Lemon Tree IPO: Strong prospects but high valuation for the hotel chain

The IPO is valued at 44 times the company's FY17 figure and 38.6 times the annualised operating profit for FY18

Lemon Tree, the country’s largest hotel chain in the mid-priced segment, has 4,697 rooms in 45 hotels across 28 cities. Roughly half its revenue comes from the upper midscale (Lemon Tree Premier), 23-28 per cent from the midscale (Lemon Tree Hotels) and the rest from the economy (Red Fox) segment.

During FY13-17, annual revenue grew 18 per cent and operating profit rose 33 per cent. The company made a profit for the first nine months of FY18, after losses over the past several years. Analysts expect the revenue to see robust growth, given the strong expansion plan and 11 per