Schloss Bangalore (The Leela) is a luxury hospitality company operating under "The Leela" brand in India. It owns, operates, manages, and develops luxury hotels and resorts, offering premier accommodations and personalized services inspired by Indian hospitality.

As of March 31, 2025, Schloss Bangalore is one of India‘s largest luxury hospitality companies by number of keys, with a portfolio of 13 operational hotels comprising 3,553 keys. The portfolio includes The Leela Palaces, The Leela Hotels, and The Leela Resorts. The company operates through direct ownership and hotel management agreements with third-party owners.

The owned portfolio comprises five landmark hotels across key business and leisure destinations: Bengaluru, Chennai, New Delhi, Jaipur, and Udaipur. These hotels, renowned as modern palaces, blend traditional Indian architecture with contemporary luxury. In addition to the company’s owned portfolio, its portfolio also includes seven operational luxury hotels and resortsmanaged under hotel management agreements with third-party owners and one operational luxury hotel which isowned and operated by a third-party owner under a franchise arrangement.

TheLeela plans to expand its portfolio with seven new hotels, aggregating approximately 678 keys through 2028 that will be either developed, owned or managed by the company and is currently in various stages of acquisition and development. This includes modern palace hotels in Agra (Uttar Pradesh) and Srinagar (Union Territory of Jammu and Kashmir), resorts in Ranthambore (Rajasthan) and Bandhavgarh (Madhya Pradesh) and serviced apartments in Mumbai’s (Maharashtra) international airport district.

The Leela Palaces, Hotels and Resorts was initially founded by late Capt CP Krishnan Nair in 1986. However,The Leela brand is currently owned by Brookfield Asset Management through Project Ballet Bangalore Holdings (DIFC) Pvt Ltd and others.

Brookfield is a global alternative asset manager with over US$1 trillion of assets under management, operations in over 30 countries and approximately 250,000 operating employees as of March 31, 2025.

Object of the offer

The IPO consists of a fresh issue of Rs 2500 crore and an offer-for-sale(OFS) of up to Rs 1000 crore. At the higher price band of Rs 435, the OFS comprises up to 5,74,71,264 shares by Project Ballet Bangalore Holdings (DIFC) Pvt Ltd.

Out of the proceeds from the fresh issue, Rs 2300 crore will be used for repayment/ prepayment/ redemption, in full or in part, of certain borrowings availed of by the company and its subsidiaries and the balance for general corporate purpose.

Strengths

Leela is an established brand in the luxury hotel space and operates in key Indian markets, which have high entry barriers and are strategically important. Presence in prime locations helped these properties attract both leisure as well as business demand. In addition, the hotels in the company’s owned portfolio are strategically located in prime locations where acquisition of large parcels of land is challenging. New hotel construction requires a significant gestation period in site development and operational stabilization, creating significant barriers to entry for new supply.

The company owns and operates five hotels and manages another 7 operational luxury hotels and resorts owned by third party owners and 1 operational luxury hotel which is owned and operated by a third-party owner under a franchise arrangement. This provides healthy assets as well as geographic diversification for the company.

The hotels in the company’s portfolio have a comprehensive luxury ecosystem that caters to evolving customer preferences,by providing luxurious accommodation, curated experiences, and F&B venues offering award-winning dining experiences spanning multiple cuisines, award-winning wellness offerings and several other amenities. This ecosystem has enabled the company to attract a diverse clientele spanning leisure travelers, business travelers and groups, while also diversifying its revenue base across non-room revenue sources such as F&B, MICE and banqueting venues. For the Financial Year 2025, the company derived 56.96% of its room revenues from retail and leisure guests, 16.97% from corporate bookings and 25.45% from group bookings, demonstrating the strength of the diversified customer base.

As owners and operators of properties, the company drives operational efficiencies through its structured and disciplined approach to asset management, which has helped the company deliver superior EBITDA margins. The company has also been able to increase its revenue per available room (RevPAR) for its owned portfolio from 1.2 times in the FY2019 to 1.4 times in the FY2025, as compared to the luxury hospitality segment in India. As part of the company’s asset management initiatives, it has invested in its assets towards refurbishment, upgrading and repurposing of underutilized spaces, which has helped enhance the performance of the company’s portfolio. These measures helped to more than double the average room rent (ARR) from Rs 11,928 in FY2020 to Rs 28,756 in FY 2025 and increase the RevPAR from Rs 7,037 in FY 2020 to Rs 15,242 in FY 2025.

