Lemon Tree Hotels Q1 FY27 earnings call

Lemon Tree Hotels reported a total revenue of ₹346.8 crore in Q1 FY27, marking a 9% year-on-year increase. Net EBITDA stood at ₹151.9 crore, up 7%, while adjusted Net EBITDA (excluding GST impact and SAR provision) reached ₹162.5 crore, a 14% increase from Q1 FY26. PAT grew by 19% to ₹57.3 crore, and cash profit increased by 17% to ₹96 crore. The Net EBITDA margin for the quarter was 43.8%, a 99 basis point decrease from the previous year, primarily due to SAR provisions and a 3.1% impact from GST.

The company continued its asset-light expansion strategy, opening 6 managed and franchised hotels with 334 rooms in Q1 FY27. Additionally, 13 new managed and franchised hotels with 1,020 rooms were signed, significantly expanding the pipeline. The combined operational and pipeline inventory now totals 23,381 rooms across 279 hotels, with 11,946 rooms operational across 135 hotels. Management expressed confidence in achieving the target of opening 2,000 keys in FY27.

Fleur Hotels, on a pro forma basis, reported FY27 revenue of ₹311.4 crore, up 7% year-on-year, and Net EBITDA (without GST impact) of ₹125.1 crore, a 10% increase. The Net EBITDA margin improved by 112 basis points to 40.2%. Fleur's strategy focuses on asset creation through development and acquisitions, with a long-term target for debt-to-EBITDA to hover around 2x. The company anticipates a significant growth spurt, with Fleur expected to increase its rooms by over 50% by FY30.

Lemon Tree spent approximately ₹10 crore on renovating 300 rooms this quarter, with a similar number expected in the next quarter. The Keys portfolio renovation is two-thirds complete, with a remaining spend of ₹13-14 crore for 300 rooms. Management highlighted that renovation expenses, which were ₹9.8 crore in Q1 (2.25-2.3% of revenue), are expected to normalize^📎 to about 1% of revenue from next year onwards. This reduction, along with a focus on increasing ARR, is expected to drive EBITDA margin recovery.

Q1 FY27 saw softness in corporate demand, particularly in Mumbai and Gurgaon, attributed to the West Asia conflict and companies tightening travel budgets. This led to a tactical shift towards a volume-based retail strategy, impacting ARR growth (up only 2%) despite strong occupancy (75.7%). However, management noted that July and August showed significant recovery, with expectations for improved ARR and a more balanced mix of business in Q2 and beyond. The Mumbai market also faced a lag effect from 2,000 new rooms supply.

The company's gross debt stood at ₹1,475 crore as of June 30, 2026, an 11% reduction from the previous year, with the cost of debt decreasing by 53 basis points to 7.48%. The group's net debt was reported at ₹1,275 crore, considering a cash position of ₹200 crore. Fleur's capital deployment strategy is focused on asset creation, with Warburg Pincus infusing ₹960 crore, which is expected to be deployed into exciting opportunities, including potential acquisitions and developments.

The demerger scheme, separating Lemon Tree and Fleur Hotels, is progressing through regulatory approvals. Management indicated that the process involves SEBI, CCI, stock exchanges, and NCLT approvals. While the timeline is subject to these processes, the company expects to complete the demerger and list Fleur within the first half of calendar year 2027. This separation aims to create two distinct entities with different mandates and risk-return profiles.