(MIPM) Lemon Tree
(MIPM) Lemon Tree
Owned /
Upper Mid-Scale
Leased 1,697 rooms Enterprise Value ₹ Revenue (FY19) ₹ 5,495
Hotels Managed Hotels Co-Living 62,105
Mid-Scale Market Cap ₹ EBITDA (FY19) ₹ 1,666
Asset Asset Light Model New JV with
Heavy 2,555 rooms Warburg 50,623
Model Economy Pincus P/E* 88.7x EBITDA Margin 30.3%
1,273 rooms EV/EBITDA* 37.1x Debt / EV 18.3%
Marquee Investors: Promoters (30%), APG AM (14.99%), Warburg Pincus (12.42%), SBI (7.17%) Cash 634 Total Debt
*Market Cap is based on₹Jul-25-2019 ₹ 11,359
Source: CapitalIQ
Increasing Vintage Of Owned Hotels Owned Vs Managed Hotel Mix ₹ 100 ₹ 42,000
Lemon Tree Sensex
58 58 FY18 FY23 ₹ 90 ₹ 40,000
42 45 ₹ 80 ₹ 38,000
34 34
Manag LTP LTP ₹ 70 ₹ 36,000
Manage
ed 1158 2396
d
1841 ₹ 60 ₹ 34,000
Red LT 3924 LT
Fox 1562 Red Fox
1821 ₹ 50 ₹ 32,000
850 938
2019 2020 2021
₹ 40 ₹ 30,000
New (<3 Years) Old Owned:66% 2 1 / 2
Owned:57% 7/ 3/ 1 1 7/
Managed:34% Managed:43%
Key Takeaway : ~1.5x growth in rooms over next 5 years planned with increased focus on managed Key Takeaway : Trading at high P/E and EV/EBITDA because of
properties high growth potential
Asset light model: Oyo leads the way; Managed space model
Multiple Co-living space: Emergence as a fast-growing market
models
Cross-selling: Juxtaposing loyalty with ubiquitous presence
Increasing ARRs
Rapid scale: Critical with both growing demand & competition Growing demand
Low commitment: Critical in high growth strategy Being ubiquitous: Leverage brand to cross-sell
Long term partners Proven track record of long-term Availability of properties Increasing with dropping prices
relations
Lower development costs 12% lower than industry
Apt location Established skilled site selection
Hassle free stay experience Excellent service quality
Location staff capabilities Excellent staff retention Apt location Skilled site selection
6
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Differentiated capabilities of Oyo and Lemon Tree will transform the industry into a two-
player dominated market with eventual buyout of Lemon Tree made attractive due to
location and customer capture
Parameter Today Few years later
Mitigation Mitigation
RevPAR premium- 10%, Development
Differentiation Per room cost Rs. 5 M vs Rs
50% and 30% in upper-midscale, cost 5.6 M competitors
midscale and economy
24 25 26 27 28 29
2 13.1% 16.0% 18.8% 21.6% 24.3% 27.0%
3 18.0% 20.0% 21.9% 23.7% 25.4% 27.2%
4 19.2% 20.6% 22.0% 23.3% 24.6% 25.8%
5 19.8% 20.8% 21.9% 22.9% 23.9% 24.8%
Annualised Returns for potential EV/EBITDAs
24 25 26 27 28 29
2 2.5% 5.4% 8.2% 11.0% 13.7% 16.4%
3 7.4% 9.4% 11.3% 13.1% 14.8% 16.6%
4 8.6% 10.0% 11.4% 12.7% 14.0% 15.2%
5 9.2% 10.2% 11.3% 12.3% 13.3% 14.2%
2 https://www.lemontreehotels.com/factsheet/Policies/LemonTreeHotels-Q4FY19
EarningsPresentation_Final.pdf
3 https://www.icra.in/Rationale/ShowRationaleReport/?Id=76426
4 https://www.fortuneindia.com/enterprise/marriott-international-checking-into-t
he-big-league/102514
5 https://content.knightfrank.com/research/1004/documents/en/india-topical-rep
orts-in-the-first-of-its-kind-industry-report-titled-co-living-rent-a-lifestyle-we-give
-a-comprehensive-analysis-of-the-potential-for-rental-housing-in-india-6027.pdf
6 https://www.lemontreehotels.com/factsheet/Policies/LTHL_Annual_Report_201
7_18.pdf
7 https://www.sebi.gov.in/sebi_data/attachdocs/oct-2017/1509179942020.pdf