Lemon Tree Hotels Ltd’s FY25 benefitted from a full-year contribution of Aurika, Mumbai SkyCity, which opened in the third quarter of FY24. FY25 consolidated revenue and Ebitda each rose about 20% year-on-year to ₹1,286 crore and ₹634 crore, respectively. Growth was aided by an 11% increase in revenue per available room (RevPAR) to ₹4,575 and an improvement in occupancy rate to 71.7% from 69.9% in FY24.
In the near term, the stabilization of Aurika and further successful ramp-up are vital for earnings growth, while renovation expenses could hurt profitability. FY25 renovation expenses stood at 2.7% of revenue, a 30 basis point rise over FY24. A basis point is one-hundredth of a percentage point.
The company said this increased investment in renovation expenses will continue into FY26, followed by a smaller amount in FY27, so that the entire portfolio of owned hotels is fully renovated and refreshed. Post this, renovation expenses will drop close to about 1.5% of revenue, thus eventually aiding Ebitda margin. Ebitda stands for earnings before interest, taxes, depreciation, and amortisation.
Focus on cutting debt
Led by the stabilization of Aurika and an improvement in RevPAR amid the ongoing renovation exercise, PL Capital estimates revenue and Ebitda CAGR of 12% and 15%, respectively, over FY25-FY27. In addition, as no major capex is lined up in the near term, barring the hotels in Shimla and Shillong, the broking firm expects debt reduction to gather pace from FY26 onwards, translating into a profit after tax CAGR of 32% over the next two years.
Lemon Tree’s debt fell from nearly ₹1,900 crore at FY24-end to ₹1,700 crore at FY25-end. The company expects debt to drop to negligible levels over the next few years. Here, the listing of subsidiary Fleur Hotels is expected to help; the management said it would come up with a definite plan by the next board meeting.
Lemon Tree’s total inventory at FY25-end was 212 hotels and 17,116 rooms split into 10,269 rooms and 111 hotels being operational and the rest in pipeline. Within operational rooms, about 5,800 were owned/leased rooms, and the rest were managed/franchised. It is confident of adding at least another 3,000 rooms to its pipeline in FY26.
Meanwhile, FY26 has begun well. Revenue grew 21% on-year in April, but moderated to 14% in May amid rising fears of covid-19 and geopolitical tensions. Lemon Tree’s shares are up 8% so far in FY26, but down 9% in 2025. Investors must track RevPAR growth and debt trajectory to place their bets on the stock.
