Is Leela Hotels (Schloss Bangalore) IPO Good or Bad

The Leela Hotels (Schloss Bangalore Limited) IPO is kicking off its initial public offering, which will be open from May 26, 2025, to May 28, 2025. While considering applying for this IPO, certain questions may arise in your mind, including whether the Leela Hotels IPO is good or bad, whether it is worth investing in this IPO, and so on. 

This article offers a comprehensive Leela Hotels IPO review, covering its business operations and fundamental analysis to help you make an informed investment choice.

Leela Hotels IPO Review (Schloss Bangalore IPO Review)

The Leela Hotels, a renowned name in India’s premium hospitality space, is gearing up for its Initial Public Offering (IPO), aiming to raise ?2,300 crore. The proceeds are primarily earmarked for reducing the company’s substantial debt burden, which currently stands at ?3,585 crore. With finance costs consuming nearly 30% of its revenue, the debt reduction plan is a critical step toward restoring financial stability.

Despite reporting losses in FY23 and FY24, Leela managed to post a modest profit of ?47.65 crore in FY25, signaling early signs of recovery. However, its financial performance still pales in comparison to listed peers like Indian Hotels, EIH, and Chalet Hotels, all of which boast stronger EPS and Return on Net Worth (RoNW) in the range of 15–16%.

Leela Hotels also faces valuation concerns. With a Price-to-Earnings (PE) ratio of 220, it appears significantly overvalued, especially when benchmarked against its more profitable peers. Notably, Leela is currently the second smallest listed hospitality player, making it a relatively less proven bet in the market.

While the IPO's objective of debt repayment could enhance future profitability, the company’s high valuation and relatively weak financials suggest this offering carries elevated risk. It may appeal only to investors with a high risk appetite and a long-term horizon—particularly those who are bullish on the broader India luxury hospitality growth story.

Company Overview of Leela Hotels (Schloss Bangalore) IPO

Founded in 1986 by the Late Captain C.P. Krishnan Nair, the brand ‘The Leela’ (Schloss Bangalore Limited) is built on the Indian belief of “Atithi Devo Bhava” (Guest is God), and is known for delivering world-class hospitality experiences with an Indian touch. Since 2021, the Leela brand and its properties have earned over 250 industry awards, underscoring its excellence and reputation.

The company’s current portfolio includes 13 luxury hotels with a total of 3,553 keys, making them one of the largest players in India’s luxury hospitality segment. This includes five wholly owned properties, seven managed under hotel management contracts, and one franchised hotel. Strategically located across 10 major business and leisure destinations, their properties cover over 80% of international and 59% of domestic air traffic routes.

Designed as “modern palaces,” the hotels combine traditional Indian architecture with modern amenities. Flagship properties in Bengaluru, Chennai, and New Delhi are recognized as hospitality landmarks, where each hotel offers luxurious stays, curated experiences, wellness services, and award-winning dining options.

The Leela Hotels are now expanding their footprint with seven new projects, adding around 678 keys by 2028. These include properties in Agra, Srinagar, Ranthambore, Bandhavgarh, and Mumbai. With this, they aim to diversify into emerging travel segments such as wildlife, spiritual, and heritage tourism, reinforcing their commitment to growth and innovation in luxury hospitality.

Industry Overview of Leela Hotels IPO

Despite being one of the largest tourism markets globally, India’s hospitality industry remains significantly underpenetrated. Of the approximately 3.4 million hotel keys in India as of March 2024, only around 11% belong to the organized sector, and luxury hotels represent just 17% of that, about 29,000 keys. 

Demand for luxury hotels is expected to outpace supply, with estimated demand growing at a CAGR of 10.6% versus 5.9% supply growth from FY24 to FY28. This supply constraint, due to high entry barriers, is expected to further boost occupancy and pricing. The Leela, with its unique owner-manager model and institutional backing, is well-positioned to capitalize on these dynamics.

India’s rising affluence, younger population, infrastructure push, and shifting consumer behavior toward experience-led spending are also fueling growth in luxury travel. While cities like Bengaluru and New Delhi still have relatively low average room rates compared to global counterparts, this gap signals headroom for pricing expansion. 

