The Leela Hotels to become debt-free post IPO

Mumbai, The Leela Hotels, Palaces & Resorts (Schloss Bangalore Ltd.) intends to use most of the Rs. 2,500 crore fresh issue proceeds to squarely pay off the debt and the company will become net zero in terms of net debt.

The company’s initial public offering of equity shares aggregating up to ₹3,500 crore is the largest-ever hospitality public offer in the country. The company intends to utilize the net proceeds from the public offer primarily for the repayment, prepayment, or redemption—either fully or partially—of certain outstanding borrowings, along with associated interest and prepayment penalties. The adjusted net debt will be ₹2,567.68 crore as of FY25 and post Offer this will decrease to ₹1,608.75 crore.

SBI Securities’ IPO note on The Leela Hotels says, “The company will repay its debt from the IPO proceeds which will result in lower D/E from the current 1.1x and improved profitability.”

KR Choksey IPO note by its analysts gives a ‘Subscribe’ Rating and says, “We believe the Schloss is expected to deliver improved earnings growth, better profitability led by reduced debt burden, healthy pipeline of upcoming hotels and industry leading sustainable margins driven by luxury segment focus We assign a Subscribe rating to the issue.”

While recommending ‘Subscribe for Long Term’, Mehta Equities IPO note says, “The proceeds from the fresh issue willprimarily be used to repay approximately Rs. 2,300 cr of outstanding debt. This planned deleveraging is expected to significantly reduce interest expenses, effectively making the company nearly debt-free, thereby improving profitability and strengthening overall cash flows.”

Several leading brokerage reports have given positive recommendation: Anand Rathi (Subscribe – Long Term), Bajaj Broking (Subscribe for Long Term), KR Choksey (Subscribe), Geojit (Subscribe), Ventura (Subscribe), GEPL (Subscribe), SMIF (Subscribe)etc.

The company (Schloss Bangalore Ltd.) is the only institutionally owned and managed pure play luxury hospitality company in India. Since acquiring The Leela Hotels brand, hotel portfolio and hotel management business in October 2019, Brookfield (a global alternative asset manager with over US$1 trillion of assets under management (AUM) and operations in over 30 countries as of March 31, 2025) has leveraged its global experience in asset management to focus on improving its revenue and profitability, enhancing guest satisfaction and increasing commitment to environmental sustainability.

The Leela Hotels has industry leading financial metrics driven by Active Asset Management approach of Brookfield. It has strong financial performance with compelling growth in revenues, EBITDA and margins across years.

The Leela Hotels, Palaces & Resorts portfolio comprises luxury palaces, hotels and resorts encompassing 3,553 keys with further pipeline of 678 keys. Its pan India portfolio comprises iconic modern palaces, hotels and resorts with strong pipeline of new properties of six new locations across 11 cities and 13 properties (including seven in the pipeline).

The Leela Hotel’s iconic modern palace hotels in Bengaluru (Karnataka), Chennai (Tamil Nadu) and New Delhi (Delhi) are recognized hospitality landmarks and benefit from high barriers to entry.

For example, during the Financial Year 2025, the average room rate (“ARR”) and eight airport cities, namely Bengaluru, New Delhi, Chennai, Jaipur, Udaipur, Mumbai, Cochin and Ahmedabad, cater to the 10 key Indian business and leisure destinations covering 80% of international air traffic and 59% of the domestic air traffic in India in Financial Year 2025.

The Leela has a proven track record of delivering guest centric luxury experiences with compelling performance including being among the top 3 hospitality brands in the world in 2020, 2021, 2023 and 2024. It claims a superior RevPAR (Revenue per Available Room) to Indian luxury hospitality. It also posted industry leading EBITDA margin of 48.92% for FY25 through an active asset management approach. Its premium market positioning comes with industry leading NPS, direct channel access and global appeal. It has an attractive international domestic customers mix of 46.8%: 53.2%.

The Leela Hotel’s growth pipeline includes expansion in new segments such as wildlife, spiritual and heritage tourism, diversifying geographical footprint across additional cities and tourist destinations. This includes a modern palace hotels in Agra (Uttar Pradesh) and Srinagar (Union Territory of Jammu and Kashmir), resorts in Ranthambore (Rajasthan) and Bandhavgarh (Madhya Pradesh) and serviced apartments in Mumbai’s (Maharashtra) international airport district.

Recently the company entered into hotel management agreements for two properties: a new hotel that is located in Gangtok, Sikkim (140 keys) as well as luxury serviced apartments (63 keys) in Mumbai (Maharashtra). Emerging as the the highest bidder for lease of commerial plots based on the evaluation of the financial bid conducted by MMRDA on April 4, 2025, the company currently intends to develop a mixed-use project, including a 250 key luxury hotel in Bandra Kurla Complex, Mumbai.