The company is led by a highly experienced management team with deep domain expertise that has helped drive operational excellence. Anuraag Bhatnagar-CEO has experience across Indian and global hospitality companies. In addition, the company also benefit from an experienced and distinguished board comprising of well-diversified and renowned industry professionals, with a reputed industry veteran as the independent Chairman, who provides the strategic direction and guidance to the company.

Weaknesses

The company incurred losses at net levels in FY2023 and FY2024 to the tune of Rs 61.68 crore and Rs 2.13 crore respectively and might incur losses in the future which might affect the financial condition of the company.

The company operates in a capital-intensive industry and the company’s current and future levels of leverage could have significant consequences for future financial results and business prospects. As of March 31, 2025, the company had outstanding borrowings of Rs 3908.7 crore on a consolidated basis.

The shareholding of the company’s promoters in the company, and the shareholding in certain of its subsidiaries have been, encumbered in favor of certain lenders. If events of default arise under the relevant facility agreements, such lenders could exercise their rights under the agreements, adversely affecting the company’s business.

A substantial portion of the net proceeds will be utilized for repayment, prepayment and/or redemption of indebtedness availed of by the company and its subsidiaries.

The company is exposed to risks associated with the construction of new hotels, including The Leela Ayodhya, The Leela Palace Agra, The Leela Ranthambore, The Leela Palace Srinagar and The Leela Bandhavgarh. Delays in the construction of new hotels may have an adverse effect on the company’s growth prospectus.

The COVID-19 pandemic, or any future pandemic or widespread public health emergency, could affect the company’s business and financial condition.

The hospitality industry is intensely competitive and the company’s inability to compete effectively may adversely affect its business.

Contingent liabilities as on March 31, 2025, stood at Rs 494.1 crore.

Valuation

For FY 2025, consolidated sales were up by 11.0% to Rs 1300.57 crore primarily due to an increase in the occupancy rate and average room rent.The occupancy and ARR of owned assets have improved to 68% and Rs 22545 respectively in FY25 as against 67% and Rs 20966 in FY2024. OPM declined 82 bps to 45.7%, which led to a 9.1% increase in operating profit to Rs 594.37 crore. Other income increased 92.5% to Rs 105.98 crore, while interest cost increased 5.9% to Rs 458.17 crore and depreciation declined 5.4% to Rs 139.93 crore. PBT stood at Rs 102.07 crore as against PBT of Rs 19.43 crore in FY2024. Tax expenses stood at Rs 54.41 crore in FY2025 as against Rs 21.56 crore in FY2024. PAT stood at Rs 47.66 crore as against net loss of Rs 2.13 crore.

On January 10,2025, 622,103,028 compulsory convertible preference shares of Rs 100 each held by promoter group were converted to 100,501,294 equity shares of Rs 10 each for price of Rs 619 per equity share.

At the higher price band of Rs 435, the offer is made at a P/E of 304.82 times FY2025 EPS (EPS of Rs 1.4) and around 28.67 times post-IPO EV/FY2025 EBITDA.

The total outstanding borrowings were Rs 3908.75 crore on a consolidated basis as of 31 March 2025. The plan is to repay 58.8% of the debt using the issue proceeds. This will significantly reduce interest costs and boost profits. The FY2025 EPS would be Rs 5.2 if 58.8% of the interest cost is eliminated, assuming all other factors, including the tax rate, remain unchanged. The adjusted P/E ratio, at the upper price band, moderates to 83.65.

Listed industry peers of the company are Indian Hotels, Chalet Hotels, EIH and ITC Hotels. In comparison Indian Hotels trades at 57.76 times its P/FY2025 EPS (Rs 13.4) and 39.29 times EV/FY2025 EBITDA, Chalet Hotels trades at 136.0 times its P/FY2025 EPS (Rs 6.5) and 29.38 times EV/FY2025 EBITDA, EIH trades at 31.39 times its P/FY2025 EPS (Rs 11.8) and 22.20 times EV/FY2025 EBITDA and ITC Hotels trades at 67.21 times its P/FY2025 EPS (Rs 3.05) and 33.91 times EV/FY2025 EBITDA.