Luxury hotel chain Leela Palaces Hotels & Resorts, operated by Schloss Bangalore Ltd, has filed draft papers with the Securities and Exchange Board of India (SEBI) to raise Rs 5,000 crore through an Initial Public Offering (IPO). This IPO is expected to be the largest-ever in India’s hospitality sector.

IPO Details

The IPO will include a fresh issue of shares worth Rs 3,000 crore and an offer for sale (OFS) of Rs 2,000 crore by the promoter Project Ballet Bangalore Holdings (DIFC) Pvt Ltd, as per the draft red herring prospectus (DRHP). The fresh issue will help the company reduce its borrowings and cover general corporate expenses.

As of March 2024, the company had borrowings of Rs 4,052.50 crore. Additionally, Schloss Bangalore may raise Rs 600 crore in a pre-IPO placement, which would reduce the size of the fresh issue.

Growth of Leela Hotels

Leela Palaces operates a portfolio of 12 hotels under its brand, with 3,382 rooms (or “keys”) across 10 destinations in India. The brand is known for its luxurious hotels, resorts, and palaces.

The company has shown substantial financial growth, with its EBITDA (operating profit) increasing from Rs 87.72 crore in FY22 to Rs 600.03 crore in FY24. This financial success positions them well for the upcoming IPO.

Market Growth and Demand

Leela’s IPO filing comes at a time when India’s IPO market is booming, with around 60 companies launching their IPOs this year alone. The hospitality sector is also expected to see strong growth. A report by HVS highlights that India’s GDP is projected to double from USD 3.6 trillion in 2023 to USD 7.1 trillion by 2030.

Despite being a luxury hotel chain, Leela Palaces operates in an underdeveloped market. The luxury segment makes up just 17% of the branded hotel market, but demand is growing. From FY24 to FY28, demand for luxury rooms is expected to rise at 10.6% annually, while supply will grow at a slower pace of 5.9%.

The Leela Palaces IPO is set to make a major impact in the hospitality industry, offering investors an opportunity to be part of the company’s expansion. With strong financials and rising demand in the luxury hotel sector, this IPO marks a significant milestone for the Leela brand.