Leela Hotels plans Rs 2,500 crore IPO to reduce debt and expand operations

Synopsis

Leela Hotels, a luxury hospitality chain, is planning an initial public offering. The company aims to raise funds to repay its debt. The promoter group's stake will decrease after the IPO. Leela Hotels has shown revenue growth. The company operates several hotels and resorts under 'The Leela' brand. They plan to launch new hotels by 2028.

ET Intelligence Group: Schloss Bangalore (Leela Hotels), a pure-play luxury hospitality chain in India, plans to raise ₹2,500 crore through an issue of fresh shares to repay debt and ₹1,000 crore through an offer for sale. The promoter group's stake will fall to 75.9% after the initial public offering from 100%. The company owns and operates luxury hotels and resorts under 'The Leela' brand.

The company has shown traction in revenue over the past three years. However, higher interest cost has affected its bottom line. Given the company's intention to be debt free, the interest burden is expected to reduce over the next few quarters thereby supporting profit. The company operates in a highly competitive sector and has lower revenue per available room (RevPAR) compared with larger peers including Indian Hotels Company, EIH and Ventive Hospitality at the consolidated level. Given these factors, investors may wait to see a clear profit trend by Leela Hotels after the IPO listing.

Founded in 1986 by late Captain CP Krishnan Nair, the company had 13 operational hotels with 3,553 rooms as of March 2025. Of this, five are owned and eight are managed through franchise agreements with third-party hotel owners. It has five hotels in the pipeline. The share of revenue from room income increased to 52% in FY25 from 48% in FY23 while that of food and beverages reduced to 37% from 38%. By 2028, the company plans to launch seven new hotels, aggregating 678 keys.

Agencies

Revenue grew by 23% annually to ₹1,300.6 crore in FY25 from ₹860.1 crore in FY23 while revenue per available room (RevPAR) increased to ₹10,696 from ₹7,828. Operating margin before depreciation and amortisation (Ebitda margin) improved to 49.8% from 46.9% during the period. The company reported net profit in FY25 of ₹47.7 crore as against net loss of ₹61.7 crore in FY23. The profitability is expected to improve after repayment of debt. Interest outgo relative to EBIT was 82% in FY25 compared with 85% in FY24. Net debt fell to ₹2,568 crore in FY25 from ₹3,775 crore in FY24.

The company has turned profitable in FY25; however, high interest outgo has limited the extent of profitability.

As a result, the price-to-earnings multiple of 305 looks skewed. On a price-to-sales basis, the multiple works out to be 11 compared with 8-13 for the peers.

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