Leela Hotels IPO Closed

Financials of Leela Hotels

*All figures are in ₹ Crores.

About the industry

The Indian hospitality industry, and specifically the luxury hospitality segment, is positioned for measured growth. In 2023, travel and tourism contributed 6.5% to India’s GDP, below the global average of 9.1%, suggesting potential for further development. The organised hotel sector in India consists of approximately 375,000 keys, of which only around 29,000 are in the luxury category. This equates to 23 luxury keys per million people, significantly lower than countries such as Australia (973) and Thailand (690), indicating under-penetration in this segment.

Between FY24 and FY28, demand for luxury rooms is projected to grow at a compound annual growth rate (CAGR) of 10.6%, while supply is expected to grow at a slower pace of 5.9%. As a result, RevPAR (Revenue per Available Room) for the luxury segment, which was more than twice the industry average in FY24, is expected to increase by around 1.5 times by FY28. This growth outlook is supported by macroeconomic factors such as a projected doubling of India’s GDP by 2030, increased infrastructure investment, rising domestic and international tourism, and evolving consumer preferences. Institutional investment may also support scalability, based on international precedents.

Issue size

Utilisation of proceeds

Key strategies

• Optimising existing assets: The company plans to improve the performance of current properties by increasing room yields, enhancing food and beverage operations, and implementing cost control measures. Select properties will be upgraded to increase room inventory and add high-yield features such as spas and clubs.
• Portfolio expansion: New hotel developments are proposed in domestic markets with tourism or religious significance, including Agra, Srinagar, Ayodhya, Ranthambore, and Bandhavgarh. International growth will be considered in regions with high Indian tourist activity, such as the Maldives and Dubai. Project selection will be based on expected return on capital and alignment with brand standards.
• Hotel Management Agreements (HMA): The company will seek to expand through management contracts, which require less capital investment compared to ownership. These contracts will be structured to include fixed and performance-linked fees, with brand and operational control maintained from early stages of development.
• Brand extensions and diversification: New revenue sources will be pursued through branded serviced residences and luxury apartments, as well as the introduction of private members’ clubs in key cities. These initiatives are intended to utilise existing brand recognition while targeting adjacent customer segments.
• Capital allocation and efficiency: Growth initiatives will be undertaken with a focus on capital efficiency. This includes evaluating ownership versus management models for each project, targeting high-yield projects, and maintaining financial discipline. Cost management and operational systems will also be areas of continued focus.

Strengths

• Leading luxury brand with global appeal and rich heritage
• Iconic-owned hotels in high-barrier-to-entry luxury markets
• Comprehensive luxury ecosystem diversifying revenue across hospitality services
• Proven operational efficiency through an active asset management approach
• Strong focus on sustainability and renewable energy initiatives
• Experienced senior management and a well-diversified distinguished board
• Supported by Brookfield, a global investor with local expertise

Risks

• Deterioration in brand quality can adversely affect operations and reputation.
• Heavy revenue dependence on five flagship hotels affects financial stability.
• Persistent losses from prior years risk future financial health sustainability.
• Negative cash flow history challenges future operations and business continuity.
• Substantial debts require significant cash flows for servicing and growth.
• Exposure to risks from hotel renovations and delayed new constructions.
• Regulatory complexities may impact compliance, operations, and market positioning.
• Cyclical and seasonal industry fluctuations significantly affect financial performance.

Subscription Figures for Leela Hotels

Subscription numbers as of 5:00 PM on 28 May 2025: