India-based Lemon Tree Hotels has recently announced a significant move in its corporate structure, with the approval of the acquisition of a 41.09% stake in its subsidiary Fleur Hotels by Warburg Pincus. This strategic investment will involve a substantial sum of Rs9.6bn ($106.4m) being injected in multiple tranches.
The transaction, with an appointed date of 1 April 2026, will be facilitated by Warburg Pincus affiliate Coastal Cedar Investment, acquiring the stake from APG Strategic Real Estate Pool. Additionally, the board has given the green light to a strategic reorganisation that will see Fleur Hotels listed as a separate entity.
This reorganisation paves the way for Lemon Tree Hotels to sharpen its focus on becoming a pure-play, asset-light hotel management and branding platform. Fleur Hotels, on the other hand, will step into the role of the group’s exclusive hotel asset ownership and development company.
The investment marks a renewed collaboration between Warburg Pincus and Lemon Tree, following the initial investment made by Warburg Pincus in 2006, which played a pivotal role in Lemon Tree’s growth as a significant player in the Indian hotel sector.
The reorganisation, which will be executed through a process approved by the National Company Law Tribunal (NCLT), aims to restructure the group’s asset ownership and operational framework. This will involve the transfer of currently held hotel assets by Lemon Tree to Fleur, which will then be responsible for managing all future hotel acquisitions and developments.
As part of this restructuring, Lemon Tree will transition to an asset-light model, focusing on expanding its hotel management, franchising, and digital operations. The restructuring will also pave the way for the listing of Fleur’s shares on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
Moreover, Lemon Tree will consolidate two of its wholly owned subsidiaries, Carnation Hotels and Hamstede Living, into itself. Additionally, four other wholly owned subsidiaries – Oriole Dr Fresh, Sukhsagar Complexes, Manakin Resorts, and Canary Hotels – will merge with Fleur in exchange for shares issued by Fleur.
The demerger will encompass 12 hotels, including 11 operational properties and one under-construction hotel in Shimla, along with development capabilities and an investment in a hotel under construction in Shillong.
Upon the scheme’s implementation, Lemon Tree shareholders as of the record date will hold 32.96% of Fleur, with Lemon Tree directly owning 41.03% and Warburg Pincus holding 26.01%, excluding any dilution from Warburg Pincus’s primary investment in Fleur.
Following the necessary approvals, Fleur is expected to be listed as a separate entity on Indian stock exchanges within 12 to 15 months. The rationale behind this Composite Scheme of Arrangement includes the creation of two focused platforms – one asset-light business concentrating on hotel management, brand, loyalty, distribution, and digital capabilities, and one dedicated to hotel ownership and development.
Post-transaction, Fleur is poised to become one of the largest owners of hospitality assets in India, expanding its portfolio from 3,993 keys and 24 operational hotels to 5,813 keys across 41 hotels. Fleur aims to further grow its owned portfolio through ongoing development and acquisitions, while Lemon Tree will continue to manage existing leased hotels and transfer additional keys and hotels to Fleur.
The company will maintain its asset-light strategy, managing and franchising a portfolio of 6,011 keys across 89 operational hotels and 9,414 keys across 127 hotels in various stages of development, both in India and internationally.
Lemon Tree and Fleur Hotels founder and executive chairman, Patanjali Govind Keswani, expressed enthusiasm about the collaboration, stating, “With the Indian hospitality industry at an important inflection point, we look forward to leveraging Warburg Pincus’ global network and deep real estate and hospitality experience to scale responsibly, advance digital-led capabilities and embed sustainability as a core pillar of Lemon Tree’s and Fleur’s long-term growth journey.”
Warburg Pincus managing director, Anish Saraf, also shared his excitement about the partnership, emphasizing Lemon Tree’s pioneering role in shaping India’s mid-market hospitality segment and expressing optimism about the business’s future growth trajectory.
Morgan Stanley served as the exclusive financial adviser on the transaction. With this transformative move, Lemon Tree Hotels and Fleur Hotels are poised to embark on a new chapter of growth and expansion in the Indian hospitality industry.
