India-based Lemon Tree Hotels has confirmed that its board has approved the acquisition of a 41.09% stake in its subsidiary Fleur Hotels by Warburg Pincus, which will involve an investment of Rs9.6bn ($106.4m) in multiple tranches.
With an appointed date of 1 April 2026, the transaction will be executed by Warburg Pincus affiliate Coastal Cedar Investment, acquiring the stake from APG Strategic Real Estate Pool.
In addition to the acquisition, the board has approved a strategic reorganisation that will see Fleur Hotels listed as a separate entity.
The move allows Lemon Tree to focus on becoming a pure-play, asset-light hotel management and branding platform. Fleur will take on the role of the group’s exclusive hotel asset ownership and development company.
The investment signifies a renewed collaboration between Warburg Pincus and Lemon Tree, following the latter's initial investment in 2006, which was instrumental in Lemon Tree’s growth into a significant player in the Indian hotel sector.
The reorganisation will be conducted through a process approved by the National Company Law Tribunal (NCLT) and aims to restructure the group’s asset ownership and operational framework.
Currently held hotel assets by Lemon Tree will be transferred to Fleur, which will manage all future hotel acquisitions and developments.
Lemon Tree will shift to an asset-light model, concentrating on expanding its hotel management, franchising, and digital operations.
The restructuring will also facilitate the listing of Fleur’s shares on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
Lemon Tree will merge 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. Furthermore, Lemon Tree will directly possess 41.03%, and Warburg Pincus will own 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.
Fleur will merge existing assets with a well-defined pipeline for future development and acquisitions while Lemon Tree will expand its management and franchise operations both domestically and internationally.
Lemon Tree and Fleur Hotels founder and executive chairman Patanjali Govind Keswani said: “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.”
Post-transaction, Fleur is set to become one of the largest owners of hospitality assets in India, increasing 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. Lemon Tree will continue to manage existing leased hotels in Indore and Aurangabad, as well as an additional 1,820 keys and 17 hotels that will be transferred 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.
Warburg Pincus managing director Anish Saraf said: “We are pleased to once again partner with Patu and the Fleur leadership team to support the next chapter of growth for the platform.
“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.”
Morgan Stanley served as the exclusive financial adviser on the transaction.
