemon Tree IPO GMP Grey Market Price Trend as on 27 March 2018 : —-

Disclaimer : We are not involve in buying and selling of IPO forms in IPO Grey market.Study the fundamentals of the company before applying for the IPO.