LEMONTREE - Lemon Tree Hotel

📊 NSE: LEMONTREE 🏢 Hotels 📅 Last Updated: 12/14/2025 9:15

💰 Financial Performance

Revenue Growth by Segment

Owned hotels revenue grew 8% YoY to INR 293 Cr in Q2 FY26, representing 63% of total network revenue. Managed and franchised hotel network revenue grew 13% YoY to INR 174 Cr (37% of network). Management fees from third-party hotels rose 7% YoY to INR 14.3 Cr, while fees from Fleur Hotels increased 8% to INR 19.9 Cr.

Geographic Revenue Split

The company operates a pan-India portfolio across 73 cities. Significant revenue is concentrated in major metros including Delhi, Bangalore, and Hyderabad, where major renovations and rebranding (e.g., Red Fox Aerocity to Lemon Tree Hotel) are driving repricing and higher revenue capture.

Profitability Margins

Profit After Tax (PAT) margin improved to 18.9% in FY25 from 17.0% in FY24. For Q2 FY26, PAT stood at INR 41.9 Cr, up 20% YoY. Cash profit for Q2 FY26 was INR 76.3 Cr, a 9.2% YoY increase.

EBITDA Margin

Net EBITDA margin was 43.0% in Q2 FY26, down 306 bps YoY from 46.1% in Q2 FY25. This was primarily due to investments in renovation, technology, and one-time ex-gratia payments which together accounted for 8% of revenue. Margins are expected to expand as these costs reduce to 5% in FY27 and 2% by FY28.

Capital Expenditure

Planned maintenance and renovation capital expenditure is estimated at INR 60-70 Cr per annum over the next three fiscals (FY26-FY28).

Credit Rating & Borrowing

Credit rating improved from A to A+ (Positive outlook from ICRA/CRISIL). This upgrade reduced the average cost of borrowing by 96 bps YoY to 7.72% in Q2 FY26 compared to 8.68% in Q2 FY25.

⚙️ Operational Drivers

Raw Materials

Not applicable as a service provider; however, key operational costs include employee ex-gratia payments, technology investments, and renovation materials for hotel upgrades.

Capacity Expansion

Current operational capacity is 10,956 rooms across 121 hotels. The total pipeline includes 9,118 rooms, aiming for a total group inventory of 20,074 rooms across 242 hotels. A new 500-550 room Aurika hotel is planned for Nehru Place, New Delhi.

Raw Material Costs

Renovation, technology, and one-time employee payments accounted for 8% of Q2 FY26 revenue (approx. INR 24.5 Cr). Total expenses for Q2 FY26 were INR 175.6 Cr, up 14% YoY.

Manufacturing Efficiency

Occupancy stood at 69.8% in Q2 FY26 (up 139 bps YoY). Gross Average Room Rate (ARR) increased 6% YoY to INR 6,247, resulting in a RevPAR of INR 4,358 (up 8% YoY).

📈 Strategic Growth

Expected Growth Rate

20%

Growth Strategy

Aggressive expansion of the management and franchise pipeline (currently 9,118 rooms). Rebranding lower-tier hotels to higher-tier brands (e.g., Red Fox to Lemon Tree Hotel) to drive RevPAR growth, as evidenced by a 47% RevPAR increase in a renovated Pune property. Focus on high-demand markets like New Delhi with the new Aurika project.

Products & Services

Hotel room stays, Food & Beverage (F&B) services, and hotel management/franchise services for third-party owners.

Brand Portfolio

Aurika Hotels & Resorts, Lemon Tree Premier, Lemon Tree Hotels, Red Fox by Lemon Tree Hotels, Keys Prima, Keys Select, and Keys Lite.

New Products/Services

Launch of Lemon Tree Suites, Gurugram (246 rooms) and the upcoming 500+ room Aurika in New Delhi.

Market Expansion

Expansion into northern India and major business hubs; signed 15 new contracts adding 1,138 rooms to the pipeline in Q2 FY26 alone.

Market Share & Ranking

Among the top three hotel chains in India by number of rooms.

Strategic Alliances

Management arm Carnation Hotels Private Limited manages properties for third-party asset owners; Fleur Hotels serves as a key internal management partner.

🌍 External Factors

Industry Trends

The industry is seeing a demand-supply mismatch in major metros favoring incumbents. Lemon Tree is positioning itself by upgrading existing assets to capture higher rates as supply growth remains minimal in prime locations.

Competitive Landscape

Competes with major domestic and international hotel chains in India; maintains competitive edge through a dominant mid-scale presence and rapid asset-light expansion.

Competitive Moat

Durable advantage through a diversified brand portfolio covering economy to upscale segments and a massive pan-India footprint (111+ hotels) which is difficult for new entrants to replicate quickly.

Macro Economic Sensitivity

Highly sensitive to domestic tourism trends and corporate travel demand; H1 FY26 demand was muted due to floods and geopolitical tensions.

Consumer Behavior

Shift toward branded mid-scale and upscale accommodation; company is responding by upgrading 'Keys' and 'Red Fox' properties to 'Lemon Tree' and 'Keys Prima' brands.

Geopolitical Risks

Geopolitical tensions cited as a headwind causing muted demand in the first half of FY26.

⚖️ Regulatory & Governance

Industry Regulations

Compliance with hospitality standards and GST regulations; forward-looking risks include changes in tax laws and import duties.

Taxation Policy Impact

Tax expense for Q2 FY26 was INR 13.9 Cr, up 36% YoY. GST revisions in the hospitality sector were noted as a demand headwind in H1 FY26.

Legal Contingencies

Maintains 100% resolution rate for sexual harassment cases over the last four years; governance includes 67% independent directors.

⚠️ Risk Analysis

Key Uncertainties

Susceptibility to cyclicality in the hospitality industry and potential slower-than-expected ramp-up of new or renovated assets impacting short-term profitability.