Financial Overview of Leela Hotels IPO

The Leela Hotels (Schloss Bangalore Limited) has demonstrated strong and consistent financial and operational growth over the last three financial years. It has achieved robust revenue growth, with total income increasing from Rs 903.267 crore in FY23 to Rs 1,406.556 crore in FY25. Revenue from operations climbed from Rs 860.058 crore to Rs 1,300.573 crore over the same period. 

EBITDA also improved significantly, from Rs 423.629 crore in FY23 to Rs 700.168 crore in FY25, while the EBITDA margin expanded from 46.90% to 49.78%, indicating effective cost management and operating leverage. The company posted strong year-on-year EBITDA growth of 41.64% in FY24 and 16.69% in FY25, underlining its consistent financial strength and growth momentum.

The company has achieved a positive EBITDA over the last three financial years; however, it sustained losses in FY23 and FY24, primarily due to elevated finance costs incurred during these periods. Notably, despite facing high finance costs in FY25, the company successfully recorded a profit of Rs 47.65 crore.

In FY25, the finance expense reached Rs 458.16 crore, representing approximately 30% of the company's total revenue. This cost is largely attributed to significant borrowings, which amounted to approximately Rs 3,585 crore in FY25. Nevertheless, there is potential for financial improvement as the primary objective of the upcoming IPO is to raise Rs 2,300 crore for debt repayment. As the company's borrowings decrease, a corresponding reduction in finance costs can be anticipated, which may enhance overall profitability moving forward.

Strengths and Risks of Leela Hotels IPO

Let’s dive into the strengths and weaknesses to assess if the Leela Hotels IPO is good or bad for investors
Strengths 

• Leading Luxury Brand with Global Recognition:
  The Leela brand is globally recognized for its excellence in luxury hospitality, with over 250 awards and top rankings by Travel + Leisure and Conde Nast. With a strong heritage rooted in Indian hospitality and high service standards, it boasts industry-leading metrics like NPS and EBITDA margins, outperforming peers in both guest satisfaction and profitability.

• Strategic Owned Hotels in High-Barrier Markets:
  Schloss owns five iconic hotels across major Indian cities, built as “modern palaces” in locations with limited land availability and long development timelines. These properties consistently outperform industry averages in ARR and RevPAR, highlighting their premium positioning and market leadership.

• Diverse Luxury Ecosystem and Revenue Mix:
  The company’s hotels offer a full luxury experience with top-tier dining, wellness, and event spaces, catering to leisure, business, and group travelers. This ecosystem supports strong non-room revenue (over 50%) and consistently high TRevPAR across the portfolio.

• Proven Operational Efficiency Through Asset Management:
  An active owner-operator approach drives asset upgrades and operational optimization, boosting ARR and RevPAR across properties. Investments in refurbishments, cost control, and sustainability initiatives have delivered strong returns while maintaining luxury standards and reducing environmental impact.

• Strong Backing by Brookfield:
  Schloss is promoted by Brookfield, a global asset manager with over $1 trillion in AUM and deep expertise in real estate and hospitality. Brookfield's strong presence in India, development experience, and governance standards provide strategic support and capital discipline for long-term growth.

Risks

• Brand reputation risk:
  The success of Leela Hotels is closely tied to the reputation of “The Leela” brand, which is critical for attracting guests and third-party hotel owners. Any decline in service quality, guest experience, or misuse of the brand by franchisees or partners can lead to reputational damage.

• Revenue concentration risk in owned hotels:
  Over 90% of the company’s income comes from five owned hotels, making it vulnerable to regional disruptions. Any adverse event in these locations could significantly impact overall performance.

• High debt levels and capital intensity:
  As of March 31, 2025, the company had substantial borrowings of Rs 3908.74 crores, with finance costs accounting for over 32% of total income. Operating in a capital-intensive industry, Schloss requires ongoing funding for renovations and expansions, which may strain cash flows and limit financial flexibility.

• Renovations risk and operational disruptions:
  Renovation and refurbishment of existing hotels are essential but carry risks of delays, cost overruns, and temporary disruptions in operations. Although past upgrades have not caused major issues, future projects may lead to income loss, especially if third-party contractors fail to meet quality or timelines.

