Luxury hotel chain Leela Palaces files draft papers to raise Rs 5,000 crore via IPO

Luxury hotel chain Leela Palaces has filed draft papers with the Securities and Exchange Board of India (SEBI) to raise Rs 5,000 crore through what is poised to be the largest-ever initial public offering (IPO) in India's hospitality sector.

Schloss Bangalore, which operates a network of palaces, hotels, and resorts under The Leela brand, plans to raise Rs 3,000 crore via a fresh issue of shares and an additional Rs 2,000 crore through an offer-for-sale by the company's promoter, Project Ballet Bangalore Holdings (DIFC), as per the company’s IPO papers.

Debt repayment as a priority

A significant portion of the fresh issue proceeds—Rs 2,700 crore—will be used to repay debt, both for Schloss Bangalore and its subsidiaries.

As of May 2024, the company’s consolidated debt stood at Rs 4,052.5 crore.

The remaining proceeds from the fresh issue will be allocated for general corporate purposes, which are expected to enhance the company's operational efficiency and growth opportunities. 

Financial performance and challenges

For fiscal year 2024, Schloss Bangalore reported a net loss of Rs 2.1 crore, a significant improvement compared to a loss of Rs 61.7 crore in FY23 and Rs 319.8 crore in FY22.

However, the company still faces financial challenges. In the first two months of fiscal 2025, it recorded a loss of Rs 36.4 crore, which is higher than the loss for the entire previous fiscal year, despite achieving revenue of Rs 160.89 crore during the same period.

Schloss Bangalore's market presence

Founded in 1986 by the late Captain C.P. Krishnan Nair, Schloss Bangalore operates under the Leela brand and has grown into a major player in the luxury hospitality sector.

The company currently manages 3,382 keys across 12 operational hotels, including five properties it owns, six managed under hotel management agreements, and one franchise-operated hotel.

Known for its luxurious accommodations and dining experiences, Schloss Bangalore competes with established hospitality brands such as Indian Hotels Company Limited (IHCL), EIH Limited, Chalet Hotels, and Juniper Hotels.

IPO management

A consortium of 11 leading merchant bankers, including JM Financial, BofA Securities India, Morgan Stanley India, and Kotak Mahindra Capital Company, is managing the IPO.

KFin Technologies has been appointed as the registrar for the issue. 

According to media reports, the company is also exploring the option of a pre-IPO placement worth Rs 600 crore through a preferential offer. If this happens, the fresh issue size will be adjusted accordingly before launching the IPO for public subscription.