Leela Hotels’ parent company, Schloss, has recently filed draft papers for an initial public offering (IPO) valued at ₹5,000 crore. If successful, this IPO will represent the largest offering in India’s hotel sector to date. Founded in 1986 by CP Krishnan Nair, Leela Hotels has grown significantly under the ownership of Brookfield Asset Management, positioning itself as a key player in the luxury hospitality market.
The Surge of IPOs in the Indian Stock Market
The Indian stock market is currently experiencing an impressive surge, prompting numerous companies to take advantage of this momentum by pursuing initial public offerings (IPOs). This trend follows the successful launches of several IPOs in both the renewable energy and non-banking sectors, demonstrating investor confidence and a growing appetite for new investment opportunities. Schloss Bangalore, which operates the renowned Leela Hotels, is now preparing to join this wave with its upcoming offering.
As Schloss Bangalore moves forward with its IPO plans, it has filed a draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI). The company aims to raise approximately ₹5,000 crore through this initiative, which, if realized, will make it the largest IPO in the Indian hotel sector. This ambitious undertaking reflects the positive outlook for the hospitality industry in India, especially as travel and tourism continue to rebound.
Financial Performance and Future Growth Plans for Leela Hotels
In its bid to raise funds, Schloss plans to issue new shares worth ₹3,000 crore. Additionally, Project Ballet Bangalore Holdings (DIFC), an affiliate of Brookfield Asset Management, is set to sell shares valued at ₹2,000 crore. This dual approach of new and secondary shares aims to provide the necessary capital for expansion and operational improvements within the Leela Hotels brand.
Brookfield’s investment in Leela Hotels has been significant. In March 2019, the firm acquired four Leela Palace properties located in Delhi, Bengaluru, Udaipur, and Chennai from JM Financial Asset Reconstruction Company for ₹3,950 crore. This acquisition allowed Schloss to enhance its portfolio and solidify its position in the competitive luxury hotel market. Currently, Schloss operates 12 hotels across 10 major Indian cities and has ambitious plans to open eight new properties by 2028, further expanding the Leela Hotels footprint.
Financially, Schloss has shown promising signs of recovery. The company’s consolidated annual losses narrowed from ₹61.68 crore in March 2024 to just ₹2.13 crore, indicating a positive trajectory. Furthermore, revenue per available room (RevPAR), a critical metric for hotel operators, increased by nearly 23% year-on-year, reaching ₹9,592 in March 2024. This growth underscores the increasing demand for luxury accommodations, particularly in a recovering economy.
The broader Indian hospitality market is projected to experience significant growth, anticipated to rise from $24.6 billion in 2024 to $31 billion by 2029. This expansion is driven by increasing domestic and international travel, a growing middle class, and enhanced infrastructure. Schloss’s strategic positioning with the Leela Hotels brand places it in an advantageous spot to capitalize on these market trends.
To facilitate the IPO, Schloss has engaged the services of 11 investment banks, which include prominent names such as Kotak Mahindra Capital, JM Financial, BofA Securities, Morgan Stanley, JP Morgan, Axis Capital, Citi, ICICI Securities, IIFL Capital, Motilal Oswal, and SBI Caps. This robust team of financial advisors is expected to guide the company through the complexities of the IPO process, ensuring a successful market entry.
As Schloss prepares for this significant milestone, the potential IPO of Leela Hotels stands as a testament to the growing confidence in the Indian hospitality sector. Investors are increasingly recognizing the value and resilience of luxury hotel brands, particularly in a country like India, where tourism and business travel are on the rise.
In conclusion, the upcoming ₹5,000 crore IPO by Schloss, the parent company of Leela Hotels, not only highlights the company’s growth and strategic vision but also reflects the broader recovery of the hospitality sector in India. With ambitious plans for expansion and a positive financial outlook, Leela Hotels is poised to play a pivotal role in shaping the future of luxury hospitality in the country. The market eagerly awaits the details of the IPO, which could set a new benchmark for the industry.
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