• Construction risk in new hotel developments:
  The company’s expansion into new locations through hotel construction projects, such as The Leela Ayodhya and The Leela Palace Agra, involves risks like regulatory delays, cost overruns, and contractor dependency. A few issues may lead to budget increases or project delays.

Strategies of Leela Hotels IPO

• Optimize Performance of Existing Assets
  The company aims to improve operational efficiency and guest experience at its current hotels through proactive asset management and refurbishments.

• Expand Portfolio in India and Abroad
  Schloss is actively seeking to grow its footprint through selective acquisitions, new hotel developments, and management contracts both domestically and internationally.

• Enhance Sales and Marketing Efficiency
  By streamlining and strengthening marketing efforts and sales channels, especially direct booking platforms, the company seeks to increase revenue and brand visibility.

• Leverage the Brand for New Business Verticals
  The company plans to explore adjacent luxury segments such as branded residences, serviced apartments, and members-only clubs under The Leela brand.

• Pursue Strategic Partnerships and Acquisitions
  Schloss intends to selectively collaborate with or acquire other luxury hospitality companies that align with its brand and standards to expand faster and more effectively.

• Capitalize on Brookfield’s Global Scale
  With support from Brookfield’s asset management and development expertise, Schloss aims to execute projects efficiently and identify new opportunities across markets.

Leela Hotels IPO Vs Peers

Source: RHP of the Company

Upon analyzing the provided data, it is evident that the company in question ranks as the second smallest within the listed entities, with Juniper Hotels following closely. In terms of profitability, Leela Hotels has registered minimal profit for the fiscal year 2025. In contrast, peers such as Indian Hotels, EIH, and Chalet Hotels have reported earnings per share (EPS) of 8.86, 10.22, and 13.54, respectively, for fiscal year 2024, reflecting their strong profitability.

Additionally, the Return on Net Worth (RoNW) for Indian Hotels was recorded at 16.42% in fiscal year 2025, while EIH and Chalet Hotels exhibited RoNW figures of 16.58% and 15.03% for fiscal year 2024, respectively. This indicates a greater return to shareholders for these three companies in comparison to Leela Hotels, which has generated only a 1.32% return.

Furthermore, taking into account the upper price band of Leela Hotels, its price-to-earnings (PE) ratio stands at 220, suggesting a significant overvaluation relative to its industry peers that are demonstrating strong performance.

Objectives of Leela Hotels IPO 

The issue by the IPO will be used by the company for the following purposes:

• Debt Repayment:
  Full or partial repayment/prepayment/redemption of outstanding borrowings and interest for ‘The Company’ and ‘Wholly owned subsidiaries (Schloss Chanakya, Schloss Chennai, Schloss Udaipur, and TPRPL)’

• General Corporate Purposes:
  To support overall business operations and needs, like strategic initiatives, growth (organic & inorganic), hotel asset upgrades, marketing & branding, working capital, and general corporate needs.

Leela Hotels (Schloss Bangalore) IPO Details

IPO Dates

Leela Hotels IPO will be open for subscription from May 26, 2025, to May 28, 2025. The allotment of shares to investors will take place on May 29, 2025, and the company will be listed on the NSE and BSE on June 2, 2025.

IPO Issue Price

Leela Hotels is offering its shares in the price band of Rs 413 to Rs 435 per share. This means you would require an investment of Rs. 14,790 per lot (34 shares) if you are bidding for the IPO at the upper price band.

IPO Size

Leela Hotels is issuing a total of 8,04,59,769 shares, which are worth Rs 3,500 crores. From the total issue a total of 8,04,59,769 shares worth Rs 2,500 crores are through fresh issue and  2,29,88,505 shares amounting to Rs. 1000 crores are through offer for sale.  

IPO Allotment Status

Investors who applied for the IPO can check their IPO allotment status on May 29, 2025, through the registrar's website: KFIN Technologies Limited, BSE, NSE, or their stockbroker platform.

IPO Listing Date

The shares of Leela Hotels will be listed on the NSE and BSE on June 2, 2025.

IPO Application Link

Open demat account with Rupeezy today and enjoy a seamless experience when applying for the IPO. With an easy-to-use platform, Rupeezy makes the IPO application process quick and hassle-free.

Apply for Leela Hotels